STRATEGIC GOODS (CONTROL) BILL

Order for Second Reading read. 2.55 pm

The Minister of State for Trade and Industry (Mr Raymond Lim Siang Keat): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

This Bill puts in place an enhanced system to regulate trade in strategic goods. In broad terms, strategic goods comprise munitions and sensitive dual use items, as well as goods used for the development or production of weapons of mass destruction.

Singapore supports the global efforts to curb the proliferation of weapons of mass destruction and has always maintained high standards in controlling trade in strategic goods. Since the 1970s, we have been state parties to the Biological Weapons Convention (1975) and the Nuclear Non-Proliferation Treaty (1976). In recent years, we have ratified the Chemical Weapons Convention and the Comprehensive Nuclear Test Ban Treaty.

This Bill strengthens existing controls to keep pace with recent international developments.

What is the imperative for the Strategic Goods (Control) Bill? Mr Speaker, Sir, let me elaborate. Rapid globalisation and technological advancements have spurred economic growth, and stimulated much greater cross border flow of goods and people. But these same forces driving global growth have also thrown up new security challenges.

Technological advances have spawned a range of highly advanced products. Properly deployed for civilian use, these can improve productivity and promote new industries. But some of these products and technology can also be deployed for building deadly weapons. There is also the risk of nuclear, biological and chemical weapons falling into the wrong hands. History has provided us with cases on the use of sarin gas and anthrax, and they are a sobering confirmation of the physical and psychological damage that such chemical and biological weapons can cause. Their use makes clear that the threat and risk are real and not just hypothetical.

Global trade is growing, and the conduits which carry these huge global flows of goods have been exploited by rogue traders to smuggle a variety of weapons, including those of mass destruction. The methods used by them to illicitly divert sensitive strategic goods to proscribed entities have also become more sophisticated. There is growing international concern in recent years that such sensitive goods and weapons could fall into the hands of terrorists.

No country alone can tackle this problem. Nor can any country isolate herself from the dangers of the proliferation of such weapons and components. More than ever before, countries need to work in close partnership to build a tight, effective and efficient system of controls.

As a major trading and logistics centre, Singapore may be used as a potential conduit for such illicit activities. It is in our interest to enhance security of our ports' operations and to step up vigilance. It is also our responsibility, as a member of the international community, to play our part in building an effective global system.

This Bill represents a comprehensive effort by Singapore to plug into international efforts to curb the proliferation of weapons of mass destruction.

Work on the proposed Bill began more than two and a half years ago, as we had assessed that proactive, preventive actions were necessary. This was well before the world was shaken by the September 11 attacks. The September 11 attacks brought to the fore the urgency of dealing with terrorists threats. In recent months, we arrested a total of 36 members of the Jemaah Islamiyah network. These members were plotting to attack strategic locations in Singapore. These recent developments lent greater impetus to our efforts to take proactive measures.

Singapore will be the first country in Southeast Asia to enhance our controls on strategic goods. This is a strong deterrent measure to prevent rogue traders from using Singapore to conduct illicit activities. This is also a pre-emptive measure to tighten our domestic security. It will also contribute to enhanced regional security. A volatile and insecure neighbourhood undermines investor confidence. This will have an adverse impact on our regional stability and will dampen our prospects for growth.

Apart from enhancing our security, our export control system can become a source of competitive advantage for our industries. With a robust and credible system in place, our trading partners will have greater confidence in granting us access to their high-end technology and equipment because they know that any shared technologies will remain in safe hands.

Mr Speaker, Sir, let me now turn to the salient features of the Bill.

First, we will require all traders to apply for a permit before they are allowed to export, tranship or bring into transit strategic goods as listed in the Schedule to the Bill. The list comprises about 600 items by broad categories. It includes munitions, chemical and biological items, as well as nuclear-related materials and equipment. These have been carefully selected mainly for their direct military and nuclear applications, as well as their dual-use nature (ie, they are items which can be used for both military and civilian purposes). In drawing up the list of goods under control, we have also referred to practices of other reputable export control regimes in the US, EU, Japan and Hong Kong.

Second, beyond the control of physical goods, we will also regulate the electronic transmissions of military, encryption and WMD end-use technology. This feature recognises the realities of the information-communications age where the most sensitive part of a product may lie in its software. The provision deters all irresponsible handling as well as illicit transfers that may potentially undermine our security and defence interests.

Third, we will also regulate all brokering activities directly related to WMD and offensive categories of conventional arms, such as small arms and light weapons. The controls apply to all Singapore entities regardless of whether the goods were physically transferred through Singapore. We want to send a strong signal that we do not condone the conduct of any such clandestine activity within our territories.

Fourth, to ensure the continued relevance of our enhanced controls to evolving technologies and weapons development programmes, we have incorporated a blanket control, or `catch-all' on all goods that are likely to be used for WMD purposes. This ensures that even where the item does not fall on the control list, it will still be subject to the controls under this Bill.

Fifth, we have proposed stiff penalties for non-compliance. The penalties of a maximum $100,000 fine or 3 times the value of the goods, and/or 2 years' jail for first offenders, and a maximum $200,000 fine or 4 times the value of the goods, and/or 3 years' jail for subsequent offenders, are in line with the Regulation of Imports and Exports Act. On a case by case basis, we will be prepared to compound minor offences.

Let me turn now to an important issue - addressing business concerns. Mr Speaker, Sir, in drafting the Bill, the Ministry is very conscious that we must minimise the potential impact on businesses. Hence, over the last two years, we have conducted extensive consultations with several hundred companies representing the key industries that may be potentially affected by the proposed controls. Our industry has expressed understanding and support for the need for such enhanced security. But they ask that we implement these measures in a cost-effective and sensible way, and not erode the efficiency of our transportation and logistics infrastructure. Otherwise, our competitiveness will suffer.

Sir, let me assure the House that we have taken, therefore, all necessary steps to address their concerns. Let me elaborate.

First, the permit application procedures will be simple, convenient and business-friendly. We have upgraded the TradeNet system to accept all permit applications. We will process all applications electronically. This will reduce processing time and allow for permits to be granted more expeditiously.

Second, we will not impose any additional charges for these permit applications.

Third, ground enforcement will be largely based on intelligence and risk profiling. This ensures that cargo flows will not be impeded by unnecessary checks. Our risk profiling system will be similar to those adopted by key ports, such as Rotterdam and Hong Kong. As our risk-profiling databases develop over time, the accuracy and speed with which high-risk cargoes are identified will increase. This will allow legitimate traders to enjoy even swifter clearances.

Finally, our outreach programme is currently ongoing. We want to allay any concerns that may be generated by these proposed controls. We also want to engender a greater sense of familiarity and instil confidence so that the affected industries can adjust and ease into the changes as soon as possible. We have launched a website to provide detailed information. Prior to actual implementation, we will also conduct trial runs of the enhanced TradeNet system.

Mr Speaker, Sir, we cannot take peace for granted. The recent attacks in Bali are fresh reminders of how fragile peace and security can be. The proliferation of dangerous weapons threatens all countries. We need greater international cooperation to safeguard our local security. The proposed Bill strengthens Singapore as a strong link in the global chain of anti-terrorism and non-proliferation measures. It will also serve to safeguard the reputation and integrity of Singapore's status as a major international shipping hub. By securing our trading channels, our cargoes can clear our partners' ports faster. We would also generate greater confidence in our system, and secure greater access to high-tech equipment and technology from more advanced economies. The enhanced controls are in our national, economic and security interests. The proposed Bill is both timely and necessary.

Sir, I beg to move.

Question proposed.

Mr Leong Horn Kee (Bishan-Toa-Payoh): Mr Speaker, Sir, thank you for allowing me to speak on the Second Reading of this Bill.

After hearing the explanations of the Minister of State for Trade and Industry, and reading the contents of the Bill, I wish to express my support for this Bill.

May I take this opportunity to seek a few areas of clarification with respect to the general objectives and the implementation of these new measures on control of strategic goods.

Firstly, I support the concept of having a central agency to be the single authority to be responsible for this Bill. However, I notice that the Strategic Goods for Control Items related essentially to military, chemical, biological and technology-related goods and materials. Therefore, in essence, this Bill, in my mind, relates to defence and security items. So I wish to ask whether it is appropriate for this control of strategic materials to be vested in the Ministry of Trade and Industry, which is more interested in trade issues, rather it should be vested in the defence or security agencies like the Ministry of Defence, or the Ministry of Home Affairs.

Mr Speaker, Sir, the second area of enquiry is with regard to whether the implementation of these new measures will hamper the free flow of legitimate trading and importation of non-offensive goods and materials, which are classified within the areas of being strategic goods. For example, our defence industry, most of which are Government-owned in fact, and they do engage in activities in manufacturing and trading, as well as importation of military and sensitive products. Therefore would their businesses be affected or hampered in the process?

From the private sector's point of view, there are also many small and large private companies which are involved in the transhipment, trading and brokering of strategic goods, such as software and technology products. With these new measures being put in place, would they be hampered or handicapped in terms of operational efficiencies in their businesses? Will the additional documentation and procedure controls lead to delays and inefficiencies in their brokering business or even transhipment business, for the movement of such strategic goods? In the process, they may become less competitive against our neighbouring countries which do not have such kinds of controls. As the Minister has said, we are the first country in Southeast Asia to have this form of controls.

Mr Speaker, Sir, may I conclude by emphasising that once again I do support this Bill, but I wish to ask the Minister of State whether he could give an assurance that the carrying of legitimate materials would not be unduly affected.

Mr Raymond Lim Siang Keat: Mr Speaker, I thank Mr Leong for his helpful comments and for his support of the Bill. I think we need to put this Bill in perspective. It does not deal solely with security issues in isolation, but the security aspects of a particular category of international trade - strategic goods. In so far as it impinges on international trade of goods and services, the economic considerations in the implementation of this Bill are just as important. This is of course what the second part of Mr Leong's question relates to. So we need to see which is the best agency, the most appropriate ministry, in striking this balance between our economic and security interests.

We studied what had been the practice in other jurisdictions that have export controls. In the United States and in Hong Kong, they are vested in economic agencies. We have decided, after careful consideration, that we will vest this in the Ministry of Trade and Industry, and that the national authority for the administration of export control scheme should be IE Singapore. As the national authority, IE Singapore would be the main point of contact for the proposed export controls scheme. But it would coordinate with the other relevant agencies, including the security agencies. It would coordinate with the Customs and Excise Department, with the Police and the DSTA Technical Advisory Office.

The second part of Mr Leong's question is just as important. He asked what are the economic and business implications of having an export control regime scheme. This concern, which he raised, applies not just to defence software technology companies, but to all businesses in Singapore that deal with the movement or trade of goods and services. My Ministry is mindful that any export control regime would impose some costs to businesses. What we have decided to do is to take a practical approach. There is no point in afflicting upon ourselves an onerous system, if it is not effective. It neither benefits Singapore, nor the international community. Indeed the goal of enhancing our security would be severely undermined if shippers were put off by our strict controls and chose to divert their cargoes to ports with weaker control systems. Therefore, the key lies in establishing an effective system at a reasonable cost. To achieve this, we are building on the strengths of our current system.

First, we will tap on our already highly efficient TradeNet system to process applications for controlled goods. This electronic submission process will ensure that traders continue to enjoy the expeditious processing of the permits as before. Second, we are enhancing our intelligence gathering capabilities. With its risk-profiling mechanism and provisions for intelligence sharing, the proposed export control regime will ensure that the efficient and smooth operation of the port will not be compromised. Third, the list of controlled items has been carefully scrutinised to ensure that the level of regulation is not more onerous than what is necessary to achieve our policy objective. The result is a control list that is not excessively long.

Mr Speaker, Sir, I would like to make a final point here that beyond this limited cost, there are also benefits to Singapore. One is that it enhances the reputation of Singapore as a secure international trading hub. Two, it would actually help our defence technology and software companies by facilitating their access to technologies in developed economies. Without the Bill, these companies may find it difficult, as the supplier countries may be concerned that the shared technologies may inadvertently fall into the wrong hands. The Bill, therefore, contributes, rather than detracts, from the competitiveness of our defence and technology companies.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Raymond Lim Siang Keat].

Bill considered in Committee; reported without amendment; read a Third time and passed.

Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 3.35 pm.

Sitting accordingly suspended at 3.14 pm until 3.35 pm Sitting resumed at 3.35 pm