ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL, 2002 TO 31ST MARCH, 2003 (Paper Cmd. 3 of 2002)

Order read for consideration in Committee of Supply [2nd Allotted Day].

[Mr Speaker in the Chair]

Head V (cont.) -

Resumption of Debate on Question [15th May, 2002],

"That the total sum to be allocated for Head V of the Main Estimates be reduced by $100." - [Mr Leong Horn Kee].

Question again proposed.

Mr Ang Mong Seng: (In Mandarin): In order to make food readily available for workers at the worksite, JTC provides canteens and invites contractors to operate canteens to provide food for the workers. The food provided in factories in the industrial area used to be cheap and good, much to the delight of the workers.

However, for all these canteens, the benefit of low rental is normally granted for nine years only. Once the nine-year period is up, the operators will have to re-tender for the right to operate, and the tender is inevitably awarded to the highest bidder. At present, more than 10 canteens are affected. The new rental is more than double that of the previous one. I understand that in Jurong, the rental ranges from $13,000 to $70,000, whereas in Chai Chee, it is between $23,000 and $63,000. With high rental, the operation cost is naturally high. Consequently, the food prices must go up, and the customers stay away. Most of the operators find it difficult to sustain their business after six months of operation. Soon, the canteens close down, and the workers have no food to eat. Something must be done to prevent this unhappy situation from happening.

As the bulk of customers of the canteens in the factories are the workers themselves, cheap and good food must be provided for the workers. I would suggest that JTC learn from the Nanyang Technological University or the Ngee Ann Polytechnic. They have a fixed rental system and only experienced operators are invited to operate their canteens. The rental is clearly stated in the contract, so are the menu prices of the food served therein. This is to ensure that the food provided there is good and cheap. With this kind of operation, the stallholders, the workers as well as the canteen operators will benefit. This is an ideal system. I will encourage our people to have an entrepreneurial spirit. The nine-year tenancy period is too short. I hope the Minister will review the nine-year period.

The Minister for Trade and Industry (BG George Yong-Boon Yeo): Sir, many MPs, both during the Budget debate and under MTI's cuts yesterday, have expressed concerns for SMEs. The 2% increase in GST will make an already difficult situation for them more difficult. It is right that their problems are fully aired in this House. Under the cuts on SMEs later, Senior Minister of State Tharman will cover the many specific programmes we have in place to help our SMEs during this period of economic downturn. Minister of State Raymond Lim will address later the issue of entrepreneurship raised by Dr John Chen and the progress of energy deregulation raised by Mr Leong Horn Kee and Mr Inderjit Singh.

Fortunately, this year will be a better year than last year. The improved economic situation will provide relief to many SMEs. The key is the overall health of our economy. Our economy bottomed in the third quarter of last year with a quarter-on-quarter annualised contraction of 10.5%. In the last quarter of last year, we turned sharply upwards, growing by 5.6%. The first quarter of this year saw even stronger growth, 7.7%. This is the arrow tip, the indicator of growth momentum. If the trend of economic recovery continues in the US and in the world's semiconductor industry, and provided nothing untoward happens in the region around us, we are likely to achieve growth in the upper half of our revised 2-4% projection.

Up to the first half of next year, we can be reasonably hopeful of good, though not spectacular growth. Beyond that, it is anyone's guess. Economists are divided over the robustness of the present US recovery. The latest data show that consumption remains strong in the US, despite the depressed stock market. Corporate profits are still down. US Federal Reserve Chairman, Alan Greenspan, said recently that this is to be expected. The sequence is inventory rebuilding, increased sales, then profits go up, finally, leading to new investments. For a cautious man, he is cautiously optimistic. 12.45 pm

We can, therefore, expect the overall economic situation in Singapore to improve in the coming months. When I bumped into the Chairman of UMC, Robert Tsao, a few weeks ago, he said that there was a strong uptick in the wafer fab business. Both UMC and TSMC are now recruiting workers. There will be a lag before growth in orders spreads to the rest of the economy. But many SMEs who supply to MNCs are already feeling the change.

Because employment lags growth by two to three quarters, the employment situation may get a little worse before it gets better towards the end of this year.

Mr Leong, Miss Low, Dr Chen, Dr Chong and Mr Wee expressed concern about our international competitiveness. In fact, Singapore remains highly competitive. Throughout the Asian financial crisis and the last global downturn, our investment pipeline remained full. Despite the 2% contraction last year, EDB was able to achieve FDI of $9.2 billion and, throughout the Asian crisis, we maintained $8 billion to $9 billion every year. This year, we are on track to reach $9.2 billion. The figures for Total Business Spending has been correspondingly strong.

Mr Leong and Miss Low enquired about the fall in Singapore's competitiveness rankings. In the latest IMD and EIU rankings, we have been overtaken by European countries like Finland, Denmark and the Netherlands. This was largely due to the recession last year which followed an unexpected 10% growth the year before. However, our ranking in Asia remains high. The EIU report now ranks us as the most attractive business location in Asia, ahead of Hong Kong. BERI continues to put the quality of our labour force at the top of the chart. Our political stability and Government efficiency set us apart. Two days ago, the Straits Times reported Transparency International pushing us up two notches in the world ranking on absence of corruption to 9th place. This year, PERC rated us the least bureaucratic country in the world. I know many MPs may find this difficult to believe but, really, when we travel overseas, we realise how much worse the bureaucracies in other countries can be.

Although we are in a relatively good position for the next few years, and our economy will pick up as the global economy picks up, we must be prepared for major challenges in the medium term. This is the reason why the work of the ERC is so important. The tax restructuring, which is debated so intensely in this House, is of crucial importance to our long-term competitiveness. No one will want to invest in Singapore unless he can make good profits, regardless of whether he is a Singaporean or a foreigner. Lowering direct taxes puts us in a much better position. Lowering direct taxes makes EDB's work much easier and, if EDB is able to bring in the big investments into Singapore, there will be a lot of feeding for the SMEs. But, if the big investments do not come in, then whatever we do for SMEs will have limited effect.

We are making fundamental adjustments to stay ahead in a global game that has become more challenging, and our willingness to do this is noticed by others. Just the other day, the principal adviser to Chancellor Helmut Kohl for many years, Dr Horst Telschik, was in Singapore for an Asian-German Forum. I was invited as a Guest Speaker. He said, "You have the will to change. We have lost our will to change." So, over dinner, I asked, "Why did you say that?" He said, "You know, in Germany, we have had so many good years, it is very difficult to make any change now in Germany. You are different. You see a problem, you analyse it, you make the adjustment." So, our GST increase, in order to lower taxes, is something of fundamental importance.

Many years ago, when we were toying with the idea of a GST, I was the MOS to Dr Richard Hu. He knew I was going to Hong Kong and calling on Finance Secretary Piers Jacobs. So, he said, "You ask Piers when Hong Kong is going to introduce the GST." When I asked Piers, he said, "After Singapore", with a smile. After we introduced the GST, I went back to Hong Kong and I called on him again. I asked, "When are you starting?" This time, he shook his head and said, "No. Politically, it is very difficult to do so." I know, even though he did not say it, that the British Government did not see why it should incur the political cost of introducing a GST when it is a Hong Kong that is returned to China which will benefit from it in the long term. So, today, when we analyse Hong Kong's long-term fiscal position, it is much less comfortable than ours, precisely because they do not have a GST.

Let me assure Mr Leong, Mr Singh, Mr Wee and Dr Chong that we track very closely Singapore's relative cost position in the world. The entire tax restructuring exercise is precisely intended to lower cost for companies. And we do watch carefully the level of Government fees and levies to ensure that we stay competitive. This is how we have been able to attract more than our fair share of foreign investments. But we cannot be complacent, because relative positions change all the time. There are many inter-ministry committees, and most include members from the private sector. This is to answer Mr Wee Siew Kim's point.

As I have briefed Members of this House before, we are very much seized by the challenge of China. Mr Leong, Mr Gan and Mr Wee spoke of the need for a comprehensive response, and this is precisely what we have been doing. IE Singapore works with Singapore business associations and individual companies and businessmen to pool information, create networks and facilitate the creation of consortiums. Network China, launched by Deputy Prime Minister Lee and Chinese leader Li Ruihuan earlier this year, was established for this purpose. We also work with our Chinese counterparts in a variety of ways. For example, we have business councils which help Singapore companies operate in Shandong, Hubei and Sichuan. Our political relations with China are excellent. Mr Gan Kim Yong suggested that our GLCs team up with other Singapore companies in China. In fact, this is often the case.

China is a huge opportunity and its domestic market will continue to grow for many years to come. Since 1997, China became the Number One investment destination for overseas Singapore FDI, overtaking, for the first time, Malaysia. But China is not an easy place to do business, and not all investments there have done well. There is, really, no substitute for deep knowledge. At the end of last year, Chinese Vice Minister Long Yongtu came to Singapore to give a speech and, at the end of it, one question from the floor asked for his advice on doing business in China. He smiled and said, "Do not take at face value what you are told by provincial governors, party secretaries and city mayors. You should check for yourself and make sure you have a good local partner." Conditions vary from province to province and from county to county, and we must know the ground in which we are hoping to plant for the future.

To build up a pool of younger Singaporeans who know China and other Asian countries well, MTI launched the Asian Business Fellowship last October. Some study for their MBAs in universities like Tsinghua; others are being attached to Singaporean, Chinese and international companies operating in China for maybe one to two years.

For the next five years, we do not expect China to be a major competitive challenge to Singapore, because our economy is at a much higher level. But, beyond that, we will face the pressure. Every year, China produces some 400,000 engineers. It already has more mobile handphones than the US. China is overtaking Japan as the world's second biggest market for PCs. Still only a third of the US, but growing very rapidly. Within 10 years, probably less, China will have more Internet users than the whole of the United States. Recently, the Economist predicted, when it was analysing the Chinese space programme, that the next man to land on the moon would be from China. So, all our moves are in anticipation of a very different Asia and a very different China in the next 10 to 20 years.

But China is already a big challenge and a big headache for countries like Malaysia. Recently, I led a business delegation to Malaysia, and some MPs accompanied me. Both Minister Rafidah and I agreed that at the coming ASEAN Economic Ministers Meeting in July, we will concentrate on a common strategy to extract the maximum benefit from the proposed China-ASEAN FTA. Before I went to Penang, Chief Minister Koh Tsu Koon called me up to apologise that he could not be there personally to welcome me because he was accompanying Prime Minister Mahathir on his overseas trip. Then he said, "Can you please talk about China and our being hollowed out by China?" When I was in Penang, I met a group of Singaporean businessmen over tea and they told me that the problem there is quite serious. In the last three years, Penang received very little manufacturing investments and many factories have been relocated to China. Before that, I was in Perak. The Chief Minister hosted me to dinner and he said, "This morning, I just told Malay businessmen in Perak, better learn Chinese." So, I asked, "Isn't that politically sensitive?" He said, "No, not at all. We have got to face up to the challenge of China."

Earlier, when I was in JB for a conference on bilateral relations, Chief Minister Abdul Ghani told me that he noticed many furniture factories in Johore closing down, and Taiwanese businessmen were all rushing to relocate in China.

If our neighbours are hollowed out, we in Singapore will lose out too, because we need complementary industries based on cheaper land and cheaper labour to sustain the higher value-added activities that we have here in Singapore. It is, therefore, completely in our interest to help the region integrate and become a good alternative manufacturing base to China for American, Japanese and European investors.

I, therefore, assure Mr Leong, Miss Low and Mr Wee that all our FTAs are negotiated with ASEAN in mind. And, because we are more open and without an agricultural sector, we can take the lead, it being much easier for us to negotiate FTAs with countries like Japan, the US, Europe and others. Under the US-Singapore FTA, for example, both sides have agreed to an Integrated Sourcing Initiative which will benefit, in the first phase, Bintan and Batam for a category of ICT products. US Trade Representative Robert Zoellick and I visited those islands with our Indonesian counterpart, Ibu Rini Soewandi just last month. Ibu Rini has just written to me to express her deep appreciation for our efforts. And, as Dr John Chen suggested, our SMEs which manufacture ICT components in Batam or Bintan, or sourced from there, can benefit from the Initiative.

We are in the final stages of our FTA negotiations with the US. This morning's Straits Times reported that the US Senate has just passed an amendment which makes it more difficult for the Bush Administration to get the Trade Promotion Authority (TPA) which it is seeking in the coming days. TPA will facilitate the passage of our FTA in Congress, but it is not absolutely essential. The big issue in the Senate, this time round, is anti-dumping, which does not really involve us.

Earlier this year, we completed our FTA with Japan, and both Houses of the Japanese Diet have recently passed the required legislation, and the FTA will come into effect later this year. We have also concluded negotiations with EFTA, the European Free Trade Area consisting of Norway, Switzerland, Iceland and Liechtenstein. Our negotiations with Mexico, Canada and Australia are on- going, and we are, presently, lobbying support among the member countries of the EU for the launch of an EU-Singapore FTA which is positively regarded by EU Trade Commissioner Pascal Lamy. 1.00 pm

All these FTAs give businesses here better access to various markets and strengthen Singapore as a premier manufacturing and services hub in Asia. They also help us to help our neighbours. I know that there has been some misunderstanding about how FTAs work, but I am glad that our neighbours are now much clearer how they can benefit from them. You would have read in the newspapers about Thailand and the Philippines also being interested in having bilateral FTAs with Japan and the US.

ASEAN's greatest advantage is that, unlike China, we do not pose a strategic challenge to the big powers. We threaten nobody and therefore, we can be friends with everybody. China, too, wants ASEAN as a friend. When Vice President Hu Jintao was in Singapore recently, he said that China felt a deep responsibility for ASEAN. China's offer of an FTA with ASEAN, which will make us the world's biggest FTA of close to two billion people in 10 years, is of very great political significance. ASEAN's best response is to accept China's offer but, at the same time, make sure that we have close economic links with the US, Japan, Europe, India and Australia. Then, we minimise our dependence, we diversify our markets and we maximise our own space.

Mr Leong, Dr Chen, Dr Chong, Mr Wee and others have expressed their concern about competition from Malaysia and this seems to be a recurring theme during the last few days. Many Singaporeans naturally worry about the loss of Maersk and Evergreen to Tanjong Pelapas. Malaysian leaders have also announced quite openly their intention to take away from us logistics, petrochemical and other businesses. Johore Chief Minister, Abdul Ghani was reported to have said that Johore's cooperative relationship with Singapore has ended and the new relationship is one of competition. I think he must have been misreported. Malaysia is our second most important investment destination and half of our investments go to Johore. More than 60% of foreign tourists who visit Malaysia go through Singapore, very many of them Singaporeans. If the dominant economic relationship between Johore is not cooperative but competitive, the consequences for both sides would be very severe.

Of course, in some areas, we will compete like in the port business. We were not pleased that Maersk and Evergreen had been lost but no one believes that PSA is taking all this lying down. We did not become one of the world's greatest ports by being unresponsive to changing market conditions. Ditto for Changi Airport. In the logistics and transportation business, we intend to keep the position that we have had since Sir Stamford Raffles established Singapore as a trading post for the East India Company, and we have deep strengths. The key is the efficiency and fairness of our public administration - no corruption or cronyism, complete rationality in the systems we operate, competitive pricing and keeping our doors open to the best operators in the world. For petrochemicals, yes, other hydrocarbon-rich countries have cheaper feedstocks but we are very efficient and we intend to stay that way. If we have not been more efficient, we could never have kept the refinery business when our neighbours built their own refineries.

For most economic sectors, our relationship with Malaysia is a complementary one, with electronics the most obvious example. In fact, to be very frank, our worry here is that Malaysia is not producing enough technical manpower for the industry. Take wafer fab as an example. In Shanghai at Jia Ding, they are building a wafer fab park that will be drawing in billions of dollars of investment. We are still some years ahead of China. We are going into 12" wafer fabs while China is still trying to get equipment for 8" wafer fabs. They will compete against Malaysia's two 8" fabs in Sarawak and Kedah. If Malaysia does not keep up with China, they will be affected and we will be disadvantaged.

Minister Rafidah understands the importance of the bilateral economic relationship. She wants more Singapore businessmen to invest in Malaysia. She told me that she is coming down in early August as a guest of SCI to promote Malaysia to Singapore investors. When I told her that despite occasional bilateral problems, we were like Siamese twins, she agreed heartily and referred to Eng and Chang. I thought it was Chang and Eng. I suppose Malaysia must be Eng and we must be Chang. She told members of my business delegation in KL recently to ignore reports of bilateral problems and that the economic relationship will continue. The fact is, we need each other. Bilateral trade between us makes up half of total intra-ASEAN trade. Without Malaysia and Singapore, there is very little left in AFTA. We are major investors in each other's economy. Thus, the major challenge for Singapore is not Malaysia, but China and our response to China requires us to strengthen our links in ASEAN, especially our links to Malaysia and Indonesia.

Mr Leong and Mr Wee asked about our relations with Indonesia. With devolution of power to the provinces and to the regencies, the local authorities near Singapore are very keen to work directly with us. We are prepared to work with them to help them build up their administrative capabilities. But we are very mindful that everything we do must have the blessings of Jakarta. The Indonesian economy will take some years to recover from the disruptions of the last four years. We can play a modest role in helping Indonesia to recover. Once there is political stability, Indonesia can be very competitive because of the favourable exchange rate. Many MNCs have told us that if the environment for manufacturing in Indonesia improves, Indonesia and Singapore, as a combination, can be more than a match for China on many manufacturing activities. Unfortunately, it is not so simple but Minister Rini and I have been working very hard in the last few months to break new ground.

Mr Wee asked how we can benefit from our position in between India and China. Indeed, India is an important part of our strategy to place Singapore as a hub for a region marked out by a seven-hour flying radius around us. We have good political and economic links with India. Recently, Prime Minister Vajpayee proposed to Prime Minister Goh a Comprehensive Economic Cooperation Agreement between the two countries. The Joint Study Group has already been formed and expects to complete its recommendations at the end of one year. Like China, India is a huge country and conditions can vary quite a lot from state to state. In sectors like logistics, IT and telcommunciations, there are interesting opportunities. Since PM Narasimha Rao's policy of opening up India more than 10 years ago, Singapore has positioned itself as India's long-term strategic partner, as a Hong Kong to India. With India's bilateral trade with China growing rapidly, there are many opportunities for our businessmen to work with both sides.

Mr Inderjit Singh worries about the competitiveness of manufacturing in Singapore. I am glad to report to this House that we have not done badly at all.

Earlier this year, after September 11, when the picture looked rather bleak, AMD and UMC announced their intention to build jointly a 12" wafer fab in Singapore based on 0.065 micron technology. Such technology does not yet exist anywhere in the world today. But the two companies are confident that, with the commitment we give to R&D in Singapore, that technology will be available by the time the plant is open for operation in 2005. This is a multi-billion dollar investment.

The protection of intellectual property, a point made by Mr Wee Siew Kim, is very important for such investments. This is one major advantage we enjoy over countries like China. Two months ago, I opened two new facilities built by the pharmaceutical giant Wyeth in Tuas, costing $550 million. As I took leave, the Chairman pulled me aside and said, "Your protection of intellectual property is crucial to our decision to build those plants." And this is why we are doing a lot to build up an entire regime for the protection of intellectual property in Singapore.

Another good example is the Toshiba-Matsushita Joint Venture to build Thin Film Transistor Liquid Crystal Displays (TFT-LCD) for television and other electronic products. This is state-of-the-art technology. The panels will be used in all kinds of electronic products and will replace the cathode ray tube in television sets and computer displays. The plant in Pasir Ris, which should be one of the largest LCD plants in the world, will start operation in the second half of this year.

Recently, Philips decided to set up its global development centre also for LCD TV in Singapore. Its facility here will cover a full range of activities, from product creation to testing and marketing. The CEO of Philips in Singapore, Johan van Splunter said, "Singapore was chosen for its conducive environment and ready talent pool. The pro-business infrastructure and strong government partnerships further facilitate the growth of Philips' businesses here." Many of us would have read the Straits Times and Business Times reporting that we are losing 12 senior executives to Hong Kong, but that is small compared to what we have here. Philips has a staff of 3,000 in Singapore, including 800 engineers at the Philips Innovation Campus and has every intention to build on what it has here. There are other examples in manufacturing which I do not have time to go into today.

In the biomedical sciences, we are making good progress. Last year, the pharmaceutical sector was a bright spot, growing at over 10% despite the recession. We have announced two one-billion dollar funds, one to promote private biomedical R&D in Singapore, the other to invest in cluster development. Yesterday, Mr Leong Horn Kee asked why Mr Philip Yeo was reluctant to provide more details. The reason is obvious. There is no need to provide such information to our potential competitors.

Work on the Biopolis is proceeding on schedule. Last year, both Eli Lilly and Novartis have announced plans to set up important research facilities in Singapore. You would have read in the newspapers that the Genome Institute of Singapore was opened recently.

When Dr Alan Colman, the scientist who cloned Dolly the sheep, decided to relocate to Singapore to work for ESI which is a company producing stem cells, it caused considerable discomfort in England because we are all in the game of attracting talent. This is an interesting company, ESI, which has been formed to exploit the commercial benefit of the stem cell lines which Dr Arif Bongso of NUS has developed. You will remember that last year, President Bush approved for federal funding, work on 60 existing stem cell lines in the world. We have six of them which Dr Bongso developed in collaboration with scientists in Australia and Israel. Dr Bongso himself, a Sri Lankan, was recruited by the late Prof. S Ratnam many years ago. All these have put us in the scientific literature and on the world biomedical map.

This year, a team of 10 scientists specialising in cancer research from Kyoto University, headed by Professor Yoshiaki Ito, has relocated to IMCB because of our commitment to the development of biomedical sciences and our ready acceptance of foreign talent in our midst. They know they are welcome here.

I cite these few examples to make the point that our willingness to make adjustments in order to stay ahead of the competition, that is in itself a major competitive advantage. Our reputation precedes us. Companies know that when they have problems in Singapore, we will help them solve those problems. Remaking Singapore is not easy, especially when we are not doing badly. But it must be done. And others are watching us, watching what we do. 1.15 pm

Mr Tan Soo Khoon, during the Budget Debate and Mr Leong Horn Kee yesterday, asked why we have to rename NSTB, TDB and PSB to A*STAR, IE Singapore and SPRING. The reason is because we have reorganized these statutory boards and set them new missions.

NSTB has transferred $2 billion out of its 5-year $7 billion budget to EDB, the portion which is used to incentivise private R&D activities, which we call RISC funding. NSTB has reorganised the Research Institutes, consolidating 13 existing ones to nine, and establishing four new ones. There will be further consolidation in the future. Our objective is to build strong multi-disciplinary, applications-oriented research entities for industry. Our emphasis is not on research for research sake, but research to help build up long term economic capabilities here.

When I was in Penang, they do not have what we have. And so they recognised they are in a difficult position. Much more emphasis is now placed on the development of Singaporean scientific manpower for which $500 million has been set aside. The key to success will be the quality and quantity of top talent that we are able to root here in Singapore. If we can do it we will thrive. If we cannot, then we will move down the league table, that is that. Because of the redefinition of NSTB's function, we decided to add "Research" into its name and rename it an Agency to signal its greater closeness to industry.

The old TDB was principally concerned with trade development. With the growth of our external wing, we need to support not only our traders but also increasingly our overseas investors. Mrs Lim Hwee Hua correctly spoke of the need to distinguish between GNP and GDP. This is because our overseas portfolio, both direct and indirect, will become more and more important in the future. Because we have a high savings rate and receive substantial inward investments, we have become a major capital exporter to other countries. We have become a significant investor in every ASEAN country and beyond, in China, Hong Kong, India, Australia and other countries. Where we can help our investors overseas, we should. Our concern is no longer trade alone, although trade remains very important and has a sub-group working on it under the ERC. For this reason, TDB has been reorganised to help Singapore companies regionalise and globalise, and hence the change of the name to International Enterprise Singapore. IE Singapore will support the Singapore Business Federation if it decides on the kind of industry associations which Mr Inderjit Singh proposed yesterday. I apologise to Mrs Lim Hwee Hua for not providing the GNP data she asked for in the past. I will chase the Statistics Department, but it is not a simple matter, collecting this new information.

PSB has handed over its international functions to IE Singapore. It will no longer organise overseas missions. But it will remain the principal economic agency to help our 100,000 SMEs, only a few of which can think of going overseas. For many years, PSB has been promoting productivity and standardisation with considerable success. However, this is no longer enough in a fast-changing world. Innovation has become very important for the improvement of a country's Total Factor Productivity. Productivity improves what is inside the box. Standardisation turns boxes of different shapes and sizes into standardised containers. Innovation encourages us to look outside the box. This is therefore a major addition to PSB's mission. The name SPRING includes Innovation after Standardisation and Productivity, all of which are meant to enhance Singapore's total economic performance, which in the end translates into higher profits and wages. I was delighted to hear Mr Zainul Abidin's compliments about the name SPRING yesterday. The new names have been chosen precisely to signal change and to express a certain freshness. But I fully understand why some people may not take to them. We could have continued using the old names and carried on. But putting new wine into old bottles devalues the new wine.

One place we must remake is Sentosa. This was raised by Mr Leong Horn Kee yesterday. It has been a symbol of Singapore's success for many years and well-known throughout the world. But in recent years we were not able to make fresh breakthroughs. Facilities like Fantasy Island and Asian Village, have failed. The land has since been taken back by Sentosa. When Mr Alan Choe retired, I invited Mr Philip Ng to take over as the new Chairman. He was a little reluctant at first because his company, Far East, was thinking of making bids for land in Sentosa Cove. So I assured him that we could ring-fence the Cove from him and his company can continue to tender for the land when it is up for tender. Then after that, the CEO, a civil servant, was retiring. Mr Philip Ng looked around for a Singaporean to take over, because so many MPs have raised questions about Sentosa, he wanted to show sensitivity. So I had lunch with him and I told him, "Philip, my job is to defend you in Parliament. You choose the best man for the job. Please do a global search." So he has selected Darrel Metzger, an American who had worked before in Tokyo's Disneyland, in Hong Kong's Ocean Park and in Hawaii's Atlantis Adventure. In the coming months, Sentosa will be making major announcements, including a major reduction in entrance fees to the island. Now, I do not wish to steal Mr Philip Ng's or Mr Darell Metzger's thunder. Also we should give the Chairman and Members of the Board maximum flexibility to do their work and not make them feel that every project is somehow under parliamentary oversight.

Mr Inderjit Singh asked whether and when we are going to introduce a Competition Law. This is not a simple piece of legislation because such a law, instead of promoting competition, may raise cost and act to the detriment of consumers. This note of caution was raised very thoughtfully by Mrs Lim Hwee Hua yesterday when she asked: are we sure more competition is better in every case? We have studied carefully the experiences of other countries and circulated various draft legislation for comment in the private and public sectors.

We have more or less settled on a few key ideas. In general, the law will prohibit anti-competitive behaviour such as price fixing and abuse of dominance. Dominance by itself will not be disallowed. But abuse of dominance will be actionable. A Competition Commission will be set up as a horizontal agency covering all industry sectors. Some activities may have to be carved out in the public interest. Where there is conflict between the Competition Commission and domain regulators, like IDA, a defined process would have to be followed. We will bear in mind Mrs Lim Hwee Hua's point that we must not make mergers and acquisitions unnecessarily difficult. Our aim is to have such a law within two to three years, but because of its sweep, extensive consultations with industry will have to be carried out. As a matter of principle, we will allow parallel imports to prevent price discrimination against Singaporeans by big suppliers, which was a point raised by Mr Tan Soo Khoon yesterday in connection with "white pumps" and by Mr Ong Kian Min in connection with distribution channels.

Last year, at the Committee of Supply, I announced the formation of a CASE-MTI Task Force to look into the enactment of a Consumer Protection Law. The Task Force has since put up its report and I am pleased to inform Mr Yeo, Dr Teo and Prof. Chin Tet Yung that we will table a Bill for the enactment of such a law this year.

The Task Force proposed a simple piece of legislation which will help consumers seek civil remedies. As the amounts are small, most of these cases can go to the Small Claims Tribunal. Where there are reasonable grounds for complaint, CASE will assist them. The law will provide for civil but not criminal remedies because there already exist laws for criminal cases like the Consumer Protection Act, the Penal Code, the Miscellaneous Offences Act and the Commodities Futures Act.

I would like to thank Mr Yeo Guat Kwang, his predecessor Dr Teo Ho Pin, and their colleagues in CASE for helping MTI come to such a position.

Prof. Chin proposed the establishment of a statutory board specifically to protect consumers. We might do that one day, but for the time being, I think let us regulate with a light touch rather than with a heavy hand. Whatever the laws in place, buyers should always beware. If a deal looks too good to be true, it probably is not.

Let me assure Mr Yeo that MTI will continue to support CASE in its efforts to educate and protect consumers.

Yesterday, Mr Tan Soo Khoon, having read Business Times' report of a recent representation to MTI by the major oil companies, asked whether the Government was going ahead with "white pumps". Let me confirm that we have every intention to. We have earlier identified some sites to try out the concept, but they were dropped due to security considerations after September 11, except for a new site in Punggol. This is a site in HDB's reserve list of sale sites for an integrated development of residential, commercial and petrol pumping facilities. The oil majors have raised valid points about the importance of a level playing field so that petrol stations will not compete at a disadvantage. We will study them and take them into account. For the Punggol site, we will open it to public tender.

As for the mini-marts operated by petrol stations, which Mr Tan Soo Khoon is opposed to, they are a convenience for all of us and I think they should not be disallowed. In any case, since we are allowing supermarkets to go into the petrol pump business, we should not prevent petrol pumps from going into the mini-mart business.

The Senior Minister of State for Trade and Industry (Mr Tharman Shanmugaratnam): Sir, many Members have expressed concerns about the problems and challenges that our SMEs face.

Sir, the Government places great importance on developing a vibrant SME sector. It recognizes the difficulties faced by small firms in getting access to financing, or in investing in technologies and capabilities before they have acquired economies of scale. I will address Members' queries on how Government is assisting the SMEs. But first let me elaborate on the issue of business costs as was raised by several Members, including Mr Inderjit Singh, Mr Ong Kian Min, Miss Penny Low, Mr Arthur Fong, Dr John Chen and Mrs Lim Hwee Hua. As the Minister has said, the Government takes very seriously the issue of cost.

There are three main components in business cost: land, wages, and what Mr Inderjit Singh referred to as hidden costs, or charges and levies imposed by Government, such as utility fees. Land costs are of concern to the Ministry, particularly industrial land. We agree with Mr Inderjit Singh that land has to be priced to ensure that manufacturing remains viable in Singapore. Land is zoned for industrial use in Singapore for this reason. The State has provided a substantial amount of industrial land which will secure the long term requirements of our manufacturing sector.

Land is scarce in Singapore and we cannot match land prices in much larger countries or those with much lower standards of living. Our approach in industrial land is therefore not to match the lowest prices internationally, but to make the most competitive use of the little land we have. Hence, we ask industrialists to make more intensive use of their land and cluster together to share common facilities. JTC now builds factories, which used to be on the ground level, on multiple storeys with vehicular access. These are popular with companies. Our petrochemical companies occupying huge tracts of reclaimed land are also competitive because of the advantage of large scale integration.

Sir, current land prices in Singapore are competitive. JTC's posted industrial land rentals in urban and suburban areas have declined by about 40% since the peak in 1996, while those in outlying areas have fallen by about 19%. Singapore's prime CBD office occupation costs are now much lower than in Hong Kong, Taipei, and even Beijing. They also remain lower, of course, than Tokyo, London and New York. Not every business will find Singapore's land costs competitive with other locations for the particular activity they are engaged in. But at current prices, we are fully able to attract a range of industries that add value to Singapore.

During the current economic conditions, the Government has reduced rentals so as to help companies, especially SMEs, cushion the downturn in their revenues and cash flow. The JTC rental rebates are due to expire in June. The Government has decided to extend the rebates to the end of the year. A total of 9,000 companies, including 5,000 SMEs, will continue to benefit from JTC rental rebates, which are currently about 20% on average and, in some cases, up to 30%. 1.30 pm

Besides giving direct rebates, JTC has liberalised several of its policies to give its customers greater flexibility in managing their costs. I will cite several of these measures because the specifics are important. Members may not be aware of them, and they do add up to a significant improvement in business costs.

First, JTC now allows firms to sublet up to 50% of their space. For lessees, as distinct from tenants, they are allowed to sublet as much space as they want after the first five years. This liberal subletting policy allows the firms to better manage operating costs. It also makes it easier for small firms to obtain space by subletting from someone else, instead of paying for an entire factory unit.

Sir, companies affected by the downturn are now allowed to defer their committed investments for a year or more on a case-by-case basis by the JTC, so that they can use their available funds to meet immediate operational requirements. In addition, industrialists whose leases are expiring but who are unable to decide on their investment plans due to business uncertainties are allowed to defer the renewal decision for two years while remaining in their sites as tenants.

JTC also has a scheme to help small companies that are starting out new businesses or new product lines to overcome cash flow difficulties during the initial years. It gives them rental discounts of 70% in the first year, reducing to 30% in the third year. This is the New Business Creation Incentive Scheme. JTC is, in addition, designing no-frills facilities to help SMEs who need fairly standard functional spaces to minimise their costs.

Under a further relaxation of JTC rules, exiting tenants no longer have to restore their premises to their original use if the incoming tenants are prepared to take over the premises in their current state. This saves cost for both the exiting and incoming tenants. JTC has also increased the supply of land with shorter tenures of 20 years or less, in response to requests from SMEs.

Finally, the application process for JTC space has itself been vastly simplified. Application forms have been shortened from 11 pages to 3. SMEs no longer find themselves having to engage consultants to produce in-depth business plans as part of their applications. All this reduces cost.

Mr Inderjit Singh suggested that owners of factories should be allowed to sell back their factories to JTC and then lease the premises from JTC. JTC is not keen to take on this role. Buying back and leasing is essentially a financial arrangement that the private sector is able to provide and, indeed, has begun to provide in a number of cases.

Sir, the other major component of costs is wages. To stay competitive, wages cannot run ahead of productivity. However, the objective of economic policy is not to force wages down but to raise productivity, so that workers can enjoy higher standards of living. We may have to cut wages during a bad economic downturn to save jobs, as the Government has done by reducing employer's CPF contribution rates across the board. But the longer-term solution for competitiveness lies in upgrading skills and capabilities in Singapore so as to increase productivity.

Sir, we agree with Mr Inderjit Singh that other cost components, in particular Government fees and utility charges, should be kept as low as possible, so as not to load up business costs, except where there are specific policy objectives, such as energy and water conservation. Mr Raymond Lim will be elaborating on keeping such costs competitive, including the business of electricity tariffs.

Sir, there is a wide array of assistance schemes to help SMEs. Mr Inderjit Singh feels that there are too many schemes administered by too many Government agencies, and suggested that we should form a one-stop agency overall in charge of nurturing and growing local companies. As the Minister has just mentioned, SPRING Singapore is the primary agency serving domestic SMEs. It also provides SMEs with a one-stop service to advise them on which assistance schemes, anywhere in Government, are best suited to their needs, and refers them to other agencies where necessary. SPRING Singapore has advised several thousand SMEs in this process of seeking out the best assistance in Government, given their needs. We still find cases where SMEs are sent from pillar to post when they seek Government assistance, but the instances are now few. The multi-agency approach, with SPRING Singapore serving as a central point of contact, allows for solutions to be customised to a very diverse range of companies - some domestic, some going international, some very small, some past the mezzanine stage, some with financing needs and others with various specific capabilities that need jacking up, and across a whole range of industries. However, MTI agrees that we need to streamline and rationalise our incentive and assistance schemes, and intends to do so.

Mr Singh also felt that we are imposing MNC-type rules and criteria when assessing applications by SMEs for grants and incentive schemes. Sir, the schemes operated by EDB and IE Singapore to help companies grow do not give special preference to small companies. However, Members may be surprised to know that where EDB schemes are concerned, 50% of the total number of projects assisted last year were for local enterprises, and 10% were for local SMEs. Under IE Singapore's grant scheme to help companies develop overseas markets, 73% of the projects assisted were for SMEs. Further, all of SPRING Singapore's assistance schemes are focused on SMEs. There is no lack of support for SMEs.

Mr Singh also suggested that we categorise SMEs into those with and without growth potential. This is indeed what EDB and IE Singapore have been seeking to do, so as to focus resources and assistance on companies with the acumen and willingness to upgrade, and which have had some measure of success. However, the definition of what constitutes a growth company will have to remain soft, to ensure that promising companies are not denied support on the basis of inflexible criteria. If every company had to smell like a rose, look like a rose and feel like a rose before it stood the chance of being accepted as a rose, we would end up with a very small rose garden.

Mr Wee Siew Kim has asked that Government be more pro-active in identifying global and regional champions. However, Mr Inderjit Singh felt that Government should outsource the selection of promising local enterprises (PLEs) to the private sector, as Government officials cannot be relied upon to choose winners correctly. The Government's approach is to recognise winners that have been chosen by the market. We welcome feedback and nominations of PLEs and potential regional champions from the private sector.

Next, access to financing. Mr Inderjit Singh, Mr Ong Kian Min, Mr Arthur Fong, Dr John Chen and others have pointed out the difficulties that SMEs have in obtaining financing. Their concern is valid. In fact, in most countries, start-ups and SMEs at an early stage find it difficult to obtain bank loans. In the US, for instance, few start-ups and early stage ventures obtain their financing.

As Members have pointed out, the tradition among Singapore-based banks has been to lend on the basis of balance sheets rather than cash flows. This has led to particular difficulties during the economic downturn, because of falling asset values. The Ministry is encouraged by the interest of some banks to develop cash flow financing facilities. The banks will have to build up the expertise to make cash flow projections and monitor companies' positions on an ongoing basis. But the SMEs themselves will have to open up their books to the banks, much more than is the case for traditional financing, and develop better methods of financial management. SPRING Singapore has implemented a Financial Advisor grant scheme to help SMEs in doing so.

Dr John Chen and Mr Arthur Fong were concerned that present Government financing schemes for SMEs were also asset based and do not provide working capital or business cycle financing.

Sir, the Government has been paying special attention to working capital financing, including cash flow financing. Under the Local Enterprise Finance Scheme (LEFS), Government has made working capital loans to over 400 firms last year, compared to 35 a year earlier. SPRING Singapore's new Micro Loans Programme, which provides loans of up to $50,000, very small amounts but to very small companies, without requiring evidence of orders in hand, has been very popular. More than

500 Micro loans have been granted since November last year, when the scheme was first started.

Sir, the Government has also increased its share of the loan risk under LEFS, from 50% to 80%, in the two off-Budget packages last year to encourage the participating financial institutions not to cut back on lending under the scheme during the economic downturn. Similarly, Government funding for certain schemes under the Local Enterprise Technical Assistance Scheme (LETAS) was raised from 50% to 70%.

The LEFS and LETAS enhancements are due to expire at the end of next month. Government has decided to extend them to the end of the year to help tide SMEs over while the economy is recovering.

SPRING Singapore is also exploring a Loan Insurance Scheme for SMEs, whereby participating financial institutions buy insurance on the market to cover part of the risk of loan default. SPRING Singapore will help defray the insurance premium costs. It hopes to introduce the scheme later this year, which should widen the financing options open to SMEs.

Mr Inderjit Singh has also suggested that the LEFS scheme be expanded to allow for hybrid financing by participating financial institutions, for example, where VCs and investors provide convertible loans or subscribe for preferred shares. We agree with Mr Singh that this is worth looking into. However, we will need to adjust the terms for LEFS, including the question of whether it would still be appropriate for Government to share 80% of the risk when the investors are using equity-type instruments.

Dr John Chen asked for the Government to take more direct stakes in SMEs and start-ups. This is indeed what EDB's Start-Up Enterprises Development Scheme (SEEDS) seeks to do. SEEDS was set up in October last year. So far, about 40 applications have been approved, amounting to an equity injection of $10 million from SEEDS, with a matching injection of $10 million from the private sector.

Next, capability development. Sir, the Government has sought where it can to improve SMEs' access to financial markets. That is the first prong. The second prong of Government assistance to SMEs is to help them build up their capabilities.

Our cost environment will never match that of countries with a lower standard of living than us. But SMEs can grow and succeed by developing the capacity to innovate. Many other high cost countries have a vibrant SME sector. Denmark is one example. It has thriving SMEs, and their level of productivity averages 86% of that of large enterprises. In Singapore, SMEs' productivity is about 60% of the national average. In Germany, most of the companies in the precision engineering industry, where Germany is widely acknowledged to be the world leader, are SMEs. In the state of Bavaria, for instance, SMEs account for over half of the total manufacturing sector's employment and about 40% of manufacturing turnover.

Sir, Mrs Lim Hwee Hua said that we should not neglect Old Economy firms. We agree with her. Innovation is as important in the Old Economy as in the New Economy, and the labels themselves are wearing thin as knowledge-based enterprises spring up in what used to be thought of as Old Economy industries. We have had several home grown successes in some of these industries. The food industry is a good example. Apart from well-known examples like Tee Yih Jia and others who have made it big internationally, there are several other local companies with great promise. Let me mention two companies which I visited earlier this year, and whose founders I met. They are examples of companies which have, even in the downturn, continued to innovate and experiment with new products, processes and concepts, and have succeeded.

The first example is Tac's Pte Ltd. Tac's turns industrial waste in the form of raw soybean residue into nutritional bakery food products which are high in dietary fibre. The residue is called OKARA. It is a Japanese concept. The idea came from founder Bill Lee's encounter with a Japanese scientist who introduced him to the concept. From a small family business running a traditional cafeteria at the Singapore General Hospital, Tac's now has a 7,000 square feet factory with its own R&D department, creating original soybean based bakery products, including OKARA burgers.

A second example is BreadTalk, a boutique in what must be one of the oldest food industries. They have been able to differentiate themselves from other bakeries by creating original pastries that appeal to Asian tastes, such as their signature pork floss bun. George Quek, BreadTalk's founder, started his entrepreneurial career in Taiwan, where from a very humble start, he built up a successful food stall. He returned in the early 90s and started his first food court at Junction 8, where he introduced the concept of profit sharing with his stall operators, and brought in foreign fare like Thai and Japanese food in addition to the regular food court staples. From his experience in running a multi-fare food court, George struck on the idea of putting traditional Asian favourites like "bak hu" and "tom yam" into bread and buns. He started BreadTalk, which has now grown to 13 outlets in Singapore and is now planning his expansion into China and the rest of the region.

Sir, neither Bill Lee nor George Quek started off in high-tech or knowledge-based businesses. But they have succeeded by experimenting and investing in new concepts, taking calculated risks and executing their strategies carefully. Both firms received grants and loans from Government to help them in their innovations. Both are located at JTC's Kampong Ampat Foodlink, which is a facility designed to allow for cost synergies among food manufacturers. 1.45 pm

Sir, the LETAS scheme, which I mentioned earlier, helps SMEs improve their business capabilities in a range of areas - product, business and market development, brand development, as well as technical and operations improvements. Even in the economic downturn, the number of grants approved under LETAS increased by 11% last year. In addition, SPRING Singapore's Jumpstart E-commerce Programme has helped one in three SMEs make e-commerce part of their business operations, by getting them to adopt affordable ready-made shared solutions.

Mr Zainul Abidin Rasheed expressed concern that improving the productivity of companies may lead to less employment. Sir, if our enterprises are more productive and efficient, they will be more competitive. Most, even if not all, will hire more workers as their business volume goes up. A productive economy and vibrant enterprise scene will also attract new investments and new businesses, leading to greater employment overall.

Sir, Miss Penny Low asked that Government help SMEs who cannot upgrade and cannot compete effectively to exit gracefully. As a general principle, entry and exit have to be left to the market. However, the SME retail sector in HDB estates faces a special, structural problem. There is an excess supply of shops in some estates and not enough business. Some rationalisation is unavoidable and will help those shopkeepers whose business remains viable. As Members know, the Government has piloted a Voluntary Retirement Scheme in seven selected estates. Last year, about 95 shopkeepers, or 35% of those affected, decided to take up the offer of ex-gratia payment and exit from the business. The ERC Subcommittee on Domestic Enterprises is considering a proposal to allow merchants or neighbourhood associations to initiate the Voluntary Retirement Scheme (VRS) for their neighbourhoods, rather than leaving the selection to HDB.

Sir, it would be mistaken to assume that the entire SME sector is mired in problems. I have highlighted a few examples of enterprising SMEs that have thrived in this difficult business environment. SMEs, as a whole, are also expressing more confidence now that the economic downturn is bottoming out. SPRING Singapore's survey of SMEs in December last year showed that 82% of SMEs felt that they could survive at least seven months or longer, up sharply from 46% of SMEs in July. In March this year, another survey showed that the proportion of SMEs reporting worsening cash flow dropped to 56% from 86% in December.

The Government will do what it can to improve and refine the assistance it renders to SMEs. But Government can only act as a catalyst, and not a continuing source of support. We can give promising firms a leg up, not a crutch. The best way for the Government to help SMEs grow is to provide a pro-enterprise environment that facilitates the growth of enterprises by keeping taxes low, removing barriers to entry and exit, and maintaining a level playing field for all competitors. The SMEs are responsible for their own survival and growth in this competition. If they continuously upgrade their capabilities, develop their human capital, and invest in innovations, they can get ahead of the competition and withstand the vicissitudes of the economic environment.

Mrs Yu-Foo Yee Shoon asked that Government upgrade and revitalise Jurong Industrial Estate. Jurong is a vibrant industrial district. It has seen several new state-of-the-art specialised parks, such as Tuas Biomedical Park, Jurong Island Petrochemical Hub and the Chemical Logistics Hub. However, although there have been new housing developments, shopping centres and leisure facilities in the Jurong region, Jurong was planned as a predominantly industrial-use estate. This has given rise to the perception of a lack of buzz in Jurong.

JTC and URA are therefore looking at how Jurong can be reinvigorated, including introducing more mixed uses and creating a work-live-learn-play environment in the long term. The transport infrastructure in Jurong will also be improved - last October, the Ministry of Transport announced plans for a new light rapid transit line in the Jurong region. In addition, JTC is undertaking en bloc development of selective sites to rejuvenate the estate. And the experience of those en bloc exercises so far has been very successful. We will get more feedback from Mrs Yu-Foo and other MPs in Jurong as our plans progress.

Mr Ong Kian Min has highlighted that industrialists in Tuas find it difficult to attract employees, due to inadequate public transportation infrastructure there. We have had similar feedback from industrialists. As Tuas Industrial Estate is new, public transportation is not as extensive or as frequent as desired because of the high costs involved in providing a service to cater for the peakish ridership over a widely dispersed area.

JTC is currently working with the Ministry of Transport and the public transport operator (SBS Transit) to improve public transport service levels. As an immediate solution, SBS Transit will be refining some of the existing services to provide a direct connection to Tuas and shorten the travelling time from Boon Lay.

Mr Ang Mong Seng and Mr Ong Kian Min had commented that tenants in JTC's amenity centres should be allowed extensions in their leases beyond the current nine years. Mr Ang also suggested fixed rental rates to help keep costs down. JTC amenities are leased out on 3-year terms, with an option to extend the lease for a further 3-year term, up to a maximum of nine years. The amenities are put for re-tender after the nine years.

Re-tendering is part and parcel of market competition. It provides opportunities for new entrants, and establishes fair market value. Existing operators should be able to recover their investments over a nine-year period as the upfront investment in canteens is not high. Re-tendering to establish fair market value is better than JTC having to decide on an appropriate fixed rental. JTC recognises that its earlier tender mechanism may have contributed to overly high bidding by new entrants. It has improved its tender mechanism to ensure that the process is fair and transparent to all parties. It has introduced premature termination clauses to discourage bidders from submitting unrealistically high bids just to try out. Other recent improvements include an open e-bidding system, somewhat similar to the open COE bidding system, where bids are transparent for all to see.

Mr Inderjit Singh (Ang Mo Kio): Sir, I would like to touch on the issue of promoting entrepreneurship.

While the new tax measures are welcome, the basic issue for entrepreneurs is cost first and foremost, and whether they get taxed at 24% or 20% rate is just a small issue. I can personally vouch for this, given my many experiences of starting up companies and working with start-ups. Entrepreneurs aim to create so much of wealth that the tax rate is a small issue because of the great wealth they are going to create. It becomes an issue after they have become rich. Their real worry in their early days is whether they survive or not, and for sure the cost factor is the biggest issue for them. They will be extremely grateful and will remain very loyal to Singapore if we address their survival concerns, and this involves costs and access to funds. The immediate impact of the tax issue is to attract the already rich and the already successful. I think we should also try to focus on entrepreneurs who are trying and who are basically "PhDs" - poor, hungry and driven.

In addition to the financial cost of creating new companies, one big factor is the cost of failure. And by cost of failure, I do not just mean the social cost (that one is one of intolerance to failure, which we have a problem here in Singapore), but also the high price one has to pay because of the high cost of living in Singapore. Having failed in a business may mean one never being able to own a house or a car for a long time. Such fears deter many from taking risks.

While I can spend a lot of time talking about entrepreneurship as I have spent a lot of time on it, I would like just to go to some specific issues which I feel need addressing. I am very encouraged, listening to the Minister and the Senior Minister of State, that there are many new initiatives, and I think these will really help.

On the issue of EDB's SEED financial scheme, I think that has helped a lot. Can I suggest that we include the amounts that an entrepreneur may have already spent on his own, including in kind or in cash, and also what the entrepreneur may be spending from his own pocket moving forward, when they consider matching the grant, and not just matching what the new investors are going to put in? This will greatly help them. Matching something that he is going to put in over time can mean that he may draw down on the SEED funds over a period of time.

The second issue is one of streamlining rules and regulations to cut down on red tape, especially licensing requirements. We talked about the 12 licences needed to operate a pub. In this respect, we have a pro-enterprise panel that the Government has set up. This has been very effective in trying to resolve issues that businesses face. This is headed by Mr Lim Siong Guan, who has tremendous influence over many Ministries. I hope that the pro-enterprise panel will be a permanent feature so that we can continue to address the issue of red tape and bureaucracy.

We should also make it easier to register as well as to shut down companies. The nature of entrepreneurship is that entrepreneurs have limited resources and have to face the risk of failure. While there have been improvements in setting up companies, we should make it even easier to start up companies. Shutting down companies can be a nightmare too, and it is a very onerous task and takes a long time to happen and costs a lot of money. We need to change the rules to allow easier shutting down of companies, in addition to easier setting up of companies. The cost of maintaining a company is also an issue, where there are many regulatory requirements from the Registry of Companies and Businesses and also from IRAS.

Sir, I suggest that, in addition to the many financing schemes and funds that were given to VCs, we set up a special entrepreneurship fund that can be farmed out to a group of Singaporean businessmen or entrepreneurs who already have experience. They could manage this fund on behalf of the Government. I think this will complement the VCs that are already here in Singapore.

Finally, on the issue of HDB shophouses, the Senior Minister of State mentioned this. Can I suggest that the vacant HDB shophouses that come about be converted to offices for technology type of start-ups that are basically light industries and those which are non-polluting? This, in addition to helping to lower cost, will help make the neighbourhood more vibrant and also increase availability of space, thus allowing cost of commercial spaces to come down further.

Mr Zainul Abidin Rasheed (Aljunied): Sir, entrepreneurship, we all know, is today's buzzword. In fact, Senior Minister Lee Kuan Yew, speaking on entrepreneurship in Singapore earlier this year at the Ho Rih Hwa Lecture on Entrepreneurial Culture, gave his prognosis. I suppose the debate will continue whether we can nurture entrepreneurship or whether it is born with such people. MTI should look at entrepreneurship from a wider perspective as to how we can inculcate a spirit of enterprise in our people. This seed for the spirit of enterprise can be sowed only if people are willing to take risks, meaning less kiasuism, and willing to go out and be more adventurous. For example, we, at the North-East CDC, have been looking at this issue and try to see how we can help to bring about this spirit of enterprise. We are encouraging, for example, students to go into business. Hai Sing Catholic School, for example, will be marketing second-hand pots and pans as well as flowers from the school garden through their own Entrepreneurship Club. So we are also encouraging more schools to look into setting up entrepreneurship clubs.

We also have the Innovation and Creative Fund to develop the spirit of entrepreneurship and entrepreneurship among the residents of North-East CDC. We are working with ITE and Shell to also look at how we can bring about this objective. We also have a Dare-To-Dream Fund where we want to encourage people to go out of their way to look at new ideas and even venture into something where they take risk.

The question I would like to ask is whether, in fact, MTI and its agencies, for example, the A*STAR, could also look into areas where we can work with grassroots organisations, even CDCs, and see how we can bring about this spirit of enterprise amongst our people.

Mr Steve Chia Kiah Hong (Non-Constituency Member): Sir, promoting entrepreneurship has been a hot topic in the last few years. The Government supports entrepreneurship through many programmes and funding. I am very happy to hear the Minister's response to the many concerns that were addressed. I have three, of which the Minister has addressed. I will go to the last concern.

Society needs an attitude and cultural change to promote entrepreneurship. We must go beyond the mere acceptance of business failures. We must welcome them, like we welcome Khoo Swee Chiow when he failed to cross the North Pole - with wide open and accepting arms. It is a fact that nine out of 10 businesses will fail. But a true entrepreneur will persevere and press on. They would have learnt a lot of valuable experience by their first failure. The Ministry would like to look into how society can actually support them to restart again. After gaining these valuable lessons, it will be most shameful if they cannot restart their business due to prejudice, lack of funding or support. 2.00 pm

We must educate our society to adopt this change. Getting good and high paying jobs in private or public services should be seen as second or third career choice. The first career choice should be to venture out on our own as an entrepreneur. This we need to educate the shift in mindset, especially on the parents. The Ministry would also like to consider working with the Education Ministry to send some of the tertiary students, who are studying business, to go into the smaller businesses and SMEs for internship, understudy and learn from these entrepreneurs. This will cut short the learning process.

Finally, I would like to conclude by asking the Minister if he believes in promoting entrepreneurship as a core value of our new society. If so, how would the Ministry intend to promote it?

Mr Ong Kian Min: Sir, Mrs Lim Hwee Hua mentioned yesterday that unglamorous old economy industries might feel left out of the Government's attention, an issue that the Senior Minister of State has answered. I have a similar concern about new economy sectors in that when Government policies, investment promotion efforts and resources are directed towards certain new growth areas, such as R&D, life sciences, chemicals and infocomm, could we inadvertently let other promising sectors slip by as they are not on our radar screen? For example, where were we when the first wave of Internet companies took off in the US? Innovators and entrepreneurs who are in the ignored sectors feel discouraged because what they do is not fashionable. I do not think our Government agencies actually brush them away. But they do feel that insufficient interest and encouragement are given to their endeavours.

While we must remain focused, I would like to ask how our new growth areas are determined and arrived at. And how can we be sure that these darlings of today will achieve their potential in the years ahead? What if we are wrong? Can we have some ways to catch all and nurture creativity and tap bright innovative ideas in as many sectors as possible? Will we be able to catch the next big wave as early as possible?

We should develop more creative talents. To start the creativity revolution among Singaporeans, we should set aside more money and put in place an ongoing programme to create just for the sake of creating, and not to be driven initially by business and commercial considerations. The business people can come in later to see how to make use of the innovations and inventions that have been created and make commercial applications out of them.

Sir, after we have come up with an innovative idea, the next step is to explore the full commercial benefits of the innovation. We have quite a number of internationally renowned research institutes. Let us say our R&D laboratories come out with a new invention and they are looking to sell this invention to someone who sees the potential and who can realise the full commercial value of the product. If an innovator approaches a Singapore company, even a GLC, how much can a local company, with its limited market reach, offer for it compared to an American or international MNC, who has the marketing clout and international brand to push the sales? If it comes to a bidding war to buy the invention, of course, the MNC, with its access to hundreds of millions, if not billions of consumers worldwide, would be prepared to pay a higher price and it would be in the commercial interest of the local innovators to get the best deal for themselves. Where does that leave our innovation effort? Is it to do research and come out with good ideas only to be taken over by large foreign companies? To complement and support our efforts in innovation, we must also build up or acquire strong marketing companies with strong brand presence in the international marketplace. We should pay more attention to this aspect.

The Minister of State for Trade and Industry (Mr Raymond Lim Siang Keat): Sir, I thank Members for their useful comments on encouraging entrepreneurship in Singapore. These are very relevant as a vibrant enterprise system will help drive our future economic growth. Let me touch on some of the issues that they have raised.

Yesterday, Dr John Chen suggested that we should encourage bright business ideas from anywhere in the world to take root here. We agree. This was why in 1999, DPM Tony Tan launched and led the Technopreneurship 21 programme. Its aim was to foster the growth of start-ups, especially those which build on high technology, innovation and the creation of intellectual property.

Mr Ong Kian Min made a good point when he said that we should not confine ourselves just to this area. Recognising that start-ups are not just in high technology areas, T21 will be broadened into Enterprise 21, to develop in a holistic manner an enterprise ecosystem that would make Singapore a compelling base for all enterprises - local or foreign.

I agree with Members - that access to capital, availability of capital is a key factor to develop enterprise in Singapore. What we need is a deep and sophisticated capital market that caters to a spectrum of risk appetite for enterprises at all stages of their growth.

At the same time, in the last few days, many Members have cautioned against too much direct Government involvement in business. Along the same line, our approach to enterprise financing should be to let the market allocate capital to companies with the best ideas, business plans and execution skills. Government should step in to help catalyse this only when there is a market gap, a market failure.

Dr John Chen had highlighted that there may be just such a gap for companies at the early start-up stage. As SMS Tharman said, recognising this, EDB has launched the Startup Enterprise Development Scheme (SEEDS) last year. Mr Singh suggested that SEEDS also matches the investment of the entrepreneur. However, the Government, as Members have said, may not be the best judge of private sector initiatives. So it is essential that it remains driven by private sector evaluation with the Government matching the investment of the third party investor.

Many businessmen have told me that our financial institutions tend to give loans only if these are backed by tangible assets. Other forms of credit assessment, such as those based on cash flow projections, have yet to take off. Some have suggested why do we not have something similar to what the US have, which is the Small Business Association.

Now the approach which SPRING Singapore has taken is that instead of concentrating SME financing in a single institution, such as a Small Business Association, it spreads it to more than 20 participating financial institutions (PFIs) under LEFS. These PFIs are a good mix of both local and foreign financial institutions with some focusing on SME lending, such as Heller Financial, Sing Investment and Hong Leong Finance. SMEs can thus choose from a range of PFIs in the pool.

To further ensure that access to financing for small businesses is not hampered by lack of industry knowledge, SPRING Singapore would welcome private sector initiative - be it from the Singapore Business Federation, TiE, or any other chamber or industry association, who is willing to come forward and provide more of such financing. If they meet with MAS' regulations, SPRING can then accord them PFI status to allow them to offer loans to their SME partners or members with the Government bearing a portion of the risk which is currently 80:20. This will give SMEs a wider choice of loan providers with varying thresholds of risk.

Mr Ong Kian Min made an important observation on innovation. He said that good business ideas need at some stage to be commercialised and how do we capture this. As Tharman mentioned earlier there are various assistance schemes to help not just technology but non-technology companies to actually expand their businesses. He gave the example of BreadTalk.

Recently, A*STAR created "Exploit Technologies" to centrally manage the intellectual property created by research institutes and to facilitate the efficient transfer of technology to industry. Through this mechanism, we foster healthy collaboration between Research Institutes and businesses. To illustrate, the Singapore Institute of Manufacturing Technology collaborated with a local SME, Prime Electrical Products, to develop a lifestyle water heater which is now selling regionally. Another example, the Institute for Communications Research has licensed two patents to a company called iDetect Technology to help it develop the Microwave-Guard. This is a credit-card size device that measures radiation leakage from microwave ovens and warns the user if the leakage exceeds safety levels. The company has plans to sell the product into Australia, Europe, Japan and the US.

To support these efforts, it is critical, as Minister George Yeo said, that we protect intellectual property. It takes years of painstaking hard work to come up with an invention and to apply it commercially. Futuristic as Star Wars is, even Yoda, the sage in the series, could not foresee that an illegal clone of Episode II of Star Wars could be circulating over the Internet a week before its grand premiere. So at the Ministry, we say, may the force be with the creators of intellectual property. To bring that about, my Ministry is working with the Ministry of Law to review our intellectual property protection laws comprehensively to further strengthen our regime and encourage innovation.

Many Members have spoken on rules. Rules provide business certainty and a transparent, corrupt-free environment. But we must be careful not to stifle creativity and innovation with unnecessary rules. Mr Inderjit Singh suggested that the Government streamline rules and regulations and to incorporate sunset clauses so that rules have expiry dates. The Entrepreneurship and International Sub-committee of the ERC, which Mr Inderjit Singh is a member, has proposed that there be a mandatory periodic review of rules by a high-powered Rules Review Panel comprising senior civil servants and private sector representatives. The matter is under consideration by the Government.

Members, however, would be pleased to know that we already have a headstart in rules. As Mr Singh said, since September 2000, the Head of the civil service has been chairing a Pro-Enterprise Panel. Mr Singh has been a dedicated member of the Panel, bringing fresh perspectives and ideas for the review. Since its set-up, the Panel has received 344 suggestions, of which 145 have been accepted and 59 pending review. The Panel will continue to be proactive in cutting red tape.

There is also the OASIS project under MTI and MOF, which stands for Online Application System for Integrated Services. By putting licence applications for starting a business online, we aim to reduce the number of such licences by 10% and average processing time from three weeks to 10 days by the middle of next year.

Mr Inderjit Singh suggested also that we allow HDB shophouses to be used for technology start-ups. We agree. Since 1999, HDB has revised its rules to allow shopkeepers to use their shophouses for non-retail purposes, including as offices, showrooms and food shops. HDB went a step further to liberalise the use of the living quarters above the shops in March 2001. Now, shopkeepers can use or sublet the living quarters above shophouses for all commercial purposes.

Mr Singh has also suggested that we make it easier to register as well as to shut down companies and streamline the procedures for maintaining a company. The Ministry of Finance set up the Company Legislation and Regulatory Framework Committee (CLRFC) in December 1999 to undertake a comprehensive review of our company law and regulatory framework. The Committee recognised the need to streamline and simplify incorporation and compliance requirements for small companies. It has just released its draft recommendations on 9th May 2002 for public comment. I urge Mr Singh and interested parties to give their feedback to the Committee on its recommendations. The draft report is available at the MOF website at www.mof.gov.sg. 2.15 pm

Beyond rules and regulations, we should study ways to liberalise our markets to enlarge the private sector space. At the same time, it will ensure that our business costs are market-driven and competitive, which is a point made by Mr Leong Horn Kee and Mr Inderjit Singh.

Mr Leong also asked for an update on energy deregulation. Much of this has been done. We have separated the competitive parts of the business, namely, power generation and retail, from the natural monopoly, which is the operation of the power grid. This was effected when the new Electricity Act was passed in this House in March last year. Since then, we have seven new players in retailing and two new firms in generation. The market rules to further improve the energy market are going into its final tests.

As for the retail sector, we will liberalise that in stages. Since July 2001, we extended contestability from 100 large customers to 200. This means that for these 200 consumers, they can choose which retailer they want to purchase their energy from.

An Energy Market Authority survey of some of these consumers revealed that 86% of them enjoyed lower electricity costs after the restructuring exercise. For example, in September last year, the Civil Aviation Authority of Singapore (CAAS) managed to cut electricity cost by 30%. CAAS will pass these savings on to its tenants and private developers.

By the middle of next year, we plan to extend contestability to another 10,500 large consumers. The rest of the consumers, totalling about a million household accounts, will be opened in phases, starting towards the end of 2003.

Mr Gan Kim Yong suggested yesterday that the Government should defray part of the costs of companies going abroad. IE Singapore has certain schemes that help companies in skills upgrading and marketing for internationalisation. These schemes are rightly to help in capacity-building, rather than pure cost subsidies. In the larger scheme of things, however, the basic enabling business structure must be the general fiscal regime that has been enunciated in this Budget.

A few Members have spoken about building an entrepreneurial culture. I do not know whether entrepreneurs are made or born. But I do know that many attributes associated with entrepreneurs: the "dare to experiment", "dare to fail" spirit, can possibly be cultivated from young.

So I agree with Mr Zainul Abidin, Mr Inderjit Singh and Mr Steve Chia's call for education in entrepreneurship in schools and at the community level. MOE has cut curriculum content by up to 30% in some subjects, to allow the schools and their students more time to question, explore and experiment. Several of our schools already have specific programmes to nurture in our pupils an enterprising spirit.

Cooperative societies, which are recognised CCAs, have been formed in some schools. Some of our junior colleges have started Young Enterprise Clubs to develop and nurture future entrepreneurs. Schools on their own have collaborated with CDCs and business corporations to solicit grants to fund their various business projects.

In March this year, Deputy Prime Minister Tony Tan launched Bizworld, a not-for-profit programme that brings real-world business experiences to children between Primary 5 and Secondary 2. It is a business simulation programme created by Tim Draper, the Managing Director and Co-Founder of Draper Fisher, to help students in the US learn about entrepreneurship. Its success has prompted DFJ to replicate the programme in Singapore. With the help of EDB, Bizworld was successfully introduced to Anglo-Chinese (Independent) School. Another 39 schools have signed up their teachers to be trained to teach this programme.

We will do more to widen the access for the young and adults to entrepreneurship education. What I think, however, is hard to teach is the passion that Mr Inderjit Singh spoke about. I think passionate entrepreneurs will not be deterred by the cost of failure. The worst downside to failure is generally the same in any country - bankruptcy. Whether in Singapore or any other country, a bankrupt is unlikely to afford a car or house. To make it easier for entrepreneurs to start afresh, this House has passed amendments to the Bankruptcy Act in 1999 to address some of these issues.

How our society views risk-taking and failures, as both Dr John Chen and Mr Inderjit Singh said, will affect to some degree the quality of entrepreneurship but, ultimately, it is passion and conviction of entrepreneurs that will make the difference.

Sir, in conclusion, may I make some remarks on remaking Singapore? Much has been made of the Remaking of Singapore Committees. Let me give my perspectives on this. There are no quick fixes here. I sense that some feel that we should wrap up quickly, have less discussions and debate, and come out with the magic formula, so that we can get on with it. Aladdin's lamps are as rare in Singapore as in Arabia. Remaking Singapore is a process. The Economic Review Committee and the Government are setting the strategic architecture to achieve our vision of an entrepreneurship and knowledge-driven economy with globally competitive manufacturing and service sectors. Debate and discussion are critical, so that our strategic intent is understood by all Singaporeans, without which we will fail. To intercept this future, I believe requires a process of successive approximations of what needs to be done, rather than a new detailed blueprint that is cast in stone.

As the famous Spanish poet, Antonio Machado said: "Pilgrims, ask not where the road is. The road is made by walking."

The Chairman: Mr Leong, would you like to withdraw your amendment?

Mr Leong Horn Kee: Sir, since we have a bit of time, may I ask the Minister a few questions? First, in relation to Sentosa, perhaps we should also not forget the offshore islands. Many Singaporeans in fact go all the way to Batam or even Bintan for resorts. So, please do not forget that we can also develop our offshore islands as another resort destination for Singaporeans, besides Sentosa.

Next, I would like to address my second remark to Mr Raymond Lim. I have heard of this new committee reviewing the formation of companies. I would like to give him an immediate feedback: one of the rules that I find quite cumbersome is that, for the registration of Singapore companies, domestic addresses, ie, HDB addresses or private home addresses, cannot be used as the registered address of a company. That actually deters many people from forming companies. To enable them to start companies, maybe that can be reviewed.

BG George Yong-Boon Yeo: Sir, the islands to the south of Sentosa, which were reclaimed for high-class housing, are now under Sentosa Development Corporation and will be developed in an integrated way with the rest of Sentosa.

The Chairman: Mr Leong, would you like to withdraw your amendment now?

Mr Leong Horn Kee: Yes. Sir, I would like to thank the Minister, Senior Minister of State and Minister of State for their elaborate and very persuasive replies. I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

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

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

Sir, I am glad to hear from the Minister of State that we should attract entrepreneurship wherever these may come from and develop these ideas if the ideas are good for us. The slew of industry incentives and assistance schemes provided by the Government has been very helpful to companies to improve their operations. I would like to ask, if it is true, that these incentives and schemes are not available to bodies or persons, such as trade, industry and professional associations, and, if so, can these be extended to them?

Here, I would like to declare my interest as Chairman of Singapore Quality Institute. These bodies provide services to their members and, often, also the general public. Some are also engaged in business. They are also a source of entrepreneurship. If they have access to these incentive schemes, they too can use them to improve their operations.

Mr Tharman Shanmugaratnam: Sir, we agree with Dr Tan Boon Wan that certain industry associations should be eligible for support under the Local Enterprise Technical Assistance Scheme (LETAS). Currently, SPRING Singapore is already supporting industry associations that cater principally to SMEs. Project supported could be aimed either at upgrading the associations' own operations, so as to better serve the needs of the SME members or at upgrading the industry they represent.

The Chairman: Dr Tan, do you wish to withdraw your amendment?

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 $569,087,400 for Head V ordered to stand part of the Main Estimates.

The sum of $4,263,662,000 for Head V ordered to stand part of the Development Estimates.

Head N -

The Chairman: Head N, Ministry of Foreign Affairs. Dr Ong Chit Chung.

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

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

Sir, much has happened since the last Budget debate. It was a trying year; it was a watershed year. We watched in horror and shock as the World Trade Centre Twin Towers collapsed into a heap of rubble right before our eyes on television. Thousands perished. September 11 changed our lives. The world is not the same anymore. Terrorism looms large. Terrorism can strike anywhere, anytime at anyone. We have to be prepared. We have to be alert.

Sir, nations have to sink their differences and unite in countering terrorism and preserve lives. Individuals, corporations and nations have, one and all, to redo their sums, reassess their positions and re-engineer their strategies and tactics. Being the prime victim as well as the superpower and leader of the free world, the United States takes the lead in combating and countering terrorism. Nations around the world have come together to share resources and intelligence in implementing counter-measures against terrorism.

Terrorism is global, so must be the fight against terrorism. Likewise, Singapore has come out strongly against terrorism. We have worked with the United States and other nations to counter terrorism. It is the right thing to do. We have to stand up and be counted. It is also, Sir, in our interest, as a small nation, to do so. We are vulnerable. We need to work with other nations. If not, when we are in trouble and we ask for help, they will ask, "Where were you when you were needed most?"

Sir, within Southeast Asia, September 11 has opened up potential fault lines of race and religion across the whole region. Religious fundamentalism and terrorism could be a volatile mix threatening the peace and stability of the region as well as the economic well-being of our people. The case of JI clearly confirmed the international dimension of terrorism. Singapore, KL, Manila and Jakarta need, therefore, to liaise closely on preventive measures and counter-terrorism. The Minister may wish to comment on the state of cooperation amongst the ASEAN partners on this issue and how we can further strengthen our security network in the region.

Sir, the strategic landscape has indeed changed. September 11 has altered the triangular relationship amongst the US, China and Japan, and changed and altered the balance of power in this region. China's relationship with the United States has turned for the better after September 11. Both are now combating the common enemy in terrorism. China, as we know, has its own Muslim separatist problem in Xinjiang. Therefore, in this climate, the spy plane incident, the Taiwan issue and human rights are now put on the backburner and are not so contentious. And China glows in the limelight of WTO, the APEC Summit and the coming Olympics. It was, indeed, a good turn of events for China.

After September 11, Malaysia also has a new beginning in its relationship with the US. All past frictions are happily forgotten, and Malaysian Prime Minister Dr Mahathir has found a new role as the moderate voice of Islamic nations. And this is much welcomed and appreciated by Washington, as some of us have seen last night on CNN.

Japan, still struggling to recover from the long recession, is taking a new look at defence, seeking to pass new legislation for its defence forces and to play a larger role, and the Japanese Prime Minister even made a personal visit to the Yasukuni Shrine, despite international outcry.

The US, for the first time, has committed a significant number of what is called "ground trainers" in the Philippines. This is the first time in years that American ground troops are back in the region. Sir, what do we make of all these? How do we manoeuvre as a small country? How do we navigate in the new uncharted and treacherous waters? How do we create space and advance our national interests when circumstances are clearly less than favourable? 2.30 pm

Sir, can I continue with my next cut?

The Chairman: Yes.

Dr Ong Chit Chung: Sir, over the years, ASEAN had earned its spurs and won recognition as a grouping to be reckoned with. ASEAN gave individual ASEAN nations a collective voice and a higher standing in international forums and meetings.

Nations and agencies do factor in ASEAN in their assessment of geopolitics, as well as investments in the region. With President Surharto then at the helm of Indonesia, and playing a positive leadership role in the region, ASEAN surged ahead.

But times have changed. The Asian financial crisis and recession hover over the region. Surharto is no longer in charge and Indonesia is beset with internal problems. In the meantime, ASEAN has grown to ten.

My question is: is ASEAN becoming too large and too disparate, with nations as diverse as Myanmar, Cambodia and Laos, with varying degrees of economic development, and wide varieties of political cultures and systems?

Myanmar, for example, attracts a great deal of attention from the international community and media over human rights issue. Myanmar recently released Ms Aung San Suu Kyi from house arrest. This is a right step and a good development. Would the Minister please give us his assessment of the latest development in Myanmar and whether it would lead to liberalisation and opening of the country for democracy as well as for foreign investment?

The overall question is this: is ASEAN becoming unwieldy? It will be even more unwieldy if somehow East Timor is admitted to ASEAN.

At the same time, the East Asian nations of China, Taiwan, Korea and Japan are pulling ahead of ASEAN in economic development and, in particular, in attracting foreign investments. ASEAN therefore faces the risk of being marginalised in the intense competition for investment, talent and entrepreneurship.

Sir, we cannot do without ASEAN. It is there. But ASEAN seems to have lost steam, lost its vigour - we can just carry on with a limping ASEAN - but for what purpose? But can we find a new sense of purpose, a new direction for ASEAN, a new lease of life for ASEAN?

May I ask the Minister what role Singapore can play in re-engineering ASEAN, and making ASEAN relevant in the new scenario and the new strategic landscape. How can we strengthen ASEAN and create linkages with others outside the region, eg, the FTA with Japan and the USA?

Sir, we are in the region, and would do our utmost to support ASEAN but, at the same time, we must not be boxed in, and should explore linkages globally.

Ms Irene Ng Phek Hoong (Tampines): Sir, ASEAN faces grave challenges today. It is seen by outsiders as fractured, weak and leaderless. Some of its states are constantly quarrelling with each other and let us not name names.

There is an urgent need to revive the spirit of ASEAN, the spirit that once made it strong as a regional voice. In its early years, ASEAN states considered internal communist insurgencies to be the most immediate threat. This was the threat that bound the states together and made ASEAN united and a strong voice to be reckoned with. Today, the ASEAN states face another internal threat, and that is, terrorism. Terrorism provides ASEAN with the new opportunity to demonstrate its relevance to regional and international security. It should be seized.

ASEAN's greatest potential as an international actor lies in its abilities to coordinate responses to the challenge of terrorism. I am glad to note that ASEAN Ministers will meet soon to discuss signing a pact on terrorism, although it is a little late, but better late than never. The pact should not involve only grand pronouncements of cooperation, as it is so often associated with ASEAN, but should also come accompanied with some clear and decisive action.

Sir, Indonesia has played a key role as a stabilising force in ASEAN in the grouping's first 30 years and was seen as playing a leadership role in its grouping's development. But today, Indonesia's preoccupation with its domestic politics and economy has unfortunately diluted its role in ASEAN. Indonesia's revival is necessary to revitalise ASEAN. Singapore needs to engage Indonesia more during this period. What happens in Indonesia is beyond Singapore's control but ASEAN can launch initiatives designed to help Indonesia to become involved more effectively in regional affairs and to assist them in their economic recovery.

One laudable move on Singapore's part was the proposed Free Trade Agreement with the US. It will extend the benefits of the FTA to Batam and Bintan and ASEAN, in sectors such as information technology. With that, ASEAN will become a more attractive place for investment by American and Singaporean companies.

However, there are signs that Malaysia does not see the benefit of such FTAs. Malaysia's Prime Minister Mahathir Mohamad was reported as saying earlier this month that Singapore would not be able to take advantage of its membership in ASEAN if it continued to sign bilateral trade pacts with nations outside the region. Sir, this is the time to be strengthening the investment climate in ASEAN. Such comments would not be helpful.

ASEAN has played a useful role in engaging major powers, such as through the ASEAN Regional Forum, the ASEAN+3 and the ASEAN+10 processes. But it lacks strong effective leadership and solidarity as a grouping to take full advantage of that. I am not sure how long it can determine the agenda for these multi-lateral forums involving these big powers if it continues to appear weak and disunited.

I would like to ask the Minister how Singapore proposes to play its part in strengthening ASEAN in the face of these challenges.

Mr Sin Boon Ann (Tampines): Sir, I agree largely with the sentiments of my colleague before me on the challenges that ASEAN faces today.

Indeed, ASEAN has seen many challenges that could have an impact on its status and standing as a regional organisation. You will recall at the height of the Cold War, ASEAN was seen as a regional bloc that was capable of dealing with the advancement of communism in Southeast Asia. It had assumed a profile that quickly earned the respect of members of the international community.

However, Sir, in recent years, the economic crisis and the resultant political unrest and instability within the region have quite substantially affected the image of ASEAN. These events, coupled with the inability of ASEAN to pull itself together quickly on major trade and economic issues, have raised concerns about the continuing effectiveness of ASEAN's existence. Indeed, these negative perceptions have, to a large extent, been compounded by the emergence of such other issues such as the rampant burning of forest which contributes to the haze, the emergence of terrorists cells and the inability of some countries to deal with these problems without requiring assistance from outsiders and the internal political instability that still exists in many countries within ASEAN. To be sure, the strength of the spirit of ASEAN which seeks to arrive at decisions through consensus is presently also its weakness, now that ASEAN has become a 10-member organisation.

Coupled with this negative perception, the economic challenges facing ASEAN in the coming years do not look positive either. We have just heard the eloquent exposition of Minister George Yeo on the challenges coming from North Asia, especially from China and Korea, and these challenges are real. For many ASEAN economies, the hollowing out of manufacturing and service industries to cheaper cost centres in China is a serious problem and threatens to derail the process of economic recovery within ASEAN. The fact that China has joined the WTO does not give Southeast Asian countries much comfort and in fact would increase the competitive pressure for us. Unless the growth engines of ASEAN economies, such as the US, Japan and the EU continue to power its way to recovery, it does not look as if ASEAN economies are likely to emerge from the doldrums and this will continue to be a drag factor for us here in Singapore.

Sir, I know from a recent publication that ASEAN, with its teeming population of 500 million people, is not punching at its strategic weight in relation to other regions and also regional organisations. For example, APEC accounts for 56% of the world's GDP; the EU is almost 30% of the world's GDP; NAFTA is 33% and the South Asian Organisation for Regional Cooperation alone is 19%. In the case of ASEAN, it is a dismal 1.5% of the world's GDP and if it gives us any cheer, we are only about marginally better than the Organisation of African Unity, which contributes 1.4% of the world's GDP.

Sir, these statistics are stark by comparison and obviously, there is much that we have to do if we want to bring ASEAN, and together with it, the people, to a higher standard and quality of life.

I know that Singapore's position towards ASEAN is that it plays a significant role as a regional organisation. We have sought to impress on our ASEAN colleagues to pull together and to deal with the perception that ASEAN now suffers from. Unless we begin to deal with this perception, Sir, our dialogue partners and international investors may perceive ASEAN as ineffective and may, in the longer term, marginalise us. We have to move towards greater integration, especially with our newer members and to work more closely on the projects that we have started in order to help all ASEAN members to engage in the economy. It is important if we want to raise the status, the credibility and the standing of ASEAN as a regional organisation. In that light, Sir, the friendly dialogues that we have among members of the ASEAN states must continue to prevail.

In this regard, Sir, I would like to ask the Minister whether we are making active progress on the projects that we started out with and active progress in further integrating the various economies within ASEAN.

Mr R. Ravindran (Marine Parade): Sir, the GPC Chairman and Members have drawn a very good picture of ASEAN and I would not like to go through the details of the state of ASEAN except to ask the Minister to address three issues.

One, what are the initiatives that ASEAN and Singapore in particular have taken to strengthen ASEAN as a strong and vibrant regional organisation, especially in the aftermath of the 1997 crisis and the September 11 incident?

Two, what are the new initiatives ASEAN has taken to further engage the super powers and the regional powers in dialogue and confidence-building through the ASEAN Regional Forum?

And three, whether ASEAN is exploring other Free Trade Agreements similar to the one being negotiated between ASEAN and China.

Mr Heng Chee How (Jalan Besar): Sir, Singapore is a founding member of ASEAN. In joining hands with the other founding nations to form ASEAN, Singapore must have hoped that this economic grouping of Southeast Asian countries will help provide the critical mass to attract and generate investment and trade both into and within the region, and with more investment in trade that life will get better for all people living within this region.

Sir, as a small open economy that is so reliant on free trade and investment flows, Singapore knows that our fortunes will always be, to a given extent, influenced by, for better or for worse, the standing and actions of ASEAN. Hence, our participation in ASEAN is not something that is philosophical or abstract. It has direct bearing on our well-being and prosperity.

Sir, in more recent years, and especially after the dream of the Pacific Rim Century evaporated after the Asian financial crisis, the different members of ASEAN have had to deal with their own combination of social, economic as well as political challenges. The strength and cohesiveness of ASEAN now seem greatly weakened.

At the same time, with the opening up of China, we know that a growing proportion of investment inflows into Asia is heading to the North East instead of to the South East. Sir, these trends are not insignificant. If they persist, the region may lose its relevance to international investors. When that happens, the risk of countries resorting to enlarging their share of a shrinking economic pie would increase, thereby compounding regional problems and difficulties. 2.45 pm

As Singapore will be a beneficiary of a strong ASEAN, I would like to ask the Minister, what specific steps could Singapore take to help strengthen ASEAN as an economic alliance so that it will not lose its relevance and attractiveness.

Assoc. Prof. Chin Tet Yung (Sembawang): ASEAN-10 is now a thousand pound gorilla. It was half the size when it was first born. With its 30 years of growth, somewhat unevenly, have come new problems. Its vision now appears to be a bit diffused. Its organs are not exactly working well together. Its left paw sometimes does not like what its right paw is doing. And it is currently fed mainly by the various governments. In other words, its environment is mainly government-based. It does not engage very much the other sectors of ASEAN, meaning the business sector, and, most importantly, the people sector.

I find that the main problem with ASEAN now is that we are facing a problem of internal unity, of internal cohesion, in ASEAN, which did not exist when it was originally started. Then the vision was clear - it was to provide for the security of the region, and perhaps the programmes were not as extensive as they are now. So to this end, I think, at this time, we must ask, whether as a founding member of ASEAN how should we see ASEAN, given the problems that it is facing now, and in that respect, I have three issues which I hope the Minister will pay some attention to.

First of all, has the growth of ASEAN to ten provided more problems for the organisation and resulted in it being much weaker rather than stronger as a regional force? Can we really expect ASEAN to attain its original unity, to retain its original force as an international organisation?

Secondly, would Singapore be better off in terms of geo-political strategy in charting its own course, eg, negotiating our bilateral FTAs rather than waiting for ASEAN initiative to take place, which as we have seen do take an inordinate amount of time for such agreements to be initiated, although I am very pleased to hear, I must say, that there is every possibility that there will be an ASEAN-China FTA by the end of the year.

Thirdly, if we are committed to ASEAN, how can we improve internal strength, the internal unity of ASEAN? Now, I understand that among the officials and among the governments, there is actually a very great sense of common purpose. However, this does not translate to very much in terms of the other sectors, particularly the business and the people sector.

If you look at ASEAN, actually one of the greatest strengths in ASEAN is the diversity of its people, the diversity of cultures. And I think it is very important that if we have any long term interest in ASEAN we should expand the scope of our engagement with ASEAN nations and I hope that the various Ministries, with the Ministry of Foreign Affairs taking the primary role, encourage the expansion of programmes, especially in relation to cultural activities, because I think that is one of the greatest strengths of ASEAN. It has been ignored, but it is a strength and if we can pull the 500 million people together, then notwithstanding what my colleague, Mr Sin Boon Ann, has said about us not having a great GDP significance in the world, we nevertheless can still remain a powerful regional force. 500 million people cannot always be wrong.

Mr Tan Soo Khoon: Sir, judging by what other Members have said, ASEAN appears to have lost much of its lustre. Some 35 years after its founding, several member countries are beset with political and/or economic problems. And quite a few are still dealing with the fall-out from the Asian financial crisis of 1997, reluctant as they are even to deal with obvious root causes such as inept political leadership, corruption and poor corporate governance.

Sir, the admission of the CLMV countries, Cambodia, Laos, Myanmar and Vietnam, in recent years threw up even greater disparities in the level of social and economic developments in the membership. And with that, vast differences in the approaches to different issues that confront the grouping became even more obvious. Sir, approach to trade is one such example. On the one end of the scale you have Singapore, advocate of free markets and free trade, and, on the other end, you have the CLMV countries, still far from comfortable with trade liberalisation. Somewhere in between, you get Malaysia, committed to an ASEAN Free Trade Area but still asking for protection for its motorcar industry.

Sir, with such disparity, I think it is difficult to even pretend that we can find strength in diversity. The danger is that ASEAN risks being marginalised by others. ASEAN countries offer a combined market of about half that of China's 1.2 billion people and yet we get so much less attention from others. Large chunks of foreign investments are bypassing the region, heading towards China and the North East. This is discomforting. Sir, I have experienced this uneasy feeling myself when I visited the European Parliament last year. The EU is very occupied with its own problems, such as enlarged membership. And it has its priorities and must be selective in its dealings with other regions and decide who or what comes first on its radar screen. Sir, although polite noises are made that they remain occupied with an interest in South East Asia, there is no doubt that China was the focus of their dealings with Asia. And any interest in ASEAN was probably dominated by a pre-occupation with what was happening in Myanmar.

Sir, no less than the EU's Commissioner for External Relations, Chris Patten, underscored this when he visited Singapore recently. He said that Europe remained interested in the region. Again it was a polite noise because in the same breath he said that EU-China ties were better and closer than they had ever been before. And he also pointed out that the level of European investments in this region has not recovered in the aftermath of the financial crisis, even after five years. And he reminded us that the attractiveness of South East Asia to Europeans and other investors would diminish with the rise of opportunities in China.

And he also made the point about ASEAN's disparity and pointing to the different levels of wealth in the ASEAN countries, he said that, "setting a clear and coherent policy for dealing with that variety, is in itself a bit of an intellectual Himalaya". Sir, these are ominous words from someone who was the last British Governor of Hong Kong and who knows Asia well. Or you can read between the lines to take that to mean that ASEAN had better get its act together or it is going to miss out altogether.

Sir, how can ASEAN move forward? Sir, getting FTAs with other countries is an approach that we have taken and I think it is a good way. The way Singapore has done in trying to get FTA terms with other countries has put paid to the argument that we only think of our own interest because in the negotiations with the US we have roped in products from Batam. But my concern here is that this too appears to be stalling, now that the US President has failed to secure fast track authority from Congress.

Sir, the other point that was raised was also the ASEAN-China Free Trade Agreement. I think my colleague made a mistake. I do not think it is going to be signed within a year. From what I read, it is going to take some 10 years for such an FTA to be in place and I think 10 years is certainly a long time. A lot of water would have passed under the bridge.

Sir, the other point I want to make is that ASEAN appears to lack leadership. Significant changes in the political leadership of several member states have contributed to this vacuum. Indonesia and Thailand are too busy trying to clean up their own backyards. Sometimes people ask me why Singapore cannot play a leading role. But I think, Sir, we have always said that we are small, we are pretty modest about this, and without naming names, I am sure there would be at least one or two others who would not accept us as the leader of ASEAN. So we are modest and we say no. We say that we rather get things going by pushing from behind. Sir, I think that PM therefore got it right when he said that Singapore can play the role of a path-finder.

The Chairman: Mr Tan, start winding up your speech, please.

Mr Tan Soo Khoon: Yes, Sir, just one minute.

Sir, a path-finder is one who negotiates a route and keeps everyone on track. I believe that unless someone is willing to clear the way, I am afraid that ASEAN will just hobble along like a lame old man and will have missed a lot of opportunities.

Sir, the last point I want to make is the question of terrorism which has been raised. It is now a problem. Where the question that used to be asked was, "Is this a good place to invest?", the question now being asked more often is, "Is this a safe place?" Sir, Prime Minister Mahathir himself has admitted as much that he has a problem dealing with Islamic militants and the terrorist organisation Al Qaeda is known to have links with Kumpulan Mujahidin Malaysia and other groups such as Laskar Jihad in Indonesia and the Abu-Sayaff in the Philippines.

Sir, my question is: now that Indonesia, Malaysia and the Philippines have last week signed an anti-terrorism pact and Thailand is reported to have been invited to join the pact, I would like to know why Singapore has been left out and whether we intend to sign on as a demonstration of our commitment against the war on terrorism. And apart from just signing, what concrete steps can ASEAN take together so that terrorism just does not remain a point of discussion?

Mr Ravindran: Could I just provide a quick clarification, Sir?

The Chairman: Yes.

Mr Ravindran: I think the previous speaker stated that I have made a mistake by saying that the Free Trade Agreement is only due in 10 years. I want to clarify that the Free Trade Agreement will be signed by the end of this year and the hope is that a Free Trade Area will be created in 10 years' time. That was the statement in the press.

The Minister for Foreign Affairs (Prof. S. Jayakumar): Sir, I would like to thank the Members who have spoken. Let me respond to, first, Dr Ong Chit Chung, on the strategic overview, and then the various comments on ASEAN.

First, I agree, almost completely, with what Dr Ong Chit Chung has said in his overview of the strategic situation. I think he has put it as comprehensively as any Foreign Minister could.

Last year, I had noted that South East Asia was going through very uncertain times and the situation not only has not changed materially, but the terrorist attacks of September 11 have really added considerably to the complexities. He is right when he describes it as a watershed year. In my view, the September 11 events have affected the geo-political and strategic environment in several ways. I would mention at least three ways.

Firstly, the attacks and the United States' response to them have underscored the United States' pre-eminence, and in a sense, has provided a focus for it. The anti-terrorism campaign will now clearly be the main focus of United States' priority for the foreseeable future. Washington, as we all know, is quietly determining who its friends and allies are in this new situation. The results of its determination will be a critical influence on East Asia's development and prosperity.

Dr Ong Chit Chung asked about our relations with the United States and also about an assessment of our position on counter-terrorism. I think Members will know that we have taken a very strong stand on terrorism, like all other countries in East Asia. Singapore has stood with the United States in its global fight against terrorism. Why? Because it is the right and correct thing to do. As the arrests of the Jemaah Islamiyah and the uncovering of the network in Singapore have shown, we are clearly not immune. And it is a fight that all states in the world have to take a stand to combat this new menace. 3.00 pm

The second way in which the global situation has changed is that the events of September 11 have, in fact, stabilised United States-China relations, a point which Dr Ong also referred to, and that is a very important factor in the East Asian strategic equation. The terrorist attacks and the fight against terrorism have affected big power relationships significantly. As Dr Ong mentioned, the United States needs China's support for its global anti-terrorism efforts. Although China may not agree fully with every aspect of United States' policies, it also wants stable relations with the United States. When United States-China relations are stable, it has a calming effect on the region across the board. But when United States-China relations are disturbed, as the collision of the planes incident last April showed, the entire region is considerably unsettled.

I think we can expect the geo-political positioning to continue in many different forms. There may be the occasional differences, but it is inevitable in the relationship between big powers. For now, the US-China-Japan strategic triangular relationship which underpins East Asian growth and prosperity can be described as stable.

We are fortunate, in Singapore, to have very good relations with China and Japan as well as with the United States. Singapore and other countries in the region will benefit from the strategic stability of US-China-Japan relations.

Dr Ong asked specifically about our relationship with the United States. I would describe the relationship as excellent. It is multi-faceted. It is a relationship which is a strong one that pre-dates the events of September 11. Prime Minister Goh made a very successful visit to Washington last June and, more recently, Senior Minister did so. The Prime Minister and Senior Minister met President Bush and other United States leaders, and they had very fruitful exchange of views on both regional and bilateral matters. I think many other Ministers have also had visits to the United States, or are planning to do so. This close relationship is in our interest and, as several colleagues have mentioned, both on this Ministry and other cuts, the negotiations on FTA with the United States will benefit, not just our two countries, but also the entire region. When completed, the FTA will strengthen the bilateral relationship.

The third way in which September 11 has affected the strategic landscape is that, as I had mentioned last year, the political and economic changes that have catalysed across the region by the crises of 1997 and 1998 are still being played out, and many countries are adjusting to those events. Matters are compounded by the events of September 11. A key factor will be how countries deal with political Islam and religious extremism, again a point which Dr Ong mentioned. There are more than 230 million Muslims in Southeast Asia. Southeast Asian Islam has traditionally been syncretic and tolerant. Mainstream Muslims in Southeast Asia have been moderate in their beliefs. We all know that most Muslims in our region want nothing to do with terrorism or extremism. But it is a fact that in Southeast Asia, Islam is changing under pressure. Why? Pressure of external influences. As Dr Ong said, there are extremists with political agendas, and some of the most dangerous terrorist organisations try to invoke Islam as their motivating ideology. Muslim anger in some quarters against the United States is another fact of life.

Therefore, America's pre-eminence means that there is no real alternative for any Southeast Asian government than to try to forge good relations with the United States. Good relations with the United States are not possible unless governments cooperate in the anti-terrorism campaign. But many Southeast Asian governments will also have to find ways to assuage the anxieties of their Muslim ground which may be uneasy or unhappy with the United States' policies, while at the same time taking firm action to neutralise extremist Islamic elements in their societies.

How governments are going to deal with this matter is a real political conundrum. How they are going to deal with this will have a profound influence on Southeast Asia.

Dr Ong Chit Chung asked how is Singapore going to position itself on many of these fast-changing developments. As a small state, we do not have that many options. But Singapore, as we all know, cannot exist without effective links to all parts of the world. At the same time, we must realise that Singapore's future is inextricably linked with Southeast Asia. That is why I have always stressed in this House that we will have to have a multi-track approach to our engagement with the rest of the world. We are firmly committed and must remain committed to ASEAN and to the region. And, as I will show, when answering questions on ASEAN, we have, in fact, played our part in trying to assist ASEAN to deal with some of the enormous challenges that it faces.

At the same time, we have to engage with regions beyond Southeast Asia, with the major powers, with Europe, with the United States, and with North East Asia. In doing so, not only do we advance our own interests but, I believe, it also helps focus these external players on the importance of Southeast Asia. Of course, specific policies will have to be adapted to changing circumstances. I may add that the total effect of September 11 events is that they have really underscored the unpredictability of international developments, and have underscored the need for a small country like Singapore to be agile and nimble, and to adjust both its economic, strategic and other facets of its policies to rapidly changing external environment.

With those general remarks, let me turn to the specific comments my colleagues have made about ASEAN. I discern a common theme or concern in many of the points made by Members, which is a concern as to where ASEAN is heading. Is it in decline? Does ASEAN have a future? Can it have a new lease of life? What has Singapore done? What can Singapore do in this re-engineering or remaking of ASEAN?

How do we answer these questions? I would start, first, by recalling what I said last year, and that is ASEAN is going through a very difficult period, largely because of both internal and external challenges. When I outlined those challenges last year, I was being frank and realistic. But much of what I have said still continues, but made more complex by the events of September 11 and by the uncovering of terrorist networks in several places in Southeast Asia.

Commentators continue to write articles about ASEAN which give a dismal picture and rather pessimistic prognosis. It will be misleading of me to paint an overly rosy and upbeat picture of ASEAN. But at the same time, let us not have these commentaries on ASEAN cause us to prematurely write the orbituary of ASEAN, because I think one must take a realistic position. If you ask me what is the realistic position, it is that while ASEAN faces many serious challenges, I think there are some grounds for optimism. I would not lose all hope and I think ASEAN can overcome its challenges, provided, firstly, it gets its acts together on the internal challenges; secondly, provided it stays on track on some of the initiatives which have been launched; and, thirdly, if it continues to be outward looking and not inward looking. I will elaborate on this shortly.

I said that there are internal and external challenges. Some of the Members have alluded to them. On internal challenges, it covers points Mr Tan Soo Khoon and others have mentioned. Many countries in ASEAN underwent or are still undergoing internal political transitional challenges. Some are undergoing economic challenges. And until these countries are able to effectively overcome these challenges, it is very difficult for them to pay attention to the bigger picture of regional solidarity and big picture imperatives for ASEAN.

First, every country in ASEAN must get its own act together - economic, political. Then the group, as a group, has to overcome some of the challenges mentioned by colleagues, namely, that of integration, how not to allow the recent expansion from 7 to 10 to become an unwieldy gorilla or elephant, and not to let decision making processes be severely circumscribed. These are internal challenges.

On the political side, reference was made to Myanmar. I was asked for an assessment. I think it is too early to make a full assessment. Singapore has welcomed the recent events in Myanmar concerning the release of Aung San Suu Kyi from house arrest as a positive step in the overall national reconciliation process. How it will proceed, I think we will have to wait and see. I think much will depend on the discussions between the SPDC and Aung San Suu Kyi herself. We do not know what exactly transpired in the confidential talks, but there have been signs that a certain comfort level has been reached. Indeed, it is a positive step because, as Mr Tan Soo Khoon and others have said, the situation in Myanmar previously has, in a sense, been a factor which has been responsible for some slowdown in our relationship with dialogue partners, particularly with the EU. So it is a positive step and let us hope that it will lead to more positive developments.

Several Members talked about the expansion of ASEAN to 10. We cannot turn the clock back. There were good strategic reasons why ASEAN took the decision to embrace the new members, and expanding the organisation from 7 to 10. As with all organisations, when membership increases, it must inevitably bring problems for consensus making, decision making and so on. But the challenge in that regard is how to address the problem of a two-tier ASEAN. This is a real problem, and ASEAN has to address it, and Singapore, in a sense, has contributed to efforts towards integration of ASEAN. An example is Prime Minister Goh's proposal for the Initiative for ASEAN Integration, which was endorsed by the ASEAN Summit. To give concrete support to this, Singapore had, in fact, pledged and given contributions to the Indo-Chinese countries, including setting up of training centres there. 3.15 pm

East Timor - it has not made a formal application for membership. I think the sense in ASEAN, as I discern it, is to concentrate on consolidation of the existing ASEAN 10. I believe we will proceed cautiously and take matters step by step.

I am not sure Prof. Chin Tet Yung is being completely fair to ASEAN when he said that ASEAN is focused purely at the government level. Yes, much of ASEAN's activities is driven by Foreign Affairs Ministries, Economic Ministers and a whole host of other Ministries. But he will be aware that there is also a track two process in ASEAN. The former Speaker, Mr Tan Soo Khoon, has been a very important driver of ASEAN parliamentary meetings, for example, although you may describe that as non-governmental. But Prof. Chin is right that for ASEAN, we have to work not only at the pure government instrument but at all other levels. And there is a host of organisations - professional organisations, business organisations, which are ASEAN oriented, including ASEAN business councils, and so on. So, I agree with him, but these activities are being conducted. His point that we should also have people-to-people linkages, cultural organisations, is something that I would agree with, and we should pursue that.

As regards external challenges of ASEAN, Members have alluded to it. Principally, it is coping with the challenge of China and North Asia. Minister George Yeo, my colleague, I believe, has spoken about these challenges. These are real challenges. And ASEAN, if it does not get its internal and external acts together, may see a hollowing out as more FDIs will gravitate towards North Asia and China.

I was asked about terrorism by several Members. Apart from what transpired at the ASEAN Summit last year, and it was an important development, before the uncovering of the terrorist networks in our region, the ASEAN leaders took a stand when they adopted the Declaration on Terrorism, which was not just repeating the mantra, or motherhood statements about combating terrorism, they asked for law enforcement agencies in ASEAN to cooperate, particularly front-line law enforcement agencies. In a sense, the meeting of Home Affairs or Interior Ministers, which is going to take place soon in Kuala Lumpur, I think, within the next two weeks or so, is a very good follow-up of that. Ms Irene Ng referred to that meeting. Exactly what is going to emerge from that meeting remains to be seen, but I am sure there is an earnest desire on the part of the law enforcement agencies and the Ministers who were charged with security to map out areas in which they can cooperate. This is absolutely essential in view of the events which have arisen.

Mr Tan Soo Khoon asked about this Trilateral Agreement. Let me just explain that the evolution or the genesis of this Agreement was originally started when Philippines, Malaysia and Indonesia drafted the agreement, and the text that I saw had a specific geographically demarcated area for cooperation, by reference to coordinates. Because, as Foreign Minister Syed Hamid told the press recently, there was urgency felt among those three countries for cooperating in the seas, Sulu Sea and seas off Celebes, and other areas, which were immediately adjacent to the country, to tackle specific problems. That was my understanding of how this Agreement came about. The latest Agreement has been signed by the three countries. It is not the case of Singapore or other ASEAN countries being deliberately left out because the Malaysian Foreign Minister explained that it was a sense of urgency of these three countries which felt they should proceed immediately on the areas of cooperation. Now, we have had to study the Agreement to see what aspects are contained there, and whether it has relevance for us and, if so, whether we should sign on, and so on.

But the important point is this - for combating terrorism, it has to be tackled by a variety of ways, both nationally, where countries have to take the necessary steps. On bilateral cooperation, as we know, after the JI was exposed, we have excellent cooperation with Malaysia and other countries. Whether it is trilateral or multilateral like the UN, many fronts have to converge in tackling this problem.

On the external side, the key element is for ASEAN to be outward looking. Because, as I said, if it is inward looking, I think the rest of the world will pass ASEAN by now. To be outward looking, it must continuously find ways of engaging with the external players, the dialogue partners and major powers, a point which Mr Ravindran also alluded to. ASEAN has to, in a sense, rebuild its strategic relevance. If you look back, countries were interested in ASEAN because ASEAN started the ASEAN Regional Forum, the only security forum of its type in the region, and ASEAN was in the driver's seat. ASEAN is still in the driver's seat. But to be in the driver's seat and to attract confidence and inspire a sense of support for ASEAN being in the driver's seat, whether the driver's seat for ARF or ASEAN Plus-3, ASEAN itself must be a credible organisation. ASEAN has taken some steps which show that it realises the importance of maintaining its strategic relevance, for example, the ASEAN-China FTA. Minister George Yeo may have spoken - I was not in the Chamber - about the significance of this. But the significance of this is not just in the economic benefits that may accrue to ASEAN or China, but it has a strategic relevance, in a sense, that it will underscore to other countries the importance of ASEAN. In a sense, this has been borne out because soon after the announcement of ASEAN-China FTA, you would note that Japan took an interest and has offered Japan-ASEAN enhanced economic cooperation.

That is a good sign. In this regard, Singapore's role is quite evident because the Japanese have, in fact, suggested to the ASEAN countries to have a look at the Japan-Singapore FTA as a model and to examine what provisions may be applicable, as they discussed the ASEAN-Japan economic partnership. When we have this bilateral FTA, a point made by Ms Irene Ng, it has spin-off effects for the rest of the region.

Another sign that ASEAN realised its importance of being outward looking is that it has now decided to have a summit meeting with India, which is a proposal that Prime Minister Goh had floated some one or two years ago, and this has now borne fruits. It is important to bring India into closer interaction with ASEAN.

These are steps - Members may think that they are too tentative and not enough - to show that ASEAN, despite all its problems, is aware of the importance of staying on track, the importance of continuing to be relevant to the external players. I should add that in July, there will be a further engagement with the external players when the ASEAN Regional Forum meets. And I think when they meet in Brunei, there will be another opportunity for ASEAN to show that working with the dialogue partners, it can take several steps towards discussion in a concrete manner of the matters like combating terrorism.

Several Members have asked what can Singapore do, what can Singapore assist in showing leadership of ASEAN. Mr Tan Soo Khoon referred to the pathfinder role. Whatever term you describe - whether it is pathfinder or leading from behind - Singapore's commitment to ASEAN is there. It is important for us. It is in our interest that ASEAN succeeds.

I have referred to some of the roles we have played. It was Prime Minister Goh who proposed that ASEAN invite India for a summit. This has now borne fruits. Prime Minister Goh, in Singapore, proposed an Initiative for ASEAN Integration. And we have, in fact, set an example by providing some $50 million over a 5-year period, and training centres have actually been set up in Indo-Chinese countries. We have also come out with ideas as to how ASEAN can be marketed abroad, and the idea of roadshows - ASEAN Roadshows - in fact was proposed by Singapore.

Then on the political and security side, it was Singapore which suggested that ASEAN also has closed-door retreats. Why? Because there is a tendency in ASEAN, because of the ASEAN way of doing things, to tread gingerly on sensitive and delicate topics. So what we have decided, and also it was Singapore's proposal, was in order to overcome this, let us have retreats where only the Foreign Ministers, unaccompanied by officials, meet. This has enabled, over a few years, ASEAN Foreign Ministers to discuss matters in a very frank and candid way. I would say, on some occasions, topics which in previous years would have been considered sensitive and too delicate to be brought up among the Ministers, Singapore has also suggested the proposal for e-ASEAN, which has been taken.

To sum up, how ASEAN will move, whether it moves successfully or whether it will be a marginalised organisation, depends on these twin challenges - whether we can overcome the internal challenges and whether we can overcome the external challenges of being outward looking, and continue to be regarded by major powers and the dialogue partners as a body with whom they find it useful and relevant to stay engaged with.

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 3.50 pm.

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

[Mr Speaker in the Chair]

Debate in Committee of Supply resumed.

[Mr Speaker in the Chair]

Head N (cont.) -

Dr Ong Chit Chung: Sir, following Singapore-Malaysia relations is like going on a roller-coaster ride. It zooms up and down, up and down, full of excitement and thrills. Never a dull moment, I must say. But, Sir, it is not good for the heart, not good for the heart of economic interests and not good for the heartlanders of both countries.

Sir, we should all forget the past historical baggage of merger and separation and focus on the present business of a borderless new economy. In this regard, Singapore believes firmly in the "prosper thy neighbour" policy. But recently, the Malaysian Prime Minister, Dr Mahathir, was reported to have said that "there are many ways to skin a cat, and to skin Singapore, there are also many ways". This is a most unfriendly comment from the Prime Minister of a neighbouring country.

We must remind the Malaysians that Singapore is no pussy cat. We are no pushover. They should jolly well know that it is not easy to skin a lion. And those who dare try will be badly mauled. So better do not try.

Sir, this we can promise. The lions of Singapore will stand up and roar and defend Singapore, our homeland. Are all these Singapore bashings a preparation or prelude to the coming Malaysian election? I wonder. But we welcome fair competition, whether from Port Tanjung Pelepas, or KL International Airport, as long as it is done on a commercial basis. In this regard, there is no need for Singaporeans to moan and groan. No need to generate a climate of gloom and doom. Such competition helps us to sharpen our competitiveness and enhance our productivity. This is part and parcel of life. We need not be angry or resent such competition but welcome such competition positively. It makes us better. It makes us more competitive.

Remember, earlier on in this House, BG George Yeo pointed out that our economic competitors are not only from the region, but from further afield, from China, for example. And its cost-efficient manufacturing capacities in China is one important area for us to look at. So we must thank Malaysia for giving us, indeed, a practice run.

Sir, water has been a bone of contention between Singapore and Malaysia. Singapore is indeed deemed to be dependent on Malaysia for water and could be held to ransom. On the day of Separation, Tungku Abdul Rahman said that, "If Singapore's foreign policy is prejudicial to Malaysia's interests, we could always bring pressure to bear on them by threatening to turn off the water in Johor." And this Malaysian position has not changed over the years. Now and then, Malaysians have threatened to use water as a trump card against Singapore.

Analysts and commentators have pointed out that this could lead to tension and open conflict. Even Mr Chiam See Tong, speaking in this House on 5th June 1997, declared that "cutting off the water supply is a very serious issue. It is like declaring war on Singapore." Lt General Zaini Mohd Said, a retired Malaysian General, wrote that water was a security issue that could lead to war.

But the situation has changed. The first to pick this up amongst analysts is Mr Joey Long, a young researcher at the NTU Institute of Defence and Strategic Studies. Mr Long wrote a ground-breaking article on the water issue between Singapore and Malaysia in the December 2001 issue of "Contemporary Southeast Asia", a journal. Mr Long concludes that with the desalination and NEWater from recycling plants, Singapore has the means to achieve water self-sufficiency and is no longer held to ransom by Malaysia's use of water as a leverage. In other words, the water issue has been desecuritised. There is no need therefore for rhetoric and threats. No need for confrontation and conflict. There is no more the Damocles' sword hanging over our heads. Mr Long is indeed most perceptive.

Sir, we remember that in this House on 5th April 2002, the Prime Minister confirmed that Singapore had called a tender for a desalination plant and has been operating a plant to produce NEWater using membrane technology with more NEWater plants to be built in the future. And the cost is indeed not prohibitive. The Prime Minister concluded that "it may be better for bilateral relations if we start to move a little away from our reliance on Malaysia for water." May I ask the Minister what is the reaction of Malaysia to our new found self-sufficiency in water? I also wish to ask the Minister to update us on the negotiations of the package of issues and whether the talks have resumed and whether Malaysia has sent a comprehensive note on their claims on the issue of land reclamation and the basis of such claims. The Minister may also care to draw some lessons on this roller-coaster up-and-down relationship between Singapore and Malaysia and put it in the context of history and politics for us.

Dr Tan Cheng Bock (Ayer Rajah): Sir, relations with Malaysia will always have its ups and downs. However, recently, there are more downs than ups. The reasons, I think, are, one, historical; two, increasing intense competition as a result of Malaysia's strong economic growth and progress. I have no problems with increased intense competition because, to me, it is good for both countries.

Singapore has to sit up and accept such challenges to our port and airport services with more vigour than ever before, and to compete with Malaysia for new businesses and talent with our recent tax restructuring. This healthy competition will bring about better changes to both economies. In fact, intense competitive activities attract international players to come and take advantage of the good deals that come out of these competitions. So we have Maersk Lines and we have Evergreen going to the Malaysian port, Pelapas. However, if historical reasons continue to bear down on relations, then I think it is going to be tough to resolve because of the strong emotive elements attached to this. This should, however, be addressed and left to rest once and for all in a pragmatic and non-emotive manner. Talks based on perception of issues will create a widening gap between the two countries. It must be based on facts or it will not withstand the test of law, locally and internationally. 4.00 pm

The best signal came from Malaysian Foreign Minister Syed Hamid Albar, when he played moderator and told some of the country's brightest brains to discard historical baggage when dealing with Singapore. He was addressing the Association of Young Malaysian Professionals recently in KL. In his address, one of the questions he posed was: can emotions make way for pragmatism?

Our approach to issues has always been pragmatic and, at times, clinical, and this has probably irked many. However, we were brought up in circumstances that gave us not much of an option but to work hard and survive. Our EQ is poorly ranked. But that does not mean we cannot learn from the Malaysians or from the Thais on this art of making friends and winning people. We want to be friends with all. Some have accused that Singapore is an Israel. But Singapore is not the Israel of the East, and we do not want to be.

Singapore and Malaysia have many similarities than differences. We should avoid highlighting our differences and emphasise on our similarities. Both countries' racial mix is the same, though in different proportions. Both use Malay, Mandarin and English; both have relatives on each side of the Causeway; and both have investments on either side. In fact, Singapore is the biggest investor in Malaysia. In fact, I remember, when I attended many of these parliamentary meetings with my Malaysian counterparts, I find Malaysians and Singaporeans gravitating towards each other during such meetings, and the jokes we share, the songs we sing, and the stand we took on many issues usually strike similar chords. Many of the two countries' agencies work very closely together, such as the police, the anti-narcotics agencies, tourism and even security matters, eg, the latest terrorist crackdown. Yet, it is sad when I hear of harsh calls to stop our water supply, for example. Perhaps, these were said in the heat of anger and not meant seriously.

Therefore, if we can, for once, set aside all our historical baggage, as proposed by their Foreign Minister, and negotiate all our outstanding issues purely on the merits of the case, with a little give and take on both sides, then I hope we can start a new chapter in our relations. It will be good for both countries, it will be good for our children. And for both countries because the region will be viewed differently than today, with investors more assured of their choice to put their money in these two countries.

Sir, Malaysia is a beautiful country, notwithstanding what my colleague said that we do not visit Malaysia.

The Chairman: Dr Tan, could you pose your question quickly, because we are rather short of time now?

Dr Tan Cheng Bock: I am saying that we should not just take these differences and these ups and downs that we have with Malaysia by not going to visit Malaysia. We should visit Malaysia, have more exchanges with each other, and then we will have better trust between the two countries.

Ms Irene Ng Phek Hoong: Sir, the negotiations on our bilateral package with Malaysia show no sign of real progress. On the contrary, they seem to have regressed. In September 2000, when Senior Minister Lee Kuan Yew visited KL, there was hope of a deal. An in-principle agreement was reached in skeletal form, with differences narrowed significantly between the two countries. This was despite the fact that Malaysia introduced new issues to the package, such as the building of an underground tunnel and a bridge, and the demolition of the Causeway.

Singapore had made concessions to reach the skeletal agreement, such as offering 12 parcels of land in Bukit Timah. Many Singaporeans had then queried whether Singapore had given too much. Then, instead of seizing the moment to narrow differences further, Malaysia suddenly upped the price of water being negotiated many times, and everything is now back on the drawing board. Sir, in most parts of the civilised world, this would be considered a breach of good faith. Since then, heat was generated in the Malaysian media over issues such as land reclamation, Pulau Pisang and Pedra Branca.

Sir, this does not help to improve the climate for negotiations. My concern is that Malaysia might use any of these new issues to pressure us during our negotiations over the bilateral package. Indeed, can the Minister assure us that no more new issues will be added to the already unwieldy package? And, since everything is so fluid now, it is also worth asking if it is wise for us to be even negotiating the issues at all as a package. It has so many issues tangled up together. It is so unwieldy, and it seems to be so dependent on the temperament of Malaysian leaders that I feel it cannot hold together as a stable agreement, even after it was signed. After all, the Points of Agreement on railway land, signed in 1990 between Senior Minister Lee and the then Malaysian Finance Minister Daim Zainuddin, was supposed to be binding. Yet it had to be varied now to accommodate requests from Malaysia.

I think, before any deal can be reached, confidence must be built on both sides, based on mutual respect and reciprocity. But, from the barrage of one-sided criticisms from across the Causeway, my guess is that it will take a long time - or, at least, some time.

Sir, Dr Mahathir was reported as saying that the 1963 water agreement with us was unfair to Malaysia because "it states that there can be no changes unless both countries agree." This statement worries me, because it seems to indicate that he prefers an agreement which can be broken unilaterally, then only it is fair.

Sir, it is important that our package deal with Malaysia, if it is at last made, be sealed so tightly that it would not unravel just because someone wants to pick fault with any one of the issues down the road, like a cat playing with a ball of thread. The future generations should not be bequeathed with such extra historical baggage.

Sir, as a younger MP, my hope is that, when the agreement is done, the younger generations of both countries are able to view the agreement as a positive symbol of our interlocking destinies. Then, we can move on and build on this legacy.

Mr Sin Boon Ann: Sir, I agree with my colleague before me in his choice of the metaphor to describe our relationship with the Malaysians, ie, it is like a roller-coaster, it has its ups and it has its downs.

Just last year, in this House, it was reported that our bilateral ties with the Malaysians were improving. This arises from Senior Minister Lee's visit to Malaysia, when we thought we had an agreement in principle to settle all outstanding issues with a certain measure of urgency. Unfortunately, after more than a year, it does not seem as if we are anywhere closer to resolving these outstanding issues. Not only that, we have new issues emerging, such as the issue on our land reclamation works at the Singapore straits which is now a bone of contention between the two countries. Honestly, Sir, I cannot see how the conduct of legitimate activities within our territorial waters can be seen as an interference with the rights of the Malaysians. My understanding is that the land reclamation is well within the bounds of international law and is within our legitimate right so to undertake.

Sir, it seems that in recent months, it is not uncommon for the Malaysian media to allow itself to be used as a forum to conduct international relations. The exploitation of the media has caught the attention of a Straits Times cartoonist in a recent publication, where there was a cartoon which depicted the removal of the Merlion from one side of the road to the other with a caption which said: "Let's better check with the Malaysian media before we move the Merlion to see whether they approve of it." We can all laugh at this little joke. Unfortunately, it is a sad reflection of how we have allowed our foreign relations with the Malaysians to be played out. And, as I was preparing to come into this Chamber, my GPC Chairman, Dr Ong, remarked that I have a sombre-looking tie and asked whether this reflected the tone of our relations with Malaysia. Well, I thought perhaps it might.

We have lost much ground in our ties with the Malaysians, and this is evident by the Freudian slip which the Malaysian Prime Minister made recently when he alluded to the fact that there are many ways to skin the Singapore cat. The Malaysians have called for sensitivity in our relationship with them. If, as in the case of our ties, sensitivity is to be applied, I wonder whether this sensitivity should also be mutually applied. Where, if I may ask, is the sensitivity when the Malaysian Prime Minister alludes to the fact that there are many ways to skin us? Such words, unfortunately, and sadly, are not words that will help strengthen our bilateral ties. On the contrary, it weakens and undermines the goodwill that we have put in so much effort to build up in the past.

Sir, let it be known that Singaporeans expect the conduct of our bilateral ties with the Malaysians to be on equal footing and between two sovereign states enjoying equal status and standing in the international community. If the Malaysians think that ours is an "abang-adek" relationship, then I am sorry to say they are sadly mistaken. Again, I should have guessed that perhaps the Malaysian general election is coming, and this is the usual time of the year or the season to take out the bogeyman from the cupboard to win popular support. If such was the intention of the leaders, then one wonders how it is possible for the outside world to have much admiration for their system.

I would, therefore, appreciate it if the Minister can give us an update on the existing relationship between the two countries.

Mr Ravindran: Sir, my parliamentary colleague, Dr Tan Cheng Bock, is a very nice man, and he means very nice things for everybody. Sir, I, like him, was very optimistic, being a young generation of Singaporeans, that with a new generation on both sides of the Causeway, we will have a good relationship in the long run.

But, unfortunately, as a person who visits Malaysia regularly, the contrary is happening in Malaysia. I remember Senior Minister Lee Kuan Yew made a call a few years ago that we do not pass this historical baggage to the next generation. But, if one goes and talks to the younger generation in Malaysia, on the contrary, the Malaysian leaders keep on passing historical baggage and keep on raising issues which predate historical matters. I wonder whether they sincerely want the new generation to start their relationship on a new basis or do they want all this historical baggage to be at the back of their mind when they deal with Singapore.

Sir, I would add that let us be cautious but, at the same time, try to keep an even keel with our Malaysian friends. The cat was let out of the bag recently when the Malaysian Prime Minister told UMNO to get ready for early elections next year. It explains the issues that were raised by the Malaysians in the last few months. I think the standard operating procedure for the next few months will see the usual barrage of issues across the Causeway, from Pulau Pisang to reclamation, to water, so much so that somebody even remarked that they may raise goreng pisang also.

Sir, the latest salvo, which was fired just last week, was that our Malay brothers are being left behind in Singapore, as compared to those up north. I sincerely hope that our High Commission in Malaysia can put all these bilateral issues on its website with detailed answers, so that whenever these issues are raised by the Malaysian media, Malaysian leaders or even ordinary Malaysians, our High Commission can just send them a simple note telling them, "Please refer to this particular page on our website on this issue which has been raised many times in the past." And, I think, by reminding them and telling them to keep on going to the website with those particular pages, we show them that they are, basically, playing the same old broken gramophone record.

Sir, what really perturbed me was the recent comment by the Malaysian Prime Minister where he stated that just like there are many ways to skin a cat, there are many ways to skin Singapore. That it was not a Freudian slip, but a careful statement, bothers me a lot and many other Singaporeans, some of whom wrote to the press about it.

Sir, I am heartened to see that there are many lions in this House, just like there are many other lions out there who will stand and show that there are many varieties of cats. Do not always think that this is a kucing kurap. This is Singapura and, if you try to skin the wrong cat, you may end up getting into a lot of trouble.

So, while it is directed to the domestic audience, the implications of the statement are very grave. Do the Malaysians have a grand plan to fix Singapore, which directly fixes every Singaporean? Is the grand plan to fix Singapore supported by all Malaysians? If so, in what ways are they planning to fix us? I am sure that if a Singapore leader had made a similar statement about Malaysia, they would have made a ruckus about the statement and even gone to protest before our High Commission. Many Singaporeans are polite ---

The Chairman: Mr Ravindran, I will give you another 30 seconds to skin the cat!

Mr Ravindran: Yes, Sir.

The Chairman: Sorry, Freudian slip!

Mr Ravindran: Thank you, Mr Chairman. Sir, the point I want to say is that we want to have good relationships with the Malaysians and we want to be friendly with them but, yet, we must be firm and tell them that, please deal with us as a sovereign nation and as a good friend, and do not treat us, as my colleague said, as in an "abang-adek" relationship.

Sir, I would like to ask the Minister what are the other steps that perhaps the Ministry of Foreign Affairs, and the Minister in particular, can suggest to see how we can move our relationship forward and to have a better relationship, both between the leaders and the people in the two countries. 4.15 pm

Mr Chiam See Tong (Potong Pasir): Sir, Singapore is Malaysia's second largest investor. Singapore's investments in Malaysia are only superseded by those of America. America is Malaysia's largest investor. Malaysia is Singapore's largest trading partner. Singapore is physically connected to Malaysia by a Causeway. Singapore depends on Malaysia for its water supply.

This water supply seems to be a troublesome issue. As reported by Dr Ong, an article published that if Singapore is self-sufficient in water, I suppose that much of the quarrel between Singapore and Malaysia will be taken away, but I believe even if there were no water issue, because of our proximity with each other, there shall be some form of quarrel from time to time.

The good relationship between Malaysia and Singapore is of paramount importance. What is worrying is that these angry words can escalate. This kind of situation has been going on for the last 10 years. It is not a recent event. I believe the quarrels between Singapore and Malaysia are there for more than 10 years in fact. Malaysia has complained of Singapore being "unneighbourliness'' and arrogant. Some Singaporeans have called their fellow countrymen to boycott shopping at Johor Bahru and to stop travelling to Malaysia. It would appear that, with the passage of time, the relationship between Singapore and Malaysia has not improved. In fact, it has worsened.

The words of war have escalated and become quite intense recently. Last month, the Malaysians paper the Minggu Malaysia reported, "Following the uproar over the reclamation of land off Pulau Tekong, noises are being made about going to war with Singapore. This time, it is a small group of Malaysians who are beating the drums of war." Then I quote again, "These people who do not have a complete understanding of the problems at hand want the Government to stop the supply of water and take confrontational action." It was further reported in that newspaper that, "It was an open secret that if Malaysia cut off the water supply to the Republic, Singapore would use its airforce to attack Johor, try and wrest control of the water treatment plants and occupy that state." These are very dangerous words - going to war between the two countries.

What must we do? I would suggest that if Singapore is able to take the initiative to form a committee with representatives from both countries and all questions of relations between Singapore and Malaysia be brought to this Committee and not dealt with by the press. In any event, Sir, such words or talk between Singapore and Malaysia going to war must be stopped.

The Chairman: Mr Zainul Abidin. We are running behind time now.

Mr Zainul Abidin Rasheed: Sir, last week, there was a group from Malacca, accompanied by the members of the Malaysian Institute of Historical and Patriotism Studies, who came to visit Malay-Muslim organisations and members of the community. I had a dialogue with them too. They came out saying that, in fact, from what they observed, they were very clear in their mind that Singapore Malays are very much an integral part of the society, that they have not been left out and have been looked after, and there is no marginalisation.

A week earlier, Datuk Megat Najmuddim Khas, the President of the Corporate Governance Institute also said on CNA `Between the Lines' to the effect that we should just forget about the rhetorics and the private sectors in Malaysia and Singapore should move on to improve relations between the two countries.

Sir, I think we should encourage more people-to-people relations to grow. We should encourage more of the Melaka-type of groups of people to come and similarly, we should reciprocate by sending our grassroots organisations groups to visit Malaysia to promote better understanding.

I remember that the last time our Senior Minister visited Malaysia, he chose to travel by road just to impress on the Malaysians that he is willing to come to understand the Malaysians closer and better. I think maybe it is about time that Malaysian Prime Minister, Dr Mahathir Mohamad, also made a visit here and stayed close to the ground to have a better understanding of Singapore. I say this because of two remarks which Dr Mahathir made: one, is of course the infamous skinning of the cat, and the other is his remarks about Singapore Malays. I do not want to belabour the point, Sir, but I think I remember that sometime back, one Straits Times journalist once described Dr Mahathir as a "top dog". That could have evoked him to refer to us as a cat. Never had we in fact seen ourselves as a top cat. So I do not think there is a need for them to skin us. I must remind them that neither are we stray cats. We are a very integral part of the region and we value good relations with our neighbours.

We also have a cat of our own called Kuchinta, meaning we love you. This is just to remind Malaysians that Singaporeans love Singapore and we will defend Singapore whenever there are unfriendly and uncalled for remarks made. Dr Mahathir should realise that Singapore Malays do not agree with his description of their position in Singapore. Yes, we are a minority. Yes, we still have problems to overcome but we are not marginalised. Neither do we despair in our efforts to uplift. We are happy that our efforts at upliftment not only get the support of the Government but also support from the private sector. By all means, Malaysian leaders can motivate the Malaysian Malays but do not look down on Singapore Malays. They hurt the Singapore Malays' feelings by those unfair remarks. Let us move away from the `dogs and cats' relationship to one that is more productive and more friendly.

Prof. Jayakumar: Sir, compared with previous years, I cannot recall the Committee of Supply where so many Members have moved cuts on Malaysia. I think, this is, in fact, the largest number. Perhaps it is understandable in view of what Dr Ong Chit Chung had said about the ups and downs in our bilateral relationship and the way in which Singapore has been criticised in the Malaysian media on several issues over the past few months.

Prime Minister Goh recently, on 5th May 2002, spoke about the negative reports in the Malaysian media. They started with the water issue in January. We were portrayed as having profiteered from the purchase of water at an "unreasonably" low price all these years as a result of "unfair" Agreements, as mentioned by Ms Irene Ng. Then in February, their media turned to the tudung issue, with some alleging that our policy was part of an overall scheme to marginalise the Malay-Muslim community following the September 11 events and the arrest of the JI in Singapore.

Then in late February, the focus moved on to Singapore's land reclamation works. In March, remarks which have been made in jest by Dr Vivian Balakrishnan almost threatened to become a self-contained bilateral issue. In April, criticism turned to the lighthouse that we are entitled to operate on Pulau Pisang, with wild allegations that armed Singapore personnel were going there. More recently, Members would have read reports that Singapore was buying fewer tomatoes from Cameron Highlands, and accusations that Singapore was turning away Malaysian vegetables because they did not satisfy certain health standards that we had somehow kept secret all these years.

In levelling these accusations against us, Singapore was asked to "compromise" and exhibit neighbourly behaviour. The comments suggest that Singapore should accede to Malaysia's expressed concerns, regardless of whether they were formally raised or substantiated to be facts. Anything short of accepting and abiding by the Malaysian concerns was deemed to be insensitivity on our part towards our neighbours. In essence, we were being asked to accept a zero-sum fait accompli.

How should we respond to all these unsubstantiated claims and allegations? Sir, I suggest that the best course of action for us is not to be unduly perturbed by these strident diatribes but proceed with our daily affairs as we have many pressing issues in our national agenda. Of course, we want to have good relations with Malaysia but, as the Prime Minister said recently, we cannot be chasing and answering each and every wild allegation that is made. But if a serious point has been made, backed by proper facts, we should be ready to look at it.

I therefore would not want this afternoon to reply point-by-point to every one of the Malaysian allegations that Members raised. Instead, I will briefly update Members on the status of our package negotiations and some Members talked about reclamation.

On the package, on 3rd May, when I replied to Mr Leong Horn Kee here who requested for an update on our package negotiations, Members would recall that I said that I had proposed a set of dates to my counterpart, the Foreign Minister, Syed Hamid Albar for a meeting between both sides following the correspondence between the Prime Ministers. He had offered alternative dates and now officials on both sides are working out the dates convenient to both of us. I believe that they will soon settle the date for the first meeting. Dr Ong Chit Chung asked what has been the reaction to what the Prime Minister spoke about self-sufficiency in water. But as I said before, Members would have read the statements that different leaders in Malaysia have said. There has been no official government reaction and I do not think it was really called for. When Prime Minister spoke on this, Members would have read that Deputy Prime Minister Abdullah Badawi said that if we wanted to look at other sources of water supply it is up to us and he said that it is not going to affect negatively or jeopardise bilateral ties.

On reclamation, Members would recall that I spoke on this on 3rd May also in response to Mr Leong Horn Kee. I informed the House that Malaysia had sent a Note on 30th April on our reclamation works around Tekong and Ubin. That was the third Note after two previous Notes which had focused on reclamation works in the Tuas area where they alleged that we had violated their territorial sovereignty. This third Malaysian Note only contains general allegations that our Tekong reclamation works have had an impact on their territorial waters, but there were no specific facts, none whatever, details to substantiate their allegations.

We had replied and rebutted their two previous Notes. I would like to inform Members that we have replied to this third Note on 15th May 2002. The Malaysian High Commissioner was called in to receive a copy of our official reply where we stated that their allegations that our reclamation works had caused a "transboundary environmental impact" upon Malaysian territorial waters and the claim that it narrowed "the waterway" in Kuala Johor were unsubstantiated and lacked particulars. We therefore reminded the High Commissioner to ask his government to send us a Note itemising their concerns in detail for us to study carefully. So in reply to Dr Ong Chit Chung, the answer is no. We are still awaiting that comprehensive Note. 4.30 pm

What I have said thus far about the package and reclamation works is factual. But it is true that both matters have become bell-wethers, in a sense, for the course of our bilateral relations. It would be natural for many in this House, and many Singaporeans, to conclude that our relations with Malaysia are at a low point based on the way these and other issues have hogged the headlines in recent months. There is no denying that Singapore-Malaysia relations have encountered choppy waters, but I would say that like the tide which ebbs and flows, the current rough patch is to be considered as normal in state-to-state relations between immediate neighbours. Both of us, Singapore and Malaysia, share a complex and interlinked relationship and keeping it on an even keel is never an easy task. Therefore, I agree with colleagues who have said that both sides should view Singapore-Malaysia relations, not in an emotional sense, bogged down by historical baggage, but from a pragmatic and longer-term perspective, rather than try to seek short-term gains through one-upmanship.

I have also noted what Ms Irene Ng has said just now. Yes, negotiating with the Malaysians is not easy. But does it mean we should not negotiate with them? I do not think that this is what she meant. Our experience has been that, notwithstanding all the difficulties, it is still possible to reach agreements with the Malaysians, but this is provided there is the political will and goodwill to do so.

I also agree with her that if new issues are thrown into the package that is currently on the table, it will make the negotiations even more complicated and the chances of reaching agreement even more slim. But that is not to say that in our bilateral relations new issues will not crop up. Events have shown that they do crop up, and we will have to deal with them as and when they emerge.

On this matter of "skinning the cat", many Members have alluded to Dr Mahathir's "skinning the cat" remarks. They have quoted from the Beritan Harian (Malaysia) report of 3rd May, where he was quoted as saying "We can skin a cat in many ways. To skin Singapore, there is not just one method." I was curious and looked up the various newspaper articles and magazines and it would seem that Dr Mahathir seems to have a fondness for skinning cats. He has used this phrase "we can skin a cat in many ways" on several other occasions. For example, in an interview with Asia Incorporated on 4th May, in answer to a question: "If you have to describe Malaysia's approach to globalisation in one sentence, how would you do it?", and he replied, "Firstly, listen to everyone. Number two, always accept that there are many ways to skin a cat, many ways to do things in order to achieve results." and similarly, at the PEBC conference in Kuala Lumpur, when asked to explain Malaysia's approach in dealing with the 1997 Asian Financial Crisis, he said: "People know that there are many ways to skin a cat. We have chosen the unorthodox way and the cat has been neatly skinned."

Sir, I would urge Members that we should take such remarks in our stride. This is not the first time and it will not be the last time that we are called names. We have been called all kinds of names: a little red dot', a pimple that won't burst', and so on.

Singaporeans have also often been accused of being thick-skinned. So trying to skin us can be quite a daunting task. Despite all the name-calling that we have endured over these years, Singapore continues with our business, we continue to survive and we continue to prosper. Cats, after all, have nine lives, they say. And no cat is ever going to lie down meekly to be skinned.

So I would say to Members of the House that we should not allow such name-calling to deter us from what we must do to defend and promote our national interests. Instead, I think all of us should look and take note of the underlying message behind the metaphor, the underlying message of how seriously they intend to compete with us and we therefore have to gird ourselves to meet this challenge.

Sir, Singapore-Malaysia relations are extremely complicated, as must be any relationship of close inter-dependence. There are different strands in the relationship, and not all the strands are neatly compartmentalised or compatible. There will always be ups and downs. And it is a fact that some Malaysians delight in putting Singapore down. But that strand of thinking revealed is not the only one in Malaysia. There is also an understanding that given the close inter-dependence between our countries, what hurts Singapore will also hurt Malaysia. And the games of one-upmanship should not be allowed to go too far. In fact, Dr Mahathir himself said so recently when commenting on our reclamation works, on 14th April in Bernama: "We must be careful in handling a problem such as this because we don't want to be at war with Singapore" and he said, "That's why, when handling national affairs, we have to be extremely careful and wise . ."

So, I would repeat, let us not get too worked up over these remarks. It should not deter us from seeking cooperation with Malaysia when cooperation is to mutual benefit. But we must cooperate without illusions.

I would say, let us take the Malaysian criticisms against us in our stride. There is no need to get excited. They constitute a form of psy-war to weaken our morale and soften our position on matters under negotiation or discussion. Let us quietly and politely state the facts and stand on them. Mr Ravindran said, put it on the website. I will ask my High Commissioner in KL, I know they are doing a good job in disseminating all the speeches and positions to various quarters in Malaysia. They have a website. If it can be improved, Mr Ravindran said, let us do so. But the important point is that notwithstanding the present cloudy atmospherics, we are committed to forging a long-term relationship with Malaysia based on mutual respect and sovereign equality. We are neighbours who can and should cooperate and realise the full potential in our bilateral relationship and find win-win solutions. As PM Goh himself said, both countries should in fact be working closely in order to consolidate and lead ASEAN.

Dr Ong Chit Chung asked me: Would I reflect on what are the lessons that we can learn from this? I think there are several useful lessons, if I may enumerate them. I think the points are alluded to by Mr Chiam See Tong about the media and Mr Sin Boon Ann, too.

First of all, we should not negotiate or try to raise bilateral issues in the mass media. If the goal is to resolve the problem, then conducting bilateral relations through the media actually complicates finding a resolution to the issue. Playing up bilateral issues through the media restricts the manoeuvrability of both sides. It is much easier to find a solution which would benefit both parties if such issues are quietly handled. In fact, in an interview with Straits Times which my counterpart, Foreign Minister Syed Hamid Albar, gave in 1999, he said: "But what is considered as sensitive and can be misunderstood and can create tension should be kept outside the public domain." And he noted that quiet diplomacy would enable the points of contention to be resolved speedily by both sides. That is a point I wholeheartedly agree. Unfortunately, the recent public comments made by some politicians and the media barrage there show that they have not heeded his words of wisdom.

Second lesson is that while disagreements are bound to occur from time to time, it is very important to keep open our channels of communication. And I think this point made by Mr Zainul Abidin is relevant, by still maintaining the different visits and so on. So, I am glad that despite the intense barrage and roller-coaster rides that Dr Ong Chit Chung mentioned, there has been a steady exchange of visits between Singaporean and Malaysian leaders since the start of the year. Singapore has hosted visits by Malaysian leaders. Ministers have come here and our Ministers have gone there. Barisan Nasional Youth delegation came to Singapore. Our Deputy Prime Minister visited Kuala Lumpur. Our President led the NUS team for the Games, and other Ministers like RAdm Teo Chee Hean and BG George Yeo have made visits. Mr Wong Kan Seng also led the MHA team up there and he met Deputy Prime Minister Abdullah Badawi. These exchanges should continue. Perhaps they are even more important when relations go through a rough patch. It gives the opportunity for both sides to share views and discuss key issues. The agreement by the youth wings of the PAP and the Barisan Nasional to formalise their relationship by establishing a secretariat is also a move in the right direction.

Thirdly, and this touches on the point that Mr Sin Boon Ann made about reciprocity, I think there should not be double standards applied to the cardinal principles of relationships, such as the principle of non-intervention, or non-interference with the internal affairs of one another. More so, when the issue involved is sensitive, and which can have a possible impact on racial and religious harmony.

The tudung issue is a case in point. The point that Mr Zainul Abidin mentioned is also relevant. Some Malaysian politicians continue to hold the position that they have a right to comment on Singapore issues involving race and religion. These comments do not help in any way in advancing our bilateral relations. On the contrary, they will only complicate and confuse matters further. For example, on the tudung issue, it is not about the religious rights of Muslims in Singapore, and I fail to understand how Singapore's school uniform policy is anything but a domestic issue which Singaporeans have to decide.

Fourthly, and this touches on the point which Miss Irene Ng talked about agreement. I think the relationship between Singapore and Malaysia must be based on international law and the observance of agreements. It cannot be based on subjective criteria, or based on emotionalism or sentimentality. Otherwise, there would be no basis to judge whether one's action was right or one's action was wrong. As a small country, Singapore adheres closely to this principle. That was why we have stressed several times the legal and binding nature of the Water Agreements or the POA. And that is why we also repeatedly stated that our reclamation works are being carried out within Singapore's territorial waters, and in accordance with international law. Recently, Sir, a New Straits Times editorial of 15th April, referring to my Ministry's Addendum, said that Singapore was "over-legalistic" and added, and I quote, "what follows from Singapore's overweening legalism is a fixation with 'facts', [fixation with facts], the sort that would stand up in an adversarial court of law, and a foreclosing of the flexible positions that would conduce to a friendly tete-a-tete."

Sir, "fixation with facts"? "Legalistic"? Sticking to facts and to the law surely is the only basis for any relationship which is not based on the arbitrary wishes of a single party. How else can it be? How else can sound international relations be possible if we do not have regard to principles of international law and agreements lawfully entered into by governments? Also, how can we have sound basis for bilateral relations if we were to ignore facts and instead rely on unsubstantiated allegations, distortions or rumours? Yes, we can have friendly tete-a-tetes. And indeed we are having them, as I mentioned all these to-ings and fro-ings. But, Sir, this cannot be at the expense of ignoring facts or at the expense of abandoning solemn legal commitments.

So to conclude, let me stress again that it is not the intention of Singapore or interest to have strained relations with Malaysia. We seek a cooperative relationship based on mutual benefit and mutual respect. Not one based on emotions or historical baggage, as some Members have rightly said. Inevitably, there will be ups and downs in these relations. Therefore, we believe that both sides should address the problems pragmatically, on equal terms, taking a longer-term perspective without resorting to unsubstantiated allegations or threats. On this basis, Singapore and Malaysia can enjoy a calm and balanced bilateral relationship. 4.45 pm

The Chairman: I would like to remind Members that we have about 5 items and 4 replies to be completed in 20 minutes' time. Mr Heng Chee How.

Mr Heng Chee How: Sir, it is not my intention to belabour the point about Singapore-Malaysia relationship. But I just like to bring up one subject matter, and that is on Pedra Branca.

Sir, Singapore's claim to Pedra Branca, which is the land on which the Horsburgh Lighthouse stands, has been challenged by Malaysia some years ago. I recall that, in the end, both sides agreed to refer the dispute to the International Court for arbitration. In our relationship with Malaysia, we have often lamented that there is not enough progress because details cannot be pinned down or agreed to by both sides. But in the case of this particular dispute over Pedra Branca, this agreement to refer the matter to third party arbitration seems to have placed us further along this road towards the determination of outcome.

Recently, I read reports that some politicians in Malaysia have said that they are pushing for the matter before the International Court to be expedited. Sir, I am certain that Singapore's claim to Pedra Branca has full and firm basis and we are surely just as keen to see a decision on this matter. I would just like to ask the Minister for an update on the status of the matter and what steps are being taken to have this arbitrated upon as soon as possible.

Prof. Jayakumar: Sir, it has been some time since this subject was last brought up. Let me refresh our memories by saying that Pedra Branca is part of Singapore's territory. The Singapore Government and its predecessors have occupied and exercised full sovereignty over Pedra Branca and the waters around it for more than 150 years since the 1840s.

Our ownership and sovereignty over Pedra Branca has never been challenged by another country. Even Malaysia had continuously and consistently recognised Singapore's sovereignty over Pedra Branca for more than 130 years until it contested Singapore's ownership of the island in 1979.

Yes, I have noted that some Malaysian politicians have said that the case on Pedra Branca is already before the International Court of Justice, that they want to expedite or accelerate the hearing of it.

The actual or current position is that both Malaysia and Singapore have agreed in 1998 on referring the case to the International Court of Justice. But the case has not yet been submitted to the Court, because there is a certain procedure that Malaysia and Singapore must follow in order to do so. The procedure was spelled out in 1998, when Singapore and Malaysian senior officials reached agreement on the text of a draft Special Agreement to refer Malaysia's claim to the ICJ.

But that Agreement is subject to procedural requirements such as a formal ratification of the Special Agreement, and only when that is done we can submit the case to the ICJ. On our part, we are prepared to proceed to the ICJ when the Malaysians are ready.

Dr Ong Chit Chung: Sir, Indonesia is Singapore's biggest neighbour, and an important member of ASEAN. We wish Indonesia well.

Jakarta's relationship with Singapore has vacillated from the affectionate Suharto, to frosty in Habibie, then the awkward in Wahid and now to cordial in Megawati, over the past few years.

But I must say that, despite the stronger government-to-government ties that have accompanied Mrs Megawati's ascension to power, much needs to be done to broaden the web of relationship between the two countries. However, things are quite unsettled in Indonesia. Separatist movements are still active and there is fear of the Balkanisation of Indonesia. There are signs of factionalisation of the leadership, with the Vice-President doing his own thing and pulling in different directions.

There is also concern that the leadership is not taking a strong stand on religious fundamentalism and terrorism. The sluggish handling of regional concerns over the terrorist links in Indonesia has undermined the credibility of the Megawati government. Islamic groups have gained influence and have asserted pressure on the government and increased their political demands.

Singapore has offered to facilitate direct investigations by Indonesia to confirm that links exist between Indonesian suspects still at large in Indonesia and members of Jemaah Islamiyah (JI).

Sir, what is the outcome of such Indonesian investigations? I wish to ask the Minister also for his comment on the political and economic situation in Indonesia and the state of our relations with Indonesia.

Mr Ravindran: Sir, Indonesia has been an anchor partner of ASEAN and a key trading partner of Singapore. It is undergoing tremendous political, economic and social change since 1998. Its economy is in the path of recovery and there is greater optimism of its economic prospect this year.

Our relations with Indonesia are excellent, and we must continue to build on the good work done by our political leaders, bureaucrats, the SAF and businessmen. We have extended many forms of support and assistance to the Indonesian government and other NGOs. These efforts are well appreciated both in Jakarta and at the provincial levels. Our recent suggestion to provide an export corridor for exports from Batam and Bintan to the US, under the proposed FTA, is an excellent effort to help Indonesia increase its economic growth and create more employment for Indonesians.

I would like to ask the Minister as to what are his Ministry's plans to further promote this excellent relationship between the two countries, particularly in three areas: (i) in promoting greater trade and investment between the two countries; (ii) whether we can see greater cooperation in the area of counter-terrorism; and (iii) what measures can be put in place to increase contacts between Members of Parliament, bureaucrats, businessmen and people.

Prof. Jayakumar: As both Dr Ong and Mr Ravindran said, we attach great importance to our relationship with Indonesia, and our relations are excellent. Indonesia is one of Singapore's closest neighbours and a major trading partner. Actually we have a deep and abiding interest in Indonesia's stability as a unitary state, its growth and prosperity. Indonesia is also strategically important to the region. Events in Indonesia, such as political strife or Islamic militancy therefore can have severe repercussions on Singapore as well as other ASEAN countries. Therefore, this underscores the importance of Indonesia, the importance of our bilateral relations, and the impact of Indonesia in the region.

Both Mr Ravindran and Dr Ong Chit Chung asked about cooperation on terrorism. Let me say that at the official level, our agencies are cooperating closely with Indonesian authorities and providing them with the information to conduct their own investigations after we had assured them of giving them access to the people we had arrested. But I hope Members will understand when I talk about cooperation in such areas on counter-terrorism and intelligence cooperation, the details have to be kept confidential.

Mr Ravindran asked what we can do to nurture this relationship. It is a relationship that has been based on very strong fundamentals, especially the close personal and institutional ties we have built over some 30 years with Presidents, Ministers, officials, and recently with President Megawati. We have also established good relations between her and our leaders. As you know, she visited Singapore soon after she was inaugurated as head of state. We had good discussions with her and her delegation.

Our Ministers have visited Indonesia and vice versa, and have had good discussions with their counterparts. They meet bilaterally. They also meet at the sidelines of various meetings. There are also good contacts between officials. I agree with Mr Ravindran that these are matters which we must constantly nurture because there are new actors, there are new personalities, and it is not static. You have to keep working at it. I can assure Members that my Ministry, as well as other Ministries, is very cognisant of this, particularly with Indonesia when they have so many new personalities at the centre as well as in other parts of Indonesia.

On economic cooperation, I believe Minister George Yeo did touch on this when the Ministry of Trade and Industry was discussed. We do want Indonesia to recover economically, to play a leading role in enhancing stability in the region. Therefore, we remain ready to help Indonesia within our limited capabilities as a small country. That is why we have said that we can play a catalytic role and find creative ways of assisting Indonesia's economic recovery. A good example is what Mr Ravindran mentioned, such as the extension of the US-Singapore FTA to cover Indonesian IT products.

So it is in these ways that Singapore, although we are small, can demonstrate that we have a deep and abiding interest if we want to work with Indonesia, and that we will try to be helpful when we talk to other countries to generate in them an interest also in Indonesia, and in Indonesia's future.

The Chairman: Dr Ong. "Guillotine" time is 5.05 pm.

Dr Ong Chit Chung: Sir, Singapore was privileged to be elected a non-permanent member of the United Nations Security Council. We are now three-quarter way through our term of office in the Security Council, and Singapore is again President of the Security Council this month.

May I ask the Minister what valuable lessons have we learned in terms of the scope and operations of the Security Council, and whether such an experience is useful to a small nation like Singapore. For example, how do we give input and ideas in dealing with complex and difficult issues?

Mr Chay Wai Chuen (Tanjong Pagar): Sir, continuing along this line, I would like to ask the Minister whether there seems to be a low level of perception of the importance of this multi-lateral diplomacy that we are doing, and the international organisations as fora that we embark on to protect our own interest and to further our interest as a small nation state, in pursuit of this international public route of an open economy, of international commons such as freedom of the sea, anti-piracy, anti-terrorism. I wonder this low level of perception is due to a lack of our media coverage of our action. What kind of initiatives does the Minister think we could do to improve on these?

The Second Minister for Foreign Affairs (Mr Lee Yock Suan): Sir, our experience as an elected member of the United Nations Security Council has been educational and instructive. We now have a better sense of the internal workings and procedures of the Council. We have tried, as part of our work on the Council, to try to make the Council more transparent and accountable to the larger UN membership. It remains clear that the influence of P5 countries weighs heavily in the consideration of the issues in the Council. It is not only due to their power to veto resolutions, but their global reach and access to information around the world, particularly in conflict areas. On difficult issues of the Council, where there are differences of opinion and positions among the P5 countries, the elected members can play a bridging role to help bring about a compromise.

Another lesson is the importance of Council's unity for it to be effective. For example, on the difficult issue of the Middle East, the Council was able to adopt four resolutions in two months - March and April this year - unanimously. However, recently, the lack of consensus in the Council resulted in its inability to respond to situation on the ground. Our approach at the Council has been guided by our consistent support for principles of international law, observance of the UN Charter and compliance with the resolutions of the Security Council. Because we have always taken a consistent and principled approach, our friends have been able to understand and appreciate our position, even if it means that we are unable to fully support them. We have always endeavoured to conduct ourselves in a credible and responsible manner in the Council. 5.00 pm

In responding to Mr Chay, I agree with him that more can be done to publicise what we do in international organisations. We will see what more can be done. As a small country, Singapore has been selective in applying for membership in international organisations. Besides being an elected member of the UN Security Council, we are also elected members of the UN Commission on International Trade Law and the Governing Council of the International Maritime Organisation. Being a small country, it is also in our interest to work with other small states. In 1992, in New York, Singapore established an informal grouping of small states known as Forum of Small States. It now comprises 85 countries and meets a few times a year under Singapore's chairmanship to discuss issues of concern to small states.

Various Singaporeans have contributed to the work of the UN. For example, Ambassador Tommy Koh comes to mind for his outstanding work concerning the Law of the Sea. We prefer to go about our work without fanfare. It is our style to work through quiet diplomacy and focus on results. However, we do publicise our major contributions, especially in the UN. The Ministry of Defence also keeps the media informed on our participation in UN Peacekeeping Operations.

The Chairman: Dr Lee, I suggest you just ask your questions.

Dr Warren Lee: Sir, sorry about just now. Singapore has a long history of providing technical assistance to countries in the region. These exchanges allow us not only to help build up capacity in surrounding countries, but foster great goodwill and enable long-term friendships to be built up that can help smooth over relations between states during troubled times. I wonder if the Minister could encourage more of these exchanges and training programmes to be carried out, not only by Government agencies, but through NGOs and institutions, like the Singapore International Foundation, so that we can move for more understanding among our neighbours.

The Chairman: Mr Lim, you have two minutes.

The Minister of State for Foreign Affairs (Mr Raymond Lim Siang Keat): Sir, short answer to Dr Warren Lee is, yes, we will try to do more. We are already doing that. We have collaboration not just with governments but with institutions, such as the World Bank, ADB and the IMF.

I think it would be useful here to draw Members' attention to what Dr Lee has alluded to, which is the long history of Singapore's technical assistance. We have, since its inception 10 years ago, trained more than 20,000 participants from 147 developing countries. Last year alone, we trained 4,187 participants from 113 countries. We should do more to publicise and profile what we have done because, if properly managed, this will help enhance a positive international image of Singapore and help us win friends abroad and, just as important, make Singaporeans proud of their country.

Dr Ong Chit Chung: Sir, I wish to thank the Ministers for their full and comprehensive replies. I must say that we want to send a message out from here across the Causeway that Singaporeans are friendly, but we are resolute and determined to protect and defend Singapore's national interest. Moreover, I want to say that we do not wish to play a cat and mouse game with the Malaysian leaders. On that note, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The sum of $211,975,780 for Head N ordered to stand part of the Main Estimates.

The sum of $94,891,200 for Head N ordered to stand part of the Development Estimates.

Head J -

The Chairman: Head J - Ministry of Defence. Dr Ong.

Dr Ong Chit Chung: Sir, I beg to move,

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

Sir, can I take items (a) and (d) together?

The Chairman: I am afraid not.

Dr Ong Chit Chung: Sir, when we scan the security landscape around us today, the triangular relationship between US, China and Japan continues to be a focus of attention within the Asia-Pacific.

The central issue here is how rising Japanese and Chinese national self-assertion mesh with each other as well as with the United States, the sole surviving superpower. While Chinese relations with US continue to be conditioned by the Taiwan issue, there is concern in the region over the increasingly evident desire of Tokyo to become a so-called "normal" state, able to fully exercise the political, diplomatic and military power commensurate with its economic clout.

Across the Sea of Japan, the continued stand-off on the Korean Peninsula is another potential flashpoint, particularly given President Bush's recent identification of North Korea as one of the so-called "Axis of Evil" states. Closer to home, in the South China Sea, the Spratly Islands continue to be a contentious issue between China and several other regional states, including the Philippines, Malaysia and Vietnam.

Sir, that brings us to the recent arms spending spree of Southeast Asian countries, for example, Malaysia. Some countries claim that their arms spending is to modernise, catch up and complete projects that were put on hold during the Asian financial crisis. However, given the historically competitive nature of the relationships within Southeast Asia, like between Thailand and Burma, Cambodia and Vietnam, Malaysia and Singapore, an apparent arms race is on.

More than that, it is now becoming clear that following the ouster of the Taliban and the destruction of Al-Qaeda infrastructure in Afghanistan, Al-Qaeda operatives are seeking to set up new bases of operations in Southeast Asia. In fact, an American military chief recently voiced his concern over such developments in Manila, and this explains why the Americans are expanding their military presence on the ground, the Philippines.

This brings me to what I think is the most dramatic change in the strategic environment after September 11: the frontline is no longer just something out there; it is right here within our shores. The frontline lies not in our military hardware or in our technical software. The frontline lies within our collective hardware. Do we feel, first and foremost, as Singaporeans committed heart and soul to the idea of Singapore, or are we being pulled apart from one another by a hundred different ideas?

Sir, the potential for a mass exodus of people from a crisis-stricken Indonesia is another area of concern. Are there contingency plans in place if Indonesians were to fall again into a period of protracted economic crisis or protracted sectarian violence, thereby resulting in large uncontrolled population movements?

Sir, after September 11, the nature of threats has changed. Not only have we to train and mobilise against conventional attacks, we have to give full attention to lower-intensity operations and terrorist attacks. Such low-intensity operations require highly trained personnel and specialised equipment. The SAF will have to be multi-tasked and there has to be close coordination between SAF, Police, Civil Defence and other related agencies.

There is also the issue of privacy at sea, and the need for us, together with other nations, to ensure that the sea lanes of communications are safe. I therefore wish to ask the Minister whether the SAF has upgraded its capability and recast its strategy for the tasks ahead.

Mr Sin Boon Ann: Sir, as a small country, we have never taken our defence for granted. Since independence, we have relied on the twin policy of deterrence and diplomacy as the foundation of our defence policy. One cannot deny that, if not for a strong and capable SAF, Singapore's standing and profile in the region would have been very different, and it is because of our strong and capable SAF that we are able to conduct our diplomatic relations with much confidence and assurance. We have not only relied on deterrence as a means of securing peace and stability for Singapore, but we have also invested heavily in maintaining strong ties with our neighbours and friendly big powers. These investments have paid off substantially for Singapore as we now are able to overcome the limitations of space by training overseas in the friendly countries.

[Mdm Deputy Speaker (Mrs Lim Hwee Hua) in the Chair]

5.10 pm

Mr Sin Boon Ann: September 11 has sharpened the way in which we look at security threats in this country. We are coming to realise that apart from dealing with conventional threats, we now have to deal with terrorism that, in itself, is a more subtle and insidious form of challenge. Terrorism is a non-conventional threat, ie, low in intensity in nature. The assault not only can come in the form of flying jetliners into high-rise buildings, but can also take the form, as we all know, of biochemical and cyberspace attacks. In this regard, security requirements call not only for SAF to deal with these challenges alone but on a comprehensive basis involving other agencies like the Police Force and SCDF to counter such threats. Indeed, the recent arrest of "Jemaah Islamiyah" terrorists and the neutralisation of these cells only serve to remind us that such threats are real and are not confined to distant lands.

DPM Tony Tan said recently that the demand for security agencies and the terrorists are not equally balanced. We require our security agencies to succeed in looking and neutralising these terrorist groups all the time. However, all it takes is for these groups to succeed only once for a high profile statement of their intent to create chaos and to instill fear and anxiety in our population. Against these challenges, I would like to ask whether the SAF is in the process of broadening its spectrum of capability to respond to such low intensity threats and challenges, and whether or not we will be working closely with the other security agencies, such as the Malaysians, the Filipinos and the Indonesians have done recently to share intelligence and information in order that we can more effectively deal with such threats.

Ms Irene Ng Phek Hoong: Madam, Foreign Minister Jayakumar, GPC Chairman Ong Chit Chung and my colleagues before me have provided a good overview of the strategic situation in the region. I just like to add one point very briefly that, although the situation has changed since September 11 and the US relations with China have improved and the regional picture is stable, there are still several uncertainties that we have to bear in mind.

First, as pointed out by Dr Ong, is the uncertainty over whether Indonesia can contain its separatist pressures and the agitation of its increasing number of Islamic groups. Second is the uncertainty over the future intentions of China, whether it will assert itself more vigorously in this region in the future. The third area of uncertainty is whether there will be US military action against Iraq or new pressures on North Korea as part of its "Axis of Evil". This will have implications on the regional situation here. I hope the Defence Minister can give his sense of how regional security will shape up given these uncertainties and MINDEF's response to this new situation.

Mr Ravindran: Sir, I join my GPC colleagues in asking the Deputy Prime Minister and Minister for Defence in sharing with us what are the changing security and strategic situation in the Asia-Pacific, in particular, the state of the tripolar relationship between China, Japan and the US. What are the existing relationship between Taiwan and China, especially in regard to the Straits of China? Also, what has the September 11 incident given rise to in the Asia-Pacific, particularly given the increasing engagement of the Americans in many of the Southeast Asian countries to counter terrorism? More importantly, what are the external and internal challenges facing many of the Southeast Asian countries, and how Singapore can respond to this external environment, particularly the security and military environment that is fast changing in Southeast Asia? 5.15 pm

Ms Irene Ng Phek Hoong: The dispute over bilateral issues between Malaysia and Singapore has led to the word "war" being bandied about recently from across the Causeway. Such talk of war should not be taken lightly, even if it is just talk. It could heighten tension and suspicion between the two countries. It could also give foreign investors the wrong signal about the stability of this region, already troubled by terrorist threats.

Madam, in February, when the Malaysians were unhappy over our water supply agreement and the unhappiness was at its peak, the retired General Zaini Mohamed Said wrote in Mingguan Malaysia that the dispute over water supply was the "most serious" among potential regional threats to Malaysia, as it could lead to war with Singapore. He advised that the issue be handled carefully by leaders on both sides. He also reminded Malaysians that the Singapore military was stronger and more sophisticated. Later, in another column, he warned about a "small nation with a powerful army" and said that Malaysia must prepare itself to give any attacker "a bloody nose". This phrase was repeated by Prime Minister Mahathir Mohamad last month when he spoke about Malaysia's recent arms purchases. He said, "We are buying weapons only for our defence. Those who want to attack us, we promise we will give them a bloody nose."

Malaysia recently sealed its largest defence deal in a decade for Russian and European missiles worth about S$674 million. It signed several multi-million dollar contracts for weapons, including a rocket-launching system, submarines and tanks.

Singaporeans were not rattled by the war rhetoric or by these arms purchases by Malaysia because they were confident of the capabilities of the Singapore Armed Forces. Outsiders have also acknowledged that it is the leading military force in Southeast Asia and is a significant deterrent force. We should continue upgrading our SAF and to give the men and women of our Armed Forces the support and recognition that they deserve. The people who make up our Armed Forces make an enormous contribution to Singapore's place on the world stage. The budget allocated to the Defence Ministry is money well spent.

My own view is that Malaysia and Singapore are unlikely to go to war, as long as strong and rational leaders prevail from both sides. However, a geopolitical setting that is fluid and uncertain in itself also poses a threat to stability. This is because countries will then want their armed forces to be primed in such a way that prepares them for worst-case scenarios. While this psychological priming is almost inevitable, it is important that Singapore continues to widen and deepen its bilateral and multilateral defence relations to promote peace and stability in the Asia-Pacific region. Confidence-building exercises are also important for managing the undercurrent of tension and suspicion between regional states.

I would like to ask the Deputy Prime Minister and Minister for Defence what is the state of defence relations with Malaysia, and for an update of Singapore's efforts to promote regional peace and stability in the Asia-Pacific region.

Dr Ong Chit Chung: Madam, September 11 has changed the strategic landscape in Southeast Asia. Terrorism is global, terrorism is elusive. Southeast Asian nations are now challenged and targeted by amorphous terrorist groups. Unlike the open campaign previously against communist Vietnam at the height of the Cold War, it is difficult to ferret out and combat elusive terrorists. They seem to be everywhere.

I wish to ask the Minister whether the SAF is ready and has contingency plans for dealing with outright terrorist attacks, hijacks, attacks on our computer information system, chemical warfare and biological warfare.

Mr Heng Chee How: Madam, post-September 11, the threat of global terrorism has been keenly felt throughout the world. The JI arrests in Singapore showed very clearly that Singapore is very vulnerable to such threats and we came so close to being a real victim of attack. We know that the Government has set up various coordinating structures between relevant Ministries and has also enhanced protection for key installations. I am sure that necessary policies and steps are also being put in place to anticipate and neutralise, or otherwise deal with, such threats.

Madam, what I am more concerned about is the preparation of our population in the light of this changed setting. I firmly believe that, more and more, the effectiveness of our total defence strategy will lie in how well we strengthen the non-military defence areas, even as we continue to strengthen our military defences.

Let me explain. The greatest harm that terrorism can inflict on the people is not the immediate deaths and damage that those terrorist acts exact. It is the loss of morale, the lingering uncertainty and fear associated with tackling an enemy that is in the shadows. For this reason, the psychological resilience of the people is key to a nation's response to terrorism, and psychological resilience is not something that can be left to the armed forces or security forces alone. It must involve different ways of informing, sensitising and preparing the people for certain scenarios, without frightening them and causing undue anxiety that backfires on public morale.

I recall that after the Prime Minister told us that some of the escaped JI terrorists had wanted to hijack an aircraft and crash it into Changi Airport, a television station went to interview some people at the airport, and those interviewed were Singaporeans who work at the airport or were going to travel through the airport. The general response was that they did not think that such a thing would happen to Singapore, because Singapore is such a safe place. Another person said that perhaps people would be more careful for the first few weeks but, after that, it would be forgotten.

Madam, I am not advocating paranoia. But this shows that much more needs to be done on a sustained basis to prepare our population to understand the new setting that we are in and to know what we can do as individuals, communities and nation, to strengthen our resilience towards this threat. I would like to ask the Minister if his Ministry would be taking additional steps in this area.

Mr Ravindran: Madam, this year, the defence budget is, once again, way below the cap set at 6% of the GDP. The actual amount is $7.69 billion. In 2001, the actual defence expenditure was $7.09 billion and, in 2000, it was $6.56 billion.

While some may comment that we are overspending on defence and see there is money spent without hard tangible benefits, I beg to disagree with them. Defence expenditures play a key role in having a Keynesian multiplier effect. There are also externalities experience from the state-of-art technologies developed and adopted in the defence sector by organisations like the Defence Science and Technology Agency. These can have civilian applications and they can help boost growth. In addition, the expenditure also creates and provides jobs, training and education to a large pool of people. It creates jobs in the marine, aerospace and engineering industries. Finally and, most importantly, it indirectly supports the growth of the economy by creating a secure environment for trade and investment.

Madam, we are situated in a unique geopolitical situation. The strategic and political environment can change rapidly and catch everyone off guard. In addition, the challenge of international and domestic terrorism has brought a new sense of realism that a threat can come from both within and outside. In the light of these developments and the recent resumption of arms acquisition by our neighbours, I would like to ask the Deputy Prime Minister and Minister for Defence whether we are spending adequately on defence. I would also like to ask him whether, at these levels of expenditure, we are able to maintain our qualitative and quantitative advantage against our potential aggressors.

Mr Zainul Abidin Rasheed: Madam, as a former member of ACCORD, I benefitted tremendously in understanding SAF from a close range. Last Saturday, I visited the Combat Engineers at Seletar, and I left the base even more reassured about our SAF and our defence capabilities. Whether in technology, human resource development, training and operational considerations, I could see SAF's seriousness, efficiency and determination in the security and defence of our nation.

To see some of our 18-20-year-old NSmen managing our gigantic Bionics Launched Bridge evoked a powerful emotion in me about the inner strength of our SAF. It convinced me that the increase in defence budget to ensure that Singapore is well prepared for the uncertainties of the future is well deserved.

One challenge, however, is for the SAF to continue to win the hearts of its soldiers and Singaporeans in general for what it is doing. I am glad that the Government continues to include NSmen in its offer of rebates for income tax and Singapore Shares and, now, the ERS. Perhaps, it is also time to review the modest allowances for our NSmen, to help instill a greater sense of belonging and service.

Similarly, I would like to urge the Ministry to review its total defence programmes to ensure a better understanding and rapport with the people. It would be worthwhile also to see how ACCORD could do more to bond the public and the SAF. I gather that Mindef is doing a lot of work in reaching out to the people through the Discovery Centre and the Air Force Museum, and I also look forward to the Ministry having an Army Museum. That will help us to bond the people with the SAF further.

Mr Sin Boon Ann: Madam, in recent years, the Singapore Armed Forces have participated in a number of overseas operations that are not necessarily of a training nature. Members will recall that we had a team in the early 1990s to help with the peacekeeping efforts in Namibia and, more recently, in East Timor, where we not only provided peacekeeping troops there but also logistics support that the international troops require. Such participation, one would suppose, is necessary and even welcomed, as Singapore takes its place in the international community and plays its responsible part.

Madam, not all of our participation, unfortunately, is peacekeeping in nature. There were times when the SAF had to undertake missions that could well put our soldiers' lives and military assets at risk. This took place when we flew our soldiers into Cambodia in 1994 to rescue Singaporeans who were stranded there in the aftermath of a coup.

While one would not have any objection in principle to the participation of our armed forces in humanitarian missions, one would wonder whether some parliamentary oversight in this regard is necessary, especially if our armed forces are committed to undertaking dangerous missions. I can accept that there could well be missions where secrecy, in the interest of the state, ought to be preserved and, accordingly, are not open to any form of public debate or discussion. On the other hand, there could well be missions that are not time-sensitive and that could well involve commitment of our resources on an extended basis.

In such a situation, therefore, the question is whether or not Parliament should be the appropriate forum to discuss the merits of our country's participation. Should we now define more clearly the situations in which the Government can act without the consultation of Parliament, and those that require consultation with Parliament? I hope the Minister can enlighten this House on the matter.

Dr Ong Chit Chung: Madam, National Servicemen are thankful indeed to the Government for increasing the NS tax relief by 50%, from $2,000 to $3,000 for active NSmen, and from $1,000 to $1,500 for inactive NSmen.

Mindef has wisely chosen a national service armed forces over that of a standing regular force. All male Singapore citizens know that they have to do NS, and there is an element of sacrifice involved. If we do not bear arms and defend our own country, no one else would, and Singapore will perish.

But NS allowances have been frozen for a number of years and have not been adjusted for cost of living or rising standards of living. Many parents do fork out extras to see their son through National Service. I did the same when my two sons went through NS. Do not mistake us. Parents do not grumble about such things, but it is high time that Mindef reviewed and readjusted the NS allowances. I am sure the morale of NSmen and their parents will go up. Any other ways for recognising the services and contributions of NSmen will also be much welcomed. NSmen do their best for the country. We should also do our best for our NSmen. I hope the Deputy Prime Minister and Minister for Defence will have some good news for NSmen today, this being the 35th Anniversary of National Service in Singapore. 5.30 pm

Dr Warren Lee: Madam, even in National Service, there is time for rest and recreation. To help NSmen use their time wisely, could I suggest that we might consider helping NSmen with low educational qualifications to upgrade their educational levels by encouraging them to take examinations as private candidates? For those who have actually done well, perhaps opportunities to learn about entrepreneurship, social skills or public speaking might even be encouraged.

On a different note, since National Service is such a great national institution, activities that might promote cohesion building, inter-faith and inter-racial understanding might also not be out of place during leisure hours. On a different note, some of our young NSmen may also have started families. While this may not have been wise, they are nevertheless in that position. If they have young children, their spouses are unlikely to be able to seek employment outside, because of the need to look after the young ones. Could we perhaps be more generous to this small group of servicemen on a case-by-case basis? In the same vein, there are those who come from families where, unfortunately, one or both parents may have been retrenched recently. The argument that our existing NS allowances are only meant to be allowances for the individual NSmen may then not quite be as relevant. Perhaps we could also help this group and be more generous to them, especially in cases of genuine hardship.

Mr Heng Chee How: Madam, National Servicemen play a critical role. In a small nation with a small population, these citizen soldiers are responsible for the protection of our national sovereignty. We live in a complicated part of the world, and the world itself is also becoming more complicated. Besides the stress of economic competition, we also have to confront the increasing threats of global terrorism, regional instability, piracy on crucial sea lanes, not to mention some threats of "skinning". Our citizen soldiers know that they bear a heavy responsibility to the country, to themselves and their families. They know that only when the country is safe and secure will there be a basis for a better life for our people.

The Government recognises the sacrifice and contributions of our National Servicemen in many different ways, through the work of bodies such as ACCORD and such policies as CPF top-ups and tax rebates, as mentioned by my colleague. The Government has enhanced the standing and reward for our National Servicemen, both active and operationally ready over the years. One of the most concrete ways for the Government to indicate its recognition of the work and contribution of National Servicemen is to review the allowances paid to them. Such review has been done periodically.

The Minister of State for Defence, I believe, told the media very recently, which I read in the papers that the Ministry might be reviewing the allowance for National Servicemen. I would like to ask the Minister for Defence whether such a review has been completed and, if so, when will the revised rates of allowances take effect.

Dr Chong Weng Chiew (Tanjong Pagar): Currently, our young men are called up to serve national service for two different lengths of time. Majority of our youths serve a two-year stint in national service, whilst the commander grade serve another six months. The NS system, as I understand, had since then undergone some changes. In order to encourage our youths to be fit for NS upon enlistment and thereby cutting time that otherwise would be spent on building their fitness, the fitter of the lot is cut by two months.

I note that Mr Chiam has raised the issue of shortening the length of NS before in 1991. Let me state that I am not speaking in support of him. Rather, things then and now have changed so much.

In the light of the September 11 incident, I appreciate the heightened concern over security. It might be untimely to bring this up now but I feel the length of NS, especially that for a better-educated youth, might be reviewed for a shorter period. I have two reasons for my proposal.

One, the advent of modern technology in warfare has rendered conventional warfare almost obsolete. Wars are no longer fought and won based on territorial occupation and the use of numerical forces. The recent Afghan War is a case in point. My point here is this. The development and advent of information technology is very significant in the way our security forces can be and is organised. Wars are fought and won sometimes even without seeing your enemies. The efficiency and battle-readiness of a defence force need not be compromised with the reduction of troops. There is lesser and lesser need for a large standing army.

Second and, more importantly, allow me to argue for the enhancement of our youths' competitiveness in the light of global competition for talent. Our young talents suffer from an uneven competition compared to their counterparts elsewhere who do not have to serve NS. Our youths join the workforce mostly in their mid-twenties. I have seen many times where our young graduates are much older than their foreign counterparts in university. Not only that, they are also saddled with debts which they have to service upon graduation. I wonder what is the opportunity cost to them and to the Singapore economy as a whole. I also wonder if perhaps that is the reason why we are so scarce of local entrepreneurs. I also feel that we owe our NS youths, after the contribution of their prime time of their lives to the country, the duty to enhance their economic value as much as possible.

If we can allow those fitter NSF men to serve a shorter stint, can we not then have an overall review of the length of our NS?

The Deputy Prime Minister and Minister for Defence (Dr Tony Tan Keng Yam): Madam Chairman, I thank the Members of Parliament for their relevant comments on defence policy on the SAF. I will deal with some of the points that have been raised so far. My colleagues, the Second Minister for Defence, the Minister of State for Defence, Senior Parliamentary Secretary for Defence will then deal with some of the other points.

Singapore has embarked on a process of self-examination. Since our independence in 1965, we had a business plan which enabled us to achieve significant progress and success in our economy. But times change, and the fundamentally changed circumstances now require us to re-examine our business plan and the way we do things. In short, we have to remake Singapore. We have to restructure our economy and address pressing social issues ranging from social cohesion to the implications of a low birth rate and an aging population. As part of the process of change, we must expect that some of our long-held policies will have to be updated or revised to meet the new challenges.

While we rethink and debate the economic and social policies that will make Singapore the best home for our people, one thing remains constant, and that is the absolute importance of a strong defence for Singapore. A prosperous economy and a vibrant society must be supported by a strong security foundation if it is to continue thriving. Without security, without a strong defence, there is no guarantee that Singapore will continue to survive, let alone thrive, as an independent, sovereign nation. I am therefore heartened to note the resounding support which all the Members have expressed this afternoon for maintaining a strong defence force.

Let me now comment on the point which Dr Ong Chit Chung has brought up as to whether Singaporeans will pull together when there is crisis. During the debate on the President's Address last month, Dr Vivian Balakrishnan stirred up a minor controversy, both within and outside the House, when he related in Parliament the question which his 11-year old son asked him: "If there is a war, why should we fight for Singapore?" This is not a trivial question. Neither is it a question that should not be asked. Every generation must confront this question. Every generation must decide for themselves why they should be prepared to fight and, possibly, to die for their country.

Patriotism is an emotionally charged subject. It stirs up the most fundamental emotions and reactions of Singaporeans, and this is rightly so. One does not talk of war lightly. Neither is war a subject simply to be debated in Parliament or in the correspondence pages of our newspapers. Given the terrible consequences of war, going to war is the most serious and fundamental decision which a country has to make. When to go to war, how to go to war, whether the circumstances dictate a need for a country to resort to war, these are fundamental issues which no leader and no Singaporean can treat lightly with glib remarks or clever rhetoric.

Patriotism has different meanings for different individuals. Patriotism is something that must come deep from within each individual. Patriotism cannot be mandated or forced. In deciding why one should be patriotic and willing to fight for one's country, different people will be motivated by different reasons. For example, Dr Vivian Balakrishnan's son concluded his conversation with his father by telling Vivian that he, ie, the son, would defend Singapore because this is his home and his family and his friends are here.

Outside the House, a Singaporean who lives in Canada posted a note to the Straits Times Interactive to say that if war were to break out, he would fly back to fight for Singapore simply because he wanted "to fight for my home, my family and friends". Another writer, Mr Teh Peijing, wrote to the Straits Times and this is what he said, "In my case, my main motivation for fighting in the event of a war would be my friend Norman as well as other colleagues of mine. And I believe that this is the case for most Singaporeans serving in the SAF: that they would fight mainly to be there for their friends and comrades in arms with whom they have shared sweat on the training grounds of the SAF." The reasons I have cited are good and powerful motivations for people to be prepared to fight for Singapore should the need arise.

In considering this subject, I think that it is also helpful to ponder the reasons why people are prepared to leave their country of birth to settle in another country to make a life for themselves and their children.

Mr Khaw Boon Wan and Ms Irene Ng are two such individuals. Both born in Penang, highly educated, able to settle anywhere in the world, both of them decided that their destinies would lie with Singapore.

Both Khaw Boon Wan and Irene Ng are persons of ability and drive. They could have had successful careers in Penang or, if they wanted to leave their home town, they could have settled in the countries in which they had their higher education - Khaw Boon Wan in Australia, and Irene Ng in England, for a higher degree.

Both Australia and England are bigger countries than Singapore. Both of them have larger economies than Singapore's. Both have more land, certainly in the case of Australia. For talented and determined individuals, the prospects of a successful career could be better in Australia or England than here, in Singapore. 5.45 pm

So we ask ourselves: why then should Khaw Boon Wan and Irene Ng decide to throw in their lots with Singapore? The answer, in my view, lies in the values which both of them identified as the core strengths of Singapore:

1. Meritocracy and Fair Play;

2. Equal Opportunities;

3. Clean Government; and

4. Racial and Religious Tolerance.

As Khaw Boon Wan said, and I quote, "these core values have been fundamental tenets of our nation for the last 40 years." The core values constitute the Singapore Cause for which Khaw Boon Wan was prepared to leave his hometown to settle and build a future for himself and his family in Singapore. Of all the core values, meritocracy is central to the realisation of a Singapore nation as we know it. As Khaw Boon Wan said, "Meritocracy is a powerful idea."

Irene Ng expressed the same sentiment in her words: "Meritocracy is one of our founding principles, so is the principle of equality of treatment and non-discrimination. We must make it clear that discrimination based on race, religion, gender, age or national origin is not tolerated in Singapore. We must give each individual and each group the confidence and hope that they have equal opportunities to realise their aspirations, even if unequal outcomes are the result. We cannot guarantee success, but we must guarantee equality of opportunity."

Because she valued these principles, Irene Ng said: "This is why I left Malaysia for Singapore when I was 16 because this country offered me the opportunity to live my life based on these principles. I became a Singaporean because I wanted to be a part of a country that upholds these principles."

Madam Chairman, the principles on which our nation is founded - Meritocracy and fair play; Equal Opportunities; Clean Government; and Racial and religious tolerance - are embodied in this small island of 680 square kilometres, which all of us call home, because Singaporeans believe in these principles and are prepared to defend them.

Building on the principles and core strengths, we have created a prosperous and thriving country that is able to give a decent standard of living to all its citizens. We have gained international respect as a nation, that may be small by physical standards, but we are a nation that stands by our principles and beliefs. Singapore is a nation that has often been cited as a model for other countries to emulate.

These are not small achievements. The Singapore in which we live today is a large achievement. It is an achievement which all Singaporeans can justifiably be proud of. And not only be proud of, but also be prepared to defend.

The fact that so many Singaporeans have sacrificed their time and disrupted their careers to serve our country in National Service; the fact that Singaporeans of all races and ages strongly support the building of a strong SAF; the fact that Total Defence is not an empty slogan in Singapore, but an important concept taken seriously by all Singaporeans; all these are evidence that Singaporeans value Singapore and all that Singapore stands for. So, when the question is asked: "If there is a war, why should we fight for Singapore?", I am confident that, whether or not they can articulate the reasons, Singaporeans will rally to defend our country and, if necessary, make the ultimate sacrifice to preserve and uphold the principles and values which we hold dear for ourselves and for our children.

Let me now turn to the security situation in our environment, a topic which has been commented on by Dr Ong Chit Chung, Ms Irene Ng and Mr Ravindran.

As the hon. Members have noted, the need for security has in fact taken on even greater importance. Last year, I told the Committee of Supply that there was more uncertainty in the regional security environment. Developments since then have made the security environment even more complex than any of us could have imagined just a year ago. In particular, the threat spectrum has greatly expanded.

We are now all too familiar with the threat of a new type of terrorism which is called catastrophic terrorism. This has injected greater uncertainty when the region has yet to fully recover from the economic downturn and the socio-economic dislocations of political leadership transitions. As Members have pointed out, unfortunately, this new threat is not some remote problem somewhere in another part of the world. We have all seen the chilling scenes of the surveillance by the local Jemaah Islamiyah terrorist network. We have heard of their plans to construct 7 truck bombs - 3 tons of ammonium nitrate each - 21 tons altogether. It requires 1 ton of ammonium nitrate bomb to demolish the building in Oklahoma City in the US. Imagine how horrific the consequences would have been if these extremists had managed to pull off their plans to set off these bombs in Singapore.

Besides catastrophic global terrorism, there are other non-conventional threats that we have to be vigilant against. We have to continue to be alert to these security challenges, certainly at least over the next few years. The much greater political and social instability in our region, and the economic uncertainty, have also raised the potential of what is called Low Intensity Conflict. In 1998, for example, we experienced an upsurge in illegal immigrants trying to enter Singapore. Fortunately, our firm response quickly put a stop to this flow. But many security threats are trans-border in nature, and international borders are porous. The impact can also be far-reaching.

So Singapore is vulnerable, and we must be prepared to meet such security challenges as they arise, whether the problem be illegal immigrants, piracy, cyber-attacks or other forms of terrorism from sources other than the global terrorist networks.

I would like to remind the House that these newer threats, while dangerous, and we have to tackle them, are not in place of, but they are in addition to our fundamental security concerns that we have faced since our independence in 1965, and which lie at the heart of our very existence as a sovereign, independent nation. The circumstances of how we became independent brought us to the quick realisation that our highest priority as a nation must be to safeguard our sovereignty and territorial integrity.

Singapore felt very vulnerable then in the 1960s. Today, we no longer feel as vulnerable because we now have a significant defence capability. But we must remain acutely aware that the external environment is not as benign as we may wish it to be. We must remain very conscious that we must have the wherewithal - the will and the muscle - to safeguard our security, and to ensure that we will always have the space to act according to our own best interests, and not succumb to pressure by others.

A credible defence capability is absolutely critical for the prosperity of Singapore. We learned the bitter lesson from our experience in World War II. And we continue to get frequent reminders from the example of other countries which fall prey to hostile forces, because they could not defend themselves, as well as on many occasions, from the hostile rhetoric and speeches of politicians in other countries that we frequently hear. Sometimes there is even talk of war, as has been mentioned by some Members today. We need a credible defence force to ensure that talk of war remains talk, just mere rhetoric, and no one is tempted to go beyond rhetoric to take action which directly threatens our sovereignty and territorial integrity and our vital interests.

Madam Chairman, from the debate on the Estimates of the Ministry of Foreign Affairs, and from the comments of Members just now, Singaporeans, all of us, are all too aware that our relations with our neighbours go through frequent ups and downs. It is a roller-coaster ride. We are likely to go through more of such cycles in the years ahead. This is not something of our choosing. It is more profitable, and we would much rather focus on cooperation in all sectors - economic, cultural, education, even security - which can be of mutual benefit and help to strengthen relations. And we are always looking for such opportunities. But we must always make sure that should the mood turn nasty against us and demands are made of us on a host of issues as has happened, and will happen from time to time - we have the confidence to ride out the storm, not to react hastily, but not to knuckle in under any pressure. And the SAF, the Singapore Armed Forces, gives us that confidence.

Now, a few words about our Defence Policy. Members have sought assurance that our defence policy is adequate to ensure Singapore's security in the face of the spectrum of threats that we could potentially have to deal with. I thank Members for pointing out the need to maintain and even increase our defence Budget, as some Members have suggested, so that we will be able to deal effectively with the threat of terrorism and low intensity conflict in addition to conventional military threats.

Madam Chairman, we have always given, and will continue to give, the highest priority to security and defence. Over the years, we have put in consistent effort, investment and sacrifice to build up the SAF. Today, the SAF is a technologically-advanced and operationally-ready defence force. The SAF's capabilities were not built up overnight, neither was it built up by sudden spurts in defence spending. Each of our operational capabilities is the result of long-term planning, a well-considered acquisitions strategy, structured training, and systematic maintenance. And we have been able to do so because of our policy of maintaining defence spending at a steady rate, up to a maximum of 6% of GDP each year. I commend Mr Ravindran and Mr Zainul Abidin Rasheed for saying that we should ensure that defence gets the support from Government that it needs. 6.00 pm

Capability development programmes sometimes require spending commitments spread over many years - from the acquisition of new weapons systems and training of operators, to sustaining research and development and periodic upgrade programmes for the enhancement of mature systems. To keep such a defence capability in good, sharp condition requires a sustained long-term commitment, and I am indeed gratified by the commitment which Members have expressed today for our defence effort.

Of course, Mdm Chairman, even as we continue to enhance deterrence, we are fully aware of the importance of encouraging friendship and cooperation with other countries and other armed forces - both in the region as well as further afield. We know that the stability of our security environment can only be preserved by countries working together - a point made by several Members today. So deterrence and diplomacy form the twin pillars of Singapore's defence policy. We have strong bilateral relationships with many countries, from many of which the SAF benefits greatly in the form of professional interactions, and access to training facilities and defence technology. We also contribute, as best as we can, to multilateral institutions, such as the United Nations, the ASEAN Regional Forum, and the Five Power Defence Arrangement, because these institutions provide an important layer to the security architecture in the region. One particular area where the SAF has made contributions is in UN peacekeeping missions. Currently, we are involved in the peacekeeping missions in East Timor, the Kuwait-Iraq border, and the Ethiopia-Eritrea border. I would like to assure Members that only SAF regulars are sent on such UN missions. National Servicemen are deployed on UN peacekeeping missions only if they themselves volunteer.

A word on the point brought up by Mr Sin Boon Ann about Parliament and our defence policies. There is no doubt that Parliament is the highest body in the land. All policies implemented by the Ministry of Defence must be in line with the laws passed by this Parliament, and with the Constitution of Singapore. The Ministry of Defence reports to the Prime Minister and the Cabinet who are in turn themselves accountable to Parliament.

A few words about the issue of counter-terrorism and counter-low intensity conflict, a point brought up by Mr Sin Boon Ann and Dr Ong Chit Chung. They have asked about our ability to deal with the threat of terrorism and low intensity conflict (LIC). Let me assure the House that the SAF has the capabilities to deal with what the military terms as OOTW (Operations Other Than War). These capabilities of the SAF have been developed over the years and they are constantly being upgraded as the situation demands. For the threats of low intensity conflict and global catastrophic terrorism, we are fully aware that while the SAF may have the capabilities, the military alone cannot effectively counter such threats. The SAF needs to work with other Government agencies in Singapore. This is not new, as we have long had inter-agency efforts to tackle various security issues, especially between the SAF and the Home Team. For example, MINDEF, the Ministry of Home Affairs, the Ministry of Health and the Ministry of the Environment have been working together for many years on bio-chemical defence. The Navy and the Police Coast Guard have also worked together for many years to stop illegal immigrants coming to Singapore.

We realised that the inter-agency efforts need to be tightened and strengthened when the nature of the threats changed and the threats become more real, as a consequence of the deteriorating political and socio-economic conditions in the region. Our national security apparatus has therefore been beefed up to deal with possible contingencies. The National Security Secretariat and a ministerial-level committee, chaired by me, as the Minister for Defence and known as the Security Policy Review Committee, were set up with the objective of providing a swift and coordinated response to non-conventional security threats.

But the need for coordination and integration of our efforts became even more urgent after the event of September 11 last year. The threat of terrorism now requires a level of intelligence, of monitoring, and of response which is quantitatively and qualitatively different and many times more demanding than what our system - or any system in the world - has so far been geared to handle. So we have put into place a comprehensive crisis response and management structure to meet the new requirements. This system is constantly being refined and enhanced.

The terrorist threat is not unique to Singapore. Other countries in our region have uncovered terrorist cells linked to the Al Qaeda terrorist network. While Southeast Asian countries deal in their own ways with the threat of terrorism, to their security, all of us recognise the need to cooperate to combat this common enemy. One area where there has been useful cooperation is in the exchange of intelligence. At the beginning of this year, the Joint Counter-Terrorism Centre was created to integrate Singapore's multi-agency intelligence efforts as well as to serve as the point of contact for counter-terrorism intelligence cooperation among friendly countries.

Singapore has been able to adapt to the new security environment - swiftly and with confidence - in large part because we have Total Defence. When the Jemaah Islamiyah group was uncovered in December and the rest took place, Singaporeans were neither gripped with fear nor paralysed by panic. Our people could withstand the jolt to our social fabric and take this threat in our stride. Singaporeans also had the confidence that the security authorities, including the SAF, could deal with the contingencies and safeguard our security. Singapore remained unshaken as we have strong foundations in Total Defence - Psychological Defence, Social Defence, Economic Defence, Civil Defence and Military Defence - and we must continue to strengthen this, as pointed out by Mr Heng Chee How and Mr Zainul Abidin.

Let me go on to the topic of National Service which has been commented on by Dr Ong Chit Chung, Dr Warren Lee, Mr Zainul and Mr Heng Chee How. The Government, as I said, is fully committed to providing for Singapore's security, and Singaporeans, by and large, support this commitment to defence. It is a commitment which goes beyond supporting spending on defence to serving National Service. Our young men have to commit 2-2 1/2 years of their lives, starting from the age of 18 years old, and thereafter commit a few weeks a year to service in the SAF. And, should Singapore actually come under threat, they may have to make the ultimate sacrifice.

Since 1967, about 600,000 of Singapore's sons have pledged the Oath of Allegiance to protect and defend our nation. We are now into the second generation of National Servicemen - young men following their fathers into the service of our country. This year marks 35 years of National Service. NS is a national institution. NS has become a rite of passage for Singapore men. Shared NS experience brings together Singaporeans from different social, racial and religious backgrounds in the common mission of defending our homeland.

As Members have noted, the economic progress and stability we enjoy today are possible only because we have a defence capability and security, and our defence capability is possible only because of the dedication and sacrifice of our National Servicemen. They form the backbone of a strong and capable SAF. As citizen soldiers, National Servicemen have to balance the demands of their civilian lives and NS duties. This involves commitment and no small amount of sacrifice. It has therefore been a matter of priority for MINDEF to give recognition and show appreciation for the contributions of our National Servicemen. MINDEF is committed to implementing the recommendations of the Third Committee to Recognise the Contribution of Operationally Ready NSmen to Total Defence (or RECORD III). Indeed, many of the recommendations have already been implemented and MINDEF is actively working on the implementation of the other recommendations.

Beyond this, MINDEF has been conducting an in-depth review of our NS system and policies. This review covers many issues, affecting both full-time and operationally-ready National Servicemen. They include examining ways to refine the NS training system, improve NS management and administration, and enhancing the NS experience overall. The review was supplemented by comprehensive surveys of National Servicemen and studies of other foreign conscription systems. A key consideration was that any changes, as a consequence of the review, must not undermine the operational readiness and effectiveness of the SAF.

One focus of the MINDEF review was on NS allowance. Before I go into the details of the changes, which I will now announce, let me reiterate some of the fundamental principles of the NS allowance. National Service is a duty to the country. National Service is not a regular salaried job. Full-time National Servicemen are therefore paid an allowance; they are not paid market wages. The NS allowance is meant for basic personal upkeep, given that most full-time National Servicemen stay in camp, where accommodation, food and clothing are provided.

Based on these principles, the NS allowance will be restructured and streamlined to reflect the different responsibilities undertaken by our National Servicemen. The revised NS allowance will comprise two main components - rank allowance and combat allowance. Those in leadership positions will receive a higher rank allowance, in recognition of the responsibilities they have to shoulder. The combat allowance will be paid to National Servicemen in combat vocations, to recognise the onerous nature of combat jobs.

The revision will result in a significant increase in the NS allowance across all ranks. For example, the monthly NS allowance for a Recruit will increase from presently $240 to $350. A Corporal in a combat job will receive $520 a month (up from $330), a Third Sergeant will receive $660 per month (up from $420) and a Second Lieutenant will receive $970 per month, instead of $650. MINDEF will also raise the additional allowances given to operationally-ready NSmen who hold key or command appointments. This is in recognition of the vital leadership roles which such servicemen play and the additional responsibilities they are asked to shoulder.

6.15 pm

The revised NS allowances will be implemented as from 1st July this year, in conjunction with the 35th anniversary of National Service. More details on the revised NS allowance will be given by MINDEF in a press release which will be issued after my speech.

Mdm Chairman, the NS review is still in progress. We are now looking into the operationally-ready NS training cycle and examining ways to improve NS management and administrative efficiency. I thank Members for their suggestions and I assure them their views and comments will be taken into account. I hope to announce the outcome of these reviews later this year.

A few words on the length of National Service, a point touched on by Dr Chong Weng Chiew. The length of National Service is determined by the time required to train our men to a level of military proficiency where they can not only handle their personal equipment but also fight effectively as an integral part of a large military formation - up to battalion, brigade and division level. The aim is to ensure that the SAF is operationally ready and effective. The process has to be thorough and robust, so that our men have the confidence to fight and win, when necessary. Technologically sophisticated weapons and equipment increase the potency and firepower of our soldiers, sailors and airmen. They can reduce the need for manpower in many cases. But it still takes time to master these weapons and to learn how to employ them effectively, both individually and as part of an integrated larger fighting force. This is something that we cannot compromise on.

Let me assure Members that MINDEF would not want Singaporeans to spend more time than necessary to carry out their National Service duties, because we are acutely aware of the commitment and the sacrifices they have to make. This is something that we are also carefully studying in our review.

Mdm Chairman, let me conclude by saying that few, among our older generation, will ever forget the tumultuous years in the early years of our history. It is a testament of Singapore's success that our children have known only peace and progress. But we should never forget that this is in large part because we have put considerable effort into building up our defence capabilities. We have peace today because generations of Singaporeans have put in considerable sweat and sacrifice to make Singapore safe and secure through National Service. But once our defence capabilities are eroded, it will not be long before we feel vulnerable once again and our security is put at risk.

As we remake Singapore to meet the challenges of the future, as we must, let us not take defence for granted. Only when we have guaranteed our security, can we guarantee that Singapore will have a future.

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

Dr Ong Chit Chung: Mdm Chairman, compared with other armed forces, SAF is small. But, with technology, it can pack a powerful punch, maximising intelligence, mobility and firepower. Technology is the SAF's trump card in ensuring success in its strategy of deterrence and, if deterrence fails, in overwhelming the enemy with superior mobility and firepower.

The rapid technological advances over the last 30 years have led to what is termed a Revolution in Military Affairs (RMA). Revolution in Military Affairs is broadly defined as a military revolution in which the entire armed force is transformed and renewed in terms of technology, organisation, strategy, tactics, training, doctrine and logistics. The RMA evolves around three advances. First, in terms of intelligence gathering, using sensors in satellites, aircraft or unmanned aircraft, which can monitor virtually everything going on in an area. Second, in processing intelligence through advanced command, control, communications and computing systems, known as C4, making sense of the data gathered by the sensors and displaying it on screen for target selection. Third, acting on the intelligence, for example, by using precision missiles to destroy enemy targets.

The new warfare would be multi-dimensional, ie, air, sea and land operations would be increasingly integrated. Information and outer space would also be part of the modern war. Another important element of RMA is "information warfare", disabling enemy by wrecking his computing, financial, telecoms or air traffic control system with viruses, or electromagnetic pulses. There is indeed a serious concern that the "information strike" could crash one's computer system in the country.

The most serious problem for those who espouse the RMA is that enemies could counter or copy the capabilities so generated. Every breakthrough in offensive technology eventually inspires an advance in defence. My question is whether SAF is exploiting technology fully to give it the cutting edge and updating its strategy and doctrine accordingly.

Next, SAF has been involved with UN peacekeeping operations for a number of years. Recently, we have sent SAF combat teams, as DPM has said, for peacekeeping missions in East Timor, besides medical and support group. In this context, I wish to ask the Minister for his assessment of the performance of our SAF contingents and the lessons we learn from such missions overseas. What are the reactions or state of morale of our troops in such missions? Are there plans to continue to send SAF teams to East Timor or to other peacekeeping missions elsewhere?

The Second Minister for Defence (RAdm Teo Chee Hean): Mdm Chairman, I will deal with Dr Ong's question on peacekeeping and the Minister of State, Mr Cedric Foo, will deal with the subject of technology.

About 900 SAF personnel have participated in UN peacekeeping missions around the world over the past dozen years. Today, there are about 75 SAF officers and men serving in three such UN missions - UNIKOM at the Iraq-Kuwait border, UNTAET in East Timor, UNMEE in Ethiopia and Eritrea. SAF officers also regularly participate in multilateral peacekeeping seminars and training programmes where they learn from as well as share the SAF's experience in peacekeeping with other armed forces.

With regard to East Timor, SAF peacekeepers, as well as Singapore Police force personnel, were sent to support the UN efforts to bring peace and stability back to East Timor. We have contributed to the international missions in East Timor in both INTERFET and UNTAET. Peace and stability in our region is important for Singapore's security, and we are glad that we are able to make our contributions.

Currently, the SAF has a platoon of peacekeepers in Fohorem in the western sector of East Timor, near the border. The deployment will soon go into its third rotation of six months. Our platoon is deployed as part of the New Zealand composite battalion, which includes contingents from Fiji, Ireland and Nepal. I visited our men in Fohorem. Their morale is high and they are doing their job well. The deployment is progressing well and we have had good reports from the UNTAET Headquarters in Dili on the platoon professionalism and operational readiness.

The SAF has gained useful peacekeeping knowledge and experience from this deployment in East Timor. Singapore has committed to continue with our current deployment of a platoon of peacekeepers until this November. The UN Security Council is expected shortly to endorse the details of the composition and size of the peacekeeping force which will be established in East Timor after its independence day on 20th May. This will be UNTAET's successor mission, the UN Mission of Support in East Timor (UNMISET). When the details are announced, Singapore will assess the situation and determine what size force we will contribute. Our objective, as with all our commitments to UN peacekeeping operations, would be to participate in a manner whereby we can make a useful contribution.

The Minister of State for Defence (Mr Cedric Foo Chee Keng): Mdm Chairman, I would like to thank the hon. Member, Dr Ong Chit Chung, for raising the question about the use of technology in the SAF. I want to assure him and Members of the House that the words RMA (Revolution in Military Affairs), CA (Comprehensive Awareness), C4I (Command, Control, Communications and Computers and Intelligence), PS (Precision Strikes), and so forth, are words that we use everyday in MINDEF.

The SAF has, from its earliest days, recognised the critical importance of technology in helping us overcome our constraints in manpower and other resources. Technology acts as a force multiplier by enhancing the capabilities and the firepower of the SAF. We have seen the devastating power of technology in the war in Afghanistan. In modern warfare, indeed, the odd favours the side that makes better use of technology; the side that can integrate platforms and forces into a unified, flexible and effective fighting system; the side that can see better and further on the battlefield; the side that makes informed decisions more quickly, strike with greater accuracy and from further afar.

A larger number of troops is indeed no longer enough to win modern wars. A strong capability in defence technology is also critical for the quality of our training and the effectiveness of our equipment. As a national service armed forces, it is vital that if ever our men have to go into combat, they go with the confidence that they have superior training and superior equipment.

MINDEF has been making a steady and significant investment of resources over the years to give the SAF a strategic technological edge. First, we have helped to develop the local defence industry. Today, the Singapore Technology group undertakes activities ranging from manufacture to full life cycle support of weapon systems and equipment for the SAF. This group of companies also upgrade as well as develop advanced weapon systems for the SAF.

This indigenous capability, which we cannot buy, is very important to the SAF. We have also built up a pool of engineering and scientific talent and develop our capability in defence R&D. DSO National Laboratories is the single largest R&D organisation in Singapore. We also do extensive collaboration with local and overseas research establishments. Locally, there have been many successful collaborative projects with NUS, NTU and other research institutes. Overseas, our partners include the US, France and Sweden. Such collaborative efforts allow us to leverage on the capabilities and resources of others, so that the SAF can be at the leading edge in meeting the increasingly sophisticated and complex demands of modern warfare. 6.30 pm

We spend roughly 4% of our defence budget on R&D. This does not include money spent on the development of upgrade programmes and indigenous systems. Such a commitment underscores the importance we attach in ensuring that the SAF has the edge over potential adversaries. This is a critical element of our deterrence policy.

The Chairman: Dr Ong, would you like to withdraw your amendment?

Dr Ong Chit Chung: Madam, I wish to thank the Deputy Prime Minister and the Ministers for their full answers and, in particular, the Deputy Prime Minister for the very generous increase in NS allowances. I am sure this will be very much appreciated by all NSmen. On that note, I am also assured that our defence and security are in good hands.

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Chairman: Dr Warren Lee.

Dr Warren Lee: Mdm Chairman, I beg to move,

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

Madam, the Singapore Armed Forces spend considerable sums of money to provide realistic training opportunities for its combat troops. The medical corps of the SAF also performs a crucial function during operations and even during peacetime, to preserve life and reduce suffering and morbidity. I urge the Ministry of Defence to explore the use of sophisticated training mannequins and computer-aided programmes to improve training realism for medical vocationalists in our army, especially at the level of both active and NS battalions.

It may not be necessary for sophisticated mannequins to be used at all times. A mix of sophisticated and simplified training aids may be all that is necessary. To echo Minister of State, Mr Cedric Foo, perhaps we could even get some indigenous capability in this regard.

My next cut is on NSmen memorial. On the occasion of the 35th Anniversary of National Service in Singapore, I would urge the Minister for Defence to consider some sort of national memorial to celebrate the institution of National Service. This memorial should not only commemorate the sacrifices of our NSmen and their family members, but should also celebrate the role of National Service in Total Defence, nation building and in promoting racial harmony. It should perhaps celebrate the citizen-soldiers' dual role in society and also reflect the SAF's role, not in having had to fight for freedom, but as a powerful deterrent and guardian of our national security.

The Senior Parliamentary Secretary to the Minister for Defence (Assoc. Prof. Koo Tsai Kee): Mdm Chairman, I thank Dr Lee for his comments and his questions. If I may answer the second question first, because MINDEF and the SAF place great importance on the topic raised by Dr Lee, and the topics of training and the contribution of National Servicemen are close to our hearts.

First, a word about training. National Servicemen in the SAF undergo rigorous and realistic training. To enhance proficiency and operational readiness, the SAF conducts many local and overseas exercises. Despite the high training tempo, the SAF has maintained a good, in fact, an excellent training safety record. This is due to the strong emphasis placed on safety at all levels within the SAF. The challenge is not to avoid training but to pro-actively manage our training activities to minimise risks.

There are detailed safety procedures for every training activity in the SAF. These procedures are carefully disseminated to all soldiers involved. Before each training activity, ground commanders systematically identify the potential risks, using a risk assessment matrix, what we call the RAM. These risks are then managed through measures, such as safety briefings, close supervision, precautionary actions, and rehearsals and rehearsals prior to the actual exercises. In addition, safety audits are routinely conducted to ensure that the highest safety standards are maintained.

Over the last five years, there have been very few accidents and deaths involving National Servicemen in the SAF. However, we recognise that every death, every accident is just one too many. MINDEF's priorities in dealing with training-related accidents and deaths are 3-fold.

First and foremost, is to avoid such fatalities wherever possible. We, therefore, emphasise training safety without compromising training realism and operational standards.

Secondly, MINDEF investigates every incident thoroughly to avoid similar situations being repeated in future. For every case, an inquiry involving third parties is involved, swiftly convened to examine the circumstances leading to the accident and recommend any improvements to the training system. The findings are reported to the highest level in MINDEF.

Thirdly, we help the bereaved family deal with the grief and come to terms with the death. In this respect, MINDEF has a comprehensive system in place to provide prompt assistance and support to the family. Unit commanders and professional counsellors keep in close contact with the serviceman's family. MINDEF also gives the family financial assistance and compensation payment, where applicable. The serviceman will also receive a military funeral, if requested by the bereaved family.

Dr Lee asked MINDEF and the SAF to also recognise the contribution of National Servicemen, indeed, the spirit of National Service. Every year, on 1st July, SAF organises what we call an SAF Day Parade. This is a very important and solemn occasion. The occasion is to mark the importance of the contribution of National Service as a national institution, and the contribution of National Servicemen to national security. In addition, a minute's silence is also observed, to pay tribute to the National Servicemen who have lost their lives in the course of duty.

Madam, with your indulgence, I will repeat the citation made before the 1-minute silence. The MC of the occasion will say:

"Mr President, Ministers, ladies and gentlemen,

Although the SAF has not been called to battle, precious sons of Singapore have lost their lives in the course of service in the SAF. Let us observe a minute's silence to remember our comrades-in-arm."

MINDEF believes that these are meaningful and solemn recognition of National Servicemen who have lost their lives during training.

I will move on to Dr Warren Lee's cut on the use of simulators and CAI packages for medical training in the SAF. Computer-aided Instruction (CAI) packages and medical training simulators are currently used by the SAF School of Military Medicine and by SAF's Specialist Medical Centres to enhance the training of medical personnel. They are selected to provide the appropriate pedagogic technique relevant to the provision of medical knowledge, as well as the development of individual and team-based medical skills.

The School of Military Medicine has implemented the use of Computer-Based Training (CBT) courseware in the CAI centre since 1996. Since then, more than 30 hours of computer-based training courseware were developed in-house and by commercial vendors. Our approach is to source and acquire commercially available software packages to provide professional medical knowledge and training, while developing packages for SAF-specific medical operations systems and team-based training needs.

The SAF Medical Corps recognises the usefulness of simulators for enhancing the realism and efficiency of medical skills training. The medical simulators used in training for individual technical skills include simple anatomical models and intravenous infusion trainers for use by medics, and more complex models for training in in-patient intubation. A variety of full-size and weighted human mannequins, to simulate the weight of the real patient, are also now extensively used to simulate casualties during field training of medical units.

The School of Military Medicine has also procured six sets of advanced patient simulators, what we call the SMM-MAN this year. These have just been procured and they are state-of-the-art simulators (mannequins). These full-size human models are equipped with sophisticated components that simulate clinical signs and symptoms, and they are able to provide highly realistic training for a variety of medical conditions. The mannequins allow the trainees, medics as well as the doctors, to perform specific medical interventions, and these mannequins provide real time feedback for the trainees through a change in the patients' clinical parameters, and these parameters can be observed on a monitor. These simulators are presently being used to provide a high degree of realism in our paramedic level 3 training and advanced trauma life-support courses. In time, we will provide these courses to our NS medics. Our intention is to continue extending the employment of these simulators for the medical team training as we gain further experience in their use.

I have asked the Chief Medical Officer to host a visit for the GPC members to take a look at how the School of Military Medicine incorporates CAI and CBT courseware in the training of doctors and medics.

The Chairman: Dr Lee, would you like to withdraw your amendment?

Dr Warren Lee: I thank Prof. Koo for his comprehensive answer, and I thank him for his invitation to visit the unit concerned. I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $7,695,000,000 for Head J ordered to stand part of the Main Estimates.

The sum of $509,000,000 for Head J ordered to stand part of the Development Estimates.

Head P -

The Chairman: Head P - Ministry of Home Affairs. Prof. Chin.

Assoc. Prof. Chin Tet Yung: Madam, I beg to move,

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

May I have your permission to take the two cuts together?

The Chairman: I will have to propose the question. Please proceed.

Assoc. Prof. Chin Tet Yung: The recent spate of terrorist activities in the world and the detention of Singaporeans suspected of terrorist activities last December underscore the critical importance of having strong homeland security measures. Our home, in such a case, is actually the frontline when we deal with terrorism. The dangers are enormous and the damage can be catastrophic, as was the case we have seen in the September 11 incidents. I am particularly relieved, and I am sure that members of the public will also be very reassured, that the Ministry of Home Affairs and, in particular, the Internal Security Department, had been able to identify would-be terrorists, and to stem the danger before such an incident could arise. I think this is a particularly reassuring thing for Singaporeans.

In the case of the recent December 2001 detentions of terrorists, it is quite clear that ISD has been doing its job. I believe they were monitoring the potential terrorists for some time before they were forced to take action, due to the imminent dangers that they were causing. So I am sure that the Ministry of Home Affairs will be able to assure the public that this level of surveillance, in fact, an enhanced level of surveillance, will continue. Of course, terrorist attacks, if they do take place in Singapore, would be felt much more strongly in such a small country and with so many vulnerable places packed with people. And, now, since terrorist activities take so many forms, we basically have to take extra precautions to safeguard the interest and security of our people. I am sure, today, the public would like to know how the Ministry of Home Affairs, together with agencies, intend to protect us from terrorist attacks. 6.45 pm

There are at least four areas relating to homeland security that I would like to touch on. First, I would like to ask the Minister whether the Ministry, together with the other departments, is prepared for any terrorist who might want to use biological agents to attack us. Do we, first of all, have the expertise and, secondly, have sufficient medical supplies to respond to such an attack? Have any studies been done so far, for example, of what sort of medical needs will be required, in a big bomb explosion, an anthrax attack or something of that type?

The second type of security measure in homeland security is, of course, the border and port security. Now, with an enormous number of people moving in and out, particularly through the Causeway everyday, how vigilant are we in equipping our border police and port security in determining whether or not such terrorist suspects are coming in? Are we confident that we can keep an eye on such people?

The third area is environmental and energy security. We know that the Government has, of course, done a good job over the years to safeguard important installations, such as telecommunications networks and so on. But, naturally, power stations, etc, would also be targets for terrorist attacks, and I am sure that there are plans in place to protect such vital installations. My question is not so much in relation to physical facilities that I am interested in. I wonder whether we have measures in place to safeguard, in particular, sensitive electronic information, such as in the financial sector and other forms of information of digital communications of MINDEF and MHA, whether these are secure from terrorist attacks through the Internet or through the use of computer viruses and so on. Are we confident that we can be sure that such terrorist attacks would not bring the whole digital networks of vital installations down?

My second cut relates to the role of the community in homeland security. I think there is no question that without the participation, without the consciousness of all the members of the public in Singapore, we cannot have a high degree of homeland security, no matter how hard the security forces can try. The demands of homeland security are increasing, due to the current development in this world. The primary question I want to ask in this respect is: will the Minister tell us how the community can play a more active role in combating terrorism and crime?

I would like to mention that in the World War II, we have heard of homeland security groups in a variety of countries. In England, they were partly satisfied by something called the "Dad's Army", that is to say that for men and women who cannot participate at the frontline, they would stay at home to man security installations, neighbourhood watch groups and so on. I think it is high time that, in Singapore, we had a dedicated volunteer force, maybe a citizen corps, to be trained and to provide immediate assistance to major disasters caused by terrorist attacks. If the majority of men are already engaged in NS duties, may I respectfully suggest that we encourage our women folk to do their national service in this way and play a more active role in the defence of the nation?

If this type of citizen force can be created, we hope that they will play supporting roles, like being trained as paramedics, for example, to administer drugs, to perform first aid in times of crisis. Volunteers may also be enlisted to help play an important role in instilling public awareness and educating the public on the management of emergency situations.

Of course, many of them have already joined the neighbourhood watch groups to report on suspicious activities, but I think we can do more. Many of us live in fear of terrorism. However, part of the fear is created by the fact that we do not know what sort of dangers or in what form terrorism can come. It is very important that we have some form of public education, so that members of the public will not be taken unawares and will know how to react in times of emergency.

Finally, I would like to say this. I believe that homeland security requires a highly sophisticated intelligence network, not only through intelligence agents collecting information or high-tech intelligence gathering, which I am sure is done by the professional services. But more often than not, it is public giving information on what they regard as suspicious activities. I think that will be the key to helping us combat terrorist activities. In this regard, I also hope that this sort of citizen force will be trained in basic skills and recognising suspicious characters or recognising something out of the ordinary among neighbours or whatever. I do not mean to encourage a vigilante force which would give rise to a lot of complaints about neighbours and so on. I do not mean that. But I do mean that we need a bit more education for our citizens to understand that there may be situations where they would feel that there are some danger involved in certain activities, and they would be prepared to report this to the relevant authorities. As an example of this type of reporting, I must say that I was very impressed with the fact that in the United States, for example, now they have a website where one can actually put in information for the use of intelligence services, so that the intelligence services can then follow up to see whether there are dangers involved.

I hope the Minister will clarify whether such a force can be useful in combating terrorism and also in enhancing homeland security.

Mr Tan Soo Khoon: Madam, first of all, I would like to start off by paying tribute to the Internal Security Department for its fine work in breaking up the plot by the 13 terrorists last December. I think it would have certainly been a terrible disaster for Singapore if the terrorists had gotten their way. The unveiling of the plot has brought to the surface a new kind of threat to our country, and that is why I call it an unconventional threat. Previously, we have been prepared for different kinds of disasters. I remember that we have also run exercises, simulated emergency situations and our community is generally quite well-prepared to deal with any incident that may arise. But terrorism is a different thing. It is a different kind of threat to us and I would like to know what steps the Ministry of Home Affairs has in place to mobilise the community in case a disaster of this nature should occur.

I read that the Ministry has in place a committee called the National Emergency System (NEST). I would like the Minister to provide us with more details as to what NEST is doing, how it intends to educate the population of the dangers of unconventional threats, and to what extent can the community leaders and the community be involved in dealing with a situation that may arise.

Mr Charles Chong: Chairman, I intended to ask the Minister whether our Home Team has the capability and is prepared to address chemical, biological and other conventional threats. However, the Senior Minister of State, in an answer to a Question for Oral Answer earlier this week, had already told the House that the Home Team has the capability and is prepared to address any unconventional threats.

Therefore, I would just like to ask what measures have been taken or are being planned to prepare the population in the form of public education or national exercise on how to react in the event of a chemical or biological incident.

Mr Heng Chee How: Madam, I had intended to ask the question of how the Home Team intends to involve the community more directly in exercises in connection, especially with the preparation to tackle the threats of terrorism. I want to say that the Senior Minister of State, in reply to an Oral Question raised in an earlier session, had addressed some of those concerns. I would just like to echo the questions raised by my colleagues earlier on this subject, and I look forward to more details being provided.

The Chairman: Mr Yatiman, you have three minutes.

The Senior Parliamentary Secretary to the Minister for Information, Communications and the Arts (Encik Yatiman Yusof): Madam, I would like to join my colleagues in expressing our gratitude to the Internal Security Department in handling the JI incident in Singapore and the threat of terrorism.

The recent arrests of the JI members in Singapore have proven that Singapore is far from free from the threat of terrorism. The threat is global and the network can be regional or international, thus making the protection of our home ground even more complicated and difficult. For Singapore, unlike other countries with no hinterland, with high concentration of population in an urban area, the threat of terrorism is real and can be devastating. We cannot imagine if a bomb planted in Yishun MRT station did explode, you can calculate the extent of injuries, fear and devastation, not only to the community in that area, but to the security of Singapore, as well as our image as a country that is free from threat of terrorism.

In this respect, we have to be more vigilant because the network of terrorism is well embedded in this region. As Members are aware, Abu Sayyaf is a growing threat in the southern Philippines, Al Mauna, KMM, JI Malaysia, Laskar Jihad in Indonesia, Jemaah Islamiyah - they all form into networks that can reach Singapore one day. My question is: how could our security agencies prevent Singapore from being the target of such threats, and how could we ensure investors, tourists and, most important, Singaporeans, that such threat will not be a reality here?

The Chairman: Order. It is 7.00 pm.

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

Mr Wong Kan Seng: Mdm Deputy Speaker, 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.

Mdm Deputy Speaker: So be it.