RETUNING THE CPF

[Mr Speaker in the Chair]

Mr Speaker: There are 54 speakers on my list and that excludes the Ministers. So I would appreciate it very much if Members refrain from making lengthy speeches. Mr Yeo Guat Kwang.

Mr Yeo Guat Kwang (Aljunied): Mr Speaker, Sir, listening earlier to PM's statement, I am now more convinced that the changes to the CPF scheme are inevitable. This move will further enhance our labour market flexibility and thus help save jobs and sustain economic growth. I am happy that the Government has struck a good balance with structural changes in the long term and softer impact on workers. We are reassured by PM that most Singaporeans would be able to cope with the changes made to the CPF. And the fundamental objectives of financial security in retirement and home ownership would not be compromised with the proposed changes.

Sir, I am sure that workers will applaud the Government's decision to take a gradual approach in implementing these changes. This is most welcomed as it helps workers to adapt to the changes and retuning of the CPF scheme. I am also pleased that the Government has also shown consideration with the implementation of changes made on the withdrawal age of 55.Those who are now 51 years old need not have to worry that their plans after 55 years old will be affected.

I hope employers will respond positively to PM's call to plough back the savings, particularly for those companies which are doing well, to workers in the form of variable payment.

Sir, the CPF changes this round would be most drastic. The changes will affect various groups differently. Based on the feedback I received from the union leaders, the main concerns across the entire workforce are that the cost of living is high and their commitment on housing will be affected. It is a very difficult transition for many people, a large part of it is emotional. Most people would require more time and more help to face this hard reality.

Union leaders, in general, agree that the CPF reform is necessary at this point of time. But they hope more could be done to help those who face difficulties.

In view of this, as we acknowledge the urgency to restructure our economy and reform wages and retune CPF, we also need a thorough review and reform in the way we address the social needs of the workers. The Government needs to commit and take concrete efforts in refining the social safety net as well.

Grassroots and union leaders agree that wages are high. However, they feel that the cost of living is also too high and thus it would be difficult to make adjustments to the wages. Whilst workers are prepared to accept restructuring and CPF reform, what they have heard from the Government is: be prepared to pay more, particularly in areas such as public transport and healthcare. I am pleased that the Acting Minister for Health has recently announced that MOH will take steps to address the issue of medical cost. But there is still a strong perception that the Government had not done enough to bring the other cost components down.

Take public transport as one example. The bus companies have to pay for the costs of maintaining the bus interchanges and terminals. But the advertising and rental revenue from these areas goes back to LTA. The public does not understand why this revenue cannot go directly to the operator to help defray part of the costs so as to bring public transport costs down.

Today, the economic landscape is very much different from that of the 1990s. It is therefore timely for the Government to really consider doing another review to look into the cost of living again and the areas of key concern, such as health, education, transport and housing. More importantly, to seriously review Government policies, for example, rules and requirements, that have an impact on or are likely to become cost-driving factors to our cost of living.

Sir, the changes to the CPF will also affect many Singaporeans who have.already made commitments on housing. We have to have something more concrete to help them. As the Government announces changes to the CPF system, some union leaders have also asked whether we can also make it easier for those who are affected by the economic situation to downgrade to smaller HDB flats. The lower income workers will need more help in such a difficult time.

Members of the business community should do more, and we think they can contribute to and supplement the Government's efforts to help the needy. For example, NTUC FairPrice has given $1 million worth of vouchers to the Advisors of all the CCCs and grassroots organisations to reach out to their residents and help the needy.

In 1999, the public transport operators gave a 5% rebate to the commuters. This time round, I would like to urge the public transport operators to consider sharing the savings from the CPF cut with families which are facing difficulties, especially those with school-going children, in the form of vouchers or rebates, either through the unions or grassroots organisations, for them to purchase their monthly tickets. Such CPF savings should not go to the shareholders.

Sir, moving ahead, union leaders can play a part by advocating our workers to face the challenges, adapt to changes, and to opt for simplicity and affordability. The Government can further help by sending a strong signal that it cares. Our workforce is the world's No. 1 workforce. Thus, I am very confident that, together, Singapore and Singaporeans will make this transition and get through this difficult period to a better life.

Mr Leong Horn Kee (Bishan-Toa Payoh): Mr Speaker, Sir, this debate on the retuning of CPF is obviously very important as the policy statement itself is presented by the Prime Minister, and the Prime Minister has said that we are now at the crossroads.

Firstly, I think the House should thank the Prime Minister for his decision to take personal responsibility to carry this burden of presenting the painful CPF changes to the people, and to see through its passage on implementation.

The topic of CPF changes is an emotional issue because they impinge on the livelihood of the individual. The pain is therefore felt at the personal level by almost every person and his family members, because every wage earner is affected. However, at the national level, we unanimously agree that it is a crucial policy change that has a deep and long-lasting impact on the survivability of the country, in the face of fast-changing competitive pressures from huge low-cost countries like China and India.

I would like to state that I support the proposed changes, as they are much needed to ensure Singapore's survival. Fundamentally, what are these CPF changes about? They are about remaining competitive, they are about survival and, ultimately, it is about jobs - keeping our jobs. Yes, it is painful to cut CPF, but I think it would be more painful if we have to cut jobs.

Sir, after listening to the Prime Minister, I am very relieved. As widely anticipated by the press and many corporations, it was thought that the Government would implement a hefty 6% CPF cut. The Prime Minister has announced that there is a target of reaching the 6% eventually. But according to the table that he has circulated, there will only be a 3% cut in October 2003. It will be a great relief to the people, as a 6% cut would have a tremendous shocking effect on the need for people to adjust their housing mortgages and livelihood.

This leads me to the next question. As the Prime Minister has said that the target is to lower the employers' CPF contribution to 10%, the question to ask is: when will be the next 3% cut, because there is in this Table 3 a mention of only one cut to 13%? I do hope that we would be able to survive the economic downturn to maintain the status that there would be no further cuts, if possible, that would affect the employees.

The second question I would like to pose, Sir, is that looking at Table 3, for those aged between 50-55, there are actually proposed three cuts:

(a) 3% in October 2003;

(b) 3% in January 2005; and

(c) 3% in January 2006.

Therefore, I note that those in the older age group are probably worst affected. For age 50-55 group, they have to endure three cuts over the next four years. So, maybe the Government would like to look into how to help this group of older workers. What kind of reliefs and assistance could be given to them to relieve them of such burdens?

According to the Prime Minister, there will be a saving of $1.3 billion, ie, savings earned by corporations, employers and the public sector. These are huge savings of $1.3 billion a year. In contrast with previous years, where the cuts are possibly one-time with a possibility of restoration, these are cuts forever - they stay with us. Therefore, in fact, the savings are not just $1.3 billion a year. If we take a 10-year timeframe and we multiply the $1.3 billion by 10, it is $13 billion savings for corporations and companies over the next 10 years. So, these hefty savings will definitely have a very stimulating effect on the economy. It is almost like an off-Budget measure, much like the stimulation measures that were introduced in the past when the domestic economy was in recession.

On this occasion, I think not all companies are doing badly. In fact, some companies, such as those in the IT, electronics, banking and several other sectors, have been performing well. Speaking for workers in these companies, I would like to urge employers of such companies that have done well to share their savings, by giving back either in the form of variable pay or as year-end bonuses.

Sir, the proposed CPF cut has the effect of taking about $1.3 billion per year away from the pockets of the people. This is not a puny sum. Naturally, many affected will feel the pain. I would like to suggest that besides putting the burden of economic recovery on the people, the load should be shared amongst the people, the Government and companies. What I mean is that, for the Government, there will be a need to look at the Government rates and fees so that there is a lowering of cost of doing business for companies. For companies themselves, they would also have to look at how to keep themselves lean and trim. So, they would also have to minimise their excesses and not call upon employees to share the burden of their inefficiencies.

Sir, in this debate, I would like to focus a bit more on the impact of the CPF changes on older workers. I would like to speak for those in the age group of 50-55, because I am myself in this age group, ie, in my early 50s. I can feel for them. I empathise with them. Many of my friends and associates are in this age band. But this does not mean that I do not think that Singaporeans of other age groups, such as the younger workers, are not impacted or are of lesser concern to me. But I do feel that those in the 50-55 age group have suffered a lot in the last few years and, therefore, a CPF cut on them would make it worse. In fact, as I said earlier, they are going to suffer three cuts, not just one.

Let me elaborate a bit further on these people in the 50-55 age group. They have suffered a lot in recent years. Some have lost their jobs because of retrenchments or companies closing down. At the same time, they have to have heavier property mortgages, the increase in the cost of their children's education as they grow older. Some of them even have to sell their houses or their assets to support their children through university. Now, their employers' CPF contribution will be cut, especially when they go beyond 50 years old. So, these CPF cuts are eroding their savings, and there should be a need for us to look into how to help this particular group of older workers.

On the other hand, while the 3% cut would have a saving of $1.3 billion for corporations, I would like to caution about the dampening effect of this $1.3 billion being taken away from the pockets of the people. It is a bit of a plus and minuses. So, if we could help in introducing some kind of stimulating measures, such that at least the $1.3 billion dampener effect on consumer spending could be lessened, it would be helpful. Perhaps, some kind of Government spending or pump-priming of projects would be of help.

Further to the 3% cut, for those workers who are affected and cannot manage their housing mortgages, I would like to propose that workers be allowed to draw from the CPF Special Account to top up their mortgage payments, if they have insufficient money in their Ordinary Account. This is one measure which can help them to overcome their difficulties.

Sir, I would like to say that I support the Prime Minister that we should have clarity on our longer-term CPF rates. The rate has been stated as between 10% and 16% for the employers, and 20% for the employees. I concur that the lower rate of 10% for the employers is appropriate. It will also give us more flexibility that in good years we can urge the employers and introduce higher rates for employers, so that employees themselves can benefit in good years.

Sir, in conclusion, I would like to express my keen support for these CPF changes. I earnestly appeal to the Prime Minister to look into some of the suggestions that I have made.

Mr Chiam See Tong (Potong Pasir): Mr Speaker, Sir, thank you for allowing me to join in this debate.

Sir, the Prime Minister has said that Singapore is now at the crossroads and is making important decisions with regard to CPF. He also says that the CPF changes made are the most drastic to the CPF system. In the light of these comments, this topic that we are debating on is of course very important.

May I commend that, in future, if we do have such important debates, Members of Parliament, especially the Opposition, have a look into the changes, so that we can be more prepared to debate them, and not be given at the last minute this table and we hardly know what it is all about.

Sir, in 1954, the PAP, when it was in the Opposition, stated in its Party Manifesto, that it shall resist any attempt to pass on to the workers by way of wage cuts the burden of any economic recession. The Minister for Labour in the 1980s told this House that the CPF was sacrosanct. They were the wages of the workers and that the CPF rate could not be cut. He said that the cutting of CPF rate was tantamount to cutting the workers' salary. At that time, the CPF rate was 50% of the workers' salary. Many, including myself at that point of time, thought that the CPF rate of 50% was too high. I asked for the CPF rate to be lowered, with the hope that the take-home pay of the worker might be higher. I was roundly told off for recommending the CPF rate to be cut. It can be seen that the ruling party has said many things about preserving the CPF rate, but they have not been consistent with what they have said.

Our problems in Singapore today are, one, high unemployment and, two, high cost of doing business in Singapore. The Government proposes to take the easy way out by slashing the CPF rate. The question is: can this help? Wage cut is only one component of the total cost structure. The Government should look at the other factors which keep costs in Singapore up. They are mostly due to Government policies. High wage cost, in the first place, was due to Government policy. It was thought in the early days that the Government should only attract higher value industries, but they did not come in the numbers expected. The costs in Singapore have remained high since then.

Setting up business in Singapore is also high. Rentals, land cost, transport and utilities are all higher than our neighbouring countries like China, India or Vietnam. However we cut the CPF rate, we still cannot make our wages lower than the neighbouring countries.

But this step of cutting the CPF rate can cause grave hardship to our workers and should not be implemented at one go. It should be made gradually. The Government should not again make our workers bear the full brunt of reviving the economy. The Government should seriously look at other areas of reducing costs, such as lowering of rentals, keeping land prices affordable and keeping transportation, utilities, administrative, legal services and other operational costs down.

After the last elections in November 2001, there was a slew of price increases in rentals, transport, utilities, health and other operational costs. None of those price increases have been trimmed down at all, making the cost of doing business in Singapore prohibitively high. It is high time that Government relooked at those cost increases and trimmed them down whenever it can be done.

GST is another high cost factor. The GST, as originally proposed, was supposed to be revenue neutral and not painful at all for the people to accept it. But it is now no longer revenue neutral. It has become a lucrative source of income for the Government, especially now that we hear the Government is going ahead to increase the GST by a further 1% next year. I am just wondering why the Government needs to build mountains of surpluses every year. The surpluses are supposed to be national savings for rainy days, but we are now seeing black clouds and showers thundering down on us. Still, the Government wants to accumulate wealth, all at the expense of our workers. Singapore's surpluses are purportedly estimated at about US$150 billion. If that is truly the case and Singapore is such a small country, it has the world's second largest surpluses - second only to Japan - which has about US$200 billion. It would appear that the Government's exercise of accumulation of wealth is for its own purpose, and not for the purpose of helping the people.

I note that even the interests accrued from the net investment income are untouchable. SIA, DBS and SingTel all say that they shall benefit from the CPF cut. Their savings range from $18-$45 million. It would appear then that the biggest beneficiary of the CPF cut shall be the Government, since it is the biggest owner of Government-linked companies in Singapore. The Government must share its gains with the workers of Singapore. I hope that the Government-linked companies will pay good bonuses this year to the workers.

A CPF cut, originally touted at 6%, shall not solve our cost problem. Someone wrote in the Today newspaper that a 6 percentage point cut in CPF would only reduce our wage rate by 2%. We still cannot compete with China, India or Vietnam.

We have now heard that the Government is not implementing the 6% but only cutting it by 3%, from 36 to 33 percentage points, and also on a staggered basis.

As regards the Minimum Sum scheme, I see that the cash component of $40,000 would eventually be increased to $120,000 by 2013. My feedback in this difficult economic climate is that, in fact, many CPF members are clamouring to have their cash component paid out to them. They said that they should be allowed to use their money, especially for legitimate purposes, such as for their children's education, to pay their debts or even to start a business. I hope something along this line can be considered.

As regards the Political Economic Risk Consultancy Limited's (PERC) report, I think the Prime Minister should not be unduly disturbed by it when it says that Singapore's wage cost is higher than those of America and Australia. That report is not very accurate in that it takes into account the higher paid workers, ie, executives and white-collar managerial workers in Singapore. Those people are paid higher than the equivalent in America and Australia. But the pay of a general worker or a tradesman in America and Australia is, on average, much higher than those in Singapore by, at least, I would estimate, 30%. Those of us who have visited America and Australia know that the workers in those countries are definitely paid more than the Singapore workers. It is true that the cost of doing business in Singapore is high, but certainly not due to the alleged high cost of wages of our factory workers.

Mr Heng Chee How (Jalan Besar): Mr Speaker, Sir, thank you for this opportunity to join in the debate.

After PM spoke about more changes to the CPF at this year's National Day Rally, there has been much discussion and speculation on the ground as to the details. I have met with various groups of union leaders from different industries, and listened to their feedback.

Clearly, the fear of job loss is topmost on workers' minds, as the economy continues to be weak. Many have been retrenched, or know of people who have been retrenched. Many have seen business being lost to lower-cost competitors. They know that if the situation does not turn around soon, more jobs will be at risk. And they themselves could be next in line to be axed. Hence, workers really hope that the Government would find ways to boost prospects soon, and relieve their anxieties.

Union leaders understand the big picture. We know that unless jobs are saved, there will be no income for the workers and without an income, high CPF rates are purely academic. So the priority is to save jobs, and to foster an attractive environment to create new jobs. Lowering business costs is an important part of serving this purpose and we accept that lowering the CPF will form part of such a package.

That said, no worker likes a pay cut, no matter how necessary or helpful it may be because it just goes against the grain to part with one's money this way, and they have their practical concerns and worries. And I would like to reflect these concerns.

Some said that they may run into immediate problems with their housing mortgage payments, and they want to know how they can get help. Others wonder if they will be able to save enough for their retirement years after these cuts and caps. Yet others wonder how they are going to cope with the cost of living, because Singapore is a city, and being a small city-state, there is really no way to go into the countryside for a lower cost of living. Therefore, for lower-income people, I think they will find it harder to cope, and they keep hearing that companies must make good profits for their shareholders.

There are also workers who fed back that payroll is not the only cost to business, but they have the impression that payroll is often targeted for cost-cutting. And they want to know what has the Government done about other fees and charges under its control, and what more it is going to do to reduce its cost burden on the economy.

Workers feel that as the environment becomes more uncertain and volatile, people have to find ways of upgrading and downgrading more flexibly alongside their financial fortunes. So they ask that our policies, for example, in housing and medical services change faster to accommodate this reality. There may be a larger proportion of people who need rental housing, instead of bought housing. I think earlier, this House has gone into quite a bit of questions and answers on that point. Some others also feel that it would be good to make it easier for people, whose fortunes have waned, to downgrade to a lower class ward more easily within our hospital system.

For those impacted by the across-the-board CPF rate cut, the lowering of the contribution ceiling and the consequential increase in taxable income, and that belongs to the upper-middle and higher income group, their feedback has been that they hope for some consideration to minimise the impact.

But overall, workers want to know if their swallowing this bitter pill will really help to spur economic recovery and improve job security.

Sir, just as companies and shareholders expect a good return on their invested funds, Singapore workers are also looking at these CPF cuts as a kind of investment in their collective security and prospects. They do not want this opportunity created by the CPF savings to be squandered by companies merely enjoying a pause in the pressure. They want to know, or at least have as good a sense as possible what the likely yields are going to be, and how these yields are going to be achieved by the companies. They have expectations of the employers. Workers want to know what are employers going to do to get more business because clearly, companies cannot be profitable in the long run just by cutting workers' wages.

Secondly, they want to know what employers are going to do to restructure costs. Restructuring is not the same as merely cutting. It means finding new ways to organise cost drivers so that they are more responsive to changes in competitive landscape and market demand conditions. In this, they want to see more leadership and useful ideas coming out from the employers.

Workers have also asked if employers are alert to new opportunities. Because being alert to new opportunities and being able to seize these opportunities is a critical quality for success. For instance, how many employers have plans to make use of the US-Singapore FTA and other FTAs that Singapore had signed to improve their business? According to a report in the Straits Times on 4th July, a certain chamber of commerce in Singapore did a survey among its membership. And of those companies who responded, 71% said that they could see no gains flowing from the US-Singapore FTA. The business community's response to the latest Singapore-India Comprehensive Economic Cooperation Agreement is not any more reassuring. A veteran businessman was quoted in a Channel NewsAsia report dated 26th August as saying, "This is a weakness in our system. Businessmen leave it to the Government to decide everything. They should be pushing for what they want. Some of them do not even know what they want."

Sir, I am saying this not because of any other purpose than to say that this CPF cut gives us the savings so that we could improve our competitiveness, so that our economy can rebound. Workers hope for this to happen. But in order for this to happen, employers must play their part and go and get that business. Otherwise, it is a wasted opportunity and it is a high price that workers would have paid in vain. And we must not let such a thing happen to sink our hopes.

Sir, we are in a no-holds-barred global and regional fight. We have to remove our gloves because our competitors are coming at us with bare knuckles, if not knuckle-dusters. If we lose, we will have to accept much lower conditions of living. We therefore have no choice but fight. So, I support these CPF changes, even as I feel the pain together with all workers.

On the side of the NTUC, we will support constructive efforts to improve the competitiveness of companies because we want to save jobs and to attract the creation of new and better jobs for Singaporeans. And we will do so on the basis of fair play for workers. Here, I want to thank the Prime Minister for supporting the stand taken by NTUC in asking that companies that are doing well be fair to their workers and share the gains with their workers.

NTUC cooperatives will continue to play their social role and help hold down the cost of living.

On the part of the Central Singapore CDC, besides the usual assistance schemes, I will also set aside additional funding to reinforce the accounts of the Community Resilience Fund at constituency level so that our MPs on the ground can offer help more responsively as required.

But most of all, I urge immediate and clear action from employers. Do not waste the opportunity and become complacent just because the CPF savings have bought some time and offered some reprieve. Show our workers that you have concrete plans, and are taking active, systematic and resolute action to improve the odds.

I know that in these days of intense competition, employers have to watch their monthly and quarterly bottom lines like a hawk. But I want to remind employers that the best companies that triumph in the end are the ones who not only know how to make big money, but who also know how to treat their people right while making big money. Those who think that rewarding loyalty is out of date will pay a price for it when the market turns.

The March issue of Fortune magazine featured a list of the world's "Top 50 Most Admired and Successful Companies" as compiled by the Hay Group. Among the characteristics of the winners is their encouragement of teamwork, loyalty and collaboration. Smart employers do not pay lip service to people development and loyalty. Workers are not stupid. They know whether their employers are treating them as valuable members of the company or as disposables. And they will reciprocate.

Sir, as we set about implementing these difficult but necessary moves to energise our economy and job market, I urge everyone to keep our eyes firmly focused on achieving the common good and creating our shared destiny. And as we do, we will keep the trust and the respect of our workers and our citizens.

Mr Chew Heng Ching (East Coast): Sir, like Mr Chiam, I too did not have access to PM's speech. Therefore, PAP MPs do not have any undue advantage over Opposition MPs.

Sir, since the turn of the new millennium, the world is now a different place. We may not have gone through the severe economic shock of the Asian financial crisis. But we have weathered perpetual storms in the form of September 11, global terrorism, SARS and the gulf war. The recent bombing in Jakarta, one year after the Bali tragedy, underscores the fragile and uncertain world in which we live.

On the economic front, we face keener competition from the global marketplace. Singaporeans, in recent years, have had to face wage freeze, salary cuts and, most unfortunately, rising structural unemployment. The picture is indeed not a rosy one.

Yes, there has been a pick-up in sentiment in the US and Japan economies, and the economic numbers following the slowdown in the second quarter of this year are starting to look up. However, we must not be complacent. Without clear and decisive actions to combat the costs of doing business in Singapore, or sending the right signal to the international business community, we run the risk that any nascent economic recovery may pass us by this time.

In this regard, Sir, I feel that the proposed CPF changes, whilst they may appear untimely and harsh, are necessary. I agree with many Singaporeans that the CPF changes alone will not solve our high business cost problems and make Singapore competitive again. Wage cost is but only one cost component. Our other cost components, like land costs, rental, utilities, taxes and Government rates and fees, are also important. A simultaneous effort to review all these costs and reduce them is indeed necessary if we are to be successful in making Singapore competitive again. I therefore urge the Government to consider measures beyond CPF cuts and implement these reductions if we are to send a strong signal to investors.

PM mentioned that in the course of this debate, DPM Lee will announce a package of measures to alleviate the adverse impact that the proposed CPF cuts may have on Singaporeans. I hope these measures will help Singaporeans rework their cashflow on their mortgages and yet leave them with sufficient disposable income to maintain a reasonable standard of living.

Sir, on the CPF changes announced by the PM, I am glad that we stay focused on the retirement aspects of CPF in a way that there are enough retirement funds for Singaporeans as well as help reduce overall cost to employers.

I support an immediate reduction of the employer's CPF contribution by 3% to send the right signal to companies and workers on the urgency of wage reforms. I also advocate the principle of flexibility in CPF contribution rates, as explained by the PM. While the workers' fixed salary's CPF contribution rate will now be capped at 30% with the proposed changes, I propose that we consider allowing a higher CPF contribution rate for the variable bonus. Indeed, we should encourage companies that are doing well and could afford to pay performance bonus to pay a higher CPF rate for their employees if they so choose.

Sir, together with a more flexible CPF rate, I urge the Government to introduce tax incentives to encourage companies to implement a wider range of private "retirement" plan options for their valued employees. Through this arrangement, the CPF can stay focused on providing basic retirement needs, while employers should be encouraged to develop individualised programmes for their employees based on individual needs and abilities.

Sir, coming back to CPF cuts, the proposal has the effect of reducing disposable income of Singaporeans. I would like to suggest that measures to reduce costs, to free up cash and improve cash flow for Singaporeans be implemented. By this, I refer to the need for the Government to review some of its rates and fees that affect household expenditures. One specific area would be the maid's levy. A reduction in the maid's levy may not fully offset the cash depletion impact of the CPF cuts, but will serve to offset the inelastic costs due to economic needs imposed on families. And in this case, the services of a maid. I am, therefore, proposing that perhaps the Government could consider at least a $100 cut in maid's levy to make up for the reduction in cash following the CPF reduction. This cut could be limited to one maid per household. This would certainly go some way towards the cash top-up for mortgages.

Sir, besides the maid's levy, I urge the Government to also consider other measures to assist Singaporeans in cash top-up following the CPF cuts. I propose that the Government review its various rates and fees and taxes including utilities costs, property taxes, petrol taxes and road taxes. With the upfront cost of vehicle ownership already loaded in the COE system now, such reduction in petrol and road taxes would again free up cash for Singaporeans, who require vehicles as a means of facilitating business. For Singaporeans who rely on public transport, transport companies should be encouraged to pass on such savings to the consumers.

Sir, we are aware that many of the Government rates and fees were imposed to achieve various social objectives. While we may have been successful in achieving these objectives, they have inadvertently resulted in higher costs of business and in higher cost of living in Singapore. And as PM has mentioned in his speech earlier, we need to strike a fine balance between the objective of economic survival versus social needs. I therefore suggest that it is perhaps timely that the Government reviewed some of its social policies that may have resulted in higher cost of doing business in Singapore today.

Next, I would like to touch on the changes relating to raising the threshold of the Minimum Sum and tightening the rules concerning CPF withdrawal at the age of 55. I appreciate the Government's effort to phase out the changes so that it minimises the impact it will have on Singaporeans.

Sir, whilst I support the need for Minimum Sum, I always question the need for lumpy adjustments to raise the Minimum Sum from time to time. Indeed, the concept of the Minimum Sum may be a useful one in that it attempts to set a benchmark for what an individual needs upon retirement. However, that magic number is also difficult to pin down, as different individuals have different choices and needs. The revisions to adjust for, say, longer lives of Singaporeans from time to time may be disruptive.

Like the PM, I know of many Singaporeans planning to use their CPF money upon reaching the age of 55. Some are planning to start a business, some planning to use CPF funds for their children's tertiary education, some planning to invest their money in various investment instruments, some planning to go on a long holiday with their family, as the PM has said, some planning to go on a pilgrimage, and so on. The impact of this change on the CPF withdrawal plans on individuals may thus be more widespread than envisaged. I am however glad that the Government has decided to phase out the implementation of the higher Minimum Sum and tightening rules concerning CPF withdrawl at the age of 55. Indeed, I feel that the 10-year phase-in period is reasonable. But I feel that the proposed gradual adjustment of the CPF Minimum Sum of $4,000 per year appears high in the initial years, because this works out to an inflation rate of 5% per year, which is very high, given the record of our inflation in Singapore.

I would prefer an automatic adjustment mechanism be built into the CPF system whereby the Minimum Sum is automatically adjusted based on future annual CPI changes. This will avoid lumpy adjustments from time to time as has happened in the past, and will certainly facilitate planning by Singaporeans on the use of their CPF funds upon retirement.

Sir, in conclusion, I would like to point out that even with these CPF changes and assuming other business cost components, like land costs, utilities rates and fees are being lowered, we must continue to expect lower end company operations to continue to migrate to other low cost countries like India and China. We can never compete in those areas. If we do, we will forever remain a third world country, as the PM has said. What is important is for our Government to continue to provide a favourable environment to continuously attract new investments, create employment opportunities, and continue with our skills upgrading programmes.

Sir, I support the CPF changes and urge the Government to consider my various suggestions on a flexible CPF rate and on measures to free up cash and improve cash flow for Singaporeans.

Mr Zainul Abidin Rasheed (Aljunied): Mr Speaker, Sir, thank you for allowing me to join in the debate.

I suppose I will never know whether the white wine will allow me to live up to 100.

An hon. Member: Red wine!

Mr Zainul Abidin Rasheed: Or the red wine. I do not drink either. But I do not know whether the non-alcoholic halal white wine or red wine will allow me to live to 90. But I hope maybe Mr Chiam will be able to use some of the palliatives rather than to keep asking the same questions about our reserves. Because I am glad that we have those kinds of reserves in Singapore. Otherwise, our currency and our assets would have been halved by now.

Mr Speaker, Sir, I could not believe my ears when last night, a grassroots leader told me that he heard a friend using an old caricature in the 60s to express his anxiety about CPF changes and the gloomy economic picture.

The caricature was about a lightning striking and cracking up a rice bowl. I think some of you of my age will remember that caricature. I do not know who did the caricature, but I guess it was done by the ruling Alliance Party then, which wanted to frighten voters from supporting the opposition PAP then. Well, we know the story. PAP went on to win handsomely.

I guess this person must have exaggerated the position but, nevertheless, to highlight his anxiety and worries about the proposed CPF cut and uncertainties regarding employment and the economy. After all, many Singaporeans now realise that the days of the iron rice bowl, even in Government service, are over. So, as the Prime Minister said just now, he knows the feeling and thus the compromises made in fixing the CPF cut from what people expected to be 36% is now 33%. Singapore workers, I am sure, will feel very relieved. I do not know whether the private sector will react the same way. And I am sure they will say, "Cut not enough." But, I am sure, for most workers, "Money not enough" is more supreme.

Sir, judging from the feedback and views expressed during the dialogue sessions Malay MPs held for activists and community leaders, the fears and concerns are real. Even though the recent announcement by the PM may be a relief, I am sure many are still asking, "What's next? And when is the next cut?" Many are simply frightened by what is to come. One even described the dreams of a Swiss standard of living Singaporeans were chasing for as a nightmare now.

Obviously, that was an exaggeration too, as I believe Singaporeans have shown the steel they are made of and the best is yet to be. But no matter how much one hypes the mood or the challenges, it takes much more than promises to satisfy Singaporeans. Many Singaporeans' confidence regrettably has been shaken.

But I am sure all is not lost. Singapore Government's track record of overcoming problems, the 1985 recession for one, must be the saving grace. Although it was a problem by itself, as Singaporeans have gone round to expect the Government to turn the economy as fast as it did a decade ago, the situation, as we all know, is not as simple as before. The effect of globalisation has cut deeper now. China and India threaten to blunt further Singapore's competitive edge. Cyclical changes and unemployment have gone structural, dumping thousands of our workers as irrelevant, unless they retrain and upgrade.

Sir, even if we can convince and assuage Singapore workers to accept that this is the new order of the day, and change their mindsets, at peace with the need to make short-term sacrifices for the long-term gains, many Singaporeans feel they need help, at least for the short term. They fear the CPF cut will affect further their capacity to pay for their dream homes, and I do not mean just the landed properties and condominiums but, in fact, the modest `under one HDB roof'. Many also fear about what they see as escalating health and transport costs, meaning cost of living. Here, Acting Minister Khaw Boon Wan's strategy to look at the eight priorities, including cutting costs and making the medical care system more efficient and cost competitive, I am confident, will be well received.

Sir, no matter how convinced the Government is about the need for the CPF retuning, the Government should not rush into the fast lane of changes, as the PM has announced today, to avoid unexpected ramifications that will upset the apple cart. Investors, I think, have always had tremendous respect for Singapore and the Government for its hard-nosed and hard-headed approach when faced with difficult decisions. Send the right signals we must, but phase in the changes so as not to make the effects too razor-like and in the process bleed many people unexpectedly and the consequences difficult to cope with. On this note, the phased changes announced by the PM will be welcomed by many.

If the effect of the proposed changes in the mind of the Government is marginal or tolerable, Singaporeans need to be told so and in clear terms. Take some time to go to the ground through more dialogues and information sessions. I learned that the PM will also be having his own dialogue sessions with the ground. I think that is an excellent idea and I trust more people will understand further and appreciate those critical needs for change.

Do not think only the lower 10-15% of the population will face the brunt of these challenges. I have heard some of the concerns of the middle income squeeze too. In fact, many of them feel that they are the ones who will suffer most, and without much help from the existing programmes mostly catered for the needy, which the middle income would not qualify.

Mr Speaker, Sir, I support the proposed changes in the CPF but would like to urge the Government and all its implementing agencies to watch the follow-through developments closely and to give feedback that would help fine-tune the system further, if necessary.

I realise that the Government has said repeatedly that most, if not all, of the cost-cutting measures have been taken, including reducing other cost factors such as land price, taxes and other measures, to help alleviate the interim pains felt by many, but the Government should go through with a thin comb the cost of Government and trim whatever else necessary. MOH's recent announcement to do so is a good example. This will reassure many Singaporeans that Government is not too cost-cutting happy elsewhere but indeed ready to work hand in hand with the people to overcome these challenges together.