ANNUAL BUDGET STATEMENT

Order read for Resumption of Debate on Question [28th February, 2003].

That Parliament approves the financial policy of the Government for the financial year 1st April, 2003 to 31st March, 2004.". - [Deputy Prime Minister and Minister for Finance].

Question again proposed.

Mr Leong Horn Kee (Bishan-Toa Payoh): Mr Speaker, Sir, thank you for allowing me to start this important and landmark Budget Debate for FY 2003.

This year's Budget is different from the norm in the past years. It contains Government's strategies and plans over the longer term based on its response and general acceptance of the Economic Review Committee's Report. At the same time, as a standard practice, the Budget Statement spelt out the Government's immediate fiscal and monetary plans, tax changes and action plans for the new financial year. This two-pronged long term and short term discourse of the Government's strategies and plans does require some re-orientation to readers and observers, trying to understand better this year's Budget.

Along the same vein as the Budget announcement, I shall also structure my comments on this year's Budget into two sections, covering first the ERC Report and then the FY 2003 Budget.

First, on the ERC Report. This is a monumental exercise involving about 1,000 persons directly involved in sub-committees and working groups over a period of one year. I liken this exercise to 1,000 cooks labouring together to create a Singaporean favourite dish, eg, the char kway teow, with DPM Lee as our chief cook. Now, this dish is cooked and being served to the people. What are the responses and reactions so far? Are the people satisfied? I believe the verdict is, like all recipes, it cannot cater to all tastes. Some like it, some do not. And some do not care! So, not everybody can be fully satisfied. Some want extra hot, some like it sweet. Everybody wants more goodies in it, but no one wants it bitter.

Many people have said that the final ERC Report is not exciting. Nothing new or phenomenal has resulted from it. There is no grand vision. Where are the bold measures? Generally, no excitement. I have to admit that I tend to share some of these sentiments.

However, on balance, I wish to point out that the ERC Report has accomplished its mission very well. No one should belittle the profound effort, the numerous valid recommendations and the vital conclusions of the ERC Report. One thousand of the best minds, top managers, businessmen and political leaders had, in great earnestness, reviewed all the major economic and economic-related policies that literally left no stones unturned. It is also correct that those stones that are found to be all right are put back - no need to change for change's sake.

The involvement of the large number of people has served the purpose of bringing together wider participation of many people in charting the future of Singapore. The Report has been most comprehensive, covering every economic and related issue. I support, in principle, all the recommended policy changes with regard to taxation, CPF, manufacturing and service industries development, human capital and others.

Mr Speaker Sir, allow me to spell out my specific comments regarding certain recommendations in the ERC Report.

First, concern on depressing wages and land values. A main thrust that appears to come across strongly in the ERC Report is that, henceforth, the Government wants to keep the factors of production, ie. land, rentals, wages and other operating costs low. This is a well-intended objective. I have no quarrel with that. But I wish to remark that we cannot artificially hold down prices. We do wish to hold down increases in Government rates and fees, wherever possible, but many costs, such as wages, land and rentals, are dictated by the market, and the general affluence of the people. Every year, every employee wants to see an increase in his take-home pay, so as to at least match or better inflation and rising costs of expenses. They want to see improving living standards for themselves and their families. How then can we intentionally hold down prices? Moreover, it is not correct to artificially press down values. Do we not recognise that we cannot compete with our neighbouring countries, especially against China and India based on low production cost?

I wonder what happened to the previously much promoted policy of going for higher technology and higher value added products, and to promote our brain services sector. Not much has been said in the ERC Report on this aspect. Is it an understood issue or is it deliberately de-emphasised in the Report? If it is intentional, it is useful to explain why.

Next, concern on deflation. In line with my doubt on the wisdom of focusing on depressing the costs of production, and therefore depressing values, I also have a worry on the underlying deflationary effects of such a policy. It is therefore timely that I read in a report warning about "Overshooting deflation threatens Singapore" in the Business Times on Saturday, 8th March 2003, in a study by the US investment bank, Goldman Sachs.

In the report, Goldman Sachs forewarned that, in recent years since the Asian financial crisis, there have been a series of negative shocks which add up to the largest deflationary demand shock the modern Singapore economy has ever faced. Some of the factors cited are :

(a) 12% deterioration in terms of trade since 1996, ie, after the Asian financial crisis;

(b) Rise in regional political risk premium and lower direct investment to the region;

(c) Emergence of competition from China; and

(9) Restructuring of Government-linked companies involving lay-offs.

I would add to the above list that there is also the uncertainty in the domestic sector with the recent high profile lay-offs in the Government sector - of PSA Corporation and HDB. So, I am indeed very fearful that if it is the professed intention of the Government to keep wages and land values low, it will further dampen the already depressed mood of the people, leading to lower domestic spending which, in turn, will cause domestic demand to spiral downwards into a deflationary loop. I strongly urge the Government to look into this concern of threat of deflation.

Next, changing mindset to promote entrepreneurship. Another key thrust of the ERC Report is to promote entrepreneurship, so as to cultivate an entrepreneurial nation. One of the three main tenets of the Report is to remake Singapore into "a creative and entrepreneurial nation willing to take risks to create fresh businesses and blaze new paths to success". I like this principle and I fully support it. However, I feel that this is easier said than done. It requires substantial effort and total commitment from all. Our people and our children are too used to being led, guided and spoon-fed by the Government. We have to break out of the old mould. We need a fundamental mindset change, to be creative and take initiative. But can we?

Let me quote an observation that shows that we have an arduous task to change the people's mindset, though we must. Someone called this the No U-Turn Syndrome (or "NUTS", in short). In the US, the general traffic rule is that a driver can do U-turns along any road unless specifically prohibited by No U-turn signs. In Singapore, it is the reverse. Motorists are not allowed to do U-turns unless specifically permitted at locations where permitted signs are shown. That means that they cannot do anything, unless the authorities say "yes". This mindset of NUTS (or No U-Turn Syndrome) is so ingrained in our Singaporean mentality that we do not dare to do anything unless we get a "yes" from the Government. How then can we promote initiative and creativity?

Let me cite another traffic rule example. In the US, where traffic is right hand drive, motorists are allowed to turn right at all signalised junctions on red light, provided the traffic is clear; and unless there are signs prohibiting this right turning. But, in Singapore, it is again the reverse. We cannot turn left at signalised junctions on red. However, a few years ago, LTA allowed the rule of "Turn Left On Red" or "TLOR" at some minor roads. The shocking thing is that I have seen with my own eyes, motorists who dare not make left turns on red, even though there are signages permitting it, and the traffic is clear! This is the Singaporean mentality.

I would like to get our people to be more entrepreneurial. I believe the Government, being a caring parent, must learn how to "let go". We should cut down on rules and red tapes. We have to give the people their choices to make. We have to get out of the habit of planning every minuscule matter for our people. Give them more avenues to express themselves.

Sir, on GST, in view of the budget deficit and the estimated $650 million cost for deferment of 1% GST increase for one year, I support the Government's intention to proceed to implement the second instalment of the next 1% increase in GST in January 2004. It is prudent not to incur higher deficit due to insufficient revenue collections if the GST increase is deferred further.

On CPF, I agree with the recommendation to defer the restoration of the balance 4% CPF for another two years. This will enable companies to save on lower operating costs and better able to sustain their viability during this depressed business environment. However, I do want to voice my concern for those workers most affected, such as those in the older age group of 50 years old and above. This age group will not have their CPF cut restored, and will have to contribute more to their CPF Special and Medisave accounts. The lowering of the CPF salary ceiling from $6,000 to $5,000 will also mean that they will receive less contribution to their CPF from their employers. Then, they will have to face the double blow of higher expenses due to the further increase in GST totalling 2%, and, of course, general living expense increases which are inevitable. Therefore, the lower income group and the higher age group will continue to need support from the Government in the form of S&CC rebates, rental and utility rebates.

Sir, on the next step for the ERC. As I said earlier, the ERC Report is very wide and comprehensive. What I find lacking are the specific recommendations on the implementation details to achieve the stated plans. I can concede that it will be too thick to spell out the actual implementation plans for every recommendation. It is, therefore, left to the relevant Ministries and agencies to follow through.

The Report states that the Ministry of Trade and Industry (MTI) will co-ordinate the follow-through actions. Whilst I do not doubt the capability of MTI to undertake this task, I do wish to voice out aloud why it is not deemed important enough for this matter to be monitored henceforth by the Prime Minister's Office, or the Deputy Prime Minister's Office. I feel that the overseeing body should be either PMO, or by the DPM himself. In any case, he is the Chairman of the ERC.

This rationale for high level monitoring is similar to the new Ministerial Committee on Services. I fully support the formation of this Ministerial Committee on Services to oversee the development of major new services, such as health, media and education. The reason is that the work crosses over many Ministries with inter-ministerial issues. Similarly, most of the ERC recommendations cut across Ministries. Therefore, a supra-Ministerial person being in-charge should spur smoother and speedier implementation.

Mr Speaker, Sir, I wish to move on to the policies and measures announced in the Budget for FY 2003. As I have said earlier, the difficulty with this year's Budget debate is that we have to shift our orientation between the long term issues spelt out in the ERC Report, and then re-focus back to the short term matters in the Budget.

This could be one reason why the reception to the ERC Report has been lukewarm, as some attention of the public has been diverted to short-term impact measures announced in the Budget.

Sir, on focus on short term issues and threats. We know that the ERC Report is a very important landmark document. It spells out fully the total blueprint for Singapore's future survival. However, the general public is more focused on their immediate problems. Their immediate concerns are unemployment, firstly; then the uncertainty of domestic economic recovery, diminishing asset values, the looming threat of war in Iraq and the fall-outs of war, the unclear US economic recovery, terrorism, threats of China and India, quarrels with our nearest neighbour Malaysia, and the unclear geo-politic development in Indonesia. Looking through this long list, there is indeed reason for our people to feel deeply worried. Many are experiencing a sense of loss and despondency. The road ahead is hazy and directionless.

Sir, turning back to the Budget for FY 2003, the Budget will see a deficit of $900 million. This is the third year of deficit in a row. It is a cause for concern on Government's principle of budget prudence. We have budget deficit for three years in a row.

In this context, I can accept the announcement that there will be no corporate and personal income tax cuts and no income tax rebate for FY 2003. To make such cuts now will mean that there will be a larger budget deficit. However, I would urge the Minister for Finance that should good times return next year, please do not forget to reward the hardworking tax-paying people by giving them some income tax rebates.

On the other hand, if the world and domestic economies remain poor for a few years, I wonder how would the Government meet its stated intention to cut direct taxes to 20% by 2005, without incurring further budget deficits or introducing higher GST increase. The latter move, of course, will be very unpopular.

Mr Speaker, Sir, although we have a deficit budget for the new year, there is also a disappointment that the new Budget is not stimulative enough for the domestic economy. I do admit that I seem to be speaking with a forked tongue. Just a moment ago, I expressed concerns about a continuing budget deficit, and now I seem to be urging the Government to spend more to create a higher budget deficit to stimulate the economy.

Let me explain. Although we said that Singapore has incurred three years of deficits, on closer examination, the deficits are still very small. In FY 2001, a total deficit of about $2.8 billion was incurred. This was about 10% of the total Government revenue for that year. This deficit was high but it was needed to stimulate the economy against a recession then. Last year's deficit for FY 2002 has been revised and estimated to be a modest $0.1 billion or $100 million, versus the original figure of $0.9 billion, or $900 million. So, FY 2002 is nearly a balanced budget.

But for FY 2003, the estimated deficit is $0.9 billion. This is only 3% of the total Government's operating revenue collections for the new year amounting to $29.6 billion. For the sake of getting our economy out of the rut, and to give a booster to the people and business confidence, I would advocate a higher deficit for this new financial year. I believe we can afford it.

Generally, it is thought that a deficit budget is expansionary. I would like to point out that this is not necessarily true. It depends, to a major extent, where the budget funds are allocated. If funds are not earmarked for expansionary projects, like infrastructure and growth, but to longer term projects like education and social targets, then a deficit budget may not be expansionary. This year's budget may be in a deficit, but I am not sure whether it is a sufficiently expansionary budget.

To make matters worse, we understand that the Government has directed Ministries to cut down expenditures on projects and various spending. Would this instruction of the Ministry of Finance be counter-expansionary? We are beginning to hear feedback from the private sector companies that they are receiving fewer contracts from the Government. If this trend were to continue, would it not aggravate an already depressed economy?

Sir, I would like to ask the Minister for Finance whether this year's Budget is indeed a stimulative budget. What are the measures to kick start the sputtering domestic economy? Where are the engine boosters? We do not have tax cuts, no pump priming was mentioned, and no announcement about additional infrastructure spending. So, how are we going to stimulate the economy to grow?

Moving on to what I call the "crutch mentality", there is another dichotomy that I wish to raise. This is with regard to the continuation of the use of rebates and welfare benefits to help the lower income group and less privileged to overcome the various higher indirect tax burdens such as GST increase and the higher cost of living expenses. I am afraid that the long term use of rebates, reliefs and benefits will lead to a crutch mentality of the people.

Somehow, we have to gradually wean the less able segment of the people to take care of themselves and become less dependent on welfare and financial aid. The same applies to the young. This contention is in line with my previous point that to build a truly entrepreneurial nation, the people have to learn to be less dependent on the Government, before we can truly create a new entrepreneurial and vibrant nation.

The message must be made clear - the Government will help you today, but you must learn to take care of yourself tomorrow.

Mr Speaker, Sir, we are living in very uncertain times. The sense of despondency is actually worse this year compared to last year. I recall that during the budget debate last year, my Backbench colleagues and I had already warned about this sense of doom and gloom prevailing in Singapore then. With higher unemployment, announcements of layoffs, and fear of the looming war in Iraq, the general sense of despondency is higher today. There is a general sense of haplessness as many factors are totally outside our control.

We need to boost the confidence of the people. This is a priority task. Our people have to first understand and get used to a future where double digit growth and continuing tax cuts, more NSS and ERS shares will not be easy to come by. We have to re-orientate our expectations of growth. We have to accept that, henceforth, each incremental achievement requires greater effort.

But, sometimes, I cannot help but have the feeling that we do tend to over-plan in Singapore. I recall that we had in the past the Vision 1999, The Next Lap and, more recently, the Singapore 21 Plan. We also had the Economic Committee in 1985. It seems like deja vu. No wonder there is muted enthusiasm to this ERC Report.

However, I do wish to commend the Government for launching and completing the Economic Review Committee's Report. The people have been held in suspense, pending the release of the ERC Report. Now that the ERC Report, as well as the Budget, is announced, we should move on. The Government has laid down the clear long-term goals. The new fiscal and monetary policies have been spelt out. The new directions have been set. It is time to get on with the business.

Mr Speaker, Sir, whatever is happening around us currently in the world, Singapore has to find its place. We cannot foresee and plan ahead for everything. If we can be nimble and creative, we shall always be able to find our place in this world. The Government must show strong leadership in difficult times. The people must respond and shoulder its share of the burden. Let us put on our hard hats and boots and take up the changkol. Together, let us start ploughing, to re-build a better future for our children as best as we can.

Mr Inderjit Singh (Ang Mo Kio): Mr Speaker, Sir, thank you for allowing me to join in the debate. Sir, today, I would like to talk on three points. First of all, my assessment of the Budget - what it achieved and what it failed to achieve and what more could have been done. Second, I would like to comment on the implementation of the ERC recommendations and, finally, I will touch on the issue of entrepreneurship and what I feel will be the strategies needed to be successful in this area.

My assessment of the Budget, as I listened to the Finance Minister delivering it, was that it seemed to be a balanced budget, addressing both the short term and immediate issues as well as the longer term issues needed to address the restructuring of the Singapore economy. As I analysed the Budget further, I actually saw very few new initiatives to make this Budget exciting enough to catch the attention of long-term investors. But before I touch on this point, I would like to square off some very obvious things that, in my opinion, were the disappointments of this Budget.

First of all, this Budget did not address the concerns of the middle group of Singaporeans. While we did take care of the lower income Singaporeans through the various rebates, it did nothing to assure the biggest group of Singaporeans who may have more assets than the lower income Singaporeans, but who, in the short term, have the same concerns which worry them and, that is, the loss of jobs and the short-term financial help that they can get from the Government. I feel that the Minister should have done much more to assure Singaporeans that their problems will be addressed in times of difficulties. The Minister should have put in place a temporary scheme to make cash accessible to such Singaporeans, for example, a 1% tax reduction could have helped these people in tough times and these are the people who are paying tax and who may have lost their jobs.

Sir, the second issue is the budget deficit, in my opinion, is hardly a deficit. It seems to me that the Minister tried very hard to end up with a deficit budget by making huge special transfers in the three areas of ERS, Lifelong Learning Fund and Medical Endowment Fund. Similarly, I do not see how the year 2003 Budget will end up in a deficit. Again, we are making special transfers, and we are forecasting a lower NII and we did not seem to have fully accounted for the 1% GST increase and the special income coming by way of more COEs expected. So if we had spent a bit more in trying to help companies and individuals in difficulties, perhaps that deficit would have been a welcomed deficit.

So what about the long term cost competitiveness of Singapore? Has the Minister missed out looking at this serious recommendation, made not only by the ERC, but also by the many, many committees before the ERC, like the SME21, the T21 and the Cost Competitiveness Committee? I feel that the Minister again lost the golden opportunity to address once and for all this critical issue that is sinking the Singapore economy. I am really disappointed at the seemingly short-term thinking of the Government, especially on this important area of cost competitiveness. And why do I say short term? The measures like temporary rental rebates, temporary property tax rebates and temporary CPF cuts do nothing in instilling confidence among longer term investors that, indeed, Singapore will still remain competitive not only two years from now, but also 10 years or 20 years from now. In fact, the current approach just drives investors harder to move out faster while they can, while the rebates are still in place. As a serious investor, I know that I have to worry that in six months, rentals and property tax will go up again and that the CPF will again go up in two years. The thought process will surely be to encourage companies to prepare to move out before costs once again increase when the regime of temporary rebates and temporary increases run out and go back to a steady state of higher costs.

I hope that all the efforts of all the committees I mentioned will not go in vain and I hope that the Government will overcome this inertia and get down to addressing the cost issue seriously. The ideas are all there - differential land pricing, structural changes in the wage system, levies, fees, charges from the Government and utilities, logistics and telecommunication charges. We have enough data to show that Singapore is not competitive in all these areas.

Second, the issue of implementation of the ERC. We all know that many Singaporeans were involved in the above process of deriving the ERC recommendations. I must admit that there was some skepticism among some people involved in the process and a comment which summed up the feeling went like this:

"I have been asked to give my feedback many, many times before for so many years. What is the point? The Government does not listen and does not believe in us anyway." Sir, this is a true quote coming from a few prominent Singaporeans. To convince them, the argument that all of us who were involved in this process was that, this time round, the Government has realised that there is a need to change for the survival of Singapore and everyone's input was needed. The outcome has been a lot of hard work by many, and the many recommendations to remake the Singapore economy.

While on the whole, the recommendations have been bold and will make a big difference, there are certain areas which could have been better dealt with. First, the impression that we have is: are we really re-tuning or refining the economy? We were promised that there were no sacred cows and that no stones will be left unturned in this whole exercise. The outcome in a number of areas, which I felt could have made an even bigger difference, was not changed. The ERC could have exercised greater will power to make bolder changes in certain areas. Unfortunately, the impression many people have is that all we have done is once again to just make tweaks in certain areas when we should have made fundamental changes to turn things around. When the whole exercise started, we talked about the remaking and restructuring of our economy. It now appears more like a refining and re-tuning exercise in certain areas. Yes, we did pick the stones and place them back in the same place or in some other place. We missed the golden opportunity to make much needed changes to the economy.

Let me back up my argument with a few examples. First of all, the tax system. We have been touting the tax changes as a major structural change, but as far as I can see, there was no real change in the system. The real big change happened when the Government implemented the GST system, I believe, in 1994. The ERC recommendations merely reaffirmed the 1994 changes. So the ERC's recommendation of a reduction of personal and corporate tax rate was long overdue anyway. It should have come down drastically the day we implemented the GST changes. The tax changes, in my opinion, were not radical enough.

The second example is that of the CPF. It is becoming a habit now to tweak the CPF rate in times of crisis. While I am not against this to help us in the short term, this does not give us comfort that we have gotten to the root cause of the problem and that we are just addressing the symptoms. Is it not sufficiently clear that we have a structural problem with the CPF system? We should have worked on a more permanent solution, perhaps a lower contribution from employers and compensated by alternated retirement and medical schemes. Had we made bolder changes, we may never have to fiddle with the CPF contributions now and then.

Sir, the final example is one of land prices, and in this topic, I tend to defer from Mr Leong. I believe that the high cost of property, particularly industrial land, is a big issue. To me, this is one of the most serious structural problems, other than the wage which directly affects Singapore's competitiveness, particularly in areas of manufacturing. So while we may talk about moving low value-added activities outside Singapore and trying to bring in more high-tech and high value-added activities in Singapore, the problem is the image that we have created for ourselves is that we are a place where business activity is going to cost companies a lot of money. It is a high-cost country. And I have personally visited a customer about three weeks ago in the US, trying to bring in what I thought was a high-tech activity into Singapore, and the answer I got from them was "We will probably not be coming into Singapore. But if you can promise to do it in China or some other low-cost countries for me, I will move my high-tech activity there." The problem we suffer is that the image that we have created for ourselves is one of a high-cost country. So we really need to fix this problem once and for all.

The second issue is on the implementation of the ERC Report's recommendations and roadmap. All of us agreed that the ERC exercise was a key and necessary initiative. But, in my opinion, we reacted a bit too late. There were already a few signals that we could have picked up had we been more attentive. We could have reacted much earlier. The few signals were the bursting of the property bubble in 1996, the Asian financial crisis, the emergence of China and India and the flow of FDIs into China. These are all new things. We could have reacted earlier.

But anyway, now that we have identified so many initiatives, including some considered taboo in the past, we should now roll up our sleeves and start implementing them quickly, a point that Mr Leong made earlier. The ERC should not end up as an academic exercise. Too many important people have set aside their valuable time to be involved and we cannot risk disappointing them and again failing to implement the recommendations decisively. More importantly, we cannot risk failing the Singapore economy. The reason I am bringing this up is because, in the past, we have undergone similar exercises with the likes of the S21, SME21, Retail 21 and the many '21' initiatives. For some of these exercises, we were big on plans, but short on actions. We risk losing the confidence of the key stakeholders of Singapore, should we fail in the implementation. The number of recommendations is overwhelming and, if not handled well and not implemented systematically, we could lose the intended impact.

So when I read in the papers recently about Singapore climbing up one notch among the most expensive cities in the world compared to the year before, we actually became more expensive and not less expensive by one notch. My heart sank simply because it goes to show that we have not moved fast enough in our restructuring exercise. The second concern I have is that, in our attempt to restructure, are we doing this in isolation? We should, in fact, be aware of the fact that there is a rapidly changing environment around us. Our neighbours are also contemplating the same thing as us. We are working with a moving target. We want to lower the cost of doing business, so do our neighbours. We want to be the Life Sciences Hub in Singapore, so do cities like Xian, Hyderabad, Bangkok and Kuala Lumpur.

I cannot over-emphasise the need for speed. I believe it is not only the ideas which will define our success, but more importantly, our ability to implement these ideas and our ability to implement them swiftly which will determine how successful we will be in transforming our economy. So let us not get too complacent but get moving faster than what we are doing right now.

An example of a non-starter and a failed attempt which comes to mind is the NatSteel divestment saga, which dragged on for so long. The inability to make a judgement to take a certain amount of loss, has resulted in the sloppy execution, in my opinion, of the NatSteel divestment. It is clear that Temasek failed to realise this to be a short term loss but a long term gain. Because it has to answer to the people of Singapore, it therefore has to err on the safe side by taking a kiasu approach in ensuring the best possible value because they have to answer to all of us. Therefore, this is the cause of Government getting involved in business in the first place. In the process, we lost a greater opportunity of setting an excellent example of a GLC divestment done successfully for the long-term good of the country.

I would therefore like to see an implementation roadmap and an implementation committee, like what Mr Leong suggested, with the responsibility of ensuring that recommendations are implemented the way we intended them to be, and with the speed necessary to achieve the intended impact.

It will be good for this implementation committee to share its results regularly by publishing a scorecard for all of us to see.

Sir, the final topic I would like to touch upon is entrepreneurship. Having been so used to developing a corporate-based economy in the last 30 years, the real question we have to ask is: are we willing and are we ready to make the transformation to an entrepreneurial economy? And I think this is the most difficult question for us to answer.

There are two key elements for us to succeed. Firstly, understanding what it takes to create an entrepreneurial economy and, secondly, the lessons learnt from our successes with the multi-national companies.

First of all, understanding what it takes to create an entrepreneurial economy. This is the biggest challenge and the most difficult one to overcome. Unless and until we resolve this issue, we will never be able to transform our economy. The challenge, therefore, for the Government and the Minister for Entrepreneurship is to make a sincere pledge to lead this transformation of our economy and, then, to understand what is needed to make this transformation.

The first challenge, therefore, is that of a mindset change. Yes, it is difficult to attract foreign companies to invest and set up shop in Singapore, but it is even more difficult for our economic agencies to visualise how a start-up or a non-entity - someone who is trying to do a start-up - can one day evolve into a world-class company based in Singapore. So, it is therefore compelling to still take the relatively easy way out of continuing to deal with a corporate-based economy - the tried and tested model.

The unfortunate fact is that I feel the Government is still unsure or half-hearted about putting in place an entrepreneurial economy. Why is this so? If we ask anyone of the Government economic agencies or the civil servants who are driving this initiative, we cannot help but conclude that they are still programmed to bring in foreign MNCs. The sad thing is that many are sceptical about the ability of our local entrepreneurs to make it big. I say this from my own personal experience and from direct feedback from would-be entrepreneurs.

Sir, the second issue on entrepreneurship is lessons learnt from our successes with MNCs. If the mindset change can be achieved, then I feel that the next few steps needed to succeed in transforming our economy and of encouraging more entrepreneurs to set up their bases in Singapore would be much easier. We can learn from our successes in the economic development of Singapore in the first 30 years, which have been in attracting foreign direct investments, multinational companies, and in establishing bigger companies, ie, the Government-linked companies here. We can then apply them as we focus on building an entrepreneurial economy.

There are three main lessons to be learned from building a corporate economy. They are, first, creating a conducive environment; second, putting in place incentive schemes; and last, but not least, a hand-holding of multinational companies from cradle to grave. What I am about to say may seem obvious, but I feel that we have not fully understood the root causes and have not addressed and learnt from these lessons, and to address the issues on how we can successfully create our entrepreneurial economy.

Sir, firstly, on creating a conducive environment for MNCs to set up base, why were we successful? Because the Government had developed an appropriate infrastructure, offered cheap land, removed other obstacles that may have existed and made it easy for MNCs to decide to start up operations here. Rules and regulations were tailor-made for MNCs and for bigger companies. Many of the MNCs and GLCs had direct access to top civil servants and Ministers, and this allowed them to resolve issues faster. The lesson here is that the rules made for bigger companies will not work for start-ups and for smaller companies.

Secondly, on incentives and financing schemes made for bigger companies. To complement the setting up of a conducive environment, the economic development agencies developed a slew of incentive schemes, Government grants and tax breaks, again tailor-made for MNCs and for bigger companies. The lesson here is that while it is easy for big companies to apply and utilise the incentive schemes, the smaller companies find it terribly difficult to do the same.

Thirdly, hand-holding of MNCs from cradle to grave. This, in my opinion, is the most significant initiative implemented here that made MNCs most comfortable in setting up bases in Singapore. Kudos to the EDB for this. We created a one-stop agency which hand-held MNCs coming into Singapore, right from the time that we were courting, through the time that they started operations in Singapore, up to the time that we encouraged them to leave for places like Batam and Suzhou.

Having dealt with EDB on many occasions - while working in a multi-national company as well as when I went to start up my own local companies - I thought I had a good feel of how they operate. I must confess that I really understood EDB only after reading its book published recently called Heartwork. It is an excellent book. After reading it, I understood why EDB did what it did, and became even more convinced that EDB will never be able to handle and help local start-ups. I would like to say that the EDB has done an excellent job all these years but, having understood the charter and the mode of operation, especially after reading the book, I realised that it is unfair and impossible for them to effectively support local companies. Let me share one example from the book to illustrate the mindset with which it operated in helping bigger companies coming into Singapore.

Sir, in the book, what I read was, when Apple computers wanted to set up a factory in Singapore many years ago, EDB went the full mile, did all the work for Apple in fitting up the whole factory. In fact, it went even further than that. An officer was allocated on a full-time basis to become the project manager for setting up of the factory. The American manager who was responsible for setting up the Apple factory in Singapore did not have to be personally here in Singapore while the facilities were being set up. That is what I call service.

Can anyone in this House give me an example of a similar service for our local companies? I do not know of any. The reality is that most local companies are left on their own to fight their own battles and to clear the many obstacles themselves. At times, I dare say that the bureaucracy works against them. The lesson here is that had we not had EDB to champion the cause of MNCs, we may not have developed such a vibrant economy. Champion agencies can do wonders because of the influence they have in clearing these obstacles. So, how can we apply these lessons?

Firstly, let us create a conducive environment by making a review of rules - which is happening, and I think the rules should not just be reviewed but also revamped - this time round, by putting smaller companies and start-ups centre-stage when we develop these rules.

Secondly, of course, is to revisit all the incentive schemes and tailor them to suit start-ups and SMEs.

Thirdly, we really need an EDB-style organisation, a one-stop agency for SMEs and start-ups. Today, we see too many agencies claiming to champion the SMEs and entrepreneurs, but my experience with them is such that none is able to provide the comprehensive service that EDB does for MNCs. Many things, in fact, fall into the crack for entrepreneurs and smaller companies. We need a champion.

Finally, to build a vibrant financing environment, such as the ones that exist in entrepreneurial economies in the USA, Taiwan and Israel. I will elaborate on these during the Committee of Supply debate.

Sir, in conclusion, the budget is just one of the many levers to address the current situation that we are in. The current crisis is different from the previous predicaments, although we may use the same terminology to describe them. We have been using the same old formula to address these new predicaments. The context of the problem has changed. And it will continue to change, because we live in a world where change is a constant. As a result, each crisis will become more complex than the previous one. We have to adopt newer measures, and the speed of implementation is essential for their success. This year's budget is being hailed as a budget in transition. My opinion is that we need to get out of this transition quickly. We have been in the transition mode for quite some time. We need to arrive at an economic model that we want very quickly. We have been planning for quite some time. The planning phase is over. It is now time to execute and implement bold measures. We cannot be half-hearted in our endeavours. We need to be clear in thought and be decisive in action.

Sir, on the belief that the Minister will implement swiftly these new measures, I support this motion. 11.52 am

The Minister of State for Trade and Industry (Mr Raymond Lim Siang Keat): Mr Speaker, Sir, since the Deputy Prime Minister and Finance Minister announced my appointment as Minister of State in charge of entrepreneurship, I have been inundated with emails from the public. There have been many suggestions on what needs to be done to further the cause of entrepreneurship in Singapore. I will take these and those that are being raised in this House in the course of this debate into serious consideration. Some of these I will answer in the Committee of Supply, and others I may need to get back to Members later, as it may require further thought on my part.

But whatever it is, I see this sudden deluge of advice as a big positive, as it means that there is an increasing constituency in our society to embrace an entrepreneurial, go-getting culture, where opportunities are seized and risks taken to create something different in whatever we do. In fact, some email writers, after sending me one advice after another, told me that, for a suitable fee, this arrangement could be made permanent! So, I think that there are good grounds for hope that we will indeed successfully foster an entrepreneurial society.

But let us be clear right from the outset that we are not here trying to manufacture entrepreneurs - that, I think, is not possible - but rather to create the enabling conditions for entrepreneurs to emerge and grow. This is an important role for the Government to play, and this is not, as some had suggested, unique to Singapore, the so-called "nanny state", but undertaken actively by many others, including the United States, Ireland and Taiwan.

Some Silicon Valley types might be dismissive of any role for the Government, but the fact is that one of the key reasons for the Valley's success has been the huge federal defence spendings in the high-tech sector.

The Government, as customer, as against being a direct player in the market, is one of the most important roles that it can play to promote entrepreneurship. The Government should outsource its requirements whenever the market can provide them, rather than produce them in-house. By doing so, it creates new opportunities for entrepreneurs and space for innovation. This is the basis of the ERC Yellow Pages rule, which the Government has accepted.

It is one of the most far-reaching of the ERC recommendations, as it envisions a world where the boundary between the State and the market shifts in favour of the market. Its criticality lies in the fact that, by giving institutional expression to a market-driven public policy stance, it will change the way in which bureaucrats interact with private players in the economic sphere. Consequently, just as the Government wants Singaporeans to be risk-takers, it should set an example by being willing not just to oursource its requirements, but to take a chance by accepting innovative solutions from private firms.

The impact of the Government on the operating culture cannot be over-emphasised, as its interactions with Singaporeans affect the way in which people behave. This was why I had argued that to shift mindsets, which is our paramount challenge, the Government should set its default key at "Yes" rather than "No" in its dealings with business.

If we want Singaporeans to reach for a new frontier, to establish leadership in unknown future markets, then regulating them by what is known is not the way to go.

It also means that the Government would need to gradually scale back its role in the lives of Singaporeans to allow greater room for entrepreneurship to develop. I say "gradually" as this has to be well-calibrated, so that even as Singaporeans have greater freedom, the corresponding greater responsibility that comes with it is done without upsetting the social cohesion that is underpinned by the safety nets in our society.

Finally, to make this cultural shift to a more entrepreneurial society, our education system is vital. In this, things are underway, and our schools are seeking to create a more open, innovative and creative learning culture. Some schools have also introduced programmes to expose their students to the world of business and entrepreneurship. The ERC sub-committee on Entrepreneurship and Internationalisation (EISC) that I chair had suggested that we take it further by making it compulsory that every child be asked to do a business project, in the same way that they do science projects in schools. The aim here is not, as some critics have said, that the Government is trying to fix this problem by teaching "entrepreneurship", much in the same way that if we need more engineers, we simply produce more.

Instead, it is to imbue in our young a different worldview. It is not a world where everything must have its place and nothing left to chance. In such a world, there can be little out-of-the-box thinking. Nor is it a world where we wipe off every speck of dust and, in the process, we may well be getting rid of stardust as well. Rather, we want our young to grow up in a world where they are comfortable with diversity and where their opportunities are limited not by the prevailing wisdom and strictures of the day, but by the extent of their imagination. Whether they become entrepreneurs or not, will depend on their own choices, but we would have done our part by widening their career horizons.

Besides culture, cutting red-tape, and better access to finance are also important enabling conditions for enterprise development. We need to aggressively cut red-tape. It may be one licence requirement for one agency but, when we add them all up, we may have death by a thousand cuts. This was why the EISC had suggested that rules and regulations be date-stamped. Having sunset clauses will ensure that there is a mandatory periodic review of regulations to ensure their relevance. We are glad that the Government has accepted the spirit of this recommendation by mandating a thorough house-cleaning of rules and regulations of all Ministries every five years. In the meantime, if there are any rules and regulations that are stifling businesses, entrepreneurs can and should bring this up to the Pro-Enterprise Panel.

Access to capital is another area, which is often cited by entrepreneurs as key not just to starting a business but for it to grow. We want as many modes as possible, so that there is a market for the commercialisation of ideas.

But here the entrepreneurs also tell me that we should not throw money at the problem. I have had quite a number of suggestions that recommend that the Government give money freely to Singaporeans who want to start a business. It is like having an ATM machine in which when you key in the word "entrepreneurs", out comes a stash of money.

These successful businessmen tell me that we should not do the work for entrepreneurs. Yes, a spectrum of risk capital is vital for entrepreneurship and we want to promote and develop that to support them. However, they stressed that people must work for this. Because only when people work for it, is it clear that they really believe in it, and that they are really committed to make it successful. That, which is given free, is seldom valued in life. This is why I think it is important that for most of our Government financing schemes that, whenever possible, there should be some form of market validation before funds are disbursed as the bureaucrats running them are often in no position to evaluate the viability of the business propositions. The people, who criticised this view, often tell me in the same breath that bureaucrats have no idea about business and that they are the best people when it comes to giving out money to business.

The point worth emphasising here is that the role of Government in promoting entrepreneurship is not to ensure that entrepreneurs are successful but to create the conditions that enable them to be successful. This is a crucial difference that must be borne in mind.

Mr Speaker, Sir, this then is the roadmap towards a more entrepreneurial society. We will know when we have succeeded when Singaporeans increasingly look to the market rather than the Government in making their decisions. However, there are no silver bullets here. This may discomfit some Singaporeans who are used to "instant trees". In fact, critics of the ERC have been disappointed that there have been no dramatic magic formula unveiled in its Report to ease the anxieties in the economy.

Yet, there is much in the Report that gives us hope for a better future. At its core is a transformational vision of the economy - of a people intimately connected to a wider world, infused with the spirit of enterprise and where abilities and talents are recognised, celebrated and rewarded. These, in essence, are our ambitions for Singapore.

However, it is not how well we plan that will determine whether we reach this destination. But how we adapt and adjust as circumstances change that will decide our future. And in this, one of our greatest strengths as a Government and a people has been that we are perpetual worriers, never complacent. This manifests itself in a willingness to anticipate and face problems squarely, take difficult decisions and a pervading sense of urgency that there is no permanent advantage in whatever we do in a rapidly changing environment. The year-long ERC process is a testament to this and it underlines that we are not wedded to our past successes and are open to views and fresh ideas from outside the public sector.

It was not a public relations exercise but a serious attempt at remaking the Singapore economy. In the EISC that Mr Inderjit Singh sat on, many of the key recommendations, such as the Yellow Pages rule and mandatory periodic review of rules, have been accepted and implemented. In fact, in the area of greater access to finance for SMEs, MTI is looking towards how best to implement the recommendations of a committee chaired by Mr Singh. We thank him for his initiative. It also underscores the seriousness of purpose on the Government's part.

Confidence is key to our continued economic growth. Members may want to bear that in mind. Because of the trust reposed on them as Members of this House, what they say will have a bearing on the confidence of Singaporeans. May I suggest that this trust be discharged, in what Mr Yeo Guat Kwang said in the Straits Times today, by the exercise of leadership to give hope rather than to accentuate the anxieties of Singaporeans at this difficult time.

Recently, I read a very bearish view on Singapore. When the analyst was asked whether there was any area of strength that he could see Singapore developing to get out of what he saw as a secular decline, he replied, "I cannot think of any." He had just been to China and was spooked by this vast and rapidly, emerging economy.

Mr Speaker, Sir, if this is so, we might as well fold up the tent and give up. But this is nonsense. Yes, China poses serious challenges to not just Singapore but the region. But as any first year student of international trade will tell you, even if China has an absolute advantage in everything, it will still buy from Singapore, as what matters is the comparative rather than absolute advantage of the two countries in the goods and services that they produce. In other words, there are opportunities. It is what we make of them. That he cannot see any future for Singapore is not that there is none, but a failure of his imagination.

Thus, we should not feel handicapped by our lack of land mass and natural resources. Countries like Japan and the Nordic states have turned their national constraints into enduring strengths. To illustrate, the lack of living and working space has driven Japan to the frontier of technology in miniaturisation. Similarly, the difficult terrain in the Nordic countries has spurred them to develop great strengths in communications and power transmission.

In a knowledge-based economy, it is sometimes not nature's endowment, but nature's deprivation that drives an economy's competencies and comparative advantages.

For Singapore, we have never accepted that size is destiny. We are one of the world's leading trading nations despite having a very small population. We are a major petrochemical hub despite having no oil of our own.

The Economist magazine has long credited us with inventing the MNC export-led model of economic development. This allowed us a headstart in accelerating our industrialisation and linked us rapidly to first-world technologies, expertise and markets. Many developing countries had earlier rejected this strategy as a new form of colonialism but they had since assiduously followed us.

Of course, there are always many reasons why we think we cannot do certain things because we do not have the size. But that by itself may be the spur to creativity, to force us to think beyond our current circumstances and leverage our advantages in a different way.

That was and I believe still is the spirit that characterises us as a people. We have it in us not just to ride the current difficulties but to build a better future for our children and ourselves.

As William Jennings Bryan put it, "Destiny is not a matter of chance. It is a matter of choice. It is not a thing to be waited for, for it is a thing to be achieved."

Mr Speaker, Sir, I support the motion.

Mr Chiam See Tong (Potong Pasir): Sir, before I go on to my speech, can I just ask the Minister of State to clarify certain things? I am speaking as an Opposition. If we want to create an entrepreneurial spirit, we must create conditions. I do not know whether or not he realises it but, to the bureaucracy, there seems to be two sides. Either you are on the side of the ruling party or on the side of the Opposition. Whenever the Opposition people try to apply for a permit, they seem to be put last in the queue. If a person, who is in the Opposition, wants to do business in Singapore, he will be treated the same as a political Opposition.

Mr Speaker: Mr Lim, do you want to answer that?

Mr Raymond Lim Siang Keat: If Mr Chiam could give specific examples, we will look into it. But as a matter of principle, when it comes to building an entrepreneurial society for business people to operate, there should be a level playing field.

Mr Speaker: Mr Chiam, your speech, please.

Mr Chiam See Tong: Well, I am glad to hear that. As far as our constituency is concerned, there are many examples. Whenever we apply for a permit to use a field, it will take a long time.

Mr Speaker: Mr Chiam, we are talking about entrepreneurship here, not fields. Please carry on with your speech.

Mr Chiam See Tong: In time to come, this can be related to commercial activities. I am talking about the experiences that I know for sure. If I, Mr Chiam See Tong, am going into business, will I be put last in the queue for any permits? Will such a thing happen? Because there is a feeling that if a person is in the Opposition, he may be victimised by the Government. Can the Minister of State clarify on this?

Mr Speaker: Mr Chiam, I thought the answer has been given.

Mr Raymond Lim Siang Keat: I will not give specific examples to answer him. But I will be surprised if that is the case because there are Opposition Members who are in business and who have been successful in business.

Mr Speaker: Please proceed with your speech, Mr Chiam.

Mr Chiam See Tong: Much obliged. I am thankful to the Minister of State for the assurance that whether or not you are in the Opposition, as far as the business environment is concerned, there shall be a level playing field.

Sir, the unemployment figures are perhaps the worst Singapore has ever seen since the oil crisis in 1973. There are about 4.2% or about 84,000 workers out of job in Singapore today. Some economists are saying that the unemployment situation may even get worse by the end of the year, to 4.8% or even 5%, about 100,000 of our workforce would be out of job by the year-end.

The bad employment situation is evident at my weekly meet-the-people session. In the past, when times were bad in 1985, 1991, 1997 and 1998, there were talks of unemployment but at that point of time, I did not get residents coming to see me at the meet-the-people session to ask for jobs. But these days are different. Almost every week, there is at least one resident who comes to see me to fix for him/her a job. The worst is that these days, residents who ask for jobs are not just manual workers. University graduates are also looking for jobs. Only last week, a lady in her mid-40s, a Business Studies graduate from England came to ask for a job. It looks like the Government must make creation of jobs one of its urgent priorities. Yet, this year's Budget is not a stimulating one. There are no indications to push the economy forward. The Budget does not address or to spur consumer and business spending and expand the economy.

On the contrary, we see that the Government is rather complacent when MAERSK Sealand Shipping Line moved its operations to the neighbouring port of Tanjung Pelapas. The PSA did not seem to see our neigbouring port as a dangerous threat but, obviously, it does now. The PSA Corporation has trimmed its workforce. As a result, 800 port workers were retrenched. We also hear of massive retrenchments at the HDB and also at Chartered Semiconductor Manufacturing Limited, which is the world's third largest chip foundry. Chartered Semiconductor Manufacturing Limited is a listed company of which Government-owned Singapore Technologies holds 60.5%. The retrenchment of about 500 jobs, or 14% of its worldwide workforce, at Chartered Semiconductor Manufacturing Limited is due to the closure of an old wafer plant this month. These rates of retrenchments perhaps mark the end of the iron ricebowl in the PSA Corporation and other Government-related companies. Business people are calling this phenomenon "the Singapore squeeze", resulting in job losses and affecting the island's economy.

Singaporeans must understand that our job losses at home is due to the harsh business environment in the neigbouring countries, the region and in China. Singapore's businesses are being squeezed by competition, especially from China. Singapore must find its new niches in business and the bio-technology industries that are now being encouraged and developed in Singapore. However, it is going to take time to develop. Meanwhile, Singapore must lower the cost of doing business here. Businessmen are disappointed that the personal income tax and corporate tax rates are not cut by at least 1%. Lower corporate tax rate and lower personal income tax rates would have encouraged MNCs and foreign talents to remain in Singapore.

It would also appear that the middle income Singaporeans are not benefiting from this Budget. The Report of the Economic Review Committee does not seem to highlight much on promotion of education and healthcare. The people of Singapore have attained a high level of education and Singapore should exploit its know-how in education and make Singapore the education hub of the region. The Government must make sure that the people who are engaged in the education industry in Singapore have the highest quality of honesty and integrity and not be allowed to exploit foreign students. Instead of giving good value in education, some of our private schools are, in fact, misleading foreign students. A Chinese student came to see me as a Member of Parliament. She complained that a private school in Singapore has cheated her of $3,600. She paid that sum of money so that she can pursue an English course, but the private school made her sign a hire purchase agreement to buy only a few textbooks and a few brochures. The hire purchase agreement did not include the English lessons she was entitled to. In the end, the foreign Chinese student failed to study English in Singapore. If Singapore is to build a good name as an education centre, then the Ministry of Education must make sure that private schools here in Singapore are properly regulated and supervised and they do not give Singapore a bad name in the region as an education centre.

As far as I know, most of our best and brightest students chose to study medicine. Therefore, our best brains go to take up medicine. Accordingly, I would imagine we must produce the best doctors and best surgeons that we can possibly produce. Singapore should exploit this great talent pool of healthcare givers. Singapore should have, by virtue of having such a great pool of medical talent, become the medical centre of this region. But I hear that because of our high cost, even much of our medical business is being taken away by Malaysia. As regards medical cost, I hear that the medical cost in Singapore is exorbitant compared to those in Malaysia. I have heard of a story of two brothers, both suffering from heart diseases. One had his heart problem treated in Singapore and the Singapore surgeon charged him S$40,000. The other brother had less money and found his way to Malaysia and had a similar heart problem treated in Kuala Lumpur. He paid only the equivalent of S$500 in Malaysia. Both patients recovered from their heart operations and subsequently both had normal lives. The question one naturally asks is: how can a similar operation be carried out at a fraction of the cost in Malaysia? The treatment in Malaysia was as good as that of Singapore.

I cite another instance where I have personal knowledge. I know of a private hospital in Johor Bahru which charges only RM280 or about S$131 for treatment of one-time kidney dialysis. The Johor Bahru hospital is purely run on a commercial basis and is not subsidised. On the part of Singapore, the National Kidney Foundation (NKF) clinics here are subsidised and charge one kidney dialysis treatment at about S$400, about 3 times that is charged in the Johor Bahru private hospital. I wonder why there should be such a great disparity in medical cost between Singapore and Malaysia. There is definitely a big difference in cost of medical treatment in Singapore and in Malaysia. The medical cost in Malaysia is very much lower than those in Singapore. I would like the Singapore Government to investigate why Singapore doctors are charging so much more for their services than those of their counterparts in Malaysia. Could it be that our Singapore doctors are paying very high rentals? If that is so, then I would recommend that the HDB and the Government work out special schemes whereby Singapore medical practitioners can benefit lower rentals and those savings can be passed to their patients.

The other area I would like to mention is the creative industry. Under this particular section, the report of the ERC gives only 7 short paragraphs. Although the entertainment and film industries are big businesses in other countries, in the case of Singapore, it is particularly weak in this respect. We do not have any film industry of any sort to speak of. Yet other countries, particularly America, are making very good money out of the film industry. On Singapore's part, since we do not have such an industry, we have to buy all our films from abroad, thus losing massive foreign exchange dollars in buying films to fill our television

Logically, Singapore should be building a creative industry. Singapore has no natural resources, except its people, and for creative industry, all they need are people who are entrepreneurial and creative. It looks like Singaporeans have to learn to be entrepreneurial and creative so that hopefully we can build a film industry of our own. A film industry is important for Singapore, not because it would make money for Singapore but, more importantly, it can build for Singapore a cultural identity. 12.20 pm

Ms Indranee Rajah (Tanjong Pagar): Perhaps I can start off where Mr Chiam left off. I agree entirely with Mr Chiam that we can certainly do with a few more of the creative industries. But he highlighted two things with which I thought perhaps are not entirely accurate. The suggestion appears to be that the Government has not made job creation one of its priorities. When I last looked at the budget, there was a $500 million retraining programme in there. If that is not a priority for creating jobs, I do not know what is. There were measures to attract foreign investments, there were also measures not to tax foreign income. All of that is aimed at creating jobs. So I do not think it is entirely fair to say that job creation is not a priority. I think that it is.

The second statement that was made was that the Government does not seem to promote education and healthcare. As I remember it, we spent three days debating on a White Paper on Education, three days' worth of very serious consideration on the quality and content of education in Singapore, and I think that it cannot be disputed that our Government does concentrate a lot on education. The example cited was of a Chinese student who had received rather poor treatment in a private institution. But the Government does not run the private institution. That is something that has to be taken up at the level of the educational institution that is providing the service. The Government cannot do every single thing, and that really brings me to the main thrust of my comments on the Budget, which is that it is all about taking responsibility.

A lot of comments have been floated up that this Budget does not go far enough, it does not do enough for entrepreneurs, it does not do enough for SMEs, it does not do enough for this group of people or that group of people. My response is that this Budget is what we make of it. It will succeed or it will fail depending on the amount of effort that each one of us personally puts into it. Unlike our neighbours who surround us, we do not have huge amounts of natural resources, we do not have huge tracts of land, we do not have minerals, we do not have agriculture. The one thing we have is our people. People make all the difference in these times, and the critical factor is attitude, and the mental attitude that we have to have is taking responsibility and ownership.

Many Singaporeans do this. Many of them go about in life taking responsibilities for themselves and for their work and business. But increasingly, over the years, I have noticed a trend that seems to have crept into our national psyche and consciousness, which is this trend of wanting to place responsibility elsewhere. An example is the recent MRT accident. After the accident where there was a car on the MRT line, and the train had crashed into it, I noticed a couple of letters in the Straits Times saying: Why has the LTA not built stronger fences? Why have they not done something to prevent this from happening? And my response is: Is that not a wrong question? The right question must surely be: what is a 23-year old driver of a Mercedes Benz doing in the middle of a MRT track? Surely that must be the right question. What on earth was he doing? How was he driving to land up there? Surely that is the area that one should concentrate on, rather than saying that: you must be protected against something like this. It is a question of responsibility. This idea of looking elsewhere for protection against something that is going to happen is not a good one. You cannot buffer people from the vicissitudes of life. Life is tough. That is one of the things that we have to deal with, and Government cannot protect everybody all the time, from every possible adversity that might come up. It is very much a question of what each of us makes of the circumstances that we find ourselves in.

I remember when I was very young, my mum took me to see a movie called "Born Free". Some of you may remember it. This naturalist had adopted this lioness cub, Elsa, and they raised her in the house as a pet. They patted her. They gave her milk. She had food every day. She slept in their bed. She played with them, and she grew up to be a very inept young lioness because she did not know how to hunt. One day, the time came for her to return to the wild and there was no other way to do it except to reintroduce her to the wild by leaving her there. And she was really upset because she had no idea what to do, no idea what to hunt. She kept coming back, looking for food. She found a male lion, and those of you who are familiar with the habits of lions will know that the male lion does not hunt, the lioness has to go out and bring him food. So, he found this lioness, fairly young, attractive looking, who was pretty useless at the job because she could not bring back the kill, so that did not work out either.

She had a long hard time out in the wilderness and suffered quite a bit before she eventually learned how to fend for herself and how to hunt and how to kill, and eventually had her own family, which she raised. And, it is like that with Singaporeans, because we had been buffered from a lot of things. We were a lion city. We come from immigrant stocks. We still have those instincts to hunt, but some of them have been blunted over the years simply because we have had a fairly comfortable life. I do not think that the instincts are gone. I just think that if we are put in an environment where we have to use those instincts they will come to the fore. So, being a good entrepreneur does not mean that you succeed because of the Government. The mark of a really good entrepreneur is to succeed despite Government. That is what a good entrepreneur is.

I notice also recently that SPH or Times Periodicals has come up with these awards: Woman of the Year; Young Woman Achiever. Woman of the Year Award was won by Olivia Lum. The Young Woman Achiever was Elim Chew. In their acceptance speeches, two things stood out. What they had in common, both of them, was strong religious faith, and a gung-ho attitude. I also notice that in Olivia's case, her school results were good. Elim in her acceptance speech, said that she was always bordering on not doing very well and her school results were not good. But they are both today in a position where they have made something for themselves and the common factor, apart from the fact that they are young female and single, is that they have really good attitude. They are go-getters and they are gung-ho. And that is the sort of thing that we need in Singapore today. That is the attitude that will make this Budget work or not work.

There is a second wrong question that has been asked, which is: where are the goodies in this Budget? In a time like this, one does not look for goodies. It is really time to batten down the hatches and get to work in terms of stimulating our economy and making the opportunities for ourselves. The goodies, as I see it, have come in an indirect form - the measures to stimulate business, the rebates, eg, on service and conservancy charges, the deferment of the GST - that is a pretty large goody; you just do not see it in a tangible form, but it is a very big goody - the budget for retraining. This Budget is all about what we make of ourselves and the ability to stay relevant in these times.

There is a small group of Singaporeans who really need this help, but there is a very large majority of Singaporeans who can help themselves, and the difference is what you make of it. One example is a lady who came to see me at my meet-the-people session. She has been doing low-skilled jobs. Her husband had just recently been retrenched. She wanted to try and get a job as a cashier and she found that she could not, because she did not have IT skills. In today's environment, anybody who wants to work as a cashier will have to be able to use a computer. She is going to be faced with a choice. She has got a choice of not learning IT skills and she will always remain low-skilled and, eventually, marginalised and irrelevant, or she can go ahead and make that choice to learn basic IT and, eventually, get herself a job. But that choice is hers and hers alone. The Government cannot make that choice for her.

The goodies this year did not come in the form of a sweet dessert. For Members who are familiar with Indian food, they may know of a dessert called ghulab jamun. It is the most absolutely divine dessert. It is made from milk powder. It is made into little balls and soaked overnight in golden syrup. It is absolutely wonderful and it is like an instant sugar injection, and one probably gets an instant cardiac arrest after eating it.

This year's Budget did not come in the form of a bowl of ghulab jamun. It came in the form of a plate of fresh fruit with a handful of vitamins, Omega 3 and Omega 6 oils and a bunch of antioxidants. It does not taste as good but it is a whole lot better for the system. So, it is just a question of what we make of it.

This leads me to my next topic. International Women's Day was on 8th March 2003. Every time International Women's Day comes around, there is this discussion of women's issues and the question of gender equality crops up. There is one area in which Singapore women do not have equality with Singapore men. For various reasons, we have lagged behind, though it seems the gap is narrowing. As far as I am concerned, this is one area where we should remain firmly unequal and we should stay far behind the men where we belong, and this is in the area of cigarette smoking. I firmly support the increased excise duty on cigarettes and the decision to tax cigarettes by sticks instead of weight.

I noted with concern the fact that although the proportion of smokers in Singapore dropped from 18% in 1992 to 14% in 2001, the percentage of young female smokers aged 18-24 increased from 2.8% to 8.2% in the same period. This is a danger signal because those who start at a very young age find it harder to quit later on in life. And if this trend continues, then in the next 15-30 years, there is going to be a substantial increase in smoking-related health costs among the young women who are picking up the habit now.

Cigarette smoking was initially adopted by men in developed countries in the West followed by women in those countries. It then spread to the developing countries including Asia. And the relatively low use of tobacco by women as opposed to men is not because of better health awareness. It is attributable to social and cultural traditions and, in the past, the fact that women had less money to spend. The trouble is that now they do have more money to spend. More are picking up the habit.

The reasons seem to be the same as that for young men, which is curiosity, peer pressure, need to relieve stress, desire to impress friends, and to relieve boredom. For women - for young girls especially - they think it keeps them slim. The problem is that this does not seem to be balanced by an awareness of the dangers of it. The dangers are well known. Lung cancer is the most obvious risk. That used to be a rare disease in the early decades of the 20th century. But by the 1950s, it was a leading cause of cancer death among men in developed countries. Now, it is also becoming a cause of death among women. And what is little known about the fact of lung cancer is that what you really die of is suffocation. You die because you cannot breathe. It is a horrible way to go, and smoking leads to that. There is also risk linked to pregnancy, infertility, cardiovascular disease, stroke, haemorrhage and on top of all that, you get wrinkles as well.

A World Health Organisation report noted that the sad fact is this. If women smoke like men, they will die like men. It is not a good way to go. And, frankly speaking, I think that it is a very good thing that we have raised the tax of cigarettes. What does this have to do with the Budget, you may ask? It has an indirect impact in that it actually saves on medical and health costs. That is the benefit that we will see maybe only in 15-30 years. But the Ministry of Health today has to deal with medical and health costs of dealing with diseases arising from practices that people adopted 15 or 30 years ago. Studies have shown that smokers are very responsible to fiscal measures and I think that the tax increase on cigarettes is a very good move.

With that, Sir, I support the motion.

Mr S. Iswaran (West Coast): Thank you, Mr Speaker, for allowing me to join in this debate.

Sir, allow me to start by saying that I think the Finance Minister has strived to come out with what I think is a very prudent and balanced Budget in a time of great challenge. I say "balanced" because there is clearly an attempt to reconcile some short-term imperatives with the longer-term competitive challenges that Singapore faces. I say "prudent" because it is also trying to position Singapore for the long haul and trying to educate Singaporeans on the need, and all this whilst we have a modest deficit.

Sir, I think many people have commented that this Budget lacks the silver bullet, lacks the path breaking recommendations which are going to deliver us to the new land of opportunity and prosperity. I think it was Aristotle who said excellence is a habit. And I think we should be in the habit of looking for consistent, good budgets and policies which will get us to our final goal, and not look for the magic bullet, because sometimes a magic bullet may not be so magical and it may come back at us.

I think a measure of the challenges we face in this environment today is perhaps best understood if we look at the budget that was announced by the Hong Kong government recently as well. Their corporate tax was increased by 1.5%; personal tax and property tax were also increased by 1%. I think it is going to be phased in over two years. So, they have gone up to 171/2% and 16% respectively for corporate and personal taxes. Levies, including the foreign maid levy, have been introduced in Hong Kong at the expense of the pay of the foreign maids in Hong Kong. And perhaps most significant is the deficit forecast. For the year ending March 2003, the forecast is for a HK$70 billion deficit, ie, S$16 billion. For the next financial year, the forecast is for a HK$68 billion deficit, ie, S$15-16 billion. In the subsequent two years, Antony Leung continues to expect that there will be deficits in Hong Kong. There is a lot of speculation about the robustness of the peg of the Hong Kong dollar as a result of these forecast deficits and, more fundamentally, the question is: is this a structural problem for Hong Kong or something cyclical, as they assert, which they can come out of in the medium term?

Sir, if we contrast that with Singapore, although much has been said about a third year of deficit and some have actually asked whether this is a departure from the history of fiscal prudence that we have had, clearly, the answer is no. And one need go no further than refer to the Finance Minister's speech itself where he made the assertion that fiscal prudence remains a cornerstone and over a cycle of business, the objective is still to achieve a balanced, if not modest surplus, budget. In fact, if we look at FY 2002, if we exclude the transfers to the endowment items like the Lifelong Learning Fund which is about half a billion dollars, and the Medical Endowment Fund which is about $100 million, there was in fact a modest surplus in the last financial year of about $1/2 billion. And for this financial year that we are now debating, the deficit is about $0.9 billion.

In fact, from that perspective, if we look at the last three years, what we have seen is that first there was a deficit year; last year was somewhat of a balanced year; and now we are forecasting a deficit year again, which really is not that alarming and which has therefore given rise to questions as to whether Government can do more to give a boost, especially when we look at the situation in last year's budget as well as the comparison with Hong Kong.

We have had many debates in this House against the notion of deficit funding or pump priming the economy. Some of those include the fact that ours is a small economy which has a substantial reliance on external demand. And the flip side of the coin is that efforts to boost domestic demand, whether it is consumption expenditure or Government spending, will have a limited impact, and we also allow for the fact that there will be substantial leakages from our spending. But given that, I think it would still be useful for all in this House and Singaporeans in general to better understand what would be the actual quantitative impact of such elements. Because the question is: could we not afford such leakages or such less than complete effectiveness in pump priming, and still consider additional spending in a time of some uncertainty where a boost is required in the economy, bearing in mind that overall in the business cycle, we could still achieve a surplus or a balanced budget? I would appreciate it if the Finance Minister could clarify these elements, because this is a repeated comment that emerges from the business sector and other quarters as well.

Sir, there is certainly an air of uncertainty that pervades the economy and, in general, all Singaporeans, and there are many reasons for this which have been well canvassed here - the political uncertainties, the looming possibility of a war in Iraq and also the general economic outlook which is not so bright. But I think key developments in recent times which have had a profound impact on Singaporeans' sense of optimism or hope have been the reorganisation that has occurred in the public sector through the HDB and, to some extent, also in the sector that is deemed to be linked to the Government through the PSA. Some have spoken to me and they see this as a breach of an article of faith - the iron rice bowl - the expectation that when you work for the Government or a large organisation, although it is private but linked to the Government, there is a certain expectation that you will be cared for or that there will be a certain long-term commitment to keep you employed. Clearly, the recent developments have fundamentally changed that perception. And the question is: has the Government lost touch with the plight of the average man in Singapore? Put another way, for example, the question is: can we cut wages? Why must we cut jobs? That is the question that is raised time and again. And I think that those who raised this question perhaps have failed to understand the difference between an anaesthetic and a medicine.

Cutting cost, in my view, is really the equivalent of an anaesthetic in this environment. Without a lot of detailed information, but having looked at many companies that have gone through these exercises in the last few years, cost reduction, in terms of cutting across-the-board wages, might relieve the company's pressure on the bottomline for the short term, but it will have a debilitating effect on its ability to manage its talent, because we are cutting the wages of all, regardless of performance. At the same time, it does not necessarily address the root causes of the problems which compel the company to take the actions that it is taking.

The causes could be many. It could be that there is a need to reorganise to focus on core business. It could be because of renewed competition which has structurally occurred in recent times and therefore compelled a reassessment of the whole environment. Ultimately, one could argue that there is no such thing as a good time for retrenchments. Even in the best of times, we have a problem. Mr Chiam brought up examples of companies like CSM and so on, and I can understand that, as a Member of the Opposition, he wishes to make political capital out of unemployment. But my concern is that at a time like this - and I think Mr Chiam himself has said - many come with real problems - we need to give them real solutions, not political rhetoric in trying to deal with the issues of the day.

In that context, the starting point must be to see why this is happening and whether there is a way to avoid it. Or, if we do it, is it just an anaesthetic which dulls the pain, delays the inevitable and, when the inevitable comes, it would be far sharper and graver? And let us contemplate the cost of inaction. If we do not do these things, or if these companies do not take the action, then it could be argued that the viability of the whole company and its business is at stake. And we are not talking about 10% or 15% of the workforce; we are talking about everybody. That is a consequence that is far graver.

In the case of public-sector organisations, such as HDB, whilst it is painful for the individuals affected, it could be argued that it is far better to take the bitter pill now, focus on the core issues, and find ways to help those affected through the transition, because Mr Chiam himself will argue later why we are raising taxes or why the Government is spending so much. Measures like these do help the public sector to become leaner and, as a result, reduce the pressure on tax rates, allowing us to put more back into the economy.

Sir, having said that, there are elements in this Budget which give Singaporeans cause for a lot of hope. It is not a cause for euphoria, and anyone who is unrealistically optimistic has to really be challenged. But I think there is a cause for measured optimism. And that is not only because of the many reasons that have been discussed in this House, including the intrinsic strength of Singapore financially, but also in other measures in terms of our social cohesion, etc, and other initiatives that are being taken up at quite a rapid pace.

External opportunities through bilateral and regional Free Trade Agreements and multilateral arrangements, all of these have a significant impact on expanding the space for Singaporean companies and, therefore, opportunities for Singaporeans. What we might not have today is an effective means of communicating the value of such macro initiatives to the micro level. Some companies know how to use these to their advantage, but many would need to be helped. And this is an area where I hope the Ministry of Trade and Industry and others involved in the process would be actively disseminating information on the FTAs and trying to get businesses to understand how they can turn these to their advantage.

The other major initiative that has been announced is this thrust and emphasis on entrepreneurship. Again, I approach this with some trepidation, because it is not as if entrepreneurship is the panacea for our problems. It is one plank in the bridge over this difficult time and, if it is done well, it might indeed become - to use a different analogy - the engine that will really boost the rocket. But it would be unrealistic and unwise for us to put all our bets in this one basket and say that this is going to be the solution to all our problems.

On this, I would also like to echo the point raised by the hon. Member for Tanjong Pagar, Ms Indranee Rajah, because I think we do have an element of schizophrenia in Singapore. Entrepreneurs will, on the one hand, say, "The Government should leave the private sector alone. Let us charge out there. Let us do our things ourselves." But they will also, on the other hand, say, "But we need you to help us. We need you to do this, that, and so on" - whether it is a subsidy, a grant, or whatever. To some extent, that schizophrenia is quite understandable: you want to have your cake and eat it, and that is fine.

But from the Government's perspective - and this is where I come to the policy proposal - having appointed a Minister of State for Entrepreneurship, I think the expectations are there in the market as to what the Government will be able to do to effectively promote entrepreneurship in Singapore. Mr Raymond Lim made a very eloquent statement on what he thinks his role will be and will not be, and the example of the Silicon Valley is a case in point. Silicon Valley thrived, in my view, despite government, although government expenditure fuelled it. But there was not the rules-bound and regulation-bound mentality that hamstrung Silicon Valley.

So, perhaps the key role for the Minister of State for Entrepreneurship and the Government in general in this area is to focus, primarily, on the mindset, ie, promote a risk-taking mindset and, secondly, to focus on the environment, so as to remove impediments whilst reinforcing any enabling criteria or factors we have in our environment to promote entrepreneurship and, ultimately, to have a champion for the cause. Unless you have a champion, this message may be lost. We need it to be reiterated time and again, so that it resonates everywhere in Singapore.

The last point I want to make is that having established some positive areas where more will be done and can be done for Singaporeans in terms of opportunities, I do feel that, in the short term, perhaps we could consider additional assistance for those who are in difficulty. Most of our measures in the helping Singaporeans aspect of this Budget are targeted at those who are at the lower strata in terms of income. It is right that our resources be targeted at this group who are in greatest need. But, like the hon. Member for Ang Mo Kio, Mr Inderjit Singh, I do believe that because of the nature and scale of the retrenchments we are seeing today, there is a sandwich class of Singaporeans who are hurting. By normal criteria of wealth measures, such as assets owned and so on, they would actually be deemed to be quite well-off, but, from a cash flow point of view, they are hard pressed. The response of asking them to liquidate some assets would be a lot more credible if the market was indeed a liquid market. But in many instances today, where some are in housing loans with negative equities and so on, this might actually be a difficult scenario.

I am not suggesting we therefore swing to a welfare state, with a lot of unemployment benefits and a plethora of other assistance schemes. But whilst I subscribe to tough love - which was a point that Ms Indranee Rajah was making in talking about us being more self-reliant - I do think that there is a process to be managed here. When my daughter was learning to ride the bicycle, I gave her trainer wheels first. Then, when she was a little bit more confident, I kinked it up, removed the trainer wheels, held the seat, and then let her go!

I do not think we need to go through such an arduous process in this philosophical shift. But there is a case to be made for some short-term forms of assistance which will deliver some relief to those who have worked very hard in Singapore over the years, but due to the circumstances shifting quite suddenly in some cases, they are caught in a difficult spot. This may not require a large resource allocation, but perhaps more a tweaking of existing rules in terms of how they can in fact tap their own resources, whether it is through CPF or other means, such as reverse mortgages, and special schemes for them. And I do hope that the Government will consider that seriously in the next year as a means of helping those in this sandwich class.

Mr Sin Boon Ann (Tampines): Sir, last week I was in Shanghai for a seminar to promote listings on the Singapore Stock Exchange. The seminar was held in a modern international 5-star hotel located at the rather fashionable Bund in Shanghai. More than a hundred interested parties attended, each of whom was carefully screened ahead of time to ensure that they are serious and profitable participants. The hall was packed. Those who attended took earnest notes and looked very serious about going overseas to raise their profile and, perhaps, capital. Perhaps, this reflects the strong vibrancy of the increasingly powerful Chinese economy. This was not only evident in the seminar room, but was clearly visible in the streets, shops and eating-places in the city. However, that was not what struck me. What struck me was a conversation I had with a local accountant who was present at the seminar. He told me that the Chinese recognise that they cannot go on competing on cheap labour and land alone. He recognised that in order for China to continue powering away, they must strive to move up the value chain and build on local brand names that are recognised internationally. Far from just wanting to be the back-lane sweatshops for some other people's inventions, they have strong aspirations to be the Toyotas, IBMs and Panasonics of the world.

My conversation with the Chinese accountant made me realise how fast and how aggressive the Chinese are in trying to scale the ladder of economic development to become a developed nation, rivalling the US in every aspect. And I shudder to think of what this would all mean to Singapore, its economy and the future of its people.

The truth of the matter is surely that the gap of comparative advantage that Singapore has over competing and emerging economies is fast eroding. In Singapore, we have always prided ourselves in having a brand name that is instantly recognisable and respected the world over. We can always leverage on this to charge a premium for our products and services. And it is this brand name which I believe that will hold the key to our future survival.

The way forward for our country is not to take China on in this competition game, but to see how we can lean on our unique qualities of being a well-run, hardworking and honest English-speaking society to ensure our future survival. What do I mean? Sir, please allow me to take a leaf from the humble shoemaker. On a value chain, the common perception is that shoe-making and selling does not quite occupy the same space as bio-medical science or rocket engineering science. Yet, in terms of profitability and size of global reach, there is huge potential in this business. Take Nike, for example. No one would deny that Nike today is a global multinational whose products can be found in almost every nation on earth. Most people would have either heard of the brand or even own a pair of Nike. There are many people out there, including many young boys and girls who would give a limb for a pair of Nike. They are not able to own it because a pair of Nike shoes is just too expensive for many. And those who can afford it will not think twice about paying premium money for it. Yet, we know that Nike outsources the manufacturing of its shoes to the sweatshops in China, Vietnam and Indonesia. The factories that churn out these shoes for Nike have the capability of producing similar type shoes. The main difference is that they cannot put the famous swoosh mark on it, but some other brands, like Double Flying Wheel.

Nike and Double Flying Wheel, which do you think will sell if they are both priced the same? Nike is not in the business of manufacturing. They are quite happy to leave this to others. They are in the business of branding and selling and creating in the minds of the consumers a certain desire of wanting to own and use their products. By doing that, they have added much more value to just ordinary shoes. I do not believe, Sir, that a pair of Double Flying Wheel shoes should be any worse off in quality than your Nike.

Why do people choose Nike? There are numerous reasons. And this is not a forum for us to go into these reasons. However, I will just dwell on one. I believe it has to do with the American brand name. There is somehow a certain cache in the minds of most consumers that if the product came from America, it must be of a good quality. For the same reason, we see in some advertisements that specific mention is often made of some consumer electronic items being from Japan.

Sir, people I have spoken to tell me that Singapore is not America or Japan, and that it would be impossible for a boy from the backwaters to make it big in the city. I used to think that was the case. However, over the years, we come across numerous examples of how a small and provincial company, or even an individual, was able to take on the world and the world became his oyster. I cheered recently, when I read of how a local Singaporean boy was able to build a name for himself by selling his line of clothes in competition with the big fashion houses in Paris and New York; and is able to claim Nicole Kidman and the late Princess Diana as his clients. This boy fortunately came from a family who is able to provide financial support for his dreams. Just think, if he did not have such an opportunity, he would probably be left selling his clothes in some run-down plaza in Orchard Road and the world would have passed him by without noticing him. And of course, would his clothes sell for the prices that he is now selling? Who would be the bigger loser in the long run? Singapore or the boy?

We must pay more attention to brand building and brand management. The question is: how? Sir, in my previous speeches, I had made some suggestions on approaches. The first would be to strategically acquire or acquire substantial stakes to enable board representation in companies with very strong global brand names. In doing so, we not only acquire global companies that would help contribute to our total revenue but, if managed, would allow Singaporeans the ability to have a deeper and better understanding about the ways to international branding and marketing. Secondly, I note from the ERC Report that the proposal was made in respect of the setting up of an IP academy. While I welcome the establishment of such an academy, I am just concerned that, first, the approach taken by the academy may just be too academic and may not deal with the practical difficulties of managing intellectual properties. Secondly, the academy may just be another institution that is divorced from the reality of industry to be effective. Given the broad reach of the subject of intellectual property, I do hope that the academy would also devote much attention to the subject of brand building and brand management which, I would like to emphasise yet again, has not been given enough serious policy consideration that it deserves.

At the risk of being simplistic, the world of business is very much about branding and selling. The better you are able to market and position your products and services, the better it is for you to cream off more fat for your bottom line. Everyone can manufacture a PC, it is only a question of unit cost production to stay competitive. But not everyone can create a Dell or a Compaq brand name that sells around the world. In fact, most Dell computers are manufactured and shipped out to China; but who makes the big profits? The Chinese are fast recognising the importance of the game and will soon play catch up. We, in Singapore, still have the advantage of a name that the world trusts. We should capitalise on it or run the risk of being marginalised and lose the advantage that we have.

Sir, I note the affirmation of our Government that manufacturing will continue to form an important underpinning of our economy. I would support the affirmation, provided that the manufacturing activities that we support would allow us to take advantage of our comparative advantage in relation to China and the other emerging economies. I would question whether or not we are better off leaving manufacturing to the others in most instances. The logic of the globalisation argument, as we are all aware, lies in the fact that labour and capital in an increasingly open world economy would always gravitate towards places that are most cost effective through sheer market forces. It could well be that, in many of our traditional industries, it may not be more efficient for Singapore to keep them. And I would be so bold as to predict that, in the next 10 years, many of our contract manufacturing facilities, including those that are presently found in the electronics sector, will eventually be relocated to China and other places.

The way forward for Singapore is to consider its comparative advantage rather than its competitive advantage. Singapore's strength has always been its well-qualified English-speaking younger generation of the post-independence people and the quality of its public service. Additionally, the fact that it is small also means that it is nimble and could transform itself quite easily. Clearly, Singapore can be a leading centre for research and development and brand building and development. The overall total licensing market is estimated to be some $300 billion a year. If Singapore cannot aspire to clinch even 5% of that share of the market, we might as well give up any pretensions about being a global industrial nation.

If we are able, Sir, to develop strong global brand names, we would be able to build up a strong external economy, which will then give us much room to be inefficient in our domestic economy. For instance, we can earn enough more from our external economy to consider some form of subvention or fiscal incentive to encourage the employment of those who are structurally unemployed, especially the middle-aged workers. For them, we do not have to measure their efficiency against the workers from countries where cheap and untrained labour exists in abundance. The unit cost of these unskilled middle-aged Singaporean workers can then be matched more attractively with the support of our Government. This will provide employers here with a greater incentive to hire local employees as opposed to foreign employees.

Sir, I know that the Government does not always welcome any suggestion of public subsidy, in whatever form. The conventional wisdom is that public subsidy robs the incentive from individuals to work and to improve themselves. While that may be true in general, there is no comparison when the argument is scrutinised more closely. It would be true to say that social benefits generally tend to make a person lazy and a sloth. However, what we are speaking here is to give a man back his dignity by giving him work that he would not otherwise be given, but for the intervention of the state. I know that such a policy may not satisfy in the longer term the requirement of economic efficiency. However, the point of the matter is that we do not need our domestic economy to be efficient all the time if our external economy is powering away strongly, such that it allows us this option. These structurally unemployed workers are still Singaporeans, and we will still have to carry them. Rather than give them handouts, which we have a duty to do if they are truly down, it may be better to subsidise them indirectly through employment.

Sir, we are now at what most would consider the most significant crossroads of our nation's history. We are faced with having to make choices that would decide our people's fate. If we take the wrong path, the outcome could well be very different. The one salutary lesson that we have before us is New Zealand. Like Singapore, New Zealand was very much at the crossroads since the mid-80s. New Zealand also realised the need to restructure its economy and to raise its growth rate. It pointed to the need to boost training, promote entrepreneurship and facilitate new information technologies and strengthen economic fundamentals. These are clear mantras for growth which are easy to spout. Yet, the reality in the eyes of many, New Zealand has failed to achieve the results that it aims for. This is due to a whole host of factors, which included, among other things, the country backtracking on its labour reforms. Over the years, New Zealand's economy has receded to such an extent that it could not now even afford to maintain a combat wing for its air force. If you went to New Zealand today, you would not see many signs of physical wealth, which often in Asian context is measured by the number of Mercedes Benzes on the road.

Singapore does not have to go the way of New Zealand. Unlike New Zealand, Singapore has a strong political will to see through the restructuring. We will not resile from taking politically tough decisions. Yet, political will may not be enough to see us through our present difficulties. We need to have clearer and more defined markers; which brings me now to the point about the ERC Report.

While few would deny the logic of the proposals in the ERC Report, one could arguably say that the devil is in the detail as to how the Government is going to go about its task. The present Budget Statement has given us a broad indication of the steps that the Government is going to take. However, it has been said that we should perhaps have a sharper focus. I have earlier sought to define a more specific strategy of focusing on branding and intellectual knowledge as part of the strategy of building a knowledge economy as a driver for Singapore's future. More, however, can be done. For instance, we can set clear goals for the next 10 to 15 years. It is not enough just to say that we will remake our economy and make it a pretty slogan. We ought to have specific measurable performance indicators, for instance, looking at how many companies we want to bring global. How many GLCs are going to privatise? How many startups we want to nurture, facilitating the growth and expansion of such businesses? This approach will give the exercise a stronger focus, enable us to offer more assistance where assistance is needed. Our strength is in our ability to work towards the long term, including investment, education and training. There is no reason why the ERC Report cannot aim for such concrete outcomes.

This brings us back to the question that we have been grappling with over the years. How far should Government be involved in business? Leaving aside our usual gripes about the GLCs, I believe that there is still a role for Government in business. As in the past, our Government should continue to provide leadership in strategic areas where the private sector does not have the resources or the ability to venture into. Our Government should continue to divest its holdings in the private sector, businesses that can be handled by our businessmen. However, our Government should not cease to provide initiative in other areas where the leadership of which would help us with the crucial need to successfully build up our second economic wing. I do hope that, in venturing abroad, we would have learnt our lessons from the past and avoid making the same mistakes as before; not least of which is our Government's habit of getting civil servants with little or no commercial experience to drive such initiatives. What I have advocated for is a slight departure from the yellow pages rule. We should not be afraid of going into businesses that already exist locally. Rather, we should boldly enter into such areas and add value by creating world-class companies with world-class brand names out of opportunities that we are

Sir, in all my years, I have never seen the mood on the ground to be so despairing and despondent. It is dispiriting for our people to wake up in the morning, to learn of hundreds of fellow Singaporeans being made redundant by the HDB or PSA. How many more will have to lose their jobs before our economy recovers, if it recovers? How many more middle-aged workers can we employ under the present climate? In this crisis, what should stand out is our ability to inspire the confidence of our people through our leadership. We should provide our people with a very clear roadmap on how we are going to navigate out of our present structural economic problems. Making broad statements about what we are going to do is not going to add any more confidence to the people. As I have said before, we should continue to provide sharper focus on our strategies. For me, I know where we should be heading. I would say once again that we should continue to build a strong external wing by investing in or acquiring world-class companies with world-class brand names, and leveraging on these companies to help us build our own global brand names. If we could do that, and do that successfully, we could then afford to have some inefficiency in our domestic economy by subsidising employment for Singaporeans who are not able to adapt to the employment demands of the new world economic order.

Subject to the comments above, I support the Budget Statement. 1.15 pm

Mr Chew Heng Ching (East Coast): Mr Speaker, Sir, there are many who have criticised the Budget for being "a non-event" and "uninspiring". In fact, one critique is on the removal of taxation on interest income from savings. One sarcastic remark often heard is that Singaporeans have no money to generate interest to be taxed now, given that economic conditions are so bad. Even for those who have money, interest rates are so low that the impact of the relief is negligible. So, why introduce it now?

Sir, like many other brickbats, these comments have missed some of the more salient benefits and measures announced in the Budget which will have a positive impact on the long-term health of the Singapore economy. Singaporeans do have good reasons to be concerned about their economic prospects and livelihoods, given the uncertainties that surround the world economy and the political environment today.

However, they cannot and should not just leave the job of reinventing the economy to the Government, and assuming that the Government will save the day, or will hand out something to them should things worsen. There is a fundamental need in our Singaporean society to change our mindset to economic and social matters and indeed foster a greater spirit of self-reliance. And this is the biggest challenge before us.

If we band together and change the way we see ourselves and do business, be more entrepreneurial in many aspects, the world is still our oyster. There are grounds to be optimistic and not miss the silver linings contained in the Budget 2003.

Nevertheless, Singaporeans cannot just stick their heads in the sand like ostriches, and ignore the reality of the weak global economic environment confronting us today. We have been in a "soft spot" for over two years now and, unlike during the Asian financial crisis some five years ago, the US economy is also in bad shape. With a structurally weakening US dollar following budget and external deficits in the US, our ability to export ourselves out of any economic weaknesses may be further compromised. In addition, our reliance on MNCs to provide stable manufacturing jobs is fast being eroded by the cheaper competitors like India and China.

In many respects, Sir, whilst we strive for value-added and highly skilled jobs to move up the value curve in job creation, or indeed to fulfill the EDB's vision to transform Singapore into a "Global Entrepolis", we have to be very mindful of the fact that Singapore, with its high wage and land costs, will find it harder and harder to continue to be relevant economically. The Budget 2003's proposals on putting off the restoration of employers' CPF contributions, and its lack of incentives to further stimulate demand in the property market, may be difficult for Singaporeans to understand.

Some measures which affect the pockets of the man-in-the-street are no doubt painful. They are, however, inevitable. Going forward, more radical measures to address these two cost components may still be required. And if we do not do that, when the next economic boom comes, Singapore may be left behind.

Seen in this light, Sir, to me, the crucial platform that Budget 2003 has incorporated from the ERC's recommendations is its emphasis on entrepreneurship and the growth of Singapore companies. I am glad the Government has now recognised that we must reduce our over-reliance on MNCs, and actively promote entrepreneurship, self-reliance and innovation among Singapore companies.

The appointment of my GRC colleague, Mr Raymond Lim, to head the entrepreneurship drive is a testament to the Government's commitment to ensure that Singaporeans can be lured out of their comfort zones, with incentives and some prodding on their backs. I am confident Mr Raymond Lim will do a good job and have as many of the ERC's recommendations on entrepreneurship implemented as quickly as possible. However, Sir, I do not envy him. He has a difficult task ahead.

Unfortunately, I believe that to be successful in this initiative to boost entrepreneurship, no amount of safety nets and incentives alone will be enough to tempt Singaporeans out of their comfort zones. They are so used to the tried and tested path of pursuing higher education, jobs and stable careers. There has to be a complete overhaul of the different parts of Singaporean society, both in mindsets and aspirations and, perhaps, a slow and gradual erosion of our kiasu and kiasi mentality.

Sir, taking a leaf from Mr Sim Wong Hoo's Chaotic Thoughts from the Old Millennium, Singaporeans, by and large, suffer from "NUTS" or the "No U-Turn Syndrome". He points out that:

"In the US, where there is no sign on the road, it means that you can make a U-turn. When the authorities do not want people to make U-turns, they put up signs to tell you not to make U-turns. In Singapore, it is the reverse. When there is no sign on the road, you are not allowed to make U-turns. When the authorities allow you to make U-turns, then they will put up a sign to give you that right."

Sir, the bottomline is that both systems serve the same purpose, ie, to better manage traffic. They look similar, but the social repercussion is significant. The "no U-turn syndrome" has created a way of life for us that is based on rules. And, without rules, Singaporeans cannot perform. They are paralysed.

Sir, we need to change our mindset. I fear that whilst our budget initiatives to boost entrepreneurship are good, we would not realise the intentions, if steps are not taken to also address this mindset across all Singaporean society. Civil servants, for instance, need to be prepared to make decisions that would be pro-business and pro-entrepreneurs. Civil servants must not assume that the businessmen are out to cheat the system and exploit loopholes. There is a need for a comprehensive review of internal policies that stymie business and entrepreneurs, so that the spirit of free enterprise can be enabled. I acknowledge that the Ministerial Committee on Services and the initiatives to streamline rules and regulations are already in place. However, Sir, more needs to be done at a faster pace.

Sir, I have long pointed out in this House that to effectively change the bureaucracy, we would need to enable more cross-overs of private sector talents into the civil service - perhaps, even as high as the Permanent Secretary level. After all, if the status quo continues, it could be self-perpetuating and not be conducive and responsive to change. Those from the private sector surely would be able to bring their perspective, from being on the other side of the table, to good and immediate use, rather than trying to get civil servants with long-standing practices to try to stand in the shoes of the private sector - a much more onerous task. I suggest that the Government seriously look at employing more private sector talents into key positions within the civil service, in the same way that we are now seeing more Ministers in Cabinet who are from the private sector.

Sir, there is also a need for more attention to be paid to our younger workers and students in secondary and tertiary education. This generation should not be told to achieve greater academic qualifications and skills upgrades alone. It is precisely this motivation that has made many Singaporeans kiasu. The higher the educational certificate, or the more paper qualifications achieved, the higher the opportunity costs in leaving the comfort zone from the rule-based path of JC, university, stable job and career growth.

I note the disappointment aired by a recent graduate to the Straits Times' Forum Page last week on not being able to land a job after getting his university qualifications. This is in stark contrast to the winner of Her World's Young Woman Entrepreneur Award, Elim Chew, who graduated from the school of hard knocks, at the lower end of her "O" level cohort, and many business failures. Persevering and with drive, she now runs a business of more than $10 million turnover per year. We would need to train students to inculcate in them the mindset of risk-taking and self-reliance, so that the future economy in Singapore can be bottom-up, broad-based with depth and breadth of enterprise.

Sir, take another example of mindset change. It was recently reported that the School of Sports Excellence to be set up has a criterion to take in only students who are from the Express stream. Why do we restrict ourselves to this rule? True, some of our top sportsmen have been strong academically as well, but there are many more equally successful, such as Fandi Ahmad and Remy Ong. Our Asian Games bowling champion, Remy Ong, for instance, has even set up his own business. They are both not from the Express stream. There must be a sea change in our thinking across-the-board, so that flexibility in approach, daring to try, and risk taking, can permeate throughout our society.

Sir, another measure that many would like to see would be the freeing up of the portion of CPF beyond the Minimum Sum, for use as business investment. There are some who have substantial savings in their CPF. These individuals are likely to be successful in their career, and have substantial private savings and investments, and insurance or pension plans of their own. Having a significant portion of their funds locked up in CPF would be a disadvantage, should we want to encourage entrepreneurship among the more able in our society.

I would therefore like to suggest that perhaps a means test, say, for an individual having $X of private investment/pension set aside already, be adopted to allow for the withdrawal of CPF for business investment. Entrepreneurial activity should not be capped on the basic assumption that Singaporeans cannot think and plan for themselves, and need to lock up funds in their CPF. Some can and should be given the leeway to expand the depth of enterprise in our economy.

Finally, Sir, I speak for many Singaporeans in expressing our concern about the state of our economy. True, pump-priming does not work that well in Singapore, as 80 cents of a dollar pumped in is leaked out in our highly open economy. The conditions in the labour market in the private sector are still difficult, with pay cuts, wage freezes and retrenchments seen. And this is now seen in the public sector, such as HDB and PSA Corp.

Still, Sir, it is not all doom and gloom. Many have alluded to the problems facing Singapore today as akin to Japan after the twin bubbles in their property and stock markets burst in 1992. True, we are a smaller nation and would find riding the rough tides of economic ocean tougher at times. However, in our smaller size lies our flexibility to adapt and change. As long as Singaporeans continue to pull together to make the painful sacrifices, our long-term economic future is in good hands. Indeed, unlike Japan, it is fortunate that Singaporeans have chosen wisely to have good continuous stable Government, which is able to implement essential policies for the long-term good of Singaporeans, even if it involves some pain in the near term. We should be proud of that, stand tall against the challenges we face, and I am confident that, with continued good Government in place, we will rise to the occasion again.

Sir, I support the Budget Statement delivered by the Deputy Prime Minister and Minister for Finance.

Mdm Halimah Yacob (Jurong): Mr Speaker, Sir, thank you for allowing me to take part in this Budget debate.

This year's Budget contains a clear and unequivocal message for workers. There has been a significant shift in the labour market, and this has vast implications on workers. Although manufacturing remains one of the two key engines of our economy, it is no longer the largest provider of jobs. Most of the jobs are found in the services sector, but even this sector is not spared. Some jobs have shifted out of the services sector to lower cost locations. The public sector, which has undergone a lot of changes over the last few years, is also no longer a safe haven. In a nutshell, the employment market has drastically changed, and painful adjustments have to be made.

Sir, we can see these changes that are taking place and know and understand why they are happening. Jobs are less permanent now, and shorter-term, compared to the past, and no one can expect to retire in his first job any more. But, at the same time, we must also understand that workers have families and commitments which are regular, permanent and long-term. Hence, they need income stability and job security.

How do we ensure that we continue to maintain a flexible job market but at the same time do not cause such huge fluctuations in our workers' lives as to destabilise families and our society? Can we achieve these twin objectives of a flexible labour market, which means that more of the ups and downs would have to be borne by workers, as against their need for balance and stability? Ms Chua Mui Hoong, in her article in the Straits Times dated 8th March 2003, argued that people should stop lamenting about job losses and instead should focus on how to manage job shifts. While I agree with her on this and the many other good points which she had made, I am a bit concerned about one point which she had raised. She had argued that the employment relationship should be treated as a purely commercial contract, and one should not look beyond that. If we accept this argument, I fear that one day, we will even have to do away with core legislation which protects workers' interest and welfare, such as the Employment Act or the Workmen's Compensation Act, as the argument would then be that workers should take care of these needs through individual contract negotiations. Is this a desirable development from our society's point of view? I clearly submit that it is not, as the fact remains that there are inequalities in the labour market which cannot be completely removed by adopting a strictly commercial approach. Hence, some form of legislation and system has to be put in place to ensure fairness and to balance the interest between enterprises and workers. I would argue, Sir, that this approach is good, not only for individuals and families, but also for the economy and for employers too. Workers who are more stable and secure can contribute more effectively and efficiently to the company and our economy.

Sir, I want to make one point clear though. I am not suggesting that we should become even more protectionist. But I am arguing on the need for a balance. I also wish to make the point that as we review and refine the present structure that is in place in order to achieve labour market flexibility, we also need to update and refine the existing system that is in place to protect workers' welfare.

A key refinement that is sorely needed is clearly portability of core benefits. Currently, other than the CPF, the other employment benefits are rigid in two ways. They are mostly tied to workers' present job and are not movable. Secondly, they also depend on a person's length of service. A case in point is the medical benefits, which are important to workers as healthcare cost is a grave concern for many. But as the Finance Minister correctly pointed out, once a worker moves out of a job, he loses the benefit. For older workers, this is particularly hard as employers do not want to hire them because of concerns over higher medical costs.

Sir, I am very happy that the Government has accepted the ERC's recommendation on portable medical benefits and decided to raise the tax exemption limit for additional Medisave contributions from private sector employees from 1% of an employee's monthly salary at present to a lump sum of $1,500 per employee per year. But, Sir, I would like to request that the Government consider two refinements. First, I would like to ask that the Government consider providing incentives for older workers to move into the portable medical benefits scheme. This is important, as they would otherwise not find the scheme attractive enough, as the portable medical benefits scheme is essentially a savings scheme and the earlier you come on board the scheme, the better. Hence, for older workers, because they have fewer number of years to work before retirement, they may find the scheme less attractive. Having any support from the Government will be very helpful in terms of extra premiums or other incentives.

Another possibility is for the Government to consider providing different scales of benefits for tax exemption for workers of different age groups. For example, older workers can be given a higher tax exemption instead of a blanket exemption of $1,500 for everyone.

Secondly, I would also like to ask the Government to consider pegging the additional 1% contribution into the Medisave account to the median wage of our workers. This would ensure that lower income workers have a basic floor. Otherwise, the contribution that they receive will not be meaningful enough to encourage them to adopt the portable medical benefits scheme and would not provide effective protection. Pegging the 1% contribution to the median wage is a fair and reasonable suggestion. So, I would like to ask the Minister to seriously consider this proposal.

Sir, along the line which I have argued earlier on the need for refinements to our existing system to ensure a balance between flexibility and protection, it is important that we continue to strengthen our social safety net. As the economy restructures and jobs are shared, there is a need to ensure that workers get some form of compensation to tide them over their unemployment period. While news reports are full of high profile cases, like the PSA and HDB where some have lamented that the benefits are generous, there are cases where workers are not paid when the companies retrench or wind up. While there is flexibility for employers to shed workers, we also have to ensure that employers exercise this right fairly and in a responsible manner. So, I call upon the Government to monitor the retrenchment situation closely to ensure that employers comply with the tripartite guidelines when dealing with excess manpower and ensure that workers are paid retrenchment benefits when they are retrenched. Under the guidelines, employers are required to consider implementing a shorter workweek and other measures for reducing costs before resorting to retrenchments. But there is no means of ensuring that employees comply with these.

There are two measures which I hope to seek a response from the Government. One possibility of further strengthening our social safety net is the setting up of a fund which could be used to pay some benefits to workers who are retrenched. I know that, in the past, this idea had been shot down. It had not been well-received but I think there is some need now for us to rethink about this issue. A key issue here is, of course, financing. But I would like to suggest also that when a review of the CPF is conducted, the Government could consider setting aside a portion of the CPF into this fund. Also, instead of giving out shares or topping up the Medisave, perhaps the Government could consider contributing into this fund.

Sir, I do not have ready answers on this. But this is an issue that we need to discuss and forge a consensus on how to move ahead. As the long-term unemployment rate will remain high with structural unemployment complicating the issue, there is clearly a need to engage in further discussions on this. In order to prevent this fund from becoming a disincentive to work, there can be conditions attached, such as the maximum that can be withdrawn and the need for the retrenched worker to make serious efforts to find a job. Financing, as I said, is a key issue, but I am quite confident that if we can continue to discuss, we may be able to forge a consensus.

On the issue of foreign workers, Sir, I agree that there must be flexibility. I accept the argument that there is no way that the 600,000 foreign workers can be replaced by the 80,000 Singaporeans who are unemployed. To send back even 10% of these foreign workers will significantly impact on our economy and cause loss of jobs among Singaporeans if companies pull out due to a shortage of labour or because of the lack of skilled workers. But at the same time, I feel that there is a need for balance and for the Government to monitor this issue more closely. The quotas were fixed during periods when unemployment amongst Singaporeans was lower. But with the current high unemployment rate and the projected long-term unemployment rate of up to 5%, these quotas may not be sustainable. Hence, I call upon the Government to review the foreign worker quota more frequently and at shorter intervals, depending on the economic and employment situation, to ensure that Singaporeans are not disadvantaged.

Sir, a core element of ensuring that there is a balance between flexibility and protection is workers' training and skills upgrading. I strongly support the formation of a statutory board to undertake the Continuing Education and Training and job assistance programmes. This is an important milestone in our effort to upgrade workers' skills. The current measures on job assistance were developed primarily over the last few years, arising out of the economic downturn. However, structural unemployment will be a long-term phenomenon. Hence, a more coordinated and more encompassing approach is needed in dealing with workers' training and job placement.

There is certainly a need to establish a closer nexus between training and job placement. But, on the other hand, some flexibility is necessary. If a worker is trained only if he can be placed in a job, this would also act as a disincentive to training. I want to applaud the Government for setting aside $500 million for the Lifelong Learning Fund and another $37 million for skills upgrading efforts. Singapore's huge investment in education and skills training is the envy of many countries. Many countries aspire to educate and reskill their workers as we do. Our efforts have been cited in many international publications, such as ILO's or the United Nations' publications, but few countries could come close to what we have done in terms of our heavy investment in our people.

The real challenge in reskilling our workforce is how to ensure that those who really need the training attend training courses. Based on anecdotal evidence in the Malay community, for instance, my sense is that, in terms of percentage, the better qualified ones are those who are more likely to undergo training. We should have a more in-depth understanding and analysis of the training profile of our workers so that we could have a more targeted and focused approach in our training efforts. I hope that the statutory board charged with Continuing Education and Training would be able to deal with this issue in a more focused and coordinated way.

Sir, another aspect of balance which is necessary, in my view, is to look at how to help employees balance work and family. For years, we have been trying to increase the birthrate. But we have made very little progress. Last year, despite all the incentives given to families to have more children, we had the lowest birthrate in 14 years. The underlying reason is clearly the inability of many dual-income families to cope with the increasing demands of work and family. Many women today work not for aesthetic reasons or for self-fulfillment but because they have to. Women's income constitutes a significant percentage of the total family income. Many companies have found that helping their employees balance work and family means greater job satisfaction, less turnover and higher productivity.

So, I call upon the Government, Sir, to give a stronger push to initiatives to promote work and family balance. As the issues affecting the family is multi-faceted, it may be timely to consider setting up a National Family Council, akin to the National Youth Council, to take care of all matters pertaining to the family. The National Family Council can act as the coordinating body, as well as the body to champion all matters pertaining to family.

I would also like to request the Government to consider increasing the subsidy for parents who put their children in childcare centres. The last time that the subsidy was increased was some years ago when it was fixed at $150. Since then, childcare fees have gone up but the subsidy has not been reviewed.

Mr Speaker, Sir, I also call upon the Government to pay special attention to the plight of older workers. Ageism is alive and well and employers continue to discriminate against older workers who are considered unproductive, slower and not adaptable or trainable. Such stereotypes are not only demeaning but also untrue. I have met many older workers who are unhappy that despite the efforts to upgrade and change mindsets, employers continue to discriminate against them. We need to highlight and recognise best practices among employers. The Ministry of Manpower can perhaps work out a scheme to recognise efforts of employers who have successfully integrated their older workers in their workforce.

Sir, let me move on to the public sector. I must say that there are a lot of anxieties when the Budget Statement mentioned that there would be a review of public sector's services with the possibility of privatising some of these services. There are two points which I would like to make. First, in line with our strong tripartite tradition, I would like to urge the relevant Ministries and statutory boards to consult and involve the unions before restructurings are carried out, so that workers' concerns can be addressed and the restructurings can be properly carried out. In this regard, I must commend the HDB management for involving the union and the extensive consultations that they had with the union and the workers before the restructuring.

Sir, managing change effectively is critical to ensure that we do not end up with a demoralised public sector and to ensure that the outcomes which are desired are actually achieved. Secondly, Sir, I hope that the Government will put in place a system to monitor the quality and delivery of the services which have been hived off or may be hived off to the private sector to ensure that the same level of quality in good service is maintained. A key reason why there is strong opposition to privatisation of public sector services in many countries is because after privatisation, people find that the cost of the services either went up or the quality was affected. Hence, we need to ensure that whilst the objective of outsourcing services that can now be provided by the public sector to the private sector is cost, this should not result in a lower or more costly service

Sir, I agree with Mr Leong Horn Kee that there are concerns among the older workers, whether they have enough savings in their CPF. I also agree with Mr Inderjit Singh that there is a need to further promote the monthly variable component. I strongly support the Deputy Prime Minister's call that employers should pass on part of the cost-savings to deserving workers through the variable component of wages.

During these difficult times, it is important that we continue to maintain the trust and confidence of workers. If companies that are still doing well do not reward workers, or try to exploit the current economic downturn, then I am afraid that irreparable damage will be done, and people will be less willing to accept change or to make sacrifices. It is also important that while we ask workers to tighten their belts and accept harsh measures for their own future, the Government continues to ensure that the cost of living does not escalate. If wages do not increase, or the pace of increase is very moderate, but healthcare, housing, transport or other cost increase, then this would cause hardship and affect workers' standard of living. Hence, I urge all service providers, whether public or private, to heed people's anxieties and concerns and do not indiscriminately increase their charges.

Sir, I also call upon the Government to continue to monitor the situation of low income Singaporeans. This is to ensure that they receive the assistance that they need. There are help schemes that are already in place but we need to review these schemes from time to time, to ensure that they are adequate and are accessible to those who are really in need.

In conclusion, Sir, how would I describe this year's Budget? To me, this year's Budget can be summed up in three words - pro-growth, pro-job and pro-workers. This is not an assessment that everyone would agree with. Some had said that this is a pro-business and pro-employer Budget. They pointed to the many incentives given to businesses, compared to some of the painful measures for workers. So, as a unionist, why am I arguing that this Budget is pro-worker? Mr Speaker, Sir, this is because we, in the labour movement, understand the realities down the ground. Ask any worker today and he will tell you that his major concern is about employment. Those who are employed are worried that they will lose their jobs. Those without jobs are worried about how fast they would secure another one. After the retrenchments in PSA and the restructuring in HDB, many wait anxiously and watch out for signs that will tell them whether their company is next on the line. There is an air of uncertainty and general anxiety in the atmosphere.

Sir, having spent more than two decades in the labour movement, I must say that this is the most challenging period that I have experienced. In such a climate, any measures that will help to preserve jobs or to delay retrenchments are welcomed. Any measures that tell us how new investments will be drawn in and new jobs created are welcomed. Will the measures announced in this Budget guarantee that no jobs are lost? Will it guarantee that new jobs will be created to soak up new entrants to the labour market and the retrenched? Will it guarantee that older workers will continue to be employed? The reality is that no one can guarantee anything, as there are just too many imponderables. But then we, in the labour movement, ask ourselves whether we would be worse off or better off without these measures. Sir, if we stick steadfastly to old paradigms and rules, will it help the workers or make their situation worse? How should we champion and articulate workers' interest? Does championing workers' interest mean that we have to take the popular line and shout slogans or do we adopt a more responsible attitude, analyse issues, think out the strategies and work out the programmes to help our workers? We in the labour movement have decided to cut the rhetoric, roll up our sleeves and get down to work.

Singapore's progress is in no small measure due to this responsible part that we have played in protecting workers' interest. After much soul searching, we agree that, difficult though some of these ERC measures may be, they are necessary for the short-term as well as to protect the long-term interest of workers. At least with these measures we now stand more than a fighting chance to make a break and to recover strongly. If we had stuck to our guns, we may not even have that fighting chance. Take the case of the 2-year CPF deferment. Sir, I must tell you that there was also a lot of soul searching on our part. Some would have preferred to wait and have it assessed on a yearly basis. But at the end of the day, many of us are persuaded that we are not dealing with normal times. We are dealing with unusual times. And unusual times require unusual measures, unusual ways of doing things and unusual sacrifices.

Sir, there are so many threats and challenges that Singapore is faced with. It is as if our entire resolve as a nation is being tested. I must say that we have kept the flag flying high. It has not been easy to get people to think and see the long-term. Sometimes, I think that there is a perennial disconnect between the Government's long-term plans and visions and desire for people to think long-term and people's concern over their short-term needs. The challenge for Singapore really is how to bridge this perception gap so that we have more people thinking on the same wave-length. At the end of the day, Sir, what will hold us together as a people and enable us to overcome these huge challenges that we are now faced with is the trust and confidence that people have in the Government. This trust and confidence is not something that is developed by chance or that came about overnight. It arose because the Government has repeatedly kept faith with the people and delivered on its promises. I am confident that a new partnership is now developing between the Government and the people. Trust and confidence is still a key consideration, but in this new partnership it also requires greater ownership and responsibility on the part of all Singaporeans.

On this note, Sir, I support the Budget.

2.08 pm

Dr John Chen Seow Phun (Hong Kah): Mr Speaker, Sir, I am happy to note that the Finance Minister in his 2003 Budget has taken into account many of the points made by the ERC and its various sub-committees. The ERC Report highlights the problems Singapore faces in the transition towards a full-fledged first world economy. Its recommendations will serve us well in the future as we strive to find our place in the new knowledge era. I would like to congratulate members of the ERC and its sub-committees for a job well done.

The current gloomy scenario is a good time to take stock, consolidate and plan for the future. However, we must not confuse ourselves between the effects of the current downturn and the effects of long-term change, which is brought about by globalisation, the new economy and Singapore's progress into the premier economic league. The ERC should be commended for addressing both the short-term and long-term problems. Today, I would like to comment on the issues of Singapore's competitiveness and helping dislocated Singaporeans to remain employed.

First, on competitiveness. I believe that Government can and should help Singapore businesses, be they domestic or international, to be competitive. We can do it by taking the Singapore Inc approach. By "Singapore Inc", I mean Government and businesses consider each other as partners to promote a flourishing economy. There is greater urgency for this now as we compete as a nation in a globalised environment. Government agencies must therefore seek ways to facilitate businesses and encourage entrepreneurship by removing obstacles and help the implementation of new and novel ideas. This will require a new mindset on the part of the Government, in that the Government, together with civil servants must stand on the side of businesses to help them survive and prosper.

I am glad that Minister of State, Raymond Lim, has recognised the need for this new mindset in his speech earlier, and Mr Inderjit Singh has also spoken on this. It is not unlike the role of EDB helping MNCs to set up their businesses in Singapore. Likewise, SPRING Singapore, and indeed all Government agencies should go all out to help businesses in their thoughts and actions, be more market-friendly, and when an application goes against existing rules and regulations, find ways to justify the applications, without making the rules meaningless. Let me give one or two simple real-life examples to illustrate my point.

A grassroots leader of mine operates an eating house along Race Course Lane in the central area. The property next to his has an extension jutting out from the main facade. As a good businessman, my grassroots leader put up his eating house sign above his gate away from his facade, but in line with his next door extension, so that the visibility of the sign would not be obstructed and his business would not be affected. Lo and behold, he was asked to remove the sign by the authority because advertisement rules in the central area require the sign to be flushed with the property facade. He appealed but was rejected. I found this unacceptable and so I appealed on his behalf to the Minister, arguing that if the next door extension had been allowed, and had already changed the facade of the original row of properties, why should the authority insist that the eating house sign must be flushed with its own facade? Fortunately, the Minister agreed and the appeal was granted. But what if I had not appealed? The problem should therefore not have remained unresolved in the first place. This will be the case if the relevant Government officer believes that he also has a duty to assist businesses.

Let me give Members another example. A construction company recently bought over a cement plant to produce cement for its own use. One way to make its cement competitive compared to imported cement is to lower the cost of importing the raw material. The company found that if it is allowed to unload the raw material at the existing Government jetty, which is being used now for unloading of sand and granite, it can save substantially on import cost, as opposed to unloading the material at Jurong Port. The company applied for permission to do it on the grounds that the physical form of the raw material to be imported is similar to sand and granite. In addition, if the cement plant survives, it will continue to provide jobs and utilise a substantial amount of electric power. The authority, however, rejected its application. One official actually told the company that it should just import the cement instead of producing it in Singapore.

Mr Sim Wong Hoo, therefore, hit the nail on its head when, according to his book "Chaotic Thoughts From The Old Millennium", he told his customer service officers that they were in fact the customers' advocates and they had to be fighting with him for their customers' interest rather than the other way round. I believe civil servants must adopt the same attitude. They must realise that they work for Singapore, as part of Singapore Inc, and that the businesses which they deal with are their allies, as well as their customers, and not an adversary to be challenged at every opportunity. It is commonly perceived that when a civil servant is faced with an application for a new business activity, which does not conform with some existing rule or policy, his gut reaction will be to simply reject the application. This is what Minister of State Raymond Lim earlier referred to as the default "No" button. The civil servant will, at best, and in line with our campaign for a gracious society, find a nice way to write the rejection letter. However, it does not solve the problem of the business applicant and, worse, if the applicant has come with a brilliant, revolutionary idea which can benefit Singapore.

So what should civil servants do? First and foremost, if it has not already happened, the attitude of just following the rules has got to change. Yes, we must follow rules, regulations, policies and guidelines. They are needed for good order. However, they must not be obeyed blindly. When an application from a business with a new idea comes along, civil servants ought to try to help it obtain the approvals it needs. In the new economy, and if Singapore is to remain competitive, that should be their duty. This is how they can become the "customer's advocates".

If the application cannot be approved due to some rule or policy, the civil servants should help the applicant find a way around the problem. If the case is good enough and is beyond his authority to approve, he should bring it up to his bosses. He should never wait for the applicant, who is his customer, to appeal to the "higher authorities". Being the advocate, he should initiate the appeal on his "customer's" behalf.

Secondly, in our civil service system, his immediate superior should welcome such initiative instead of finding it bothersome. Indeed, the immediate superior should now, in turn, become the customer's advocate to help the applicant obtain his approval. If a satisfactory decision still cannot be made, the matter should progress further up the civil service hierarchy. As far as possible, it should not be a matter that needs to be brought up at a meet-the-people session and be resolved by MPs writing to the Minister.

In this way, all avenues can be explored before turning down business applications with sufficiently good ideas. New ideas do not come about easily. Surely, we must give them due consideration before tossing them into the bin, just because of some old rule.

If such due process is given before rejecting applications, the entrepreneur will at least be encouraged by the experience. He will be willing to try again in future because he can see that the Government and civil servants are on his side, and not another obstacle to be surmounted. Mr Speaker, Sir, this is one way we can encourage more entrepreneurship in Singapore.

Another important issue affecting competitiveness is land. Members have spoken about it. Land cost is an important factor of production. I am glad that the ERC has recommended that our industrial and commercial land be priced competitively in relation with competing nations. In order to achieve this, land should not be priced according to alternative use but in accordance with its direct industry use. Being the largest land owner, the Government can exert a great influence over land cost.

While there is a need to lower land cost generally, I understand that there is also a dilemma. If land prices fall too drastically, existing land owners and lessees will be hard hit. Our financial system may be affected thus worsening our already fragile economy. However, while caution is prudent, I urge the Government not to "do nothing" or too little since land cost is one major factor affecting our competitiveness.

Two measures announced by DPM during his Budget 2003 speech are for a property tax rebate and rental rebates. Unfortunately, these measures are only for six months. I find this too cautious and feel that we can be far more generous. Let me explain.

DPM has justified that the freeze in the restoration of the employer's CPF contribution rates for a further two years is to give certainty to the employers, MNCs and investors about the CPF issue. It is intended to send a strong signal that we are serious in solving our problems and that we are determined to keep our business cost competitive. This is the sacrifice our workers are asked to make. But when it comes to Government rebates, I am puzzled that the Government is only prepared to give six months. Should not the Government also make the same commitment of two years on land and other costs and send an equally strong signal to investors?

The property tax rebate and the extension of rental rebates, together with the reduction of foreign worker levy and the reduction of diesel tax, etc, should also be given over a period of the same two years, instead of only six months. This will certainly send an equally strong signal to our workers. Yes, with the war looming and economic uncertainties reaching an unprecedented height, perhaps the Government should be even bolder and increase the quantum of the property tax and rental rebates given.

The longer period of two years is not as "reckless" as it seems. If the economy recovers, the Government will have more tax income and can well afford it. If not, then these rebates and reduction are certainly needed to lower business cost. Heads, we win; tails, we also win - what could be better?

Another threat we face is the hollowing out of some of our industries and the loss of jobs. The ERC has reported that we have sufficient industrial land. Therefore, we should start to consider pricing land according to industry use to hold on to even the lower-tech industries through competitive land prices, and dissuade them from migrating to low cost countries. We need to do this in order to provide continued employment for Singaporeans who find it difficult to re-skill. It is better to do this than to give them social assistance. Perhaps in order to limit any undesirable effects, this measure can be strictly targeted. We can start by putting aside only a small portion of our JTC land bank for this purpose. This is better than leaving our land vacant when these lower-tech companies migrate.

Sir, capital is another important factor. I agree with the Government on various measures to encourage the people to keep their capital or money in Singapore. Lower direct taxes will allow for capital regeneration. The stable Singapore dollar policy is also beneficial to capital inflows. Elimination of taxes on profits repatriated from abroad will also encourage more Singaporeans to bring back much needed money from their overseas operations and help lift the domestic economy. Abolishing taxes on interest earned from deposits in Singapore will also encourage money to remain here.

The capital allowances for all capital items will also be beneficial to encourage risk-taking. I also urge the Government to allow losses from an overseas subsidiary to be consolidated at the group level for taxation purposes. This measure will encourage our companies to go overseas and globalise.

There may be some concern of abuse. However, the Government is already aware of this possibility and I am sure appropriate measures, like capping the quantum of losses allowable for group tax relief, or a registration or monitoring system, can be instituted to prevent this.

Sir, the new knowledge economy will throw up one undesirable effect, ie, structural unemployment. There will be workers who will find it too difficult to retrain and reskill, either due to their age or other factors. As a modern society, we must provide some assistance to such people, not only in the form of a pure monetary handout, but also meaningful work so that their self-esteem does not suffer. My earlier suggestion on reserving some cheap land for lower-tech industries will help. However, more can be done.

I am sure Members will agree that financial help which is tied to the performance of some meaningful work is far superior to a pure handout, like ERS shares. Such work schemes may be difficult to implement due to the concern that some unscrupulous people may abuse it. Nevertheless, we should not be swayed from the higher intent and should find ways to overcome these difficulties.

It is a good idea to counter structural unemployment by using the concept of "negative income tax". This measure is better, more meaningful and more effective than the "handouts" given since the negative income tax is associated with job creation. The Government already provides subsidies for various training and apprenticeship schemes. In general, this can be further extended more widely and for longer periods, if necessary.

For older workers, I would like to urge the Government to consider subsidising part of their CPF payments, instead of simply instituting a cut in the contribution rates. This achieves the intention of lowering costs for employers and will also protect the workers' retirement nest-egg from shrinkage. The amount of Government expenditure needed is small compared to the total expenditure. The money spent here is better spent, more targeted, than simply handing out shares or money across the board.

Further, I would like the Government to consider instituting a "paid" community or social work scheme. The benefits of this are two-fold: the old, chronically sick, underprivileged and the community will gain from the services provided and improve their quality of life; and the longer-term unemployed will find some meaningful work to do for some pocket money. The newspapers reported that one Town Council is already doing this in a limited way by "employing" those out of work to do checks and inspections on common facilities so that a better level of maintenance can be achieved. The Government can provide some money for this and other schemes to be instituted and expanded. These can include a social visitor scheme for the old and the sick who are alone at home, or schemes such as neighbourhood watch, etc.

In the social visitor scheme, our unemployed can be trained to provide visits to the old, infirm or sick. These are the underprivileged who would normally be left alone at home, unable to move around easily, and need help with simple errands or maybe simply a friend to talk to. We can certainly improve the quality of life for such unfortunate people by taking care of their basic needs and, at the same time, provide some useful work for those that are unemployed.

In the neighbourhood watch scheme, an allowance can be paid to those who need a job for their role in providing some neighbourhood watch service. This could include neighbourhood patrols or even simply stationing themselves in key areas to deter petty criminals and other offenders. In difficult times like this, there is a tendency for such crimes to increase and this will be a good counter measure.

Finally, Sir, I would like to close with a comment on the budget deficit. I do realise that some of my earlier recommendations need to be funded. DPM has already taken pains to point out that the FY 2003 Budget will be the third consecutive year of budget deficits. However, many have fed back that the Budget could have been more generous. The projected deficit is $900 million. But during better years, we achieved surpluses of around $4-$5 billion a year. Why can the Government not contemplate a deficit nearer such a level in what is notably a very trying and uncertain time? The war on Iraq seems inevitable. It may happen within days. The Prime Minister has advised Singaporeans to expect tougher times ahead in the next few months. The outcome of the war is an unknown. What if it is an unfavourable one affecting adversely the political and economic environment of the world over a longer period of time? Do we have the assurance of the Government to introduce another off-Budget package of measures to help Singaporeans?

In the light of what I have said, I support the Budget. However, I hope that DPM will give due consideration to my suggestions. And I hope he will also give a commitment to provide further generous off-Budget measures to give the economy a much needed boost should the worst in the Iraq crisis come about.

Ms Olivia Lum Ooi Lin (Nominated Member): Mr Speaker, Sir, I have heard many say that this year's Budget is a non-event. Personally, I am glad to note that the Government has attempted to create more opportunities and a level playing field for all, particularly in promoting entrepreneurship.

I just wish to make two observations. Firstly, there is obviously a more deliberate move by the Government to encourage self-help and make life easier for the entrepreneurs. This is encouraging. However, Singaporeans have enjoyed many good years and the Government has been playing the role of giver and provider. Most people are used to this. In bad times, such as now, I notice the emergence of two categories of people, each with different expectations. The first category consists of those who are not willing to lower their expectations in salary or in status when they seek employment. I have witnessed this when I interviewed applicants for jobs in my company, and the problem is real. These people have been retrenched and yet they are not willing to forgo their level of material comfort and status when they seek new employment.

The other category consists of those who are willing to have a go and wish it on their own but they lack the knowledge on how to make a headstart. It is this category of people that we must place more focus on. I notice that many are still unaware of the incentives and opportunities that the Government had instituted over the years. This could be due to a lack of clear communication between the Government, the people and the business communities, especially the SMEs. As what Mr Inderjit Singh said earlier, many GLCs are already well aware of the incentives and opportunities available. However, many SMEs are not that well connected and most are not familiar with Government policies. Some are also confused by the policy changes over the years. I propose that the Government play a more active role in communicating with the general public and especially the SMEs, through more regular dialogue sessions. Different Ministries could hold separate dialogue sessions to make clear the opportunities that are available. Availability of opportunities is always the gateway sought by entrepreneurs. Throughout my life, I have sought opportunities rather than handouts. Since the late seventies when I first arrived here, Singapore has offered me many opportunities to make it on my own, and for this I am grateful.

It is time that we moved on and adopted measures that are sustainable in the long term and create more opportunities for individuals who are willing to take risks and make it on their own. Government should play strong leadership in providing opportunities. For example, Mrs Yu-Foo has recently proposed an initiative to allow residents who are unemployed to showcase and sell their homemade products. The start-up cost for such initiative is very low as participants pay very low rent. This will allow people to be proud of self help. I was also taught when I was young to be independent, instead of depending on handouts.

Another example. The Government, being such a big buyer, and the Ministries and agencies can be more open to new ideas and new innovations. And this leads me to touch on a second issue. I feel that there is a need for constant review of the Government's rules and regulations, in line with changing times. I am glad that the Government has adopted the ERC's recommendations pertaining to this. However, this calls for a change in mindset amongst officers at every level of the public sector. My experience is that most officers in the top management of the various Ministries and statutory boards are willing to make changes. However, this is often not so for lower rank officers. Most are not willing to take on the added responsibility of making a change, even if it is a change for the better.

As most officers are happy to religiously follow set rules, initiative from the top management is often needed to institute changes in the rules and regulations. This is unfortunate as the frontline officers and officers from the middle management are often the ones in direct contact with the public. They are aware of the problems created by some rules and regulations and they are in the best position to recommend and facilitate changes.

To be effective, perhaps each Ministry should set up its own Rules Review Committee, apart from the Rules Review Panel proposed. The Committee should include representatives from both the public and private sectors. The people who have suffered under unnecessary rules and regulations would be in the best position to make recommendations for the better. Officers from different levels within the Ministry should also be represented, as they are the ones who know best the grouses from the ground.

The Government is making fundamental changes to promote entrepreneurship. This is encouraging and I am confident with these changes, we are making progressive steps in the right direction.

Mr Speaker, Sir, I support the motion.

Mr Loh Meng See (Jalan Besar): Sir, it is a tradition for me to attend the gathering of Trade and Merchants Associations on the first day of Chinese New Year. I have been doing this since becoming an MP. What struck me in this year's annual get-together was the depressing mood - a sense of hopelessness and defeatism that the situation in Singapore is no longer salvageable. I have not felt anything like this before, to see our people discouraged and demoralised, on the verge of giving up. This was not evident during the 1997 regional financial crisis and its aftermath. Our people are looking for ideas, advice and seeking answers to get out of their dire straits. We need to buoy up their spirit. They need to be encouraged and given hope and confidence that we have the resources and resolve to overcome this recession. We have been able to do so in the past. We shall be able to do this yet again, emerging stronger to take advantage when the recovery comes.

When DPM Lee presented the picture and solutions in this year's Budget, they are realistic, sound and plausible. Yet, they seem to be at odds with the experience, sentiments and feelings of many people outside the Chamber. The measures required are painful but inevitable. We have to take the bitter medicine if we want to recover and there is no easy painless way out of this recession. Indeed, the Budget measures are broadly strategic and qualitative in nature, dealing not just with the immediate issues but having an eye for the next 15 years.

Between the intellect and the emotions is the attitude and mindset needed to act out our choices. Our actions must be based on the harsh realities before us. We have the natural human tendency to deny we have a problem and wish that the problem would go away without us taking the painful medicine. We were well aware of the need to restructure our economy since the 1985 recession. We had a good run of 10 years until we were hit by the 1997 regional financial crisis. Now we have to face the harsh realities of having to deal with both economic restructuring and the severe downturn. That is why the depressed feeling has been much more acute.

Perhaps when we dealt with the 1997 financial crisis, we should not have slowed down the process of restructuring our economy. We cannot afford at this time to delay any further to restructure our economy. We are aware of the high cost required in terms of job losses through retrenchment, pay cuts, and fresh graduates finding difficulties to secure jobs quickly. It is unfortunate that all the painful measures are taking place at the same time and affecting a large cross-section of our people. If we are to take bold steps now to restructure our economy, we would be able to take full advantage of the recovery of the global economy when it comes.

Sir, the marine industry is a good example of an industry that went through the 1985 recession with massive retrenchments and severe restructuring. Looking back, the actions taken in those years to cut over-capacity saved the marine industry. Today, the industry has not only survived but prospered. The marine sector was labelled a sunset' industry. It has been a long sunset' for the marine industry after 18 years. It remains a cyclical industry but the sector is able and ready to deal with the cyclical nature of business because they have put in place a structure and organisation that is resilient to cope with the upswing and downswing in the business. It is to the industry's credit that it was able to absorb some of the former PSA employees who lost their jobs recently.

For those of us who went through the bitter experience of the 1985 recession, we have gained valuable lessons on how to survive and prosper in a highly competitive business. Businesses that are built to last require a stable, committed and diligent management team, strong organisational skills, good cash management, not to borrow beyond our means, be thrifty and lean, use contract workers, instead of regular employees, a flexible wage system that pays a lower base salary but with highly variable bonuses.

It is not surprising that those Singapore establishments that started in the 1960s and 70s and have made no attempt to shed, restructure or reorganise their businesses would have inherited an organisation that is flabby with high cost and unable to compete in a deregulated and highly competitive globalised business environment.

I read a report recently that the majority of American CEOs do not have any experience in managing an economic downturn because they were not exposed to the last recession that happened a decade ago. We know that personal experience is a good teacher.

We are fortunate that DPM Lee had gained valuable experience when he helped tackle the 1985 economic recession and this has placed him in very good stead when he chaired the Economic Review Committee. The Economic Review Committee Report acts as the foundation and cornerstone of his Budget Statement this year.

Sir, I note that in last year's FY 2002 budget, we had managed a small deficit of $94 million, compared to a deficit of close to $2.7 billion in the year before in FY 2001. The smaller overall deficit was on account of a better contribution of net investment income of $3,800 million. Perhaps DPM Lee can enlighten the House how the Government is able to achieve a three-fold increase in net investment income between the years 2001 and 2002, jumping from $1.375 billion to $3.8 billion.

In this year's Budget, many quarters have hoped that the Government could have been bolder with a higher budget deficit. The FY 2003 Budget is estimated to run a deficit of close to $900 million, with a net investment income contribution estimated at about $3,000 million. If the Government were to continue to achieve the same net investment income of $3.8 billion, the Budget will end with a small deficit or even a balanced budget.

I am glad that the Government has remained resolute not to accede to the call on Government to cut corporate taxes further and others who want more expenditure to prop up the economy. I agree that it is more prudent to take the conservative approach. We do not know how the situation in Iraq will turn out. The war and its aftermath can play havoc to oil price increases and the overall adverse impact on the global economy. This Government has shown that it is prepared, as in the past, to take off-budget measures to prevent our economy from deteriorating further. And I hope that, as Dr John Chen has mentioned earlier, the Government could give an indication of such a possibility. We shall have to wait and see if all these uncertainties in the Middle East will pan out.

In promoting manufacturing and services as the twin engines of growth, we must recognise that we have fallen behind in our competitiveness. Our business cost has gone up in comparison with other emerging economies in the region and our productivity lags behind the cost increases. We have to quickly bring the business cost down before more companies get into financial difficulties. We should do our level best to prevent more companies from closing shop, relocate or shrink their operations that could aggravate our already high unemployment situation. Labour and land are two domestic components within our means to influence the business competitiveness and profitability. We have to bring down the cost of industrial land, commercial properties and manpower costs of our businesses. It is a good idea to cap the salary ceiling for CPF contributions at $5,000, instead of $6,000. The high income earners are able to manage their own retirement plans. These high income earners should be subjected to greater variability in their remuneration, linking their pay and rewards to performance and profitability of the company. This will set the tone to put quickly in place the flexible wage system against the seniority-based system that has remained unchanged for some companies.

In the effort to promote entrepreneurship, we have first to develop a culture of entrepreneurship in this country. The current adverse economic situation may just provide the right conditions and impetus for individuals to be self-employed and start up their own businesses. My concern is the over-capacity situation in the retail sector where the small retailers are already suffering from poor business. With new entrants, the retail business will be even more competitive and the situation would worsen unless the economy improves and more foreign visitors and expatriates are employed to work in Singapore. As HDB retailers contribute to a sizeable proportion of neighbourhood shops, there is the urgency to deal with HDB neighbourhood shops.

Singapore has an excellent reputation in our educational system. It requires business acumen to translate the reputation and expertise into successful businesses. For many years, the Chartered Institutions of United Kingdom collect large sums annually in organising examinations for their courses and issue certificates qualifying them to become members of professional bodies. Singapore has already gained expertise in a number of areas. We should be able to conduct our own examinations for foreigners who are interested in them and issue relevant certificates attesting to the standards achieved in the examinations. If properly organised and managed, they should contribute to making Singapore an education hub in the region.

Our top students have acquitted themselves very well in the reputable universities in the US and UK. They are gifted and would be able to fend for themselves whatever educational system we provide. Our challenge is to bring an expanded number of students in the next few levels to an even higher level of achievement than currently the case. Our students have to be more well-rounded and be imbued with a wider interest. They should be able to handle both the Science and the Humanities subjects with ease. There is an urgent need to encourage the interest and strengthen the learning of humanities in schools and universities. The challenge in working and dealing in a cross-cultural context and issues require a deep appreciation and understanding of the Humanities subjects, and cross-cultural issues will pose a greater challenge in the future and our students should be prepared for it. Our young who neglect them do so at their peril in later years. It is like the Chinese Language now. No parent needs to be persuaded on the importance of learning the Chinese Language in schools today. So I hope that our schools do not take the short-term view in performance ranking at the expense of the long term good of our students in the study of Arts and Humanities subjects.

Indeed, the biggest challenge today is to help preserve the jobs of Singaporeans and for those who are unemployed to help them find new jobs. This issue will remain with us as we expect a slower growth for our economy rising in the region of 3-5%, but unemployment is likely to stay around 3-4%. Lifelong learning has become more pressing. I am glad the Government is taking this very seriously with the setting up of a statutory board to take care of this area. But I like to echo many of my colleagues that it is the personal responsibility and self-help of the individuals that matter. This may be a wake-up call to Singaporeans to take up lifelong learning seriously to ensure their employability. The Government is in a good position to draw up the information and resources to help Singaporeans who are in need of work to be trained and help find work. Employers should also play their part to be fair in the employment and treatment of Singapore workers. They should not rely on foreign labour if Singaporean workers are prepared to lower their expectations and work hard to earn a livelihood for themselves and their families.

Sir, I am happy with the breadth and depth of coverage in this year's budget. It is a reassuring Budget. The Government is on top of the situation. We have the resources. Singaporeans must draw out their courage and not be deterred by the storm we are sailing through. We will indeed reach the safe harbour if all our hands are on deck and focus on the direction we should be heading. We can then look forward to a better year ahead.

Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 3.00 pm.

Sitting accordingly suspended at 2.37 pm until 3.00 pm. Sitting resumed at 3.00 pm