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

[Mr Speaker in the Chair]

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

[Mr Speaker in the Chair]

Head S (cont.) -

Resumption of Debate on Question [17th May, 2002],

"That the total sum to be allocated for Head S of the Main Estimates be reduced by $100." - [Mr Yeo Guat Kwang].

Question again proposed.

Ms Irene Ng Phek Hoong (Tampines): Sir, first, I want to take up what the Manpower Minister said yesterday about the proposed CPF cut for workers above 40. He argued that it should not be viewed as introducing age discrimination. He pointed out, rightly, that the CPF rate for workers above 55 was already lower than the rate for younger workers. This is true.

But, if I recall correctly, the main reason why the CPF rate was lowered for workers above 55 was because the Government wanted to extend the retirement age from 55 to 60, and then to 62. It would be raised to 67 eventually. At that time, 55 is considered the age when all workers would stop work and retire, with zero employment income. And, therefore, it is at this age that they can start withdrawing from their CPF for retirement purposes. In this context, reducing the employer's CPF rate to keep these workers employed past 55 was considered reasonable, and does not offend our sensibilities. But this is not the case for workers below 55. Many in their 40s are still in their prime, and still saving for their retirement years. To cut the CPF rate of workers between 40 and 55 is to send the unintended signal to the market that this group of workers can be discriminated against.

Sir, many unemployed people above 40 say that they find it very hard to re-enter the job market because of age discrimination at the hiring process. This is a very serious issue for middle-aged and older workers, a barrier that cannot be removed simply by offering more job-matching schemes or excellent training programmes. Older job seekers who cannot find work because their wage expectations are too high can learn to reduce their expectations. Those who lack the required skills can retrain. In both cases, they can adapt and find work. But in the case of an age barrier, older job seekers have no recourse, no matter how willing they are to adapt. If this problem is not addressed, it will become even more severe in time, as our population continues to age.

Sir, just last week, an employer came to see me to seek my help in getting 20 work permits for foreign workers to work at his food stalls all around the island. He asked me to write to the Ministry of Manpower. I dutifully did so but, at the same time, I also grilled him about why he did not employ Singaporeans who are out of work. I told him I have many residents who do not have a job and asked if he would consider them. I asked him what were the criteria for the job. Is there an age limit? He said, yes, below 45. He said that frying over a wok requires a lot of energy. I was not persuaded. It so happened that the very next resident who came to see me was looking for a job, any job. He looked strong, he is able, but he is 48. I dashed out of my MPS office, grabbed the employer, who was on his way out, and made him give an on-the-spot interview to this resident. The employer was not obliged to hire this older worker, but I think I registered my point with him - older Singaporeans should be given an equal shot at the job.

Economic growth will not take care of the situation completely, as it has to do with employers' perceptions of the elderly. And it is particularly during a downturn that older workers need extra protection. Is there a mechanism for the Ministry to ensure that employers who apply for work permits do so only after they have trawled from MOM's bank of jobless workers who can do the same job? It is true that even this will not mean that older workers will be hired. But it will send a strong signal to employers that we take seriously our mission of creating jobs for Singaporeans. This is not to discourage employers from hiring foreigners that they need to run their businesses. Rather, it is to encourage them to give Singaporeans an equal chance to get a job. There is a difference in nuance.

The Minister earlier said that the Ministry had received only a few complaints from older workers regarding age discrimination. He said that in 2000 and 2001, there were four and five complaints respectively.

The Chairman: Time is running out, Ms Ng.

Ms Irene Ng Phek Hoong: Sir, I would like to ask the Minister how these cases were resolved. The only way to fight age discrimination, short of legislating it, is to make clear that our labour mechanisms do not tolerate bias against older workers.

Mr Yeo Guat Kwang (Aljunied): Sir, there are many advantages of flexible work arrangements. Through flexible work arrangements and flexible working hours, other than pro-family and enhancing the employees' welfare, more importantly, such arrangements can actually strengthen the company's competitiveness and workers' employability. On the part of employers, however, it seems that they are pushing for flexibility more on the basis of cost savings. As a labour MP, my view is that, while there may be cost savings, they need not necessarily come from wage cost.

One good example is ST Aerospace. ST Aerospace had, with the endorsement of the MOM, implemented a scheme of compensatory time-off. The exercise involved the union very early in the development. It also incorporated safeguards to check against abuse, eg, half yearly reviews to see if the scheme could be improved further. At the same time, there was ample communication to ensure that all workers understood the implications of the changes. Under the scheme, the company releases employees on full pay when they are not needed at work. These employees make up the credited hours and time off from their future overtime. The workers continue to receive regular pay while having flexibility in their time schedules and enjoy more leisure time. The company is now able to improve its competitiveness, with a manpower deployment plan that was more aligned with the job schedule. This enabled it to free up its resources so that it could garner more jobs. The gains in profits arising from this new arrangement were also shared amongst the staff. I am aware that KK Hospital is another good example that also has good flexible work arrangements.

However, todate, the examples I have cited are the exceptions rather than the norm. Does the Ministry have any plan to amend the legislation to facilitate greater workforce flexibility? I urge the Ministry of Manpower to do more to encourage companies to adopt flexible work patterns and flexible working hour arrangements that will strengthen their competitiveness and enhance their employees' employability and welfare.

The labour movement will support flexi-work arrangements, provided certain fundamental principles are adhered to. For example, it should not solely be a cost-cutting measure. Rather, it should make the company more productive and the gains must be shared with the workers. We do not want to see a significant swing in the workers' income. Clear guidelines must also be given. I urge the Ministry of Manpower to do more to encourage companies to adopt flexible work patterns and flexible working hours that will strengthen their competitiveness.

Mdm Halimah Yacob (Jurong): Sir, over the last few days, we have heard quite a number of points made about workers being fussy about jobs. Yesterday, the Minister said that there are jobs in the marine and hotel sectors, for instance, but there are no takers because workers are fussy. That may be one perspective. On the other hand, I want to offer another perspective, ie, basically, it is the way the jobs are designed that makes it very difficult for workers to work in these sectors. We seriously need to look at this area of how to redesign jobs for three reasons: one, is the aging workforce; second, the negative image of some sectors; and, third, the need for flexibility to accommodate different life cycle needs.

Let me just elaborate on the first point, ie, the problem of an aging workforce. If we were to look at the median age of workers, we will notice that it has increased from 33.6 years in 1991 to 37.8 in 2001. The pool of workers aged 40 years and above has also increased by 90%, from 31% in 1991 to 43% in 2001. Clearly, if jobs are still being structured and designed in a way that only take care of the needs of a younger workforce, the older workers will find it very difficult to do the job.

Let me give an example of a resident who came to see me. She is in her 50s and she is working in a hospital. She told me that her job involves having to take care of 7-8 patients in a day, cleaning them up and bathing them. She feels that, very soon, she will not be able to do that job and she will be sacked, because she will not be able to perform up to standard, as it is a very physically demanding job. In the course of my work, I also came to know of another worker who works in a factory producing TV mainframes. Her job requires her to move the mainframe from one workbench to another workbench for a minimum period of eight hours. She had worked for 10 years, and she said that she does not think she can continue working in that way anymore, because it requires her to stand and to carry these heavy mainframes from one workbench to another. She is really looking forward to the day when she gets retrenched and gets her retrenchment benefits, and she can take a break and look for a lighter job more suited for her age.

Sir, I do not believe that such jobs cannot be redesigned to make it easier for people to work. If we do not look at this issue, and then we make it very difficult for Singaporeans to work and allow employers to tap into an everlasting pool of young foreign workers, there will be no incentives for them to redesign jobs to meet the needs of older Singaporean workers.

On the second point of image, this is a serious problem because, if we were to look at jobs in the marine sector, it is usually categorised as jobs that attract the three Ds - demanding, dangerous and also dirty. Sir, I do not know whether any Member in this House has gone to a shipyard. But if you have gone to a shipyard, you will really understand what working in a shipyard means in the marine sector. Can we imagine a worker coming for a job interview in a shipyard and, for the first time, looking at the work in the shipyard? Most definitely, the worker will get very frightened and worried. So there is clearly a need for us to try and improve the image of jobs in these sectors which workers do not find attractive at all. For instance, we can say that the safety record in the marine sector has improved considerably, so there is no fear for people to work in the shipyards. Safety is taken care of. There could also be an orientation programme, etc, to get them acclimatised to work in a shipyard. We really have to do a lot more in order to enhance the image of jobs in these sectors.

My third point is about flexibility - flexibility to take into account the needs of people in different lifecycles. We have heard what the Deputy Prime Minister said a few days ago. He said that we are very much a patriarchal society. Women have to perform certain tasks and we see a lot of women staying at home. But there are still many women who want to come out to work. As the jobs become more intermittent and there is less job security, we will find that a lot more women will have to come out to work in order to supplement the family income. If we look at the survey done by the Ministry of Manpower about two years ago, it says that 40% of those women who wanted to go back to work could not go back to work because they said that there was just not enough part-time work. That means that if there is more part-time work available, then, obviously, they would want to come out to work. And it is not just a question of them coming out to work in order that they can buy more ---

The Chairman: Mdm Halimah, could you complete your third point, please?

Mdm Halimah Yacob: My point is that there must be a definite attempt and there must be serious efforts made to redesign jobs. And we need to redesign jobs to take care of these three areas: one, the aging workforce; second, to redesign jobs to take care of the poor image in some sectors; and, third, to redesign jobs to enable more women to get into the labour market and, therefore, to supplement the family income.

Mr Yeo Guat Kwang: Sir, workers are badly affected when they are retrenched. To help them tide over a difficult situation, it is necessary to give the affected workers some form of retrenchment benefits. Recently, our retrenchment benefit system has come under scrutiny. Are there any weaknesses with the present system? I think the answer is yes, there are. While the law states that those with more than three years of service can claim retrenchment compensation, the payment of such compensation is not mandatory, neither is the sum. Indeed, we know of cases where workers are retrenched without compensation in non-unionised companies. 1.45 pm

The present system is unfunded, which means no funds are set aside for retrenchment. When the time comes, the company looks for money to pay for these retrenchment benefits. This causes a drain on the company's financial resources, and even endangers the jobs of the remaining workers. For example, it is possible that a company is able to pay all the retrenchment benefits to the workers who are laid off first, but yet still finds that it is not viable and ceases operation. The workers who remain after the first round of retrenchment, who may be the better lot, end up with nothing at all.

Further, as business cycles become shorter, if we stick to the approach that workers with less than three years of service are not entitled to claim any retrenchment benefits at all, we will have problems because there will be more such workers who are under this category, as the job market will get more volatile.

One possible suggestion put forward by some of the union leaders is an enhanced bonus system. Under the system, the employers and employees put aside a certain amount of money, say, from the performance bonuses when the company is still doing well and in good health. The money is vested in their employees' names over a period of time. It could be in the form of unit trust. Over the years, it will be gradually built up. Then, when the worker is retrenched, the fund can help the worker to tide over financially until he finds a new job. Such an arrangement does not add to the financial burden of a company during retrenchment, and it is portable. The fund can be built up as the worker moves from job to job. In the current system, service with a previous employer does not count for retrenchment benefits.

I - and I am sure many workers - would like to know the Ministry's thinking with regard to our current retrenchment benefits system, and the practices. Does the Ministry acknowledge these weaknesses? What is the Ministry's thinking on how we are going to improve the system?

Mr Chew Heng Ching (East Coast): Sir, it looks like the days of full employment are over. Like all developed economies, we may have to accept that there will always be some form of structural unemployment, because there is a mismatch between the skills of laid-off workers and the skills requirements of new job openings.

Indeed, it has been forecasted by many economists that the longer term natural rate of unemployment in Singapore will rise to about 4%-5%. Sir, if this rate stays or increases in the long run, there could be an increasing burden on society.

A possible way out is to look into having some form of unemployment insurance for workers or for employees in general. This would help the unemployed workers tide over temporarily, whilst they seek retraining or alternative employment. Sir, for the private sector to run such an unemployment scheme alone without it being made compulsory by law for all employees may not be economically viable, as there is a lack of economies of scale and the problem of what is often called in the insurance industry "adverse selection", in that only those most at risk would take up this form of insurance. Those who have relatively secure jobs, like in the civil service, would not take up.

The scheme could be similar to the concept of Medisave or medical insurance where individuals may be mandated by law to contribute, say, 2-3% of their CPF contribution towards an unemployment insurance scheme. Since all employees will have to contribute on their account to this scheme, it can also be administered privately, instead of being State run. An unemployed individual may draw on these balances and the insurance for a period of time to help him meet his or her financial obligations during this period.

Sir, we could prevent abuse of the scheme by, say, tying the payment of unemployment benefits during this period to skills training or retraining and/or active job search. In this way, we could avoid inadvertently promoting the welfare state mentality and the disincentives to work.

Sir, I see the introduction of this kind of unemployment insurance as a possible extension of our CPF scheme, ie, to expand the coverage of our social security to meet unforeseen unemployment circumstances. This is also in line with our plan to encourage greater self-sufficiency and responsibility for individuals, whilst catering for a real and possible need in the future, in view of globalisation and our changing domestic economy.

I would, therefore, like to ask the Minister if his Ministry has conducted any studies on unemployment insurance and, if so, whether he would consider introducing some form of unemployment insurance scheme, similar to the Medisave scheme, through the CPF.

Dr Tan Boon Wan (Ang Mo Kio): Sir, the global economic slowdown has played havoc with the lives of our people. As several of my fellow hon. Members had earlier recounted, many of the residents, like those of mine, lost their jobs and came to seek our help to find another job, and to tide over a very difficult and traumatic period in their lives.

Not all of them were doing low-skilled work, a group whose plight many of my fellow colleagues have focused on. Some were holding skills and technical positions, while others held managerial positions. While their immediate needs - feeding their family and paying household bills are indeed pressing - what I am equally, in truth, more concerned with is whether the jobs that were lost would ever return, even when the economy recovers. Some will never return, having permanently migrated from our shores. New jobs will be created. But, at the same time, some skills would have become redundant and obsolete. How are our people going to cope in a world that has changed so abruptly?

I would like to join my fellow hon. colleagues to ask the Minister the following questions. How many jobs were lost since 2001 when the slowdown began? If we were to classify the jobs that were lost as low-skilled, skilled and technical and managerial, how many would there be in each category? How many of the jobs that were lost are lost permanently? What are the job prospects for this year? How many new jobs will be created? Finally, how many of the new jobs will be filled by Singaporeans or permanent residents? What is holding our people from the rest of the new jobs? What is being done to help our people to overcome the obstacles to these jobs?

Mr Zainul Abidin Rasheed (Aljunied): (In Malay): Sir, providing assistance to residents to look for jobs is the most important talk of the CDC at present. Our experience shows that it is not an easy task. Many are still waiting and hoping for assistance but they are disappointed. The number of those who are assisted has been increasing but is still under 20%. This is a serious problem and MOM should continue to help with greater effort. I have found that there are many more job mismatches than job matches.

With your indulgence, Mr Chairman, I would like to give two examples that I had experienced. A 45-year-old father of two school-going children used to receive a salary of $4,200 and did not want any other job except in the manufacturing sector. We had suggested that he work in the IT sector with a salary of $3,500 but he refused because he said he liked the experience and the skill that he had learnt from the manufacturing sector. The job that he had lost will never come back.

Another person, an Eurasian who used to get $3,600 had been retrenched. He tried to apply for many jobs, by the hundreds but was not successful. Finally, he said that he was a victim of discrimination because he came from the "others" group. I have always heard many Malays saying that they were discriminated against because of language or race, but this is the first time that I heard of a person being discriminated for being under "others". Actually, he had a colleague at the same place, a Chinese, who did not get an alternative job. I convinced him that his case was not a question of discrimination because his Chinese friend also faced the same problem. Finally, he and his friend agreed to attend a diploma course on Freight Management with funding under the Northeast CDC's surrogate scheme.

There is still the problem of people being too choosy in finding jobs but there are still employers who are also choosy in selecting workers, especially those 45 years and above.

Finally, Mr Chairman, in the past, you could still get hawker stalls. Presently, there is no such opportunity as everything is done by tender. The opportunity to open a stall in the school canteen is also lesser. So what is the fate of such individuals? It is true that the only way out is to go for training and retraining. But I must say that this process takes a long time and it is a difficult task due to the mindset of the workers and the employers. As we try to convince others to go for retraining, MOM should cooperate with ENV to find out ways to provide new job opportunities, which include hawking and setting up small businesses for more workers who have been retrenched and might be difficult to be retrained in the short-term.

The Minister of State for Manpower (Dr Ng Eng Hen): Sir, Members have expressed concern regarding the welfare of our workers especially in this downturn. We also share this concern. Mr Hawazi was worried that employers, in view of their difficulties, might be quick on the mark to dismiss their workforce. Sir, the law, specifically the Employment Act, protests against unfair dismissal, and MOM reiterates that workers who have been unfairly dismissed or denied their benefits should inform my Ministry. We will investigate, seek appropriate remedies and compensation. Nevertheless, Mr Hawazi will be heartened to note that unfair dismissals in the last three years, at least those reported to MOM, were stable - 32 last year, compared to 29 in the year 2000 and 33 the year before.

Mr Yeo Guat Kwang asked what about the plight of retrenched workers. In this regard, let me applaud the unions' efforts. Our data shows that many retrenched workers in unionised companies were paid reasonable sums of retrenchment benefits, while those who were non-unionised were reported to have received little or no retrenchment benefits. Mr Yeo suggests an enhanced bonus system where a proportion of the company's profits is put aside and built up over the years to be utilised when workers get retrenched. It is a good idea, but may be better encouraged on a voluntary basis, rather than through Government intervention. Unions and employers could negotiate for such arrangements based on individual circumstances.

Since employment will be more disruptive, should we protect and provide even more in the form of unemployment insurance, as suggested by Mr Chew Heng Ching? He asked whether MOM has studied this. Yes. Other countries that have instituted unemployment insurance have regretted doing so. As expected, there were abuses. In Japan, the claim rate in a recession is so overwhelming that the scheme has become a severe financial burden to the state. There is a moral hazard inherent in unemployment insurance. In Canada, 'brunching' occurs - brunch, between breakfast and lunch. Workers abuse and game the system by working for the minimal qualifying period and then resign to claim the unemployment insurance benefits. The well-intentioned unemployment insurance system deteriorates into unemployment handouts. 2.00 pm

I am aware of the counter argument of those who say that having seen and presumably learnt from the mistakes of others, we can craft our own version to avoid the pitfalls by tying up unemployment insurance with job search, training, etc. This argument is enticing, but we should remain wary.

It reminds me of the latent alcoholic who rationalises that since most alcoholics are addicted to hard liquor, he would remain immune if he stuck to fine wines. The latent alcoholic would be quite wrong, and with devastating consequences. Once introduced, unemployment insurance would be difficult to roll back. MOM's view is that we should avoid introducing unemployment insurance at present.

Members have quite rightly pointed out that we need to enhance the employability of older workers. I agree with Mr Seng Han Thong, Ms Irene Ng and Mdm Ho Geok Choo that negative attitudes towards older workers are unwarranted and unjustified. Mr Seng remains puzzled about how the age barrier for a mature worker got shifted from 60 to 50, and now rests at 40 years old. I am equally puzzled and I am not sure how the age 40 cropped out. I thought perhaps because we started our People-for-Jobs Traineeship at that age. But we chose that age 40 barrier to compensate in part for the seniority-based wage system, where older workers found it harder to compete with younger counterparts commanding a lower salary. We certainly did not mean to send the message that at 40 your brains go ga-ga and your body goes goo-goo. This myth flies against the face of reality where, as Mdm Ho and Ms Irene Ng rightly pointed out, many workers because of their skill sets, experience and networking, peak at that age. Sir, at this juncture I have to confess that I have a vested interest in supporting this argument. But I am sure that if I put the motion to this House that life begins at 40, the ayes will have it. Many here, who are above 40, will confidently attest that they are better now than they were 10 years ago.

On a more serious note, no single remedy will quite work as the difficulty for older workers finding re-employment is multi-faceted. To quote my Minister, there is "no single magic bullet' and we will have to approach this problem holistically. To alleviate the problem, we will have to address the issues relating to disparity in skills sets and the seniority based wage system. Ms Irene Ng asked: should we move by way of legislation? Other countries which have tried that have realised that there were severe rigidities introduced, such that the overall pie shrank. We do have in place, for example, certain policies which actually protect against age discrimination. I talked about this yesterday when replying to Mdm Halimah in terms of anti-discriminatory practices.

Mr Ong and Mr Seng suggest that we should further "ring fence" certain public sector contracts or vocations for locals, or tighten foreign manpower, to protect mature workers. I would like to inform the House that our workers' policy does have in place a dependency scheme. If we use the example that Ms Irene Ng brought up, where one had to apply for 20 foreign workers, he would have to hire about 50 Singaporeans in order to get the 20 foreign workers. So there are some measures in place. Should we further ring fence it? Should we further tighten foreign worker policies? It may solve one problem, but would create many more.

Last year, we introduced the People-for-Jobs Traineeship Programme. As at April this year, about 2,000 workers above 40 have jobs under this programme. It is premature, and I think unwise, in this recession to judge the success or failure of any programme. We will have to wait till when the economy recovers and with a tighter labour market to gauge the level of discrimination against older workers and at what age that discrimination is most apparent. We will monitor the situation closely and introduce more measures, if need be.

I do though agree with Mr Seng and Mdm Halimah that we should be looking at work redesign. Some cited McDonalds as a model that others can emulate as to how they successfully integrated a more mature workforce. MOM is now working with SPRING to identify specific industries for redesigning work, whether it is for elderly or females. We have been trying to change the image of certain industries, as Mdm Halimah suggested, for example, in the marine industry.

We all agree that the solution to unemployment is a vibrant economy. Can we facilitate this through more flexible wage and work arrangements, asked Mr Gan, Mr Heng and Mr Yeo. I think this is a more enlightened path to pursue. I agree with Mr Gan and Mr Heng that the CPF cut for the purpose of helping companies to reduce cost is a blunt instrument. The National Wages Council has recommended that the Monthly Variable Component be part of our wage structure. How is this proceeding? Some 34% of unionised companies have implemented, but for non-unionised companies only 3.4% have implemented this. The current recession has impeded the progress of implementation. The ERC is studying further ways to enhance its progress.

MOM also agrees with Mr Yeo Guat Kwang that greater flexibility in work arrangements will help our overall competitiveness and increase jobs. The ERC is studying the issue of "Quarterly work hours scheme" to help companies adjust to peaks and lulls due to seasonal demand. We will study this carefully, as he has advised, to ensure that workers' interests and health are still looked after with respect to overtime, rest days and safety.

In response to Dr Tan Boon Wan's specific queries, we had about 26,000 workers who were retrenched in 2001. About 41% were production and related workers, another 39% were professionals, managers and executives, and 19% were clerical, sales and service workers.

Sir, we will continue to change mindsets. We will continue to help Singaporeans adjust. This will take time, but our efforts will continue unimpeded.

Ms Irene Ng Phek Hoong: Sir, my question was not answered, whether there is a mechanism for the Ministry to ensure that employers, who apply for work permits, do so only after they have gone through MOM's bank of jobless workers who can do the job.

Dr Ng Eng Hen: Sir, it was indeed answered, and this is the question of ring fencing, however you call it. In other words, can we introduce certain barriers before they applied for work permits? I said that if we did that, we could solve one problem, but probably create more problems. There are other mechanisms that we can use. I think we will want to move slowly on that because, it will be onerous on certain industries and we might end up reducing the overall pie to satisfy one sector.

Dr Tan Boon Wan: Sir, may I ask the Minister to let me know how many of the jobs that were lost were lost permanently, because this is a reflection of the structural unemployment? If the Minister does not have the figures now, perhaps at some other time the figures could be released.

Dr Ng Eng Hen: Sir, certain sectors that have moved out may not come back. For example, yesterday, I mentioned Philips and Hitachi. Certain production operations that have moved out of Singapore may find it not cost competitive to come back to Singapore. The overall picture will take time to emerge. I think the lesson is that we have to be nimbler and respond to training, again the point that I brought up yesterday. We will have to monitor the situation and see which skills sets are more relevant and help our workers transit.

Mr Zainul Abidin Rasheed: Sir, with the Minister's indulgence, I asked a question about whether we can look at those who are not trainable, and whether we can recreate some of the older jobs like small businesses and stalls, and for the Ministry of Manpower to work with the Ministry of the Environment.

Dr Ng Eng Hen: Sir, it is indeed an option that we have explored. The question is: can we create an informal sector formally? We have gone through the arguments. We tie ourselves in knots. It will be a difficult exercise, but we will continue to work on training, trying to adapt our workers, trying to change some flexible work arrangements, to increase the overall pie before we move on that. It is something that we want to look at, but we will look at it carefully. It is not that we do not want to do it, but it creates so many distortions that we are not sure how it will move.

Dr Ong Seh Hong (Aljunied): (In Mandarin): Sir, although our unemployment rate has gone up, we should continue to attract and retain foreign talents.

During the period of Warring Kingdoms, the Kingdom of Yan often suffered defeats in the hand of the Kingdom of Qi. So the King of Yan asked his cabinet minister, Guo Wei, how he could recruit talents to help build up the country to fight the Kingdom of Qi. Minister Guo Wei told him the story: "Once upon a time, there was a King who wanted to find a horse which can race a thousand miles - Qian Li Ma. When he heard of one such Qian Li Ma, he quickly dispatched his most entrusted official to go and bid for it. However, when the official reached there, the horse was dead but, nevertheless, he paid 500 taels of gold to buy the dead horse. As expected, he got a scolding when he went back to the King with a dead horse. He replied, "If a dead horse could be worth 500 taels of gold, how about a live Qian Li Ma?" True enough, when the news spread, many Qian Li Mas were brought in front of the King. King Yan Zhao took the message and started treating his talents well and in no time, his Kingdom was able to beat the Kingdom of Qi.

Sir, I am not asking our Minister to go and buy a dead horse. However, we need international talents more than they need us. Talented human resources are globally mobile. Even China is trying its best to woo back its outflow of talented Chinese. Our Malaysian neighbour is courting our talents as well. I understand there are a number of Singaporeans working in the tech park in Penang and elsewhere.

Even with our current unemployment situation, we should continue to attract them to Singapore, to enhance our limited human capital, and to treat them well. This will send out the right signal to the global talents.

However, we must not stop here. For our country to benefit maximally from these talents, we must help them sink roots and become an integral part of our society.

Many Singaporeans view foreign talents with mercenary suspicion that they are here only for economic self-benefits. I believe some of them are. But we are partly to be blamed if we deal with foreign talent purely on an economic basis. That being the case, when we pay well, they work for us. When someone, somewhere, pays better, they move.

Sir, to retain them, we have to make them feel at home, give them a strong sense of belonging, and integrate them well into our society.

I would like to quote the Prime Minister who said this during the debate on Singapore 21 on 5th May 1999:

"To sustain our economy and to let our society flourish, we need to import foreign talents and offer some of them PR and citizenship. Our population will become more cosmopolitan. The city will become more international. Newcomers every year have to be integrated into our society. We have to create in them the same strong sense of belonging to Singapore as the thoroughbred Singaporeans."

While Singaporeans working overseas miss our "char kway teow" and "roti prata", our foreign colleagues here are human too, and miss the creature comforts, their friends and the environment that they grew up with. Therefore, it is very important to help them feel at home and feel as if they are part of us.

Singapore has many things to offer. As a society, our core values of "meritocracy, equal opportunities, clean government and racial/religious harmony" are attractive to many of them, including our Senior Minister of State, Mr Khaw Boon Wan and hon. Member, Ms Irene Ng. This is the soft side of selling.

On the practical aspect, we should make life easier for them. For instance, I propose that the Manpower Ministry could perhaps set up a one-stop agency to assist foreign talents relocate. The agency could help in the following areas:

1. Visa applications for spouse and dependants;

2. Housing problem; and

3. Education for children.

After helping them settle in, we could have a programme to systematically integrate them into our community such as joining in the grassroots activities. We should also encourage them to join in national events such as National Day Parade. For example, a contingent of foreign talents or a performance by them would be a recognition of their contribution to Singapore and render them a strong sense of belonging.

Mr Ong Ah Heng (Nee Soon Central): (In Mandarin): For the last three years, foreign workers have made a great contribution to our economy in sectors such as manufacturing, shipbuilding, the health service and the construction industry, thus playing a significant role in our economic development and in enhancing our productivity.

When these workers go overseas to earn a living, they invariably have to cough up huge sums of money to pay for their passage. Some of them told me that a skilled worker has to pay more than $10,000, while an unskilled worker has to fork out at least $2,000, depending on which country they come from. Besides, when they leave their native villages to go to a strange land to make a living, they have to endure much emotional trauma. For them, this is an enormous challenge. Hence, whenever I come across stories about their being swindled and cheated of their hard-earned savings by unscrupulous persons here, I feel sorry for them.

In recent months, there have been a spate of newspaper reports about some unfortunate incidents which have happened to these foreign workers. Such reports are quite sensitive and will, in the long run, impair the image of our country, as they would create the impression that it is not safe for foreigners to come here to work and they would be unfairly treated. Currently, more than 600,000 foreign workers are being employed in Singapore, and only less than 1% of them are alleged to have been ill-treated by their employers. Going by press reports, one would be misled to think that employers in Singapore are a bunch of immoral crooks. This is far from the truth. As a matter of fact, there are many good employers who provide suitable accommodation, amenities and welfare for their workers. However, these go unreported in the media. 2.15 pm

Our press should make it a point to highlight such good behaviour on the part of the employers and not lay out a few unscrupulous and unprincipled employers in their news reports. We have in our midst bad employers just as we have bad foreign workers here. As I mentioned earlier, many foreign workers had to incur huge debts to pay for their passage to come here to work. Many of them are unable to earn enough to pay back their loans. Hence, they have to moonlight or resort to some illegal activities to make more money. When they are found out, they would just disappear. This results in many law-abiding employers having their deposits forfeited. This is very unfair to most of the employers. So I hope when such cases are being dealt with by MOM, there should be some kind of flexibility and human touch. While I fully support Government's firmness in going after employers who ill-treat and exploit their foreign workers, we should also take equally stern measures against those foreign workers who bunk off without any reason.

We are morally bound to look after the interest of these foreign workers and we would not like to see them march and protest in the street, because this will cause very serious damage to our country. Therefore, I would urge the Ministry to formulate some measures to make sure that foreign worker agencies follow certain rules and regulations. They should have enough financial resources to pay for their workers' salaries for at least 2-3 years.

Currently, there are more than 1,000 foreign worker agencies. We see a lot of newspaper advertisements on foreign worker agencies. We ought to have a very strict evaluation system to verify whether these agencies operate under basic ethical standards. Otherwise, their licences should be revoked. This will act as a deterrent against errant agencies.

The NTUC is morally bound to look after the interests of all foreign workers. Foreign workers who work in some shipyards and in the construction industry have opted to join trade unions to safeguard their interest. They are also entitled to join various training courses and welfare benefits provided by the NTUC. I would urge the relevant departments, especially MOM, to continue exercising stringent control over employers and foreign worker agencies to make sure that they maintain basic ethical standards.

Mr Inderjit Singh (Ang Mo Kio): Sir, I have three different issues to raise. First, is on the issuance of employment passes.

Sir, many companies, especially the smaller ones, face a dilemma when they try to bring in foreign talent into Singapore, especially from developing countries. Good people from these countries have many capabilities, sometimes better than our locals, but do not demand very high salaries.

On the other hand, many start-ups cannot afford to pay high basic salaries, even if the employee deserves it, but instead they issue stock options or variable compensation like bonuses, commissions or profit sharing as alternatives to make up for lower salaries.

In both cases, with our restrictive employment pass issuance practices, we create great problems for companies hiring such people from overseas. The issue is one of minimum salary requirement for employment pass approvals. The Ministry should exercise flexibility, in my opinion, to give the benefit of doubt to the companies when they declare that such people are indeed talented, despite the fact that they are paying lower basic salaries. Currently, to cover all eventualities, the rules have become very tight. I hope the Minister would consider this.

The second issue is on the termination of employment passes. When employment pass holders lose their jobs, and they have to leave Singapore, they are only given about a couple of weeks, I believe, two or three weeks, to leave. In the last few years, there are quite a number of them who have lost their jobs. Many of them have been in Singapore for many years too and have families and children comfortably studying in our local schools, and they have other commitments in Singapore. Giving them a very short time to wrap up, pack up and leave the country is not a fair and humane thing to do. It does not give a good signal to future potential talent whom we want to bring into Singapore.

I suggest that the Ministry work with the Home Affairs Ministry to issue such people with a six-month Transition Visa, so that they can either look for alternative employment or have enough time to organise themselves before they leave.

Sir, the third issue is on work permits for non-domestic workers. We have a few levers to control this. The first is the quota system and the other is on the levies. Can I suggest that, for the sake of employers who cannot find enough local employees and for the sake of reducing cost, we have a multi-tier system of levies? Because we already have quotas to control foreign workers, perhaps for the first 50% of the foreign workers, we could issue a lower levy. And as they hire more, we can gradually increase the levy. In this way, companies will still be compelled to hire locals first. The cost of business will be kept low, and we can still control the number of foreign workers by controlling the quota.

I fully support that we should hire local workers first. But the truth of the matter, as many Members have brought up, is that there are some jobs which are not attractive enough, especially those that require shift work or those that require employees to work in clean rooms, and the reason is of discomfort. I would like to qualify myself that I have always believed in hiring locals first in all the companies that I have worked in. My own record is that I have hired a 66-year old retiree, a drug addict, who despite 200-300 job applications, no one wanted to give him a chance, and I hired him. I would like to hire locals. I also have the opposite experience with locals who, after taking the job and working for a few days, because of the discomfort that I mentioned earlier, left in a hurry. For the sake of employers being able to carry on business here, I hope that the Minister will consider this request.

The Chairman: Mr Heng Chee How is not here. Mdm Halimah.

Mdm Halimah Yacob: Sir, first, I would like to commend the Government for ratifying Convention 182 on the Worst Forms of Child Labour last year. This year, based on what the Minister had announced at the International Labour Conference last year, the Singapore Government is considering ratifying Convention 100 on Equal Remuneration for Work of Equal Value. These are very important conventions and will send a very strong signal about our Government's stand on the eradication of child labour and gender inequality.

International labour standards provide an important benchmark against which countries can measure their labour legislation and practices on key areas affecting rights at work, conditions of employment and health and safety. As a member state of the ILO, there are certain obligations which we are expected to fulfil. Since 1998, with the adoption of the Declaration on the Fundamental Principles and Rights at Work, there has been mounting pressure for states to adopt the eight core conventions covered under the Declaration. This being the case, I certainly look forward to our Government ratifying more ILO conventions as a signal of our commitment to the ILO and to show that we take our obligations seriously. I am not suggesting that just because we are under pressure internationally, therefore we ought to ratify conventions, but rather that if we feel our standards and practices are up to par, then we ought to ratify those conventions.

In Asia, Sir, Singapore is rated well, because of the tremendous improvements that we have made to workers' lives and also because of our huge investments in human capital, which is often cited - I am proud to say - in many ILO publications. In many ways, we are looked upon as a developed country that can act as a role model for others in the region. I have sometimes heard criticisms that our labour standards and practices are pro-employer, and that they are more beneficial to employers rather than to workers. I have also heard criticisms that the laws make it difficult to organise and do not provide basic protection to workers, in terms of security of employment and in terms of their basic terms and conditions of employment.

So, I have two points to make and two questions I would like to put to the Minister. One, I would like the Minister to inform the House as to whether our labour standards, labour laws and practices are up to par and in line with international labour standards and conventions, despite the fact that we may not have ratified all the key ILO conventions. Secondly, I would like to ask the Minister to share with us the Ministry's long-term plans on ratification, and whether the Ministry will consider reactivating the tripartite committee that was previously established to further study this matter.

The Chairman: Mr Hawazi Daipi is not speaking. Mr Yeo Guat Kwang.

Mr Yeo Guat Kwang: (In Mandarin): Sir, last year, the number of fatal industrial accidents in Singapore was 52 cases, ie, an average of one per week. The total number of accidents has also gone up to 3,790 cases last year. I think we have to work harder to bring this figure down.

On the basis of our tripartite cooperation, we have already raised safety consciousness among our workers in the work sites and much improvement has been achieved in our occupational health and safety standards. But I think there is still room for further improvement. MOM should have more comprehensive plans to prevent industrial accidents from happening.

Recently, we read in the newspapers that there are a number of workers falling to their death from a height, and there seems to be a rising trend in this type of cases. MOM should also do something to find remedies to prevent such incidents from happening again.

Today, the work environment is so different from the past. Work site is not confined to factories, and many union leaders have pleaded with us to raise the issue with MOM to change the definition under the relevant legislation, to extend the coverage of occupational health and safety beyond the confines of the factories to cover all workplaces.

Mdm Halimah Yacob: Sir, I would like to ask the Minister whether he will consider reviewing the income ceiling of $1,600 that is stipulated under the Workmen's Compensation Act and also under the Employment Act. As we know, the Workmen's Compensation Act provides for payment of compensation to workers who are injured in the course of work or who suffer from occupational diseases. The Employment Act provides for the basic terms and conditions of employment of workers. But both Acts only apply to non-manual workers if their salary ceiling does not exceed $1,600 per month. As we know, the ceiling was reviewed in 1996, and it was raised from $1,500 to $1,600. The ceiling of $1,600 is pegged to the median wage of workers in Singapore. Today, the median wage of workers in Singapore is $1,874. Therefore, there is a need for us to look at reviewing the ceiling; otherwise, the number of people covered will be significantly less.

The second point which I wish to raise concerns the definition of "earnings" found under the Workmen's Compensation Act. The Workmen's Compensation Act defines earnings to include overtime payments or other special remuneration for work done, whether by way of bonus, allowance or otherwise. In other words, the $1,600 ceiling under the Workmen's Compensation Act is based on gross pay. This is disadvantageous to the workers and deprives quite a significant number of workers from the protection of the Workmen's Compensation Act. It is also a definition that is not in line with the Employment Act, which has a similar salary ceiling but which excludes overtime payments, bonus payments or allowances. In other words, the Employment Act salary ceiling of $1,600 is based on basic pay, but the Workmen's Compensation Act ceiling of $1,600 is based on gross pay. There is clearly an anomaly here. Because what would happen is that we could have a worker who is covered under the Employment Act, but because the term "earnings" is defined differently under the Workmen's Compensation Act, the same worker who is covered under the Employment Act is not covered under the Workmen's Compensation Act. So if we have a clerk in a shipyard earning $1,600 and he does some inspection work, he is still covered under the Workmen's Compensation Act. But if he is injured, he is not covered under the Workmen's Compensation Act. So there is an anomaly there. And I really hope that the Minister can look into rectifying this anomaly and to bring the Act in line with the Employment Act's definition, that means, the gross ceiling of $1,600 should be based on basic salary and not on the gross salary. And secondly, I would also like to ask the Minister to consider reviewing the ceiling of $1,600 under both Acts. 2.30 pm

Ms Indranee Rajah (Tanjong Pagar): Just following up on Mdm Halimah on anomalies, this is the point that I had raised in my speech in the debate on the Budget, which is the difference in the legislation to the Employment Act employees and non-Employment Act employees as far as maternity leave is concerned.

The Employment Act allows for paid maternity leave of two months and protection against termination of employment. This covers all employees except for professionals, executives, managers, and those in the confidential positions. For the Employment Act employees, they also get protection for the third child under the Children Development Co-Savings Act. For women though, who are not covered by the Employment Act, they do not get this protection for the first and second child but, oddly enough, they get it for their third child and that is because the legislation used there is a tool for social engineering.

But I would like to ask the Minister whether he would consider correcting this anomaly by extending paid maternity leave and protection against termination to professionals and women in executive positions for their first and second child. There are two reasons. One, it will achieve the objective of having more babies. But, secondly, and, much more importantly, just for humane reason, because having gone through what they have to go through for nine months, they are tired at the end of it and I think they do need that rest. So for humane reason, I think it is important.

Mr Steve Chia Kiah Hong (Non-Constitutency Member): Sir, like Mdm Halimah and Ms Indranee, I would also like to talk about protection for mothers and also about the $1,600. Currently, the labour laws provide for the protection of pregnant employees from being dismissed or retrenched from the company on condition that she is not under probation and that she earns less than $1,600 per month. What help is there from the Ministry for pregnant employees who are earning higher than $1,600? In today's economy, where many women are highly educated and earning higher salary, I wonder if this amount is considered too low. Can the Minister look into reviewing this matter?

It is common knowledge that pregnancy is a very stressful and difficult time, as what Ms Indranee has also said. There could be hormonal swings or morning sickness. Employees may be on more frequent medical leave and work performance may be affected during this period, thus affecting the company.

If the company is small and cannot afford the luxury of personnel disruptions or employing more additional employees, are they allowed to dismiss these pregnant employees? Do they need to give reasons for such dismissal? In view of the difficult economy that we are facing, it is important to reassure mothers-to-be that their jobs will be protected. Can the Minister explain what kind of help can a pregnant employee obtain? And who can she turn to for help?

The Chairman: Ms Irene Ng is not present. Mr Heng Chee How is also not present. Mdm Ho Geok Choo, you could take all your three cuts together.

Mdm Ho Geok Choo (West Coast): Sir, I refer to the mission statement of the Ministry of Manpower on page 381 of the Main Estimates, which reads, and I quote:

"To develop a globally competitive workforce and foster a highly favorable workplace environment, in partnership with workers and employers, to achieve sustainable economic growth for the well-being of Singaporeans."

As it currently stands, the mission statement is indeed a commendable one; one which has served Singapore well for many years. However, in view of the knowledge-based economy that we find ourselves currently in, I wonder whether the statement has missed out a critical sector of our workforce.

As I see it, the mission statement makes reference to "workers and employers" alone, while leaving out the entire segment of our workforce that constitutes professionals, executives and managers (PEMs). In light of the critically important role played by this workforce segment in our increasingly sophisticated knowledge-based economy, would it not make better sense to reflect their importance in this mission statement?

The Minister for MTI has explained in defence for the change of names of three statutory boards as to better reflect their evolving and changing roles in the current operating environment. Similarly, since the Ministry of Labour changed its name to MOM a few years back, the role of MOM has to evolve and change to reflect its relevance in the operating environment.

I am heartened by MOS Ng Eng Hen's acknowledgement of the need to pay more attention to PEMs, in view of their growing numbers in the workforce, constituting something like 40%. Since we need to forge a close synergistic relationship between the principal actors of the workforce, it is important for the Ministry of Manpower to also incorporate the concerns and contributions of our professionals, executives and managers. By acknowledging their role and contributions, we will certainly be able to better engage their commitment to propel Singapore in a global competition.

In light of this, Sir, I beg to propose that the mission statement takes on a more global tone to read something like this: "To develop a globally competitive workforce and to foster a highly favorable workplace environment, in partnership with workers, employers, professionals, executives and managers, to achieve sustainable economic growth for the well-being of Singaporeans."

On my second question, Sir, I refer to Code Head S of the Main Estimates on page 384 of Paper Cmd. 3 of 2002. Looking through the estimates of the Ministry's Manpower Development Programme, I note that the amount earmarked for the operating budget for the next fiscal year is $47.65 million. I suppose that most of that amount would be spent on the Skills Redevelopment Programme and on the implementation of employment assistance and retraining programmes for the unemployed under the Manpower Action Plan. I am given to understand that these two programmes are basically intended to retrain blue-collar and manual workers who have been retrenched, or who need to upgrade their skill levels.

Sir, yesterday, I proposed setting up the Higher Education Endowment Development (HEED) Fund for PEMs as we have done so for workers. Today, I would like to ask the Minister, in respect of our Manpower Development Programme, whether there are funds that are specifically earmarked to help upgrade the skills and education of our executives who have been displaced through company retrenchment exercises.

It would not be unreasonable to suppose that many of these displaced executives need help either to update or to re-orient their skills. As an example, with the liberalisation of our banking sector, there is an urgent need to upgrade some of the knowledge and skill levels of professionals in this sector so that they come up to par with their counterparts in more developed financial centres. Are there funds from the Manpower Development Programme to help people like them make that critical switch up the knowledge ladder?

Sir, I also note in the same page of the Main Estimates that $54.56 million have been earmarked for the Manpower Augmentation Programme. As outlined in the estimates, this programme is primarily meant to attract and manage international talent into this country. I have no qualms about the amount spent on the attraction and management of international talent.

The point I like to raise, though, is, if there is provision in the Manpower Development Programme, then whether there are other types of grants earmarked for the development of PEMs, particularly those who have been displaced. If there are indeed such grants set aside for the development of PEMs, are they specifically targeted at our domestic managers, professionals and executives, or are they also made available to the foreign talent in our midst?

As I see it, while the emphasis given to the attraction and retention of international talent is not wrong, I think that more can be done to nurture our own domestic talent by allocating more funds to the training of our own professionals, executives and managers.

On my third question, Sir, I note that on page 384 of the Main Estimates the Ministry has set aside some $75 million for the development of a new NTUC Building at the Marina South New Downtown. Sir, I like to applaud the Government for setting aside this sum of money to subsidise the upgrading of the physical infrastructure of workers in Singapore.

Since the workforce also constitutes a fairly high proportion of professionals, executives and managers and with increasing levelling up of the workforce to the ranks of PEMs, we must also begin to accord support to PEMs.

Last May, the Singapore Professionals, Executives Cooperative (SPEC) was registered as a co-operative to facilitate mutual self help for professionals, executives and managers who have been displaced. Today, SPEC has about 750 members from across the industry. Being relatively young, SPEC's mainstream of revenue is from subscriptions of co-operative shares of members. SPEC is also today engaged in some recruitment, training and consultancy services. Nonetheless, these activities have not earned enough gains for SPEC to be able to afford expanding resources on office space. At this point, Sir, I would like to declare my interest in SPEC, being one of the founders of SPEC.

Currently, SPEC is being hosted and housed in the premises of the Singapore Human Resources Institute which is already bursting at the seams. As this new co-operative is envisaged to be an on-going concern, it needs to have access to a more permanent place to house its activities. By allocating some space for their use in the NTUC Building, the Government and union movement will be sending a strong signal to PEMs that their needs are being recognised and acknowledged. I would like to request the Minister for Manpower and the Chief of the NTUC to consider setting aside some subsidised rental space in the new NTUC Building to house this co-operative. I urge MOM to do more to help PEMs, in terms of initial seed funding or subsidy in their search for a roof over their heads.

The Minister for Manpower (Dr Lee Boon Yang): Sir, I thank all hon. Members who have spoken on a wide range of subjects under my Ministry. I propose to give the response in the order of their speeches as they came along. So I will begin with Dr Ong Seh Hong. I thank him for giving us a very colourful lesson in the warring states and the dos and don'ts of buying dead horses. The valid point that he made was that, despite the economic downturn and the increase in unemployment, we still need international talent. And I thank him for supporting this position because there is always the tendency when you are faced with some crisis or difficulties, for instance, rising unemployment, people will think that that is the time to shut the door and try to preserve jobs for our own citizens. We have explained on many other occasions why in fact we should not do so.

Today, in this age of globalisation, capital and talent do not recognise any borders and boundaries. For us to succeed in this more competitive, global environment, we really need to supplement our domestic talent, our home grown talent, with those that we can recruit from the flow of talent in the international labour market. There is an ebb and flow of talent going around. And our mission at MOM is to try to attract and recruit a fair share of these international talents to Singapore. They can help us to become more competitive. They can help us to reach out to new opportunities. They can in fact create jobs for fellow Singaporeans. 2.45 pm

Dr Ong emphasised that there is a need for us, apart from just bringing them here, to try to help them to settle in quickly. He proposed that we should have a one-stop agency to help these international talents when they freshly arrive in Singapore. I am glad to inform Dr Ong that, in fact, we do have such a facility, we do have such a service. This is our Contact Singapore. Contact Singapore has a network of offices in the world and they do offer advice and assistance to international talents who are keen to come to Singapore to take on jobs. They also offer a wide range of settling-in services, once the international talent arrives in Singapore. Contact Singapore has a local office here that will provide assistance to international talent. The local Contact Singapore office also works with other economic agencies to organise events to help international talent to network with Singaporeans, to get to know more Singaporeans since they are total strangers here, and also to build up contacts with members of their own community in Singapore.

At MOM, we also work in partnership with other Government agencies, such as the Ministry of Community Development and Sports, the People's Association and various other organisations of foreign nationals here, to provide opportunities for foreign talents to interact with Singaporeans and for them to also participate in community work. This is a point that Dr Ong also mentioned, that they should be involved in community life, so that they can start to sink roots in Singapore and, hopefully, more of them may be persuaded to stay on for good.

In the process, we do hold regular get-together, dialogue sessions and feedback sessions for the international talents, who are here on employment passes, to better understand the issues that they face when they come to Singapore, and to help them overcome some of the difficulties, if there are any.

Next, I would like to turn to Mr Inderjit Singh's points on the dilemma faced by some of the smaller companies when they apply for employment passes. We welcome international talents, regardless of who in Singapore is trying to employ them. Employers in Singapore, whether they are large or small, if they recruit well-qualified international talent, they will find that the application process is quite straightforward. The processing time is actually quite short. For hon. Members' information, more than 90% of the applications for "P" employment passes, ie, for top-quality international talents, are processed and approved within a week. Although salary is an important criterion in the overall assessment, it is not the only criterion that we use to decide whether an employment pass should be issued to the international talent. We also have to consider the applicant's background, as well as the background of the company. But let me assure the Member that we are always flexible and, if employers feel that they have a very special case, they have a very special person whom they should bring in, who warrants exception or deviation from the rules to be made, let me assure Members that we are prepared to consider such appeals. And we have, in fact, made such exceptions and deviations, on appeal from various employers.

At the same time, however, I have to caution Members that while we are prepared to make exceptions, we must also guard against abuses by some employers. Some companies make false declaration either as to educational qualifications or salaries in order to bring in foreigners of a work-permit calibre masquerading as international talents. They do so to circumvent the restrictions on the entry of low-skilled foreign workers of the work-permit holder type.

The number of employment pass holders investigated for employment pass abuses went up by more than 55%, from 247 in 2000, to 384 in 2001. The majority of these abuses involve false declaration of salary, followed by forged educational certificates, and illegal employment or deployment of employment pass holders. A total of 152 companies were involved in these abuses.

Sir, the recent recession showed that lower-skilled Singaporeans are most adversely affected in an economic downturn. If we make no effort to check those who abuse the employment pass system to bring in low-skilled foreign workers masquerading as international talent, then we are only doing a disservice to Singaporeans.

A barrier-free system means that more Singaporeans are going to face unfair competition for jobs. So, while our rules and procedures should not obstruct companies in need of genuine international talent, we will always need some checks and balances. Since our present system already sees 90% of the "P" pass applications being approved within a week, we feel that the system is adequately serving the needs of the vast majority of employers.

The Member also brought up the problem of employment pass holders whose employment passes are terminated or not renewed, that they are given a very short period of stay, currently about two weeks, to settle their affairs and to wind up. Let me first point out that if the pass is not renewed, very often the employment pass holder will know about it well in advance. The company does not just spring a surprise on the employment pass holder because, if they are not renewing their contract, they will have to let them know in advance so they will have a chance to make arrangements. Nevertheless, if the employment pass holders need more time to settle their affairs in Singapore, we are prepared to consider. They just have to let us know. We are prepared to even grant an extension up to six months for them to settle their affairs here.

Finally, on Mr Inderjit Singh's point on work permit, suggesting that since we have a dependency ratio or a quota system, we should consider lowering the levies for the foreign workers, or have multi-tier levies, to reduce costs for the employers. I would like to point out that the quota or dependency ceiling system is in place to prevent over reliance on foreign workers. Levy, on the other hand, although it will moderate demand on the part of employers, also serves another useful purpose, ie, to narrow the wage gap between work permit holders coming from low-wage countries and Singaporean workers who are basically doing the same kind of job. Therefore, we have to maintain a balance, so as not to result in increasing replacement of Singaporeans by low-wage work permit holders.

However, we do recognise that levies add to the cost of employers. That is why, during the economic downturn in January 1999, we reduced the levy across the board, except for the construction sector, and these lower levies will be maintained until December this year, as announced by the Deputy Prime Minister and Minister for Finance during the Budget Statement.

On Mr Inderjit Singh's point about having a multi-tier levy system, we already have such a system in the manufacturing sector. There is a two-tier system. If the employer employs foreign workers up to 40% dependency ceiling, he pays a lower levy. When he exceeds 40%, for additional foreign workers employed between 40% and 50%, which is the maximum allowed presently, he pays a higher levy. So we have such a system. When we review the levy system towards the end of the year, we will look at whether this multi-tier system should remain as it is or should be refined.

Let me now turn to Mr Ong Ah Heng, also on work-permit related matters. His concern is that employers whose foreign workers abscond or run away will result in the employers losing their security bond, ie, the security bond posted by the employer will be forfeited if the employer is not able to repatriate the foreign workers. I understand this concern. Employers say that they cannot be 100% responsible for their foreign workers while they are here, and some of them do run away. They are not in a position to monitor the foreign workers' activities round the clock. This is true. On the other hand, if we do not have a requirement that the employer who brings in the foreign worker gives this undertaking that he will repatriate the foreign worker at the end of the contract, or when the work permit is terminated, we could end up with a situation where there would be large numbers of foreign workers brought in to work and then end up being abandoned by the employer on the streets of Singapore. That is why the security bond is important. It serves a useful purpose. There is a hold on the employer, that he cannot abandon these foreign workers and leave them to their own devices, find their own way around, and then he goes off and recruits some other foreign workers.

The bond makes sure that the employer knows that he stands to lose a substantial sum of money if he does not repatriate the worker. In the process, it means that the foreign worker would receive better welfare, better treatment from the employer, because the employer does not want to jeopardise his bond by ill-treating the foreign worker to the point that he will run away. The result speaks for itself because, over the last 10 years or so, if I remember correctly, we have only about a thousand-odd cases of employers who lose their bonds, which works out to about a hundred-odd cases a year. This is for foreign domestic workers who absconded and caused their employers to lose their bonds. So the numbers are not large, which should mean that, in fact, the bond system does work. The vast majority of employers are conscientious about their undertaking to the Government, and they do repatriate their workers at the end of the period of working in Singapore.

He also expressed concern about the employment agents, and whether they have treated the foreign workers fairly or not. Here, I would like to make clear that there are two sides to the coin, because while the foreign workers claim that they pay enormous sums of money to agents, they are referring to the agents in their own country who extract huge sums of money from people wanting to leave their home country to work in Singapore. These agents' activities are obviously beyond our control. They are outside our jurisdiction. But for the employment agents that are in Singapore, of course, we do license them and we do regulate their activities to ensure that they serve the interests of both the employers and the foreign workers who are here to work.

I would like to inform the Member that my Ministry is working with CASE to introduce an accreditation system for employment agencies, especially those that deal with the placement of foreign domestic workers. More than 80% of the foreign domestic workers who come into Singapore are currently employed through employment agencies. We feel that if we have an accreditation system, it will help to upgrade the professionalism and the ethical standards of these employment agencies, and also provide employers with information that they need to make decisions when they are selecting the employment agencies for their services. Under the accreditation system, the employment agencies will be assessed on a number of factors, including adopting fair and ethical trading practices, having well-trained staff, providing accurate information on the foreign workers, the nature of the foreign workers' training, and providing after-placement services.

The details of this accreditation system will be announced by CASE in due course. The scheme initially will start off as a voluntary scheme. So employment agents are welcomed to participate, to have themselves graded and evaluated. But my Ministry intends to eventually make it compulsory for all employment agencies that deal with foreign domestic worker placements to be accredited when they renew their licence. We hope that through such a system we will, over time, be able to raise the ethical standards in the industry. 3.00 pm

Next, I turn to Mdm Halimah Yacob who asked whether our labour standards are up to par. Let me assure her that our labour standards are up to par. In fact, our labour legislation has been rated quite highly every year by BERI in its assessment of our labour force. The fact that our labour legislation is rated highly must mean that we have a good framework for managing or regulating the labour market. I am quite confident that our labour standards will stand up to scrutiny by any international organisation.

She asked what are our plans for ratifying more Conventions. At the moment, we have ratified a total of three out of the eight core Conventions, namely, Convention 29 on Forced Labour, Convention 98 on the Right to Organise and Collective Bargaining, and Convention 182 on the Worst Forms of Child Labour.

We have announced that we will ratify Convention 100 on Equal Remuneration. We will convey the Instrument of Ratification at this year's International Labour Conference in June. With this latest ratification, we would have ratified a total of 22 ILO Conventions, including four of the eight core Conventions. I think this compares quite favourably to many countries, including some of the developed countries. We will continue to evaluate the other Conventions and consider ratifying those that are relevant to us. In the process, we will consult both the trade union movement and also the employers' federation.

Mr Yeo Guat Kwang has raised some questions on occupational safety and health at the workplace. He noted that the number of fatal accidents had dropped, but the total number of accidents had, in fact, increased. But over a longer period of the last 10 years, the number of accidents in factories had in fact declined quite significantly. This improvement can be attributed to measures that were taken by my Ministry, such as the implementation of the Safety Management System for construction, shipbuilding and ship repair industries.

We have also introduced other measures to inculcate and instill greater awareness of occupational safety and health. For instance, we have a debarment scheme for contractors in the construction industry. If they fail to meet certain standards, they could be debarred from tendering for public projects. We have also introduced safety training for all levels of personnel and also, last but not least, through a range of stringent enforcement exercises. I think we have brought the point home to many of the employers, so they are paying much more attention to this area of occupational safety and health. Our experience shows that the Safety Management System is an effective tool in improving safety in factories. Hence, last year, my Ministry extended the implementation of the Safety Management System to process plants, wafer fabrication plants and metal working factories employing more than 100 workers.

With regard to Mr Yeo's concern about fatal accidents resulting from a fall from heights, this is a concern which my Ministry also shares. In fact, two of the main causes of fatal accidents are due to workers falling from heights, or being struck by falling objects. These accidents usually arise at the edge of buildings under construction, or in shipyards where scaffoldings have to be used in the course of their work. My Ministry will introduce regulations to ensure that scaffoldings used at workplaces are safe and of sound construction.

As I have informed this House in the last Parliament, my Ministry is planning to amend the Factories Act to extend coverage to more workers at other workplaces. In the process, we have embarked on an extensive consultation and feedback programme from the affected workplaces. Our staff have met with organisations, such as the Singapore Dental Association, National Healthcare Group, Singapore National Employers' Federation, Singapore Hotels Association, the Restaurants Association of Singapore and also several Government departments. This feedback is being considered in finalising the draft Bill to extend occupational safety and health protection to more workers at different workplaces. This process of consultation and gathering feedback has taken more time than expected, because many employers have expressed a lack of understanding about how the new legislation will impact on them and have raised certain concerns which my Ministry is addressing. Hence, the timeframe for introducing the Bill to Parliament has been delayed. We hope to complete this whole cycle of consultation and addressing their concerns and feedback and finalise the Bill and introduce it in Parliament later this year.

The answer to Mdm Halimah's request on the income ceiling under both the Employment Act and the Workmen's Compensation Act is yes, we will review the salary ceiling in these Acts. We will also rationalise the difference in definition between the Workmen's Compensation Act and the Employment Act in terms of salaries or the earnings of the workers concerned.

However, we will have to implement a new ceiling at a point in time when the economy has sufficiently recovered in order to be able to absorb this additional cost on employers. We will review and find a suitable time to introduce this new ceiling.

On anomalies, again as Ms Indranee has mentioned, on maternity leave, there is a segment of the workforce that is not covered, mainly the managers and the executives who are excluded from the Employment Act. But it does not mean that female managers or executives, who are not covered by the Employment Act, do not receive the maternity leave benefits that are received by those who are covered by the Act. In fact, in Singapore, the employment terms of managerial and executive staff, who are not covered by the Employment Act, are generally equal, if not better than those who are covered through a process of individual contract negotiations or through the market forces at work. Even though they are not covered, they have been able to arrive at individual contracts that provide equal or better benefits.

Mr Steve Chia also raised the same point. We are able to assist those who feel that they have been unfairly dismissed by the employer or their employment terminated unfairly as a result of pregnancy. If there are such cases, he is free to inform us or advise the employees who feel that they have been unfairly dismissed to appeal to the Ministry. We will certainly look into their case to help them.

I next turn to Mdm Ho's comments on our Ministry's Mission Statement. Yes, we use the word "workers" in our Mission Statement. But when we use the word "workers", we were not thinking of blue collar workers. We were thinking of workers in a wider sense, perhaps workers as being equal to employees. It was not meant to be workers in the way that she defines it where we have excluded the professionals, managers, executives and the technicians. That was never the intention. We will certainly take note of her comments. If there is this implication, if there is this perception that we have excluded this group, my Ministry is actually in the process of reviewing our Mission Statement. It was crafted sometime ago when we were transformed from Ministry of Labour to Ministry of Manpower. I think it is timely for us, in the light of these few years of experience, operating as the Ministry of Manpower, to review our Mission Statement. We will certainly take note of her comments. But let me assure her that it was not the intention to exclude this group.

That is why, in fact, when she asked whether there is any specific fund under the Manpower Development Programme to assist the professionals, managers and executives, the answer is yes. We do have programmes that are designed to help the PMEs, especially those who have been retrenched. We have programmes, such as the Strategic Manpower Conversion Programme, where we can help professionals to be retrained for redeployment in a different sector. Not only are there programmes in the MOM's Manpower Development framework, but there are also programmes in EDB, Infocomm Development Authority (IDA) and in MAS where they have seed funds which are targeted to help develop professionals, managers and executives within their particular area of economic activities. There are quite extensive programmes available to help the PMEs. It is not as if that MOM had overlooked this group.

In fact, our People-for-Jobs Traineeship Programme was designed to be able to reach out to the younger group of PMEs because we crafted the salary support, 50% of the salary of anybody who is aged over 40, at the level of $2,000, that means anyone earning $4,000 can benefit. The middle-management group, who is earning around $4,000, and who has been retrenched, can perhaps benefit from the People-for-Jobs Traineeship Programme. When they get a job, the employer will receive 50% of his salary for six months offsetted by the Government. It will help them get jobs.

We have also introduced a Work Skills Training Programme to help executives equip themselves with better career planning and job search skills so that they can cope with this period of difficulties. We have even introduced a programme of self-employment training so that retrenched PMEs, who want to start up a new business, can sign up for this programme and learn how to start up a small business on their own and make use of their past working experience to start up a business. We do have programmes that are focused at meeting some of the needs of the PMEs.

Finally, Mdm Ho asked whether SPEC, which is a cooperative of professionals, managers and executives, can also share the space at the new NTUC Building. May I suggest that she put her proposal directly to NTUC because the Government has subsidised the building of a new NTUC Building at Marina South Downtown, in recognition of the contributions made by the trade union movement in helping us to mobilise our workforce, participating in workers' training and also, generally, looking after the welfare and well-being of our workers. This is a very important contribution that has made a very significant contribution to strengthening our economic competitiveness. In return, the Government has given NTUC this special recognition. We have alienated land for them to build a new headquarters and we have also subsidised the construction of the NTUC portion. If SPEC wants to co-locate its operation/premises with NTUC, I think SPEC should make a proposal to NTUC to see whether this is feasible or not.

Mr Chairman, I think I have addressed most of the concerns.

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 3.35 pm.

Sitting accordingly suspended at 3.15 pm until 3.35 pm. Sitting resumed at 3.35 pm

[Mr Speaker in the Chair]

Debate in Committee of Supply resumed.

[Mr Speaker in the Chair]

Head S (cont.) -

Mr Yeo Guat Kwang: Sir, I would like to thank the Minister and the Minister of State for their comprehensive answers and their reassurance. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Chairman: Amendment No. 2. Mr Chia.

Mr Steve Chia Kiah Hong: Sir, I beg to move,

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

Sir, like the Minister had responded earlier, I agree that the NTUC has come a long way in helping nation building and being the people's representative. However, the NTUC cooperative has become the small shopkeepers' nemesis. The NTUC group of cooperatives has stretched itself very aggressively in the last two decades, into too many diversified commercial activities. Consequently, it has edged out many local business persons and small shopkeepers and endangered the viability of many more. As we all know, the small business enterprise plays a very large role in keeping Singaporeans employed. Can the Minister look into this matter and see how it can restrain the NTUC's ambitious commercial empire, so as not to cause greater business difficulty and unemployment in the small business sector?

Mr Seng Han Thong (Ang Mo Kio): Does the NCMP mean that NTUC Fairprice and other cooperatives should withdraw and give way to the small shopkeepers? Does he know that, in fact, the cooperatives also provide employment and better services? And third, NTUC Fairprice and other cooperatives, in fact, help workers to stretch their dollar and, even at this point of time, help to absorb GST.

Mr Yeo Guat Kwang: Does the hon. Member suggest that MNCs like Carrefour should take over?

Mr Steve Chia Kiah Hong: Sir, I am stating what I have observed as a problem among the SMEs. I am asking the Minister what kind of solution can be given. I am not saying to let Carrefour come in and take over, or that NTUC is not giving employment. Yes, they are giving employment, but the SMEs, the small shopkeepers, are actually having a lot more employment, and if NTUC is coming in aggressively, it will cause these small businessmen to close shop and the unemployment figure will actually go up. So I am asking what kind of solution can be given. Maybe it is a question of balance, rather than stopping them totally. It is a balance, an issue which I would like the Minister to address.

Dr Ng Eng Hen: Mr Steve Chia sees NTUC as part of the problem. Many others would see it as part of the solution, particularly as other Members have rightly pointed out that NTUC has gained considerable goodwill from their past practices. Recently, they said they would absorb next year's increase in GST for one year. Mr Chia seems to suggest that if NTUC moves out of the way, then our SMEs would survive. That is clearly not the case. The competition will come, and in the form of competitors who would likely charge higher prices, and who are not likely to pass on the rebates to their members. I think the record for NTUC speaks for itself.

Mr Steve Chia Kiah Hong: Sir, I am not saying that NTUC should close shop or reduce their size, but rather a balanced approach may be taken and maybe considering limiting their growth and expansion aggressively to let the SMEs have a chance to grow.

Dr Ng Eng Hen: Sir, Mr Chia assumes that NTUC is a bigger fish compared to SMEs. But I put across the point to him that when NTUC moves out of the way, a bigger fish would come along.

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

Mr Steve Chia Kiah Hong: Sir, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Chairman: Amendment No 3. Mr Seng Han Thong.

Mr Seng Han Thong: (In Mandarin): Sir, I beg to move,

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

Sir, a few years ago, the factories in Singapore had difficulty recruiting workers. They had to offer all sorts of incentives to attract workers to work there. But now, the situation is reversed. It was reported in the newspaper that someone has claimed to own a factory which manufactures handphones and pagers, and placed an advertisement inviting job-seekers to go for interview at a HDB flat. A few hundred applicants actually went to the HDB flat and found that it was a hoax. In the past, if you asked job-seekers to go to a HDB flat to be interviewed for a factory job, nobody would fall for it. Yet, in this instance, a few hundred people were fooled. It just shows that they were desperate for jobs, as jobs are hard to come by nowadays.

We used to hear cases of employment agencies cheating on foreign workers, but now even our own local workers are being fooled. I hope the Ministry of Manpower would look into the matter.

Dr Ong Seh Hong: Sir, actually I want to raise my concern about the quality of service of maid agencies, but the answer was given by the Minister just now and here I would like to thank the Minister for giving the assurance that the service quality of maid agencies will be accredited through the system.

Dr Ng Eng Hen: Sir, Mr Seng Han Thong brought up a relevant point. MOM empathises with those who have been cheated. There are currently, as Mr Ong Ah Heng pointed out earlier, 11,000 licensed employment agencies in Singapore, of which the majority, about 700, deal with foreign domestic workers. My Minister has made the point that we are going to strengthen that particular sector by working with CASE on the foreign domestic workers. In terms of the other employment agencies, we will continue to increase our enforcement agencies, as well as to facilitate these agencies to improve their performance. But I think a word of caution is required for the public. There will always be companies who will try to capitalise on aspirations and hope, especially when the downturn is severe. I think the public will have to be wary because sometimes these fly-by-night operators can do it very quickly and you get cheated. If there are instances where the public feels that they are cheated, they can approach MOM. We will conciliate, we will also refer them to the Small Claims Tribunal, but I think they would have to exercise substantial caution when dealing with these agencies.

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

Amendment, by leave, withdrawn.

The sum of $165,569,690 for Head S ordered to stand part of the Main Estimates.

The sum of $55,141,000 for Head S ordered to stand part of the Development Estimates.

3.45 pm

Head T -

The Chairman: Head T - Ministry of National Development. Dr Teo.

Dr Teo Ho Pin (Holland-Bukit Panjang): Sir, I beg to move,

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

Sir, the Concept Plan 2001 has put forward a vision to make Singapore a dynamic, distinctive and delightful city. To be a global city, we must provide more flexibility in our land use planning so that we are able to make quick adjustments to better fulfil the development requirements of future industries and aspirations of our people. High-rise and high-density office and housing are planned to cater for future needs. This will indirectly exert pressure to demolish existing low plot ratio developments. One area of concern is a loss of identity and heritage when we transform housing estates and commercial developments into skyscrapers. We must make efforts to retain our identity and heritage so as to build a sense of belonging among our people.

Sir, I wish to seek the following clarifications from the Minister:

(a) What are the key performance indicators to measure the achievement of the vision in the Concept Plan 2001?

(b) What are the specific strategies and plans for preserving our heritage and identity?

Mr S. Iswaran (West Coast): Sir, Concept Plan 2001 has identified the need to focus on the identity of places, neighbourhoods which are of distinct character or centres of social and commercial activity. This is a welcome move. It is a clear acknowledgement of the fact that Singaporeans' sense of ownership, rootedness to this place derives not just from kinship ties and other experience of growing up, but also from the physical relief or landscape of our country. I know that this is a challenge, especially in an urban context. We do not have large natural reserves or mountains and valleys, and yet we seek to at least capture some element of nostalgia and the history of our country.

Sir, that being said and acknowledging the good intention embodied in the Concept Plan, there are a few key questions that have been raised. They fall into three broad categories.

The first is criteria. The question really is what qualifies a neighbourhood as, to quote the URA, "a one of a kind neighbourhood", which is worthy of such preservation. The URA has identified Jalan Leban in Upper Thomson and Anak Bukit, Beauty World area, as examples of these "one of a kind" neighbourhoods. Yet, we have also seen places like, say, Taman Serasi, being ruled out as worthy of conservation. And yet it could be argued that those areas have similar emotional ties for Singaporeans.

The question is: what is the criterion in identifying such neighbourhoods? If it can be made more transparent, it would be helpful for all Singaporeans in having a common level of understanding. That would also help them participate more meaningfully in the process, which brings me to my next point - how are Singaporeans able to participate in this process, to be meaningfully involved?

The URA has done a good job in terms of consultation on its Master Plan, Development Guide Plans, Concept Plan, and so on, through various channels (feedback sessions and so on). But it could be argued that Singaporeans feel left out, partly because these macro plans do not quite resonate with Singaporeans. We do not really think in such big picture terms, in general. We worry about what is in our neighbourhood, in our immediate locality, what we are comfortable with. At the same time, it could also be said that this is a rather intimidating way of seeking legitimate views on what people consider to be worthy of preservation.

The question is: what can we do, in terms of process, to enhance the involvement of Singaporeans - active citizens - who would like to preserve certain nostalgic neighbourhoods, because they think that would add to the collective experience of Singaporeans?

Lastly, Sir, there is a question of what will happen after we have identified such neighbourhoods. I think the fear in the hearts of many is that in the Government departments, there is a rather clinical perspective of the term "preservation". Once a place has been identified as an area we want to preserve, we clean it up, we white-wash the buildings, we sanitise the place, and in the process we render it devoid of the very character perhaps that it had, which merited the treatment of it as a special place. And that is the question that needs to be addressed clearly, which requires some stoicism on the part of the URA officials to be able to tolerate some level of messiness in the environment, so that we can still carry on and enjoy messiness, which is a part of the character of these neighbourhoods.

I would like to know, therefore, how we are going to be able to preserve that character and what sort of measures are in place to ensure that we do not lose that charm in the process of identifying and preserving old neighbourhoods.

The Chairman: Dr Amy Khor, you have got two cuts. You can take them together.

Dr Amy Khor Lean Suan (Hong Kah): Sir, the Government owns an estimated 90% of land in Singapore and this proportion is set to grow due to reclamation and acquisition. In this light, the Government's Land Sales (GLS) programme has been a crucial tool of the macro-economic management of Singapore's property market.

The GLS has been frozen for the past one year in recognition of weak market conditions. When announcing the freeze in GLS last year, the Ministry also implemented the Reserve List system which allows developers to apply for a site on the list by indicating a price. If this price meets the URA's reserve price, then the land would be released for tender.

The Ministry should be commended for the Reserve List which has proven to be a very effective and efficient tool, where the market dictates when a site is to be released, not unlike the HDB's build-to-order system. The Reserve List allows supply to be triggered by demand and is thus a more responsive system of land allocation.

It thus injects flexibility into the GLS programme which hitherto has been largely rigid and lags behind fluctuations in the market because the programme is underpinned by prior assumptions about market demand which may not materialise. The consequences of a demand and supply mismatch are most clearly illustrated in the more than 16,000 private residential units which have been launched or are ready to be launched and have not been sold.

I would like to ask the Minister how the Ministry intends to determine the supply of land for each use in the immediate future when it resumes its GLS programme next year and in the medium and long term. I would also like to ask the Minister what form the GLS is likely to take.

In determining the supply of State land for various uses, it is important for the Government to take into account all land and real estate that will be put into the market by the various Government agencies, such as JTC, HDB, SLA and LTA, besides URA.

The "infamous" Turf City project, which drew much flak from developers and retailers in the area, as well as the One North project and most recently the Ang Mo Kio Centre site which was directly allocated to the SLF, are examples of major projects launched or announced recently that are outside the GLS programme, but which constitute a very significant supply.

There is a need to coordinate such releases and include such projects into the URA's published statistics to give an accurate picture of supply conditions. These numbers should also be taken into account in the GLS programme. The Turf City project, for instance, added approximately one million square feet of retail space into the market.

As noted by the Prime Minister recently in a press interview with Asian editors, there is a need for a more and even better statistics on real estate so that investors and developers do not overbid for property thinking that there is strong demand and/or lack of supply, and then contribute towards not just inflation but over-inflation in property prices.

Towards this end, I would like to suggest that all land supply allocation policies be coordinated by a single Government body, at least for each major property sub-market, for instance, URA for housing and commercial, and JTC for industrial. This will yield a more coherent policy for each property sector, better accountability, more certainty and transparency on total supply from both private and public sectors and allow for quicker responses to changes in the specific markets.

Additionally, in determining the form that the GLS programme will take when it is re-launched, I would like to suggest to the Ministry to consider enlarging the role of the Reserve List system.

In effect, the Reserve List should rightly be considered as actual land supply since the sites on the list are available for sale at any time as long as there is at least one interested party willing to pay at or above the reserve price. The Reserve List is useful as it injects flexibility into the GLS programme by allowing demand to be directed by the market. The Reserve List should thus remain and complement the GLS programme.

Being the largest land owner in Singapore, the Government is for good or ill the single most dominant player in the property market. The GLS programme is the key means by which the Government supplies land to the private sector and thus must be managed carefully, so that volatility in the property market can be reduced.

I will go on to my second cut, Sir. Before I forget, which I did earlier, let me, first, declare my interest, because I am actually in the property industry.

Sir, the Government's system of selling land via tender or auction, with a minimum reserve price, has always attracted much attention from investors, developers, businessmen and the public alike, and has been the brunt of much criticism. This is not surprising, given that the Government is the single largest land owner in Singapore and also the key supplier of land, as I had noted earlier.

Of late, much attention has again been given in the press and in this House on the Government's land sale and pricing policies. These policies have been much maligned as the ultimate cause of high costs.

My fellow MP, Mr Inderjit Singh, had on Monday identified the Government's land sales policy and the approach of reserve pricing as one of the three Government policy levers that has created a vicious cost circle, with the high cost of owning properties driving the need for higher wages, which add to business costs. This is also a common refrain among many businessmen, especially SMEs, who feel that the recent tax measures do not help them if they are not making a profit and that they are being squeezed out by high costs, including land costs.

Sir, I do not fully subscribe to Mr Singh's argument but, nevertheless, think that the Government's land pricing policy formula should be revised. Under the Government's land tender system with reserve prices, the land is generally not awarded unless it hits the predetermined minimum threshold price, which the URA has said is 15% below the reserve price. This reserve price implies that the Government is setting a benchmark for land prices. Businessmen often question why the land cannot be awarded to the highest bidder as long as there is more than one bidder. The reply, as I understand it, has been that the State land, being a scarce resource, should be optimally utilised and awarding the site at less than reserve price (within the 15% margin) is fiscally impossible. Why should the Government let the private sector gain at the expense of the State because he gets it for a "song"?

Additionally, developers and investors have also commented that the Government should be more transparent and reveal the reserve price at the outset, which is already in place for many private land tender and auctions.

I would thus like to ask the Ministry if it would be refining its land tender system in response to these concerns. I would like to suggest that as a first step towards more transparency and efficiency, as well as avoid unnecessary waste of resources, the Ministry could consider having and publishing reserve prices for the sites under the GLS programme when the sites are launched for sale. After all, developers would already have an indication of the reserve price of a site under a Reserve List when it is launched for sale upon a successful application. Moreover, as noted earlier, reserve prices are also largely in place for private land tenders and auctions. 4.00 pm

Additionally, the Minister could also adopt a more flexible policy and widen the band around the reserve prices, say, from 15-25% particularly for sites which serve strategic objectives and where there is more than one bidder so that actual supply will not be stifled and developers will not be denied the opportunity to earn their rewards for taking on risks.

I am pleased to note that this has already been done in the case of the two sites at Marina South that have been sold by tender. I would therefore urge the Minister to adopt this as a more sustained policy.

Mr Ong Kian Min (Tampines): Sir, the Singapore property market has declined significantly over the last few years from its peak. Many owners who had bought their property during the few years before 1996 are now saddled with negative equity. There is concern that prices should not be allowed to fall further as this would affect the net worth of all home owners. The relevant Government agencies - MND, SLA, URA, JTC, HDB and CPF Board - must therefore be cautious not to trigger another drop from these levels, thereby bursting the property bubble and bringing about a prolonged downward spiral and asset deflation, like in the case of Japan.

The use of the word "bubble" is meaningful. It is not a balloon where one can let out air when it is too inflated and let in air when it has room to grow. One cannot say, let us lower property prices by 30% and be certain that prices will come down 30%, and no more, no less. A bubble is fragile. There is a real danger of this bubble bursting in our faces. But being cautious does not mean the Government should be paralysed from acting for fear that the property bubble will burst.

Property prices are still relatively high. High land prices will translate into higher costs for everything that is related to land, add to our business costs and erode our competitiveness. The issue we have to tackle is how do we ensure that the stability of the market is maintained and yet introduce lower cost land use so as to bring about lower usage cost. For one, URA can be more flexible on the use of space and have a lighter touch on its rules and enforcement. We should also study other countries, like the United States and Hong Kong, to see how they use space flexibly.

Some of our planning norms need to be changed. We need to push as far to the margins as possible to maximise the use and the returns on our land resources. High land cost is a real concern. I think we can slice this problem in a number of ways and come out with creative ways to solve it. The Executive Condominium concept was a brilliant solution, at that time, to bridge the gap between HDB and private condominium. It means buying an apple now and 10 years later, when the restrictions are lifted, it turns into an orange. There is an element of subsidy. By modifying the restrictions and the title of the land, the Government has sold a piece of land, which physically is the same property, for lower price by artificially imposing man-made rules and conditions.

I would like to ask the Minister for his views on the present state of the property market and whether his Ministry has any policy or plans to bring about better and more competitive usage of land.

Mr Inderjit Singh: Sir, my key point is one of keeping property prices affordable. There have been recent calls by some section of our society to allow property prices to rise again, particularly, developers. The Government on its part has been party to trying to keep the property prices higher than necessary by, first of all, slowing down the sale of land and, secondly, by lifting the anti-speculation measures first put in place after the property bubble of the 1990s became untenable.

The anti-speculation measures were a good move. The intention at that time in 1996 was to remove the speculative element in property prices and allow market forces to rule. I was therefore disappointed when the Government got the 'cold feet' and went on to remove all the anti-speculation measures in an attempt to prop up property prices. As the phrase "prop up" indicates, it is an artificial measure and by propping, it does not allow true market forces to determine and settle property prices. I have dealt at length on the impact of the asset enhancement policy of the 1990s and will not repeat it again. I am afraid that removal of the measures seems to indicate that the Government has too short a memory of the property bubble problem of the 1990s.

I am not denying that, in land scarce Singapore, prices of land and properties have to go up, but in our case the prices went up a little too much. The Government has all the levers to fix the problem. The first lever is the rate of release of land for development; the second is the price of new HDB flats; the third is the limit on the proportion of CPF that can be used for investing in properties; and the fourth is putting in place permanent anti-speculative measures. For the last lever, the Government should stick to its original objectives and that the fundamental strategy should be to curb speculation in the property market, whether times are good or bad.

In his reply to the Member's questions on the use of CPF for housing, the Minister for Manpower highlighted that some Singaporeans over-invested in properties for the purpose of speculative gains (and he used the words "speculative gains" when he replied) and it is this category of people who are now in real difficulties as their property values have decreased. I therefore wonder why the Minister for National Development has once again created a "death trap" for Singaporeans by lifting the anti-speculative measures. There seems to be a disconnect in the Government's thinking on this issue. I urge the Minister to relook at the whole issue and put in place once again the relevant anti-speculative measures so that we can avoid getting into the same problem again down the road. After all, speculation is undesirable for any situation, or for anything that we do.

The Minister for National Development (Mr Mah Bow Tan): Sir, let me, first of all, address the Members' concerns about the Concept Plan and our land use policy. Then after that, I will deal with the issue of property prices.

Sir, first of all, let me explain the purpose of the Concept Plan and what the Concept Plan is all about. It is a strategic land use plan that helps us to map out the long-term physical development of Singapore. By long term, I am talking about 40 to 50 years, and it will affect, to a large extent, how Singaporeans live, work and play. Because of this, when URA prepared the Concept Plan, it undertook an extensive part of the consultation exercise in preparing for this plan. In addition to this, there were also considerable inputs gathered from professionals, both locally as well as overseas.

Sir, the Concept Plan is not an exercise in forecasting the future. We cannot forecast the future. Rather it is a kind of road map that guides us as we move into the future. So as the road takes unforeseen twists and turns, so too must we adjust. This is the reason why we say that we have to review the Concept Plan every 10 years, and the last review was done in 2001.

Having completed this Concept Plan review, the next step is to now proceed to review the Master Plan. Let me explain what the Master Plan is as opposed to the Concept Plan. The Master Plan is reviewed once every five years. And what it does is that it translates the strategic vision of the Concept Plan into a specific actual land use plan for the whole of Singapore. And this is not for 40-50 years, we are talking about the immediate as well as the medium term. So from the Concept Plan, we break it down into land use plans for the various districts in Singapore and we call this the Master Plan. And this Master Plan is revised every five years. The last one was done in 1998. So the next one is due next year, 2003.

As such, the Master Plan is of considerable interest to the general public and, in particular, to the property owners. Because if you are a property owner, from the Master Plan you will be able to establish what you can use your land for, how intensively you can develop that land and also the kind of land use in your neighbourhood so that you will know what is going on around you. As Members have noted, URA, in preparing the Concept Plan, underwent an extensive consultation exercise and it is going to do the same for the Master Plan review, in other words, consult the public extensively so that the Master Plan can take the interest of various parties into account.

Inevitably, in the course of consulting the public, what is going to happen is that there will be many different points of view that will surface between different individuals and different groups. For example, an owner in a landed housing estate wants to have a higher plot ratio for his land. In fact, we constantly receive many requests from landed property owners asking for plot ratios to be intensified. But his neighbour may not agree, his neighbour may not want to have a taller building, changing the character of his estate.

And the point that Mr Ong Kian Min brought up about change of use, this is a common issue. Many small businesses want to convert, they want to use residential properties for commercial use, etc, so they ask for flexibility in their land use, with good intention. Because what they want is to be able to keep the costs of business down. But, inevitably, there will be complaints from neighbours. It causes disamenity to the estate. It brings more traffic into the estate, and so on. So there is always this constant tussle between one group wanting one thing and another group wanting another. One group may lobby strongly for conservation. They want to preserve the social memory of the place, they want to leave everything untouched. But the owners of the property may not be interested in conservation and preserving memory. What they want is to be able to redevelop their land, to bring in more activities.

Sir, all these examples go to show the dilemma that confronts URA when we review the Master Plan, particularly, when we have many diverse interests which are conflicting. After considering all these views, URA must make a decision, and this decision has to strike a balance between these diverse views in as fair a manner as possible and, at the same time, assure that the needs of competing land uses and, of course, the national interests are taken into consideration.

This is where I come to a point raised by Mr Iswaran on the question about identity, how do we preserve heritage and identity, how do we choose, how would Singaporeans participate in the process and what happens after we have identified various areas. Do we run the risk of making it overly clinical, rendering it devoid of character, as Mr Iswaran mentioned just now? I am pleased to inform both Dr Teo and Mr Iswaran that the new Master Plan 2003 will place its greater emphasis on the issues of identity and the quality of our living environment. Let me elaborate.

First of all, on the identity plan. Yes, I agree that, as Singapore develops, as Singapore grows into a world-class city, we need to establish certain things which are distinctive and unique to Singapore, familiar places, places which represent our shared identity and our social memory.

Sir, as part of the Master Plan Review 2003, an island-wide identity plan is being prepared which will take stock of all such significant roads across the island. Guidelines will be proposed to reinforce the existing character so that whoever develops these areas must ensure that the character of these places is not inadvertently eroded. Some of these areas naturally spring to mind: Anak Bukit is one of them, along Bukit Timah Road. Those of you who are familiar with Anak Bukit will know that this is a place which is rich in local identity and significance. It is a little village centre, a little kampong for people living in the Upper Bukit Timah area. It has got a sizable cluster of shophouses. It has got many popular eating places, many retail shops. It is also a place where many of Singapore's older shopping centres are. So URA is proposing to retain the character of the area by retaining the low-scale developments and allowing more space for outdoor dining. Hopefully, this will reinforce the liveliness of the area. 4.15 pm

We are looking at similar plans for other areas, such as Katong, and Jalan Leban along Upper Thomson Road. Mr Iswaran asked how do we choose such places. Why not Taman Serasi? Why not, indeed? If there are other places which can lend themselves to such efforts, by all means surface them, because the process does not start and stop with URA. The identification of these places is not the end of the story. What we want is to be able to create more vibrancy, more buzz in these areas, while retaining their existing charm.

And, yes, I also agree with Mr Iswaran that we must be mindful that we do not, as he put it, be too clinical about it such that we render these places devoid of character. We will be mindful that we do not overdo it, that we will not over-plan, and that we will not destroy the very essence of the place that we are trying to preserve.

Let me also explain to the House what else we are doing, in terms of trying to enhance the quality of our environment. There is a Parks and Waterbodies Plan that will be incorporated as part of the Master Plan review, and this is now being prepared, the idea being to make our existing parks more accessible and also to open up previously unexplored areas for recreational activities. I remember Dr Teo making this point earlier about how inaccessible some of our parks are. That is a valid point. To the extent possible, we will try to open up more of our existing parks but, equally importantly, there is an opportunity for us now to open up previously inaccessible areas. For example, the Central Catchment area. One proposal is to open up the Central Catchment area by introducing more trails through the forests and boardwalks along the waterfront. There will be a new canopy walk, which we constructed to offer a different experience of the Central Catchment area. Of course, all these plans will have to be discussed with the various relevant agencies, to make sure that, for example, the environment of the Central Catchment is protected, in order not to compromise our water quality. There will be other parks being planned. Woodlands will see a new regional park. In Sengkang, along Sungei Ponggol, there will be a riverine park.

So we are trying to create different types of parks to cater to different interests and with different facilities. As these plans are intended to reflect the character of places that are meaningful to our people, I assure Mr Iswaran that URA will consult widely. It will consult a wide spectrum of Singaporeans when we put together this Identity Plan and the Parks and Waterbodies Plan.

Since April this year, URA has begun seeking inputs from advisers and grassroots leaders in preparing the draft proposals. But, as we are well aware, such things can be very subjective. Things like social memory and identity mean different things to different people. It has to depend very much on individual experiences. So what we are going to do is to prepare the draft plans and, thereafter, we will exhibit these plans sometime towards the middle or later part of this year, and people will be encouraged to come and visit these exhibitions and to give us their views and inputs. This public feedback that is gathered will then be incorporated into a Draft Master Plan. This Draft Master Plan will then be exhibited, region by region, because as I explained earlier, these are rather detailed plans. So we are going to exhibit them, region by region, probably in the first half of next year. This is another opportunity for the public to offer their views. After all this is done, URA will finalise the Master Plan, and that will be towards the end of next year.

So we can see, Sir, that this is a rather lengthy but important, worthwhile and necessary process because, through this process, I hope that the final plan can truly be a joint project of the URA and its stakeholders. By stakeholders, I am talking of course of Singaporeans, people who live, work and play in these areas.

Sir, I now come to the comments made by various Members about the property market and, particularly, about the role of the Government in the property market. Mr Inderjit Singh, in particular, suggested that changes be made to Government policies in order to lower land and property costs, so as to boost our economic competitiveness. He said that if the Government has all the levers in place, it will be able to control property prices. Can the Government control property prices? On the surface of it, the answer is yes. One way is for us to flood the market with land, and prices will react immediately. We may even bring property prices down by 30%, as suggested by Mr Inderjit Singh as being a desirable target to achieve. However, as Mr Ong Kian Min rightly pointed out, is it going to stop there at 30%? But that is another story.

What would be the outcome of this, if we were to do that, assuming we wanted to do that? Some businesses will benefit in the short term from lower property prices, and those who are not property owners currently will rejoice. But many existing land and property owners will face a sudden drop in the value of their assets, with serious financial consequences. Mr Inderjit Singh, I think, acknowledges this. But, just to give a rough idea of what I mean by serious financial consequences. I did a rough back-of-the envelope calculation. If we just take HDB flats, for example. There are 800,000 flats and, very conservatively, we value it at, say, about $200,000 per flat. There are 3-room flats which are about $150,000, 4-room flats, about $200,000-250,000, and 5-room flats, $350,000. But if I just take a very conservative $200,000 per flat, for 800,000 flats, a 30% drop in prices means that we wipe out $48 billion worth of value! And that is not a laughing matter.

That is not the end of the story. Because land is limited in Singapore, no matter how much we reclaim land, even with all the current reclamation that we are planning to do and, if possible technically, we can reclaim even more land. [Interruption.] Even if we were to be able to do that and - if Mr Low has any good ideas, he could let me know - eventually, our limited land supply will mean that prices will start moving up again as the supply is used up. And what do we do then to bring down land prices, if indeed that is the key to our competitiveness? Mr Inderjit Singh's suggestion is a well-intentioned one. His point is that if we bring down land prices we will regain our competitiveness. But I suggest to him that his medicine will probably kill the patient before he cures him. Sir, we need to be mindful that we are a nation of homeowners. 90% of Singaporeans own homes.

So I agree with Mr Ong that it is very important that we maintain a stable property market in Singapore and, in order for us to do so, we need to have a right balance of Government measures to achieve this desirable objective. The question then is: what are these measures? What role can the Government play in the property market?

There have been very specific comments made by various Members, Dr Amy Khor particularly, about the GLS and the reserve price, the use of the Reserve List, etc. I would like to address some of these issues now when talking about what role the Government can play.

First of all, let us start from basics. What is the objective of the Government? The key objective of the Government surely must be to sustain economic growth. In this regard, our land policy must be to make available land for development through the Government Land Sales programme, such that we are able to sustain economic growth and not to just control property prices. Dr Amy Khor asked how land is supplied under the Government Land Sales programme. The Government Land Sales programme seeks to ensure that there is a steady supply of land to meet the demand for various parts of the economy, for various uses - commercial, industrial and residential. How do we determine the supply? We take into account factors, such as household formation rate, potential supply in the pipeline, and the average take-up rate. And, if we have a sufficient and steady supply of land, then prices will not escalate sharply, and the market will be more stable.

As we all realise, there will be circumstances when the Government may have to intervene. These are exceptional circumstances when there are abnormal trends in the market. For example, in the mid-90s, when speculation became rife, the Government introduced anti-speculation measures in 1996, because we recognised that it is not healthy when speculation causes a property bubble to build up. After the property bubble was pricked, some of these measures were removed. Why were they removed? For the simple reason that there was no longer any evidence of property speculation and there was ample supply in the market. By releasing sufficient land, and by intervening when necessary, the Government aims to provide a stable property market environment for businesses to operate in. And some of the desirable operating conditions for businesses are stability and predictability.

But we recognise that it is difficult to determine demand accurately because the market is dynamic. This is why we introduced the Reserve List system last year, in order to enable the GLS programme to be more responsive to market demand, as Dr Amy Khor said. With this system, reserved sites will be released for land when developers apply for them. So our GLS system allows the market the flexibility to adjust the amount of supply which it can readily absorb. Dr Amy Khor did allude to the fact that we should expand the Reserve List. I am not sure whether she meant getting rid of the Confirmed List. We already have a substantial Reserve List, but we would still like to keep the Confirmed List, because it is not just a matter of supplying land through the GLS programme. The GLS programme is also a tool for the Government to steer private capital to achieve certain specific development objectives.

Let me give one example: the new Downtown. It is our intention to expand the existing Central Business District into the new Downtown area in Marina South. In so doing, we want to develop Singapore into a business and financial hub. We have put in a lot of infrastructure into the new Downtown to support this expansion. For example, the common services tunnel has been laid, the MRT is going in there, and many other services are going in, in order to allow us to move development into this area. So, the Confirmed List will help us to steer office development towards the new Downtown, and that will align it with our plans for a business and financial hub in the area.

We will need to manage the overall supply through both the Confirmed List and the Reserve List. I do agree with Dr Khor when she says that when we have allocations of land, eg, Turf City as well as the SLF land in Ang Mo Kio, we should take these into account in our overall land supply. I would like to assure her that we do. The SLF land has been allocated because the Government wants to redevelop the Ang Mo Kio Interchange area. There is a lot of quantum which is being provided for the unions to use. Whatever is left over is being used by the private sector, but that quantum is minimal. Even then, that quantum is being adjusted and taken into account in the GLS. So we will do this in order to make sure that the market knows how much land is available. Giving you another example, we have indicated that we are looking into the release of a large site for an integrated development at the new Downtown. The details are still being worked out by the Economic Review Committee. But I can say that we will not be implementing the project this year but when we do, again, the supply from this development will be factored into the GLS programme. It will take into account the floor space that is generated from this integrated development. We will, of course, also make sure when the project is implemented, that it will not destabilise the property market. 4.30 pm

Sir, let me now touch on the reserve price. Dr Khor commented that the GLS does not give us an idea of Government's reserve price and that, to a certain extent, the reserve price system has caused prices to go up. Let me explain why we set a reserve price for our land sales. It again goes back to the fundamental principle that State land is an asset that belongs to the people. As a custodian of the people's assets, the Government has the responsibility to ensure that land is disposed of at its true market value and this means setting a reserve price to ensure that our land is not sold off for a song.

But reserve prices are not cast in stone. They change with market conditions. So when the economy goes up, prices go up, and when the economy is not doing well, prices come down. I think she is aware, for example, that when we sold two sites in the new Downtown, one was sold in March 2001, the price was $3,100 per square metre of floor area. Then, just earlier this week, we awarded the second site for $2,400 per square metre of floor area. In other words, the market recognises that prices have come down. Similarly, the reserve price has also come down and this is the reason why we were able to award both these sites.

Dr Khor also proposed that perhaps we should not have just one reserve price - we should have a band. This is already being done. We recognise that the Chief Valuer's reserve price is not an absolute figure, it is not absolutely precise. This is the reason why we have a band. If the tender price is above 85% of the Chief Valuer's price, we will award the site. This 15% band is considered to be an acceptable range by valuers.

Let me conclude by assuring the House that the Government is fully conscious of the need to maintain Singapore's economic competitiveness. We will make sure that there is sufficient land to meet the demand from all sectors of our economy. To ensure that we remain price competitive, we regularly benchmark our property values and rentals against other major cities. Just to give you an example. In the case of commercial properties, there was a survey done in January this year and Singapore ranked 31st amongst the major world cities in terms of cost of office space. Our office rentals were cheaper than several major Asian cities, such as Tokyo, Hong Kong, Taipei and Beijing. Admittedly, we were more expensive than Shanghai, Delhi and KL.

Sir, Singapore will never be as cheap as some other countries which have a large land mass, and we cannot compete on property prices and those alone. We have many strategic competitive advantages. We have a stable political and social environment. We have a world-class business infrastructure. We have a highly trained workforce and unsurpassed connectivity to business opportunities regionally and beyond. At the same time, we have a Government that is responsive, pro-business and willing to change, whether it is reviewing our tax regime or attracting high value-added industries or facilitating business opportunities, both locally and overseas.

Sir, we have a lot going for us. It is not necessary to deliberately depress the true market value of land and destabilise the property market and it is not in our interest to do so.

Mr Inderjit Singh: Sir, can I seek some clarification? I would like to ask the Minister whether he is now willing for a speculation to once again take place in the property market since he says that it is no longer an issue and all the measures have been lifted, and whether he is willing to wait for another bubble to build up before doing something to moderate future prices.

Mr Mah Bow Tan: Sir, if and when such a development takes place, the Government will act appropriately.

Dr Teo Ho Pin: Sir, our present HDB housing policy is too rigid and lacks flexibility to promote family members to stay together. The Registration for Flats System does not give home-buyers much choice to select a flat near their parents or siblings. The five-year minimum occupation period prevents home-owners to sell their new flats when they need to move near their family members. The 10-year minimum qualifying period does not allow parents to upgrade and stay with their children applying for new flats. There are many other restrictions which do not facilitate families to stay near one another.

Sir, we need to review our housing policy to make them more family-friendly. If families were to be a pillar of our society, we must facilitate Singaporeans to stay within or near their family members. This will be crucial when our population ages.

Sir, I wish to ask the Minister the following questions:

(1) What percentage of HDB dwellers is staying within two kilometres of their family members?

(2) What is the long-term plan of HDB to facilitate families to stay near one another?

(3) Will HDB provide more flexibility for families to convert their flats to accommodate multi-tier family living?

Dr Amy Khor Lean Suan: Sir, in view of concerns that many Singaporeans are over-investing in housing and the already high percentage of public home ownership, there is a need to re-evaluate some aspects of our housing policy which may have become less relevant. The increasing recognition that an entrepreneurial culture is needed for the new economy would also make it desirable to separate the investment component of home ownership from the utility component of a dwelling house.

While home ownership helps to give a sense of rootedness, asset enhancement policies, which emphasise the investment component of home ownership, may encourage speculation. Put differently, why bother to work hard and take risk in business when one can potentially make more money punting on properties, like punting on stocks and shares? This was a phenomenon we witnessed in the run-up to the 1996 boom when even HDB flat owners sold their flats to unlock cash and then purchased another flat with CPF monies.

I would thus like to propose two specific recommendations for the Minister to consider.

Firstly, the role of HDB. The role of HDB needs to be reviewed. Towards this end, I am pleased to note that the Ministry has already announced that it would be undertaking this. I would thus like to urge the Ministry to undertake a comprehensive and thorough review of the role of the Board.

HDB was created in the sixties with the noble aim of housing the masses. Indeed, it has more than fulfilled this mission, with some 86% of the population living in public housing. Since its inception, its reach and influence have grown. In fact, it has scope-crept from low cost housing to middle income housing.

However, building flats, particularly to house over 80% of the whole population, is exceedingly onerous since the HDB, like everybody else, can never perfectly forecast the market. There are constant risks of the HDB over-building, such as the 17,500 unsold flats in non-mature estates reported at the beginning of the year, and under-building, such as in 1997 when the queue swelled to 146,000.

Moreover, HDB currently has a labyrinth of rules and regulations, such as the single scheme, extended family scheme, walk-in selection, BTO, resale levies, contra rules, and so on and so forth. It would probably not be an exaggeration to say that the HDB rule book must be about two inches thick! As at 2nd March 2001, the HDB has more than 8,000 employees. Such a large bureaucratic organisation may not be ideally suited for the rapidly shifting economic and social landscape. Hence, it would be appropriate for HDB to re-look at its role and streamline its operations.

While HDB's role as a provider of affordable mass housing remains relevant, it should perhaps shrink its target market at the higher end. It could, for instance, sell more Executive Condominium sites as a step towards increasing the proportion of this housing type. It can then re-focus its mission and efforts on low-income housing. It could also extend the qualifying criteria for renting its flats so that the needy do not fall through the gaps. To redress the current imbalance of over investment in housing and complaints about high accommodation costs, it could perhaps also look at offering flats with shorter lease tenure, not unlike the granny HDB flats.

This leads me to my next recommendation, which is tenure choice. The tenure of public housing has an effect on the concept of the home as an investment. The 99-year standard housing term, while giving security of tenure, encourages the treatment of housing as an investment more than as a consumption good.

The introduction of shorter tenure homes will provide more housing choice at different price levels to suit different income households. There are already precedents. For instance, like I mentioned earlier, HDB's granny flats have a 15-year old tenure, renewable for another 15 years. Elsewhere in Hong Kong and China, 50 or 70-year leases for housing are common. Hence, shorter tenure, especially for public housing, should be considered as an option to increase the housing choice and help to decouple the investment and consumption function of housing.

Mr Ang Mong Seng (Hong Kah): (In Mandarin): Mr Chairman, Sir, in order to understand the single persons' need for housing, I have carried out a survey among the ordinary citizens, professionals, and even Members of Parliament. The result of the survey is as follows:

20.6% of those surveyed knew their girlfriends or boyfriends while they were schooling, 17.6% at the place of work, and 28% through introduction by friends and relatives. As to the ages at which they knew their partners, from ages 16 to 20: 16.5%, 20 to 30: 80.2%. It would appear that between the ages of 16 and 30 is the best time for young people to get to know their future spouses. As for those who are still unattached after the age of 31, the vast majority of those surveyed remarked that they were too preoccupied with their work that they had no time to court or be courted. In the process, they missed the boat - the love-boat, and hence have to remain single.

Sir, in order to create more opportunities for the single persons to socialize, to fall in love and to set up families, I suggest that HDB work out a scheme whereby each single person would be allowed to apply for a flat, say, a 3-room or 4-room flat, and subsequently when two single flat-owners get married, they would sell back one of the flats to HDB.

The single residents can also set up some social clubs on the void deck, like the Residents' Committee Centre, so that the young people could inter-mingle among themselves, with the prospect of leading to future development, thereby reducing the number of singles in our society. I hope the Minister would consider my suggestion. 4.45 pm

Mr Othman Haron Eusofe (Marine Parade): I would also like to ask about the role of the HDB. The HDB has done well to provide good quality homes to Singaporeans. But I think there is now a decrease in the demand of new purchase flats and also rental flats. In fact, in the recent offer of new flats in Sengkang, I am told that there was a low take-up rate. I believe HDB is now scaling down its development of new flats, and for many of the projects, like Main Upgrading Programme (MUP) and Interim Upgrading Programme (IUP), I think a number of these projects have been farmed to the private sector.

Sir, in view of these developments, I would like to ask the Minister whether he envisages a new role for HDB in providing housing to Singaporeans. And, in this connection, if the HDB is to be downsized, I would like to ask the Minister for an assurance that the well-being of the current HDB staff will be adequately looked after.

Next, affordability of HDB homes. I believe one of the main reasons for the decrease in demand for HDB flats is the pricing of the new flats. Many are concerned that the new flats are moving beyond their affordability. While the property market is softening, the prices of new HDB flats are steadily increasing. So I would like to ask the Minister to clarify the pricing policy of the new HDB flats. Sir, not all Singaporeans are able to purchase their own flats and I would like to ask the Minister to ensure that the HDB will continue to provide sufficient rental housing, up to 3-room flats.

Dr Michael Lim Chun Leng: Sir, the strong aspiration for Singaporeans towards home ownership and the increasing wealth of many Singaporean families in land-scarce Singapore over the past few decades, have resulted in an escalation of home prices, in the view that the home is an investment whose value will increase with time. The Asian financial crisis, followed shortly by the global economic recession, were instrumental in making many Singaporeans review the aspiration to buy new flats or upgrade their homes. With uncertainties in the disposable income of families and the downward pressure on home prices, queues for public housing have virtually evaporated, and the visit to the Meet-the-People sessions to appeal for early allocation of HDB flat is virtually unheard of now. Buying a public flat is no more an investment with guaranteed increase in the value of the flat.

The highly illiquid nature of homes and the high percentage of home ownership present new problems. In an economy where many have lost their jobs and are unable to service their loans, the absence of a pent-up demand for public housing, and the presence of a glut in public housing, presents an opportune time for the housing policies to be reviewed. There are a few areas I would wish the Minister to consider.

Firstly, reviewing the role of HDB. HDB was created to meet the housing needs of Singapore during its early years. It no longer builds 1- or 2-room flats, but has now evolved to build public flats, which are not too far in quality from that of private flats. This is most evident in new towns like Punggol 21. With the queues for public housing fast disappearing, and most Singapore families owning a home, HDB has to ask itself what is its role in this current economic and social milieu. HDB should focus on becoming a regulatory body, ensuring that the supply, standards, quality and design of public flats are both in keeping with the aspirations of a modern Singapore family, and to accommodate the needs of family units which have become smaller. It should focus on providing affordable housing for those who need it most, including young and low income families. It should consider hiving most of the development and building of high-end flats to other entities or the private sector.

Secondly, making public housing more affordable. The boom years of the mid-1990s, coupled with the demand for bigger and newer flats have resulted in the escalation of the prices of public housing flats. Families which have placed bookings for flats find that the flat prices have escalated by more than 50% by the time they reach the front of the queue, but their incomes have not increased correspondingly. In the past few years, the battered Singapore economy has seen significant job layoffs. It has also seen significant depreciation of flat prices. Over the last year, I have had many new flat owners coming to see me because they were unable to service their housing loans. Many of these families have breadwinners who have lost their jobs. They are in a quandary and are unable to sell their flats because they have not met the 5-year occupation period. They have difficulty meeting their mortgage payments, utility bills, conservancy charges, and even school fees. The problems of these families cannot be resolved so easily.

It is time for HDB to review its policy to make public housing more affordable. For many of these once proud home-owners, their homes have become a millstone around their necks. The house which has been their largest asset and their largest investment has now become their largest burden. To address this, HDB should consider making available flats with a shorter tenure for these lower income families. HDB should perhaps consider 30-year leases, with an option to renew for another 30 years, for lower income families and lower-middle income families. 30 years would be about the time when flats might be suitable for consideration for Selective En-bloc Redevelopment Scheme (SERS). This will make the cost of housing much more affordable. Replacing the 99-year old tenure with a shorter tenure can perhaps help these families retain their homes.

HDB should also review its policy of not allowing owner-occupied flats to be sold in the open market within five years. Those who are in dire financial straits, and who are unable to meet their mortgage payments, should be allowed to sell their flats in the open market and be allowed an allocated rental flat upon sale of their flat. Forcing them to keep their flat will result in further default in mortgage payments and repossession of the flat, which will be worse off for the family. HDB will need to take a major paradigm shift to meet the challenges of the new economic and social environment.

Thirdly, making housing available for singles. While we advocate marriage, there is an increasing number of singles who are unmarried or who have divorced. Not all of them can afford a private home. While our policies are pro-family, we cannot ignore that the changing social milieu has made singles a significant minority in our population. Given the slack demand for public flats, it is time for us to consider the needs of this group, many who are highly mobile and are also important contributors to our economy. HDB should consider making available smaller flat units for singles to meet this demand.

Lastly, the rental market. HDB has a stringent policy for rental flats. HDB should review their rental flat policy to meet the needs of families who have lost their homes as a result of financial reasons, or families which have had to sell their flat because of court ordered sale of the flat following a divorce. For these categories, HDB should not put a time bar on them, as their public flat was not sold to make a profit, but because they have to do so. We should recognise that while home ownership is actively promoted, there will be some families who will be better off with rental flats in the interim.

There is no better time than now to review our public housing policy. We must make bold changes. I do not fear for those who can buy private homes, but I worry for those on the lower end of the social ladder, who find that their once prized asset has now become their greatest burden.

Mr Iswaran: Sir, a review of the public housing policy is timely and I think the Minister has announced this recently. There are many reasons for this. I think key among them is, first, by and large, the public policy objective of home ownership has been achieved. 85% of Singapore's resident population are in HDB estates. Secondly, there are questions about whether we are spending too much on housing. A recent NUS study suggests that Singaporeans spend about 37% of their household income on property and insurance, property tax and other related expenses, compared to about 15% for the US and about 12% for Germany. This in turn has an impact on incentives to take risks and so on.

Thirdly, Sir, we have been reminded by the Finance Minister on our funding constraints going forward, and what would be available in the way of money for building new flats and upgrading existing flats. So, that being the case, in going forward, clearly there are several issues that need to be dealt with and I would like to raise a few key points upon which I hope the Minister would be able to give some insight on the Ministry's thinking.

First, is on whether we should decouple the role of the developer from the role of the planner with the oversight of the public housing market. Both these functions are encompassed within the HDB today, and there is some merit to the argument that this should be separated. A Public Housing Authority, for example, could be established which would have oversight on issues such as supply, demand, price, quality and other policy objectives, which might emanate from time to time.

The second question, Sir, is whether we could create a competitive market for public housing development. In other words, the Public Housing Authority could create a tender or a bidding system, where parcels of land are opened up for various developers, private or public, to then bid in order to develop certain types of housing. The nature of the flats and the type of mix to be offered can all be specified in the process of inviting the bids.

The third, is whether we can retain HDB as a core developer, a developer who can focus on certain aspects of the housing range, perhaps at the lower end certainly, in terms of rental and in terms of 3-room flats, perhaps, but also because we want to harness HDB's vast experience over the years as a developer. And we want to make sure that there is a certain quality assurance and price stability in the market. One could draw an analogy, say, with the cooperatives in the context of grocery business, and so on. So I think we need to seriously consider retaining HDB's role as a core developer in any revised public housing market going forward.

Sir, on this score, in relation to a subsequent cut I have, I just want to make one important point, echoing what Mr Othman Haron Eusofe has said. I am an Advisor to the HDB Staff Union and I have received feedback that the staff are quite concerned, largely because of uncertainty about the future of HDB's role, and then, of course, on the impact it will have on their own livelihood. I think it is important that we address the issue reasonably fast, and we give them some level of assurance on, first the future of HDB's role and, at the same time, on how their welfare will be addressed.

Finally, whether we could move away from subsidies to the developer, in this case, HDB, towards a voucher-based system in our public housing. Once we have got a competitive public housing market, where various developers might be involved in the process of building and offering new units, then perhaps what we ought to be doing is offering Singaporeans vouchers which they can then use in deciding which houses they want to buy, done by which developers. That would also give important feedback, it seems to me, to the Ministry on the quality and type of housing Singaporeans desire.

Sir, I know that in bringing up these points, there is a risk of being somewhat simplistic about a very complex issue. But I have a healthy regard for the calibre of the Minister and his team, and I know this is a matter that has been under heavy discussion in the Ministry for quite some time and I would appreciate some clarity on the matter.

Ms Indranee Rajah: I would like to ask the Minister if the Ministry would consider a review on housing policy, vis-a-vis, singles. At the present time, of course, one cannot rent unless it is under the Joint Singles Scheme, which means that they must find somebody as a partner, and also be over 35.

Secondly, singles cannot purchase unless they are 35 and above, and this is for resale flats. This policy ignores the changing demographics, and therefore the changing aspirations in our society and, in some cases, actually causes hardship where there is genuine need.

Minister Lim Boon Heng did mention that there may be over-housing in Singapore. That may be true in some cases, and there may also be cases where people buy for investment or speculation. But there are other cases where there is a genuine need for housing for singles. Let me give Members three examples which I have encountered in my MPS cases.

First, there is a man, over 50, with a low level of education, primary education, I think, and he cannot find a place to live. He needs a place to live but he does not have a family and so he needs to have a flat. He cannot just go into the street and ask some man or woman to come and live with him. Not everybody needs a house as well, but he needs one. So he is in a very difficult position. I have written on his behalf and I hope something would come out of it.

Second case is a woman, who has been divorced. Her mother is dead, the father would not let her back into the house because he did not approve of the marriage. She earns something between $700-800. She cannot go and get private housing. Where is she to go?

Third case, unmarried mother, primary 6 education. She is estranged from the family. Mother is also dead, and we begin to wonder, after a while, whether there is a common element here, about not being let back into the family home where the mother is not there. The father would not let her come back because he does not approve of the fact that she is an unmarried mother. She is estranged from her siblings. She needs to look after her son. Where is she to go? Where is she to live? She cannot afford private housing either. She has been told by the HDB that there is another policy which is because she is an unmarried mother, she cannot get a flat. And it is difficult. We say we want to be a gracious society, but to be a gracious society, sometimes we have to show grace. So I anticipate the answer from the Minister will be that for exceptional cases, we can always write in for a waiver of policy. Well, my colleagues in this House know all about waivers of policy. The Minister will forgive me if I say that sometimes, I think, with a certain lack of originality, it is easier for the camel to pass an eye of a needle than to get a waiver of policy. 5.00 pm

Sir, let us go back to the issue of policy itself. Why this policy? The Minister will say that it is subsidised housing, we must be careful because it is taxpayers' money. I understand that. But the singles will also say that they pay taxes too. So they are not quite sure why they cannot benefit from this. If the second reason is to encourage people to get married, then the policy is not working. Because the number of singles is growing and the birth rate is falling. If the objective of the policy is to give priority to married couples, then, no problem. By all means give them priority because a family unit would have a greater need. But then we have a surplus of housing. So the singles do not understand why, because there is a surplus but they still cannot get their hands on it.

Then there are rental flats. Because not all married couples want rental flats, there are obviously rental flats available. But when you apply for it, you run into the policy, and so you cannot have your rental flat. In truth, I do not blame the civil servants or those in HDB because their hands are tied by the rope of policy.

Mr Chairman, I will only take another 30 seconds. We come back to the original thinking of the need for housing, the raison d'etre for the HDB, which is that we wanted housing so that Singaporeans could have a stake in Singapore. The singles think or feel that they are Singaporeans. They too are entitled to a stake in Singapore and they do not understand why they should be discriminated against.

So, I would just ask for a review on allowing rentals for people above the age of 21 and perhaps reviewing the age at which they can purchase HDB flats and consider the question of subsidised housing for singles.

The Chairman: Mr Steve Chia is not moving. Mr Iswaran is also not moving. Dr Tan Cheng Bock.

Dr Tan Cheng Bock (Ayer Rajah): Sir, as of end March this year, I learn that 19,400 households have not paid their HDB mortgage loans for three years or more. Two years ago, there were some 12,800 households having this problem. Also, I learn that there were 18,200 Singaporeans who applied to HDB for financial assistance. My question is: is this trend a result of the pricing of our HDB flats, ie, pricing it too high? As brought up by Mr Othman and Dr Michael Lim, they also suggested that the pricing of new HDB flats is extremely high. Of course, they can always blame it on the current downturn as a cause for not paying their mortgages, but it could be both. Or is it because these flat dwellers bought bigger flats than they required during the good years, hoping to cash in on profits should they decide to sell and are now caught in this property downturn?

Sir, for those who are having their mortgage problems, is downgrading a problem? As HDB has stopped building 3-room flats, will this restrict their choice to only 4-room flats, which may still not be affordable to them? Does the Minister see a return to building no-frills 3-room or even 2-room HDB flats in the future, to make sure such flats are more affordable for those who are downgrading and for those cases brought up by Ms Indranee in her speech just now?

Dr Michael Lim has also touched on rental flats as another option for those downgrading. So I would not dwell on it.

Mdm Cynthia Phua (Aljunied): Sir, in view of the surplus of 16,900 flats, I commend the Ministry in taking firm and decisive action in introducing the build-to-order programme, that is, to build based on a certain demand, and also taking the opportunity to review HDB's role. The surplus is due to the mismatch of supply and demand of flats. Would the Ministry also take the opportunity to review its machinery to assess the future demand of flats and see how it could promptly respond to changes in the demand of flats, although it is difficult to determine the demand in view of the dynamic market situation?

The past trends have indicated a slowness in the machinery in HDB in detecting the future demand of flats, for example, the large number of surplus of 5-room and Executive flats, and the slow response in cutting back the construction of flats, in view of the low numbers in the registration of flats. The cutting back of the tender award of flats to 11,000 was only done in FY 2000/2001 when the registration of flats had already dipped sharply in FY 1997/1998 and FY 1998/1999, ie, from 67,000 to 24,800, to 7,160.

When the Ministry is reviewing its role of HDB in the supply of flats, I would like to urge the Ministry to retain the two primary pillars in the supply of HDB flats, which is mainly for the lower and middle-income families. Can the Ministry assure the people that it will still have the capacity to meet the possible upsurge in demand of flats and give a definite acceptable time period from application to getting the keys? Over the history of HDB's application of flats, this stated period is a roller-coaster ride. Sometimes it is two years, three years, or even five years during the peak demand in 1994. Can the Ministry also assure the people to continue to give good and affordable quality of flats to meet the aspirations of our people?

How can the Ministry ensure that the design-and-build flats achieve the design or buildability and have well-chosen building materials and features and fittings to ensure a lower cost of construction and also subsequent maintenance? This is important as it would lead to lower affordable flats for our people.

The next issue is on spalling concrete of HDB flats. In August 1995 and July 1998, there was a three-year programme where HDB assisted a total of 17,600 households in the repair of spalling concrete of flats. This constitutes only 2% of the total flats that we have now. There are about 900,000 flats presently, half of which, 450,000, are about 20 years' old. There is a large number of demand now for the programme to be reactivated. Can the Ministry again reactivate this programme for all the flat lessees so as to assist them in the repair of spalling concrete, especially families who could not afford it would have the danger of falling concrete over their heads? It could end up as a quiet home killer. If this is not possible as a separate programme, can the Ministry consider including this work under the IUP, as it would target the older flats where the concrete quality specification is poorer when the flats were built?

Mr Ang Mong Seng: (In Mandarin): Sir, because of the economic downturn, the number of purchases of resale flats in the open market has reduced significantly. During my meet-the-people sessions, some residents told me that they had applied for new 4-room or 5-room flats, to upgrade themselves. Now that they were allotted the flats they had applied for, they were unable to get buyers for their existing flats. They are now having difficulty raising the cash required to meet the 20% downpayment. Many of them had to cancel their applications for the new flats which they had been waiting anxiously for the last few years.

In 1994, HDB introduced a buy-back scheme for 3-room flats. This was extremely helpful to the upgraders. The HDB can also sell these 3-room flats to the other people who want to downgrade, particularly to those affected by the SERS scheme. This was a good policy, but it was unfortunately terminated in the year 2000. I would like to ask the Minister whether HDB would reconsider the flat buy-back scheme in view of the present situation.

The Chairman: Mr Mah, you have got less than 20 minutes before "guillotine" time.

Mr Mah Bow Tan: Sir, I do not think I would be able to cover all the points in 20 minutes. So I will take the main ones first.

Sir, let me, first of all, touch on the review of public housing which has been a concern of many Members who spoke. First of all, I would like to reiterate that home ownership is the cornerstone of our public housing policy. HDB has been the principal agency responsible for implementing this policy. The result has been quite remarkable, if you take the 40 years of the history of HDB. In 1960, for example, 9% of the population lived in public housing. Today, 86% of Singaporeans are HDB dwellers. So, from a time when we had 9% or 10% of Singaporeans living in HDB flats, today we have a situation which is a reverse where actually 10% of Singaporeans do not live in HDB housing. Of those who live in HDB houses, 96% own their own flats. Sir, this is an achievement that is unmatched in any other country, whether you are talking of a developed or a developing country.

Now that we have met our objective of providing affordable housing for the vast majority of Singaporeans, as many Members have pointed out, it is now time for us to review the future direction of public housing and also the role that HDB should play in the future. When we do the review, we will have to have certain fundamentals in mind. And two basic considerations will guide us in this review. Firstly, we will have to be more responsive to the housing needs and aspirations of a new generation of Singaporeans - more discerning, better educated. Secondly, we need to utilise our limited financial resources wisely and prudently, so that we can meet these future challenges.

As Mr Iswaran pointed out just now, this is something that is going to become more and more critical because the physical needs of Singapore in the years ahead are going to become much more demanding. Our population is aging; global economic competition is increasing. So we have to determine what is the right balance between expenditure on housing and expenditure on health care, education, and so on.

Let me stress at the outset that the Government is committed to providing affordable public housing to the masses. I think that is something that we will not lose sight of. More new households are being formed each year, not all of them can afford private housing, as Dr Tan Cheng Bock pointed out. We also need to ensure that low-income families continue to have access to housing. By this, I am talking about rental housing as well as sold housing.

Before I elaborate on the review, let me address some of the comments that have been made by Members about our current stock of unsold HDB flats. HDB started selling its stock of 17,000 flats in the non-mature estates since January this year, first of all, to the 11,000 applicants who were in the Registration of Flats System (RFS) queue, which is the current queuing system, and then subsequently to members of the public through the walk-in selection system. To-date, HDB has sold more than 5,000 flats, and I expect that there will be more flats that will be taken up in the months to come.

The current overhang is a temporary phenomenon. We should not try to, because there is an overhang, change our rules in order to generate artificial demand for these flats, for example, through the buying back of more 3-room flats from the open market, as Mr Ang Mong Seng suggested just now, in order to help the flat owners to upgrade. 5.15 pm

But what has happened, as a result of the overhang, is that it has highlighted the need for us to review our allocation system, particularly, the Registration of Flats System (RFS). This system, called the queueing system, has worked well, especially when the demand is high. It provides applicants with greater certainty, as Mdm Cynthia Phua mentioned just now, you know exactly when you get your flat. It may not be as fast as you would like it, two years, three years, four years, even five years. But it does provide some certainty when you apply. But it is not sufficiently responsive to sudden changes in demand. For example, when the Asian economic crisis broke out in 1997, followed by the economic slowdown in the last few years, many people dropped out of the queue. The queue was 146,000 in 1997. It dropped to 8,800 recently.

HDB planned its building programme based on this queue. As a result of this, despite the reduction in the building programme, since 1998, the unsold stocks continued to build up because of the contracts that were already tendered. Of the 8,800 applicants, some 3,300 have been in the queue for five years or more, majority of them are upgraders and they have many opportunities to select a flat. But, I guess, as to be expected, because there is a lot of choice, the more choices you have, the more choosy you become. And many people, when they are given many flats to choose from, decide not to select any.

Recently, I received a complaint from an applicant who was on the queue. He was asked to select a 5-room flat in Punggol. He decided that none of the 700 flats that were on offer to him was suitable for him. 700 flats, none suitable. Because he wanted one on the higher floor. So he said, "I don't have a flat available that I like, I would like to get my registration fees back. If in three months' time, you cannot allocate me a suitable flat, I want a refund." But that is not the end of the story. More interesting part comes now. He said that we should accord him a flat on a priority basis, priority over other Singaporeans because he travels frequently overseas on business and, therefore, since he is a cosmopolitan Singaporean, HDB should favour him over others. I guess he thinks he is doing a national service for Singapore.

I just give you this example to illustrate how choosy people can become. It is quite understandable. If you are talking about choosing your dream home, you can be a little bit choosy. But I think we have to bear in mind that public housing is subsidised, and subsidised housing has enabled Singaporeans to own their own homes and for Singapore to be a home-owning nation. But we have to ask ourselves how far the Government can go and should go in trying to meet such demands.

So we have to review our allocation policies, as Mdm Cynthia Phua suggested, and how we assess the demand for flats. Last year, as Members will recall, HDB piloted the Build-To-Order (BTO) system to better tailor supply to the preference of the applicants and also to better manage change in demand. Under this system, applicants indicate their preference for certain sites which HDB is launching. HDB will then call tenders for construction but only when there are sufficient applicants for the flats. In other words, if the number of people who want to book these flats reaches a certain threshold, then HDB will let out the tenders.

The pilot project was successful. Of the four contracts offered, one was dropped because there was poor demand, so we did not build. And 92% of the flats in the other three sites were taken up. So we proceeded with the other three sites. We dropped one site and we proceeded with three sites.

Sir, in view of the current supply-demand situation for HDB flats, we have decided to suspend the RFS system and switch over to a BTO system from next year, 2003. With immediate effect, HDB will stop accepting new applications under the RFS. And those who are on the queue now can opt for a flat under the Walk-in Selection System, or the balloting exercise for flats in mature estates. He will also be given one more chance to select the remaining unsold flats that have not yet been released under the Walk-in Selection System, in other words, before these flats are offered to the public.

As there is demand for 4-room flats in certain areas, HDB will offer about 1,300 4-room flats in Punggol and Sengkang in the fourth quarter of this year under the BTO system. Applicants of the RFS queue can choose to participate in this offer and they will be shortlisted, according to their queue position. After this offer, the queue will be expunged. Those who are not interested in any of the offers, or who are successfully shortlisted, will have their fees refunded. HDB will release more details in due course.

For Singaporeans who are not on the queue now and who would like to purchase a flat, they have got quite a few choices. These options include applying under the Walk-in Selection Scheme, or the regular balloting exercises, or they can wait for new contracts to be offered under the BTO system, and of course they can also opt for resale flats. HDB will continue to monitor the sale of flats under the various modes of sale before deciding if it should start to build any new flats in 2003 and, if so, how many of such flats to build.

Sir, let me now take the questions raised on rising prices of HDB flats and the related issues of affordability. I believe this was raised by Dr Tan Cheng Bock, Mr Iswaran, Dr Michael Lim, Encik Othman Haron Eusofe and several others. Let me, first of all, reiterate that affordability has been and will always continue to be a primary consideration in the pricing of new HDB flats. We have publicly stated that the Government will price new HDB flats such that 90% of Singaporeans can afford at least a 3-room flat and 70% can afford at least a 4-room flat. In other words, when we talk about affordability, this means that the maximum mortgage instalments that a family has to pay to buy either a 3-room or a 4-room flat will not exceed 40% of its monthly household income. This is the guideline that HDB uses which, I believe, is a prudential norm which is also used by other institutions. But in actual fact, even though we use the 40% rule as the norm, in reality, most buyers of our flats today, the 4-room and 5-room flats, do not use more than 25-26% of their household income. So it is not 40%, but 25-26% of their household income. In other words, they are well able to service their mortgage instalments just using their CPF alone because the current CPF rules allow them to use up to 26% of their salaries on housing.

In fact, last year, for the typical 4-room and 5-room applicants, they needed to use only about 15% of their household incomes for the monthly mortgage instalments. So Members will realise that, in terms of the price that they pay for their flats and in terms of the ability to service their mortgage, it is well within their means. And this is what we mean by pricing HDB flats to be affordable to Singaporeans.

Of course, when we are talking about pricing, we also have to take into account certain micro features, like individual attributes of the flats, facing, floor level, and so on. We also take into account one very important aspect, which is the resale flat prices. And finally, we have to take into account the potential impact of new flat prices on the HDB resale market.

Let me take you back to the time when property prices shot up in the mid-90s as a result of excessive speculation, as Mr Inderjit Singh pointed out just now. When property prices shot up in the mid-90s, HDB new flat prices lagged the market, in other words, it increased more slowly than the market. Between 1992 and 1996, resale flat prices tripled, went up by more than 200%, while new flat prices increased less than 50%. While the resale prices were going up like that, the HDB increased its new flat prices by much less. Why? Because it wanted to ensure that flat prices would not rise beyond the reach of the people, to keep them affordable.

But, on the other hand, now that the property market has softened, HDB prices are also being adjusted downwards, but more slowly than the market. If you go back to the peak in 1996, and you compare with today, resale prices have fallen by about 30%, but new flat prices have been adjusted downwards, on an average by about 10-15%. So prices of HDB flats are coming down, they are not increasing, as Mr Othman suggested just now.

Our approach to pricing of HDB flats has served us well so far because, in the process, we have helped to stabilise the property market and we have helped to preserve the value of the assets of the majority of Singaporeans. But, Sir, I must admit that this policy and this approach does not please everybody because those who have not yet bought a flat, they want us to reduce prices even further, even faster. You have such a big overhang, why do you not slash prices and have a cheap sale, lelong. That is for those who have not bought the flats. But those who have already bought the flats earlier were extremely unhappy when we reduced prices. They start to compare the prices that their neighbours have just paid with what they paid. Then, they go and approach their MPs to ask HDB for a refund.

Sir, I have tried to explain why we have to raise prices when the market goes up, but not as fast, and why we have to lower prices when the market comes down, but again not as fast. In the process, I suppose somebody would be unhappy with this policy. But it has served us well and we will continue with this policy.

The Chairman: Mr Mah, do you like me to end the lelong?

Mr Mah Bow Tan: Sir, this is a good point for us to stop because I will touch on the other issues later on on Monday, with your permission.

The Chairman: Order. It is 5.30 pm.

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

Mr Mah Bow Tan: Mr Speaker, Sir, I beg to report that the Committee of Supply has made further progress on the Estimates of Expenditure for the financial year 2002/2003, and ask leave to sit again on Monday, 20th May 2002.

Mr Speaker: So be it.