RETUNING THE CPF

Debate resumed.

Mrs Yu-Foo Yee Shoon (Jurong): (In Mandarin): Mr Speaker, Sir, I support the proposal by the Prime Minister and the Deputy Prime Minister to reduce the CPF contribution rate. After the announcement by the Prime Minister on the CPF reduction, I spoke to some grassroots leaders and my friends in the business community. They have some comments on the CPF cut.

In his National Day Rally speech, the Prime Minister gave an indication of the direction that we were going. So many people guessed that it would be a 6% reduction. But, after giving much thought to the matter, the Government decided that the cut would be 3%. I think that it is a very rational decision and it also proves that the Government is one that cares about the people.

Today, the Deputy Prime Minister has proposed a comprehensive programme to help Singaporeans, particularly the lower income and the older people in Singapore. The whole package shows that the Government does not take this CPF retuning exercise lightly. I fully support this reform by the Government, but I would like to make some suggestions.

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

5.25 pm

Mrs Yu-Foo Yee Shoon (Jurong): Globalisation. In fact, some five years ago, we thought that the pace would not be so fast and that the emergence of China and India would not be that fast. But we now realise that the whole impact is more much severe than we thought it would be. We have to adapt ourselves to this environment, as it is a case of "survival of the fittest".

Prime Minister Goh has said that we have only two choices: either we go on a drastic reform, or just keep to our old ways and gradually go downhill. The Prime Minister has picked the first method, ie, to undertake drastic reform to our system.

Talking about competition, we have to, first of all, talk about cost competitiveness, secondly, on efficiency and competitiveness and, thirdly, competition in our living environment, ie, to be one of the best places to live, work and play. We want to make our talented people in Singapore feel that Singapore is a good place to live in and we also want to attract foreign talents to come and work and live here.

Over the last two days, we have been talking about cost competitiveness, and two Ministers have given us a very clear picture of the situation. Yes, we want to cut cost, but it does not mean that we want to bring ourselves down to the level of China or India. In this competition, yes, we want to tighten our belts, but it does not mean that we want to drastically lower our standard of living. Perhaps, some people's standard of living may have stagnated, and some of them may continue to go higher and some may go lower. But economists who have studied the matter advised that if we were to purchase the cheaper products from the developing countries and adjust our lifestyle a little, then perhaps our standard of living would not go down so fast.

It is an unavoidable fact before us, ie, we would have to face these three types of situation in Singapore. Some people's standard of living may be stagnated at the present level; some people may be affected. We have to be psychologically prepared that we will not be able to grow so fast like in the past. We need to do some adjustments to our choice of housing, the car we use, and our consumption pattern. A number of Ministers have mentioned that in some developed countries, even in the United States, the standard of living of some of the people is affected. In some less developed countries, maybe China and India, we can see that the standard of living has been going up. But in the developed countries, many people's standard of living has actually gone down.

Just now, Minister Lim Boon Heng and Deputy Prime Minister Lee had mentioned about what the CDCs could do to help. I am very glad to report to our colleagues here that in the past one year, we have been quite successful in our efforts to help our residents who are affected by the recession to look for jobs. We have made use of some of the packages introduced by MOM. We have also gone down to the factories. We have trained some of the workers to upgrade their skills or to retrain them.

In July, there were 4,800 unemployed who have registered themselves with our South West CDC. We have successfully secured interview opportunities for 60% of the job-seekers. A total of 1,235 actually took up the jobs that were given to them, among whom 588 are 40 years and above. So the older workers were also able to find jobs so long as they are willing to be more flexible. Out of 1,235 jobs, 374 or about 29% were lower-paid ones, and our local residents were prepared to take these jobs. So long as we give them some encouragement, give them some skills training and some guidance, we can persuade them to take the jobs available to them. For example, we cooperated with the hospitals to train the older female workers to do some cleaning work in the hospitals. We brought them to Alexandra Hospital and KK Hospital and the success rate was quite high.

If we had not held their hands and encouraged them and just told them to go to KK Hospital or the mental hospital, they would be worried and may not even turn up for interview. But when we bring them to the hospitals, have tea with them there and explained to them the situation, they will be more receptive and willing to work there. We even brought them to the handicapped children's homes. At first, they were not willing to go. But if you hold their hands, arrange to have people from the hospitals to explain the job requirements to them, they would respond positively. We discovered that many of them who went to the home for the handicapped children, felt that the children were very appreciative of their attendance there and they cultivated a love for these children.

So, as a CDC, we will help to cooperate with MOM and the employers to arrange for training, particularly for the older workers, and I can see that we are getting better results nowadays.

As for the cost factor, yesterday, we talked only about CPF. But today, the Deputy Prime Minister had introduced various packages to help the people. I am sure that both the employers and workers would welcome these packages. But some people I spoke to feel that companies which are not linked to globalisation, for example, our energy companies, utilities companies, public transport companies, and are not affected by the global competition, are also enjoying the 3% savings on CPF. These companies should share the benefit of these savings with their customers.

We would also like to see how the Government could cut down on all those bureaucratic red tapes. Recently, the Government introduced "e-Government" which is a very good initiative. We can now provide the foreign investors with a "one-stop" service. I feel that this one-stop service should not be confined to the MNCs. We should extend this one-stop service to all the services and the various industries, including the local SMEs.

I know of one old lady in our constituency who works on a sewing machine in the market and she offers the service of clothing alteration for her customers. It took me 10 years to get her a licence to run a small stall at the market place. Over the years, all her applications were rejected because the officials said that there was no such precedent, and clothing alteration was not one of the skills specified in their manual for approval of a vocation licence. I think if one is prepared to be self-reliant, we should make it more convenient and even encourage one to earn a living by using one's skills, so long as it is legal, proper and cause no harm to the country. We do not want retrenched people to queue up for handouts. We should encourage these people, make it more convenient for them to earn a living with their skills or special talents so that they could earn enough to support themselves. I think we should encourage them to take up these jobs as well as micro enterprise.

We have also a lot of small and medium enterprises (SMEs) in Singapore. When we talk about SMEs, it usually means those with a paid-up capital of $1 million, or at least $500,000. But there are some older workers who have no means to start a business of that size, and it is very difficult for them to be trained or re-skilled. I think we should encourage them to do some small trades so that these people can earn a living for themselves. I think SPRING Singapore should consider encouraging this sort of small businesses.

In some developed countries, like the United States, they have also promoted this type of small trades. Capital loans of $10,000 or so are readily available for the older folks to start their small businesses.

Another point I wish to mention is that in our South West CDC, we promised our residents that no child would be deprived of the opportunity to be placed in childcare, kindergarten, student care and be educated simply because his or her parents have financial difficulties. A Children's Fund has been set up to see to it.

The Prime Minister mentioned the Home Ownership Plus Education (HOPE) Scheme. We hope that we would be able to promote this scheme to the families who have financial difficulties so that the children would not be deprived of the opportunity to be educated. We should give this assurance to the residents that their children will be looked after.

Just now, DPM had also mentioned that he hoped that the HDB could relax their rules. I think Minister Mah and his ministry officials are very active people. We have taken up quite a bit of issues concerning HDB rules to them, and these issues were settled expeditiously through the efforts of Minister Mah and his officials. I hope in this aspect, we could accelerate the exercise to simplify the procedures so that it would be easier for the residents.

In the long term, we cannot just depend on wage cuts. Minister Lim Boon Heng had recalled several wage reforms that we have undertaken over the years. And just now, Parliamentary Secretary, Mr Hawazi had also talked about companies where the employees are not unionised, less than 10% of these employers have adopted flexible wage system. We, the labour MPs, have been advocating a flexible wage system for the past 18 years, and yet so few of these employers have heeded our advice. So perhaps, I should offer two suggestions to improve the situation. One is to grant some tax incentives to those who adopt a flexible wage system. Maybe it is too late for this round of CPF cut. But I hope that there would never be another round of CPF cut. But in the unfortunate event that this happens again, I think those companies which do not have a flexible wage system should not be allowed to enjoy any reduction in the CPF contribution. This way, we can encourage these companies to quickly adopt a flexible wage system.

Last week, I visited a company known as Ameron. I was told that the company has been making profits every year since 1998. This year, they have enjoyed the highest profits ever. So originally, in my speech, I was supposed to tell their workers to tighten their belts and to exercise wage reform. But when I heard their results, I held back and asked the CEO how did they manage to have profits every year despite the economic downturn. He told me that they make sure everybody in the company, from the senior mangers to the factory workers, understands the competition they are facing, and they have therefore to adapt to changes. Everyone should make a contribution at his own level and, if necessary, make sacrifices too. The company guarantees that its products must be 100% accurate - because their products are used in deep seas for oil exploration - there should not be any defects in the quality. Another factor is the speed. The products must be able to deliver on time. He said that his company was very happy to invest in Singapore and that the workers here were good. But he commented that the younger workers normally do not stay in their job for long. They would work for one or two months and resign. But the older workers have worked for more than 10 years because they know that when the company makes money, they will be given bonuses and a lot of benefits, but the younger workers work for one or two months and they quit, because the working hours are long. So, I think we should not just be concerned with wage cuts. We should help ourselves by upgrading ourselves.

There have been retrenchments in some big companies like PSA Corp. We know that PSA Corp aims to be a globalised group of companies. It ranks very high up in the world. It is one of the best ports in the world. Recently, we also visited the Keppel Offshore and Marine Company. The company has invested heavily in research and development. They are the world leader in the manufacturing of jack-up rigs. In fact, some 60% of all the jack-up cranes in the world were constructed by them. So we should not feel depressed. If we have a long-term plan, we will still be able to maintain our standard of living or even enjoy a better standard of living.

But on the issue of training, I still have some reservations. Some 20 years ago, Dr Tay Eng Soon promoted the WISE and BEST programmes, but the response was not too good. Even now, many workers in the 40s have difficulty undergoing training because of their lack of linguistic and mathematical aptitude. Twenty years ago, when these programmes were launched, these workers were about 25 years old. Twenty years later, they are now 45 years old. There are real problems in training them. We should sit down and study where the problem is. Is it because the workers refuse to be trained or the employers are not proactive in wanting to train them? So, for 20 years, this generation of people are already moving into middle age. I hope that for those who are 25 years old, we do not have the same problem 20 years later in Parliament. So I think we should really sit down and systematically analyse this problem as to how to enhance our competitiveness.

Just now, I mentioned about PSA. I asked them how we could further improve the productivity of our workers. They told me that they do not have a problem with the facilities. They have the capital to meet the requirements. The problem is how to let our workers work in a wiser manner. They are hardworking, but how do we train them so that they can work smart and provide a higher level of service. This would involve training and equipping them with proficiency in languages, mathematics, and the use of computers.

Yesterday, the Prime Minister mentioned that many office jobs have been relocated to other places. I think this is a serious problem. We should sit down and conduct some in-depth studies and analyse the situation.

Finally, I would like to talk about our fighting spirit. The Prime Minister had mentioned that in the past, Singapore was able to counter all difficulties because our people had the fighting spirit and the spirit of unity. I hope that our people should not be down-hearted. Our basic infrastructure is good. Our system of government, strong reserves and transparency in our system are our forte. So, the most important thing is that we must lift up our fighting spirit like what Mayor Heng Chee How had mentioned.

Many of my residents said that I was speaking for the employers. I said, "No, we are speaking for all the people of Singapore." Maybe the employers should say more. It seems that all the time, it was the Government and the trade union leaders who are speaking up. I think the employers themselves should also speak up. We are speaking for the general good of the people so that we can break through this present economic dark cloud.

Mr Andy Gan Lai Chiang (Marine Parade): Mdm Deputy Speaker, we have often heard that a large number of potential jobs may be lost in Singapore as more companies contemplate moving their operations to countries that have lower labour costs. This, I believe, is unavoidable. Among the ASEAN countries, the attraction of lower labour costs, such as in Indonesia, Malaysia and other neighbouring countries, is irresistible to investors.

Many businesses in Singapore, whether local or foreign, have been and are still producing traditional goods and services that provide employment for a large number of people. Their products are of high quality and some may even have the potential of expanding overseas with their products. However, they are currently facing heavy competition from overseas companies with lower cost of operations, and especially those that are labour intensive may be forced to cease operations here if nothing is done about the cost of labour.

I am happy to note that the Government recognises this problem and that the Prime Minister is now taking action to remove one of the financial obstacles in the path of businesses, and that is the high statutory CPF contribution rate for employers. The current rate of employer's contribution rate of 16% has not been sustainable for a long period of time, and has been an inflexible reward instrument for employers to use in managing their payroll.

Flexibility has now been brought into the formula by the Prime Minister to make CPF contribution move in tandem with the economic climate. This move, I note, is a significant signal to employers that the Government is serious about creating a robust economy. And the relief measures that the Deputy Prime Minister has just announced will further make our economy more nimble and aggressive.

Minister of State Raymond Lim has also acknowledged today that competition in many industries - and it is a common trend now - has forced prices down and margins are under tremendous pressure as fixed overhead cost remains high.

With the lowering of the CPF rate from 16% to 13% for employer's contribution, overheads will drop tremendously for companies, and especially so for those that are labour intensive, allowing them to match lower prices and keep the business going and thus preserve jobs. In fact, some of the savings in CPF contribution will be a saving grace for companies that are facing losses. For those companies that will enjoy greater margin in their profit statements, staff bonuses should be encouraged.

Saving jobs in an economic downturn is the Government's primary objective and attracting new investments and creating a conducive business environment for business to trade will be on top of the agenda. Without jobs, there will be no CPF contribution for the workers. Therefore, as Government adapts to the changing environment to save jobs, so must the people. This will include a mindset change as to how we perceive the amount that should be in the retirement fund. A fair amount of savings has to be set aside for the future. But with inflation, CPF savings will not be sufficient to meet old age requirements when a person retires. So what future quantum should this fair amount be? Should it be $120,000 as the Minimum Sum or more? It all depends on the standard of living that one desires. It may not be attainable but whatever the amount is, the future rate of savings in the CPF should be an affordable amount for both the employers and employees, that should be flexible enough to move in line with economic trends prevailing.

The range of employer's contribution stated by the Prime Minister lies between 10% and 16%. This, I believe, should be a comfortable band for most businesses to work within. However, if the employees need to top it up, and it is possible for them to do so, they should resort to using other financial tools such as instrument products to supplement retirement savings.

Employers should also be encouraged to set up a second source of retirement fund to reward employees, and build up a second pillar of savings in addition to their CPF savings.

Another mindset change for employers would be for them to recognise that total pay package includes the quantum of employer's contribution to CPF. This portion should not be regarded as a benefit on top of the salary, but an amount earned through the course of employment. So, if a person earns $30,000 a year, his total pay package will be $33,900, inclusive of the 13% employer's contribution. The additional $3,900 should not be regarded as an employee benefit but as part of his gross salary for the year. Any additional amounts of CPF paid through performance bonuses are benefits accrued. A distinction between the two will help employers and employees better plan the use of CPF as an incentive tool to increase productivity.

The feedback I received from the ground is that a reduction in employer's CPF contribution is tolerable, but a pay cut is not. But if it is necessary to do so, I would not advocate that salary levels be cut down to that comparable to, say, China, for us to remain competitive. We must, however, structure our salary scales inclusive of employer's contribution to a level comparable to our productivity. In this way, we get to enjoy a reasonable standard of living and still be competitive.

The Business Times reported on Monday, 25th August 2003, that despite far higher labour cost here, total business overheads in Singapore may be only slightly higher than almost comparable wage levels in China, the much vaunted cheap workbench of the world, according to consulting firm Political and Economic Risk Consultancy (PERC). Assuming that this report is correct and Singapore reduces its cost of labour and thus overheads further, we should then be able to compete for a bigger share of the economic pie internationally.

Mdm Deputy Speaker, I support the Prime Minister's call for retuning of the CPF.

Mr Ng Ser Miang (Nominated Member): Madam, many businessmen that I have spoken to fully appreciate and support the decision of the Government to retune the CPF, cut contribution rate to 33% from 1st October and to bring the range of CPF contributions to 30-36%. I am sure Singaporeans and businesses alike also welcome the package of measures announced by DPM Lee earlier, with about $900 million going to support businesses and another $132 million that will go to support Singaporeans in need.

Companies in Singapore have, in the past years, survived in extremely difficult economic conditions and tougher and tougher competitions. Even when we thought that we were turning the corner, we were hit by the impact of the Iraqi war and SARS. I can say that most companies have tried all they could to reduce cost, increase productivity, retain and redeploy workers, and as a last resort, some had to retrench workers.

I believe that the Government's decision to retune CPF is also a recognition that companies have done all they could to reduce cost and a more fundamental change to wage structure has to take place to ensure that we can compete globally. The cut from 36% to 33% will save $1.3 billion a year on employers' wage bill. While the extent of savings will differ from company to company, it could mean the difference between profit and loss, survival or failure and, ultimately, translating into job retention and creation or job loss. It would also mean that Singapore will be more attractive to foreign investments.

Several MPs have urged companies, which will enjoy a windfall, to share the CPF cut with the workers. I fully support this notion. Companies that do not look after their workers cannot enjoy their loyalty and are doomed to failure. However, I would like to put in a word of caution, lest we raise unrealistic expectation. The retuning of CPF is necessary to help reduce costs and make our companies more competitive. Companies will use this to lower their costs and make their products and services cheaper or better so that they can compete better and remain viable and, in the long run, help to retain jobs or even to create jobs. They will have, in their own way, to make the most efficient use of this saving, while competition with China, India and the rest of the world will continue.

I am not certain that many will enjoy a real windfall from this CPF cut. Let me illustrate. In the Straits Times' article dated 21st August, it was reported that big firms stand to save millions if CPF is cut. It said that if there was a cut of employer's contribution from 16% to 10%, then, for example, SIA's after tax saving could be as high as $46 million. Since there is only a 3% cut, the assumed saving would be half or $23 million. Will Singapore Airlines make enough money this year so that it can share the saving from the CPF cut with their workers? I am not certain.

If we look at it in perspective, Singapore Airlines had announced on 30th July that it had suffered a loss of $312 million as compared with a profit of $478 million in the first quarter of last year. The savings from CPF cut will definitely help SIA to reduce cost, while it continues its efforts to increase traffic and revenue and to contain costs. Even then, it will be an uphill task for Singapore Airlines to match last year's financial profit of about $1 billion. As we can see from this example, companies like SIA may not be able to share its savings from CPF.

For those companies that are profitable, and the CPF cut represents a real windfall, I fully agree that they should share the savings with their workers through bonuses, performance linked incentives and so on. Perhaps we can even encourage these companies to continue to pay the 16% CPF with the Government giving incentives to them such as double tax relief on this extra 3%. The cut of 3% will help companies to some extent, but not sufficiently to really bring down business costs.

I agree with several of the Members who spoke before me that we need to look at other ways to lower business costs, such as fees, rates, rents, land and transport costs. I believe these have been sufficiently dealt with by DPM Lee and Minister of State Mr Raymond Lim earlier.

My next point is really on the return on CPF balance. Currently, interest paid on the Ordinary Account is 2.5%, and 4% on other accounts. Can we do better than the 2.5%? I am quite confident that this is possible. I would, therefore, urge the Government to look at better ways of managing the CPF fund and to give a better return to CPF members. And, if we are able to do so, then it will certainly help to mitigate the cut in CPF rates of our workers.

Individual members have tried through various schemes to improve the return on their CPF balances, but not all achieved the same desirable results. At the end of 31st December 2002, three million CPF members have a total of $89.1 billion in their CPF balances. I believe, with this huge sum of money, the CPF Board has the skill, and is in a better position, to achieve better returns than individual members themselves. So I believe that this is possibly one way to increase or enhance the returns on members' CPF balances.

Mdm Deputy Speaker, I support the measures.

Dr Mohamad Maliki Bin Osman: Mdm Deputy Speaker, thank you for allowing me to participate in this debate. During the Budget debate this year, I spoke of the several "R" words that had dominated our vocabulary - Restructuring, Remaking, Refreshing, Revitalising and Renewal - all in the effort at preventing Retrenchment. Yesterday, PM Goh introduced two more "R" words - Retuning and Restrategising - two more important processes we have to undergo as our economy remains relevant and effectively responsive to the ever-changing global scene. Perhaps another "R" word we have to emphasise to Singaporeans is "Reality". There are several realities that I would like to focus on.

Reality 1: We are at the mercy of our environment. CPF has been touted as one of Singapore's most sacred cows. So when a sacred cow is not spared, Singaporeans must wake up and appreciate the gravity of the situation. No one can predict what else is going to happen in other parts of the world. No one will know when the next bomb will explode or when SARS will reappear. But the reality is, unless we prepare ourselves for whatever may happen, we will be caught off-guard and we will have to pay dearly for the consequences.

Reality 2: We are no longer leading far ahead in the economic race. One of the motivations of the CPF change is the realisation that Singaporeans are just too expensive to employ. We used to be way ahead in the race and thus we command good wages because we are able to provide goods and services that are of more superior quality compared to our competitors. But these competitors are catching up and the reality is that what we can do today, they can do just as well, if not better. If we do not find the competitive edge, we will be overtaken and left behind.

Reality 3: Gone are the old jobs and get prepared for the new jobs. We have been talking much about the need for Singaporeans to understand that the old jobs that they are comfortable doing are gone and will never be back. Changes in the CPF rates promise to save jobs and bring in more jobs. But no amount of CPF cut is going to help if Singaporeans do not realise the need for them to do their part and be skilled for the jobs that will come. The jobs will come and they will go if the workers are not prepared and ready for them.

Reality 4: Is money really not enough? - The need to lower expectations and aspirations. The decision of the Government to establish a range of 30-36% as the target for the CPF contribution sends a strong message to Singaporeans that they have to be flexible and nimble all the time. Although the changes will not happen every year, it may and will happen under circumstances of great economic uncertainty. We have heard the laments of many Singaporeans, and voiced by many Members of the House, about the increase in the cost of living. In not so many words, increase in cost of living translates to "money not enough". But is it really not enough? Madam, the data from the Household Expenditure Survey of 1997/98 showed that the average household expenditure exceeds household income for those in the less than $2,000 income group. For example, the average household expenditure for those earning below $1,000 was about $1,300. The average household expenditure for those earning between $1,000 and $1,500 was about $1,600. But a closer look at the data leads to an interesting interpretation. For those earning below $1,000, about half spent less than $1,000 in their household expenditure, ie, spending within their means, perhaps. For those earning between $1,000 and $1,500, about 57% spent equal or below their income levels. From a strength perspective, this suggests that some low income Singaporeans are capable of living within their means, while some are not. The issue is complex and will be compounded by variables like the household size and the number of dependants in the household. The question then is: are we really living within our means and can we continue to live within our means in times when our incomes are reduced? Can we make the choices of prioritising our expenditures such that we are able to make do without some, ie, are we able to differentiate between our needs and our wants? Or are the needs really beyond our means?

Madam, a related question is: are we being fair to Singaporeans, having given them so much promises and having them increased their aspirations, we now tell them they have to be realistic and lower their aspiration. We encourage homeownership and we take pride in that 90% of Singaporeans are home-owners, even when we know some are struggling to keep up with their payments. We encourage them to upgrade, but when the lightning strikes, we must be there to help those who are hurt. It is more than just extending the mortgage repayment periods, more than just the ERS to cushion the GST increases. It is how we walk side by side with Singaporeans as they overcome their difficulties. Some of these difficulties are compounded by our own policies.

Madam, last night some of the banks came out proudly announcing their willingness to help Singaporeans who are affected by the proposed changes. But these are only cases that already have existing loans with them. I see many residents are severely affected by the economic downturn, feel depressed and dejected when their effort at securing a bank loan is rejected. They need to sell their flats and downgrade for they cannot afford their flats anymore. They have huge debts to settle and because of their poor credit standing, no bank wants to lend them money. Yes, you can say that they are responsible for their own actions but, Madam, I think we are also responsible for encouraging them to dream and aspire. Now that they have woken up from the dream and are facing reality, we must be there to support them.

Madam, I am glad to hear the support mechanism announced by DPM Lee a while ago to help families who are affected. I only have one appeal to make on the revised HDB rental policy. I laud the move to increase the salary eligibility criterion to $1,500 and to charge higher rentals for those who earn more than $800. However, I urge HDB to assess the households on per capita income when deciding on the rent to charge these families. I would also urge HDB to periodically review the tenancy period such that those who can really afford it should be asked to purchase their flats.

Reality 5: Unemployment is a real possibility. While the proposed changes are aimed at ensuring Singaporeans keep their jobs and more jobs would be made available, they do not negate the possibility that jobs continue to be threatened. The threat is as real as SARS coming back every winter. The shorter economic cycle necessitates that we prepare Singaporeans for impending unemployment. Madam, the crisis has shown many Singaporeans that they cannot take their job, nor their lifestyle for granted. Many Singaporeans are caught unprepared. I think the changes in the CPF fall short of preparing Singaporeans for the eventuality of the next economic crisis when they lose their job again. When the crisis struck, many were not prepared, as they did not have sufficient savings to pull them through. They scrambled around looking for the safety nets. The Government also scrambled in knitting the net and throwing it at them. We cannot allow this to happen again.

Madam, anecdotal evidence suggests that apart from the compulsory savings of CPF, Singaporeans are not saving enough. In fact, many are indebted. With many spending more than their incomes, one wonders how they can possibly save. We have read about bankruptcies heading for an 18-year high. A paper entitled "Wealth and Liabilities of Singapore Households", published by the DOS in March this year, noted that the ratio of outstanding loans to the personal disposable income and GDP of Singapore is the highest amongst several developed countries, like the US, Japan, UK and France. Madam, I think one mindset that we have to change is that we save only for retirement and thus, with CPF, it would be fine. In reality, CPF will not guarantee a good retirement, thus the need for us to radically change some of its features. Recognising this too, the Government introduced the Supplementary Retirement Scheme (SRS) to enhance Singaporeans' savings mechanism for retirement. But while we may save for retirement, I believe we need to also save for potential unemployment. While we may be at the crossroads and taking the path of the CPF changes that may lead us back to the sunny island, the road may be bumpy, with thunderstorms and lightning. We need to encourage Singaporeans to be prepared for these rainy days.

The Rainy Day Account. Madam, I propose that the Government introduce a scheme that encourages Singaporeans to save for unemployment. I am not advocating unemployment insurance for there are too many negative social implications to it. I am proposing an opt-in savings programme that can incentivise Singaporeans to participate. Such a scheme subscribes to the philosophy of self-reliance that we advocate in the people. The key feature of this programme is that the amount of benefits available upon unemployment depends largely on one's own employment history, last-drawn pay and how much he has saved in the account. The benefits available from the scheme are based, first, on what has been accumulated in the account and, second, upon registering with the Singapore Workforce Development Agency and deemed to be actively seeking work and engaging in training, a line of credit may be extended to him after he has exhausted the balance in his account. He will continue to contribute to the account and repay the loan once he is gainfully employed again.

Madam, we must make Singaporeans understand that such savings must be one of the items that they work on in their monthly budgets. I am working on the final details of the proposal and will be pleased to submit it to the Government for consideration.

Madam, this is the second debate on the CPF in as many years. Last year we debated it, following recommendations by the ERC. We have been doing so much in the past years to grapple with this economic situation. Each time we see a ray of hope, something happens. While we continue to give Singaporeans hope, we must moderate their expectations. We must come to terms with the realities. Madam, I support the proposed changes and hope that by the end of this debate and, further into the future, in times of economic crisis like this, CPF will be remembered by Singaporeans as creating a promising future and not cutting pay first.

Ms Irene Ng Phek Hoong (Tampines): Madam, I would like to thank the DPM for the comprehensive and well-designed assistance schemes that he has announced, which would help workers affected by the CPF changes. But despite the generous relief package announced, the CPF measures announced will still mean pain for workers and I would like to highlight the far-reaching effects of two changes in particular, and ask that the Government pays special attention to these aspects.

First, the change to make the CPF rates more flexible. With the change, the CPF rate will go up and down within the 30-36% range, depending on the economic situation. Madam, this change will come on top of on-going efforts to make wages more flexible and the wage cuts that workers are already taking. The result is that a larger portion of their wages, plus CPF, will become variable and less reliable as a steady source of funds. A smaller amount of their wages will now be fixed. The variable portion can fluctuate, depending on the economic situation. And we know that, increasingly, economic cycles are getting shorter and more volatile. This means that workers would have to factor in a greater level of uncertainty in their plans for the future. It will be harder for them to plan with confidence and to chase their Singapore Dream. For instance, they should think long and hard, in fact, longer and harder before buying the biggest flat they can afford at that particular moment. They must now factor in a big enough buffer in case their CPF and their variable wages are cut drastically, unexpectedly as well. This requires a drastic mindset change.

It also requires a special will to resist housing agents who do their sums for buyers on the basis of their prevailing salaries and prevailing CPF rates and who insist to buyers that they can afford it, never mind what the future holds. I have met too many workers living in bigger flats who now regret bitterly going for the biggest flats they could afford a few years back. And, now, they are having a hard time trying to sell their flats even if they want to downgrade.

Madam, recently, I had a dialogue with the union representing the public daily-rated workers. They are basically the bottom earners in Singapore. I am the union adviser. One of them, an electrician, lives in a 5-room flat and has nothing in his CPF balance, ie, 0. He is 52 years old and earns about $1,000 a month in gross. He takes home about $800-plus a month and he supports three school-going children. He has nothing in his CPF because all has been used up to buy his 5-room flat. His wife and his son also contribute their CPF towards the flat. But when we think about it, we cannot really blame them for upgrading to a 5-room flat years ago because, going by the CPF rate and the salaries at that time, they could afford the flat. They had dutifully done their sums. HDB did not discourage them.

Madam, the flexible CPF rates coming on top of their other uncertainties and worries can be psychologically quite hard on Singaporeans. A moving CPF target may be an easy escape route for the Government and employers. But for individuals, especially the lower income living from hand to mouth, it can be a trap. I would rather that the Government just leave the CPF at a fixed sustainable rate, say, 33%, or, if necessary, just 30%, than to have it fluctuate between 30% and 36%. When times are good, it should return the cut to the workers via CPF top-ups and wage bonuses, rather than raise the rate. When times are bad, the companies affected should just shave 3% off the variable part of the wages, if necessary, rather than cut the CPF across-the-board by another three points to 30%.

But for this to work, employers must take wage reforms seriously. However, as we have heard, many employers continue to drag their feet on this. And, indeed, when the labour movement called for profitable companies to return the savings from CPF cut to workers via special cash bonuses, some companies said that their salary structure does not allow for this. It is that rigid. Such a state of affairs is quite unacceptable to workers who have been asked, time and time again, to take CPF and wage cuts quickly and flexibly for the greater good. Employers should take the extra effort to also reform their wage system and to reward workers just as quickly and as flexibly so as to be fair to the workers - if not for the greater good, then for their own good. If workers see their employers just distributing the windfall from the CPF cut to shareholders with little improvement in the employment situation, they will be less inclined to support CPF cut so readily in the future.

The CPF should not be seen as part of the variable wages. It should be seen as a fixed part of the wages. It is important to keep a steady fixed stream of savings for retirement purposes. I worry that as long as the Government allows CPF to be flexible, employers will be reluctant and slow to implement wage reforms to make the wages more flexible. And I do not think this is in the interest of workers.

Madam, the second difficult change for workers involves the raising of the Minimum Sum. By 2013, workers must set aside $120,000 in their CPF, half in property, and $25,000 in their Medisave, before they can withdraw their CPF balances at age 55. I am glad that this is being introduced in phases. But, still, it would be hard for workers, especially the lower skilled and the lower income. Take the example of a daily-rated cleaner that I know, who is 41 years old. She is supporting three school-going children. She will be affected by this change. She earns about $800 a month, takes home about $600-plus after deducting CPF. She now has about $20,000 in her CPF savings, and even if she works night and day, for another 10 years, she will never build up the required CPF Minimum Sum of $120,000. So what does retirement hold for her? More back-breaking work?

Indeed, one important consequence of this Minimum Sum requirement is that it will force workers, especially the lower income, to just keep working, whatever the work is, till at least 62 years old, or else they will find it hard to survive. They cannot withdraw from their CPF at age 55 as they cannot meet the Minimum Sum requirement and they have little, if any, personal savings to rely on. Indeed, woe to the workers who lose their jobs after 55 years old for reasons out of their control, such as the jobs disappearing to a cheaper location or their company restructuring. They will be caught in the twilight zone, unable to get a job because of the skills mismatch and the job market preference for younger workers, and unable to draw on their CPF savings because of the higher Minimum Sum rule. They will have little, if any, savings to rely on.

Madam, if we do not pay attention to this group and defuse this potential time bomb, we will have a mass of unhappy jobless older Singaporeans with nowhere to turn to for ready funds, except maybe the loan sharks. Indeed, in this respect, my biggest worry is for women. According to the latest CPF figures, as at 31st May 2003, women aged between 25 and 55 have a median net balance of only $27,000, compared to men in the same age range who have about $36,500. The median cash balance refers to cash remaining in the CPF accounts.

Another set of figures, that of the median regrossed balance, is even starker. The median regrossed balance includes cash CPF savings and those withdrawn under the various schemes before retirement. For women aged between 25 and 55, their median regrossed balance is just about $64,000, while men of the same age range have about $94,000. In other words, on average, women have about a third less than men in their CPF accounts. This means that, compared to men, women would have a harder time meeting their Minimum Sum requirement at age 55. The reasons for this include the fact that women tend to take time off from work to care for their families and then return to work later, often for lower pay.

On the other hand, women tend to live longer and would arguably need more in their CPF savings for their retirement. I urge the Government to pay special attention to women to see how we can help them to prepare better for their retirement. Perhaps, we should consider a bigger CPF top-up for women, when times are good, to recognise their role as primary care givers for their families, like the way we recognise NSmen for their sacrifice for the country.

We should also not forget singles who are the primary care givers for their ageing parents or siblings. I would suggest that the Minimum Sum need not be a fixed amount, standard across all income groups, but should be differentiated with different figures for different income groups. In this way, at least the lower income can touch their CPF savings after 55 years old.

Madam, in every dialogue with workers and unionists, they have asked for the cost of living to be kept down, as we have heard in this House. I urge the Government to take these calls seriously and I am heartened by DPM Lee's assurance that the Government is looking into ways to cut waste. But to cut waste, it does not mean to translate the savings into cheaper transport or cheaper housing for workers. So I would urge the Government to consider whether it is necessary to revive the Cost Review Committee, under PMO, to examine every facet of transport costs, education costs and housing costs, and put pressure on the Ministries and see how costs in these sectors can be kept down. And, in fact, the Health Ministry is setting a model in how it is aggressively looking at ways to cut down costs which will be translated into keeping costs down for the consumers. It would go a long way in assuring workers that their worry is taken seriously, especially since the GST will rise next year.

Madam, in conclusion, workers accept these CPF changes because they want job security. They also want to retire with peace of mind. They have been taking wage cuts on their chin and, now, the CPF cut. In implementing these changes, the other two tripartite partners, the Government and the employers, must do their part to improve the situation for workers and to keep non-wage costs down. The tripartite partnership is only as strong as each partner is and each must be seen to pull its weight fully during this difficult time. It is like a three-legged race. Each partner must keep pace or the race to save jobs and improve our competitiveness will fail.

On that note, I support the changes.

Mr Zainudin Nordin (Bishan-Toa Payoh): Mdm Deputy Speaker, as many of my colleagues have spoken before me and many issues have been raised and covered, I would only touch on some of the issues that I feel strongly about and try to keep my speech as short as possible.

Generally, Singaporeans understand the need to tweak the CPF to save jobs. What it means for many is that, be it in their take-home pay or their CPF account, they have to make every penny work and work even harder. But I am sure that the announcement made by DPM would go down well to allay some of the concerns of the workers. In fact, I am really happy that the Government is showing genuine concern and is acting on the feedback from the ground.

Madam, recently, there has been an increase of bankruptcy cases. In fact, the Straits Times reported on 27th August 2003 that bankruptcies are set to hit an 18-year high. It will reach levels not seen even during the last major recessions of 1985 and 1986. With the weak economy, there are many companies that hit the bottom of the sea, taking with them many individuals who are either directors, owners, or sole proprietors with them. That is part of the business risk, and these businessmen knew what they were in for. But the unfortunate group are the employees who find that they have not only lost their jobs but also their CPF contributions held in trust by the companies. As I understand, many of these companies would deduct their employees' monies as CPF contributions but delay for months from crediting the amounts to their CPF accounts. As a result, when the companies hit the iceberg and sank, the employees were left in the cold icy water. All that the CPF Board could do was to represent them at the creditors' meeting. Even if the CPF Board was a first lien on any money that was left of the insolvent company, there would be nothing to compensate these workers for the loss of their very own monies. So the CPF first lien becomes a paper type.

Just as the Law Society is looking into requiring lawyers to deposit their clients' monies into a special account held by an independent body, the time is opportune for the CPF rules to be changed. With electronic banking and technology, the CPF can arrange for employees' contributions to be deducted directly from their salaries into the Board's accounts. In this way, even if a company sinks, the employee will only lose his employer's contribution, but not his own contribution. In fact, employers who use their employee's contributions to roll back into business and defer payment to the CPF Board are arguably committing a serious offence. I believe it is now timely to do something about this. Since the Government is fine-tuning the CPF rules, it should also look into this loophole and protect the workers for whatever that is left in their savings.

For those who escape the property downturn, I hope that they learn from the experience of others. Singaporeans must take heed of their own financial planning. They have to understand that the days of going for bigger and bigger flats are no longer viable, just as prices can go up, they can fall too, and even faster. I remember that, in 1995 and 1996, Bishan flats were one of the highest priced HDB properties. Today, some of these property owners are facing serious difficulties. Even if they want to cut losses and bail out, they may find difficulty in finding a buyer, at least in the near term. In fact, the demand pattern is likely to change with more people turning to rent, rather than buy the flats.

To the younger generation and potential property owners, may I suggest that they plan wisely and think carefully. With the greater policy changes that may come soon, as mentioned by DPM earlier, our younger generation will have more choices and they should plan better. I would say it is better that they endure a little hardship or inconvenience now while in their youths, than jeopardising their future at old age.

In the same light, I am glad that the Ministry of National Development will make the necessary changes, and it will be a welcome one in these present times.

Madam, we must understand that the ripple effect of the CPF cut goes beyond just servicing mortgage or property loans. Consumer spending pattern will change, as people prioritise on their expenditure. But for the economy to get out of its current woes, the dose of medicine will require a multi-disciplinary approach. The Government should also look at a whole spectrum of indirect taxation that is contributing to high business costs. The efforts announced by DPM in his speech is good news, but I hope they will translate into significant cost cutting, and the cost of all governmental fees will need to be realigned to the new economic situation.

Additionally, Government Ministries should be more frugal in spending. Cost-cutting measures should be introduced wherever possible. By this, I mean that civil servants should be measured against their ability to provide an efficient and cost-effective public service, not by the credit balances in their coffers at the end of each year. Singaporeans are practical people. They know that there are other charges that will have to be increased in the days to come for one reason or another.

The CPF retuning introduced by the Government will benefit the big companies more than the smaller ones. We have to do more to help our SMEs who are our own home-grown companies, our own entrepreneurs. These are the companies that do not employ many workers, due to their size or technology. Many of them do not benefit much from the CPF cuts. Though the package announced earlier to assist SMEs is a welcome one, I hope that the Government will work out a wider package of other measures to help our SMEs.

In conclusion, the current scenario brought me back to my student days when I was in France in the 1980s. I read about European companies leaving the country to move to Southeast Asia, where operating costs were lower. It caused unemployment, and unions battled with the employers and government, as protectionism sentiments emerged. Today, some of the industries returned to Europe, especially those which are dependent on a highly-skilled workforce. But unemployment still prevails and the numbers are still high. What it means for Singapore is that, even as we take these corrective measures, we cannot but face the fact that, in time, we have to change mindsets as we will have to face the ills that come as we approach the developed economy status. Yes, there is economic growth, but so too unemployment.

With this, I would wrap up by hoping that the Government will look into the proposal to give further protection to workers' CPF by amending the rules and drawing up a more comprehensive package which will help our SMEs. I am sure many Singaporeans will be cheered by the generous relief package announced by DPM earlier but, again, some may not. Nevertheless, I am confident that many have found something to be happy about in it.

Mdm Deputy Speaker, I support the retuning of CPF.

Dr Ong Chit Chung (Jurong): Mdm Deputy Speaker, I am an independent director of two listed companies doing business in China. One, a metal stamping and computer parts manufacturer, pays only about S$120 per month per worker in Guangzhou and Suzhou. The other, a fish and vegetable processing company, pays about S$130 per month per worker in Qingdao. And when I first visited these factories, I was taken aback. How can we then compete against PRC workers unless we restructure our economy and sharpen our competitiveness?

Madam, it does not mean that we have to lower our wages to the level of the PRC workers. But it does mean that we must try hard to improve our competitiveness, especially in terms of value-add and quality.

Madam, India is another rising giant, in terms of outsourcing and service industries. Now, more and more global companies are outsourcing their IT, call centres and backroom operations to India, including some Singapore companies and MNCs. It is, therefore, really no fun to be squeezed between China and India - two giants. Nearer home, even Thailand and Malaysia are rapidly changing and competing against us in terms of manufacturing, logistics and even healthcare. Bangkok and Malaysia are fast developing their medical facilities for foreign patients. They compete fiercely against our private hospitals in terms of costs. And we are well aware of the fierce competition from the Malaysian port at Tanjung Pelapas. And the story goes on.

In such a competitive situation, Singapore cannot afford to stand still, or we will be priced out of the competition and out of existence. For small and medium enterprises that are struggling and trying to keep their heads above water, the reduction in CPF contribution could be a lifeline thrown at them. It would definitely help cash flow. It would definitely make a difference: staying afloat or going under the water. If more SMEs survive, jobs will be saved in Singapore.

Madam, the CPF changes will therefore send a strong signal to MNCs and foreign investors that Singapore is making a concerted and determined effort to cut and contain costs. MNCs will consider this a plus factor and, if they stay put and expand in Singapore, we will avoid the hollowing-out effect. And if new investments come in as a result, more new jobs will be created for all Singaporeans. I have met some MNC and local CEOs recently, and they are upbeat about the changes and the positive impact on our economy.

When the Prime Minister confirmed that the CPF cut would be by 3%, from 36% to 33%, there was a sigh of relief. People feared the worst, a possible cut to 30%. We can see from here that the Government has exercised great restraint and care phasing in gradually the changes in the CPF salary ceiling, Minimum Sum and the Medisave Minimum Sum for CPF withdrawal at the age of 55. Moreover, the Government has taken great pains to implement a package to cushion the impact of CPF changes for Singaporeans, as we heard in this Chamber today. They are really encouraging and better than expected, and we can say for sure that the Government has left no stone unturned to help each and every Singaporean in his time of need.

Likewise, I would like to appeal to banks and financial institutions to do their utmost to assist homeowners, particularly those from the lower income groups who are adversely affected by the CPF changes. Banks should consider seriously reducing interest rates, restructuring the loans and extending the loan repayment periods for their customers.

Employers should not take the workers for granted. They should take note of and recognise the sacrifices of the workers in forgoing their CPF. Companies that are doing well should therefore share their savings or profits with their workers through increases in the variable wage components or through bonuses. Employers should also lead by example, and cut management salaries and fees.

Madam, CPF cut is not the only factor or solution. What about cuts in corporate and individual taxes, Government levies and fees? And, not to forget, there should also be cuts in red tape in the Government bureaucracy. Cuts should not be one-sided. Otherwise, CPF cuts will be in vain. In that sense, I am encouraged that DPM Lee and the Minister of State for Trade and Industry, Mr Raymond Lim, have both pledged today in this Chamber that the Government will try its best to contain and cut red tape and fees.

As the Prime Minister said, we are at the crossroads. There comes a time in the history of the nation when we have to decide collectively to move forward, or to fall behind and be marginalised. The choice is clear. We have to retune CPF. We have to retool our economy. We have to bite the bullet.

In Chinese, it is said "chang tong bu ru duan tong", ie, rather than suffer long agonising pain of prolonged unemployment, it is better to have it out, bear the immediate pain of CPF adjustment, restructure the economy, sharpen our competitive edge, attract new investments, and create new jobs for our people.

We have overcome many crises before: Separation, early British withdrawal, the 1984 recession and, most recently, the SARS crisis. Fear not. We have done it before, and we can do it again. We shall overcome. The economy will recover and rise again. Jobs will be plentiful for Singaporeans. There will be a better tomorrow.

This is, therefore, the time for all Singaporeans to rally behind the Government, to work as a united team. We shall triumph and prevail.

Madam, I support the CPF changes.

Mr Seng Han Thong (Ang Mo Kio): (In Mandarin): Mdm Deputy Speaker, the Prime Minister raised the proposal to retune the CPF. He said we have to throw away some of the burdens so that we can climb this road to the highland. This reminded me of the "Reform and Opening Up" of China. In the early 1980s, when China started to have this reform and this opening to the outside world, Mr Deng Xiaoping's famous quotes were displayed at big billboards along the thoroughfare in Shenzhen at that time. He said that, "If we do not open up and we do not reform, this would be a dead world for us." The Prime Minister did not mention about death yesterday. But at the National Day Rally, he said that if you cannot breathe, then you will die. If you just lose face, you would not die. And the Deputy Prime Minister had just proposed the relief packages. These are a shot in the arm. So, even if you may lose face a bit, you can still stand up and then you can walk. In the past, when we fell down, we just stood up and walked again. But now, when we fall down and scratch ourselves, we wait for the Government to help us. So, I think the people should take action themselves and cannot just rely on the Government. Thus, while I support the PM's retuning of CPF and DPM's relief package, the issue here is: what next? I have three suggestions.

First, as the Prime Minister has said, we have to lighten our burden, to travel light, and we have to have a thorough reform. It is our hope that the Government and the whole set-up would cut waste, just like what the Deputy Prime Minister has said, the Cut Waste Panel (CWP). I think the Government should do it thoroughly and have a thorough reform of the whole service.

NTUC had held dialogues with 38 unions involving a few hundred union leaders. They all understand that we needed to adjust our expectation. We have accepted this CPF adjustment. The question they asked is, "Will the Government adjust our cost of living?" "Will the Government reduce its charges?" "Will the employers look after our welfare?"

DPM has given us an assurance. The Government should change the mechanism. So, when the workers have adjusted, the Government should also adjust. One point brought up by many people is that they could not understand why is it that hospitals still insist that if you stay in a B1 or B2, you cannot downgrade to a C-class ward. And if you are living in a 4 or 5-room flat, why not make the downgrading easier for them?

There is this song "Struggle to Win" saying that sometimes you go up and sometimes you go down. The Teochews said that if you can only go up and cannot come down, the whole family will die. So, I think the Government should do away with all the bureaucratic red tape. We are having a problem now. All said, we want to reform. But when the economy recovers, let us hope that the civil servants will not say that we will have to increase charges here and there. If that happens, everything will go back to what it was before.

As far as the employers are concerned, I am very happy to note that although Dr Gan See Khem is also an employer, she feels that employers should do more to care about their employees. Many employers give a lot of lip service. They talk a lot but do very little. So, I think when the employers have benefited from this CPF cut, and if they are doing well, they should share the gain with their workers.

As far as jobs are concerned, nowadays, we keep hearing employers saying that Singaporeans do not want to do certain kind of work. But the question is: what type of job - because the work system and salary are not conducive for locals. They treated Singapore workers as foreign workers. I think the employers should redesign, re-engineer their work so that workers will find it more friendly and conducive to work. In this aspect, NTUC will work closely with the employers in various sectors on this so that more unemployed Singaporeans can get jobs.

Secondly, the Government is very good in its financial management. But this CPF adjustment is actually a manifestation of Government's financial policy and philosophy. The ordinary folks may not be good in managing their finances. Singaporeans in general know the ways to prosper and want to make profits, but they do not know how to manage their fortune. It is said that if you save one handful of rice in every meal, in three years, you will be able to buy a horse. When we talk about horses, Singaporeans will always talk about horses in terms of buying 4-D during the weekends and make some windfall from there.

It is also said that even billionaires should be calculative. However, Singaporeans take this to the extent that as they have a few thousands dollars in the CPF, they have to keep calculating about it every night and every day. They always look at how they can maximise it.

The Prime Minister had mentioned about the inadequacy of the Minimum Sum and proposed that it be raised over a period of time. We have to explain to our people plainly. Otherwise, the Government may put in a lot of efforts. They may have very good intentions but the people would not appreciate it. In financial management, we do not just resort to the experts. We should teach every Singaporean how to manage their own wealth and property.

Thirdly, the Prime Minister had mentioned that this reform is painful. In other words, everyone must be prepared to endure some pain. The Prime Minister said that if we do not have a fish, even a prawn will do. But I have people telling me that prawns are as expensive as fish. It shows that people are not thinking what the Prime Minister was thinking. The Prime Minister said that if we do not eat fish, then eat the cheaper prawns but Singaporeans are thinking about the more expensive prawns. I think, in this case, if you have no fish to eat, you have to adjust downwards to have dried prawns, not fresh prawns.

Earlier on, Mr Low Thia Khiang had said that the Prime Minister might have forgotten, might have amnesia that we promised a better life. In fact, Government has not forgotten what they have promised. They want to give the people a better living. Thus, the retuning of CPF is exactly with this aim in mind that you must first of all have a job before you can live a better life. So our Government is anxious about them. That is why we have to do this reform very speedily, as fast as we can.

Mr Low Thia Khiang said that Government has not fulfilled its commitment to the people and we should apologise to the people. I think he did not understand the serious situation. For instance, if a father had promised the child that if he passed his PSLE, he would give him a watch. But now, the father runs into financial problem. He may not be able to afford to buy the son a good watch but he will still buy him a watch when he gets a job. The son can understand. I do not know why Mr Low Thia Khiang cannot understand. Mr Low compared the Government with that of a rabbit which has been sleeping and has just woken up from its dream. I must say that the Government has sleepless nights on the job situation in Singapore. So if you do not sleep, how do you have a dream? Every day, the Government has been thinking of how to restructure our wages. The Prime Minister has already raised a lot of points in this aspect, I would not repeat them.

I would like to urge the Ministry of Manpower to get more Singaporeans upgraded through its newly set up Workforce Development Agency. The new economy has taken away many of our jobs, so we have to speed up our skills redevelopment programmes. NTUC has launched various upgrading programmes and many workers have benefited from this scheme. But some people do not see the benefits including Mr Low Thia Khiang. He has said that the Government should apologise to the people. Actually, the Government is looking at the big picture. Many years ago, we had already made the preparation by urging workers to adopt the lifelong learning approach. Now it is raining, and the weather is getting very stormy, so we have to prepare ourselves for the stormy weather. Mr Low Thia Khiang blamed the Government for the bad weather. My point is that we could not stop the bad weather but we can prepare for it. I think we should encourage more workers to participate in these training courses so that we could see the general trend. It is not the time for us to blame one another. We should be working together in one heart.

Mr Arthur Fong (West Coast): Mdm Deputy Speaker, as PM revealed the CPF retuning measures yesterday, he likened the measures that we have to take as bitter pills. As I sat listening to DPM this afternoon, laying out the assistance and relief programmes, it was like listening to a Budget statement delivery in a form of sweets for Singaporeans affected by the CPF changes.

The Prime Minister's National Day Rally speech provided a sombre backdrop to our workers today - the difficulty in finding jobs for school-leavers and graduates, the fear of retrenchment, the realities of being retrenched, the difficulty of securing re-employment, the face of international terrorism, the deadly SARS outbreak. With all these before us, some were worried that the Singapore dream has broken.

We will be beaten if we allow ourselves to fall into this mindset. Singaporeans were asked to rally around the Government in these difficult times. Singaporeans and Members of this House asked what the Government could do to help us rise out of this valley of gloom. Today, we have heard from DPM the programmes that would help Singaporeans taking the bitter pill, much more palatable.

DPM's analogy of the boiled frog is that we have to act now. The changes to the CPF will help us. The saving of jobs is the key objective here. The signal to investors and employers is clear. We all agree on that.

Many Singaporeans, who have been holding their breath since the National Day Rally, were a little relieved yesterday when the CPF retuning measures were revealed. Then, there were those who have been worrying about the top-ups to pay for their mortgages. We now know that they number 76,000, although big, but manageable and will be assisted.

With impending changes to HDB's policy that are to be announced, it is clear that the Government is serious and leaving no stones unturned to help our people. This is an unwavering fundamental commitment of the PAP Government. Just like the SARS battle, Singaporeans rallied to the Government's call for action and to forge a strong bond that the international community held us in high regard.

Mdm Deputy Speaker, though the sacred cow of the CPF has been adjusted and tampered with, the Government's bond and trust with the people, to this Singaporean, has not been broken. Singaporeans will once again be lauded for taking hard knocks and rolling with the punches whenever necessary to keep the Singapore ship ship-shape, sea-worthy and sailing on. Fundamentally, we will all get together and push on.

Madam, I had prepared a long speech, asking the Government to do this and that. After DPM's statement, I am glad that the programmes that will be put in place will address the people's concerns and that help will be delivered.

However, I would like to touch on PM's message yesterday about changing our lifestyles and to be prudent in our spending. The Government is encouraging more employers to adopt the monthly variable wage component. In future, the employer's CPF contribution can also vary in accordance with how the economy performs. Both of these components, taking effect at the same time, might be a double-whammy for some people, if they do not do their financial planning well.

At present, the mortgage interest rates are at historic lows. As sure as the rates have come down in recent years, these rates will once again rise. There may be periods where the interest rate increase may overlap with the reduction in the income due to a reduction in employer's CPF and a reduction in the monthly variable component. People should take this time to refocus and to look at prudent spending.

There would be no formula in place to indicate when the employer's CPF would be increased or decreased. It will mean that Singaporeans must be realistic in their budgeting for housing costs. I understand that it may be difficult to have a formula in place, as well as to stipulate a definite notice period. Having this formula or a stipulated period of notice will hem in and inhibit the Government's responses in case when our economy is threatened once again. So Singaporeans should create a buffer in their finances in good years and it can be done by spending prudently, and to make changes to their lifestyles.

Mdm Deputy Speaker, I support the CPF retuning.

The Senior Parliamentary Secretary to the Minister for National Development and Minister for Defence (Assoc. Prof. Koo Tsai Kee): Mdm Deputy Speaker, so many speakers have spoken. So much has been said. The analysts have dissected all the figures. The Prime Minister gave an excellent overview. DPM gave a very comprehensive review of the relief measures that would cushion the impact of this proposed CPF cut.

So I asked myself whether I should speak. One less speaker out of 51 speakers makes no difference. But I thought to myself: maybe I should speak. So I asked my good friend here, Dr Tan Cheng Bock, "Shall I speak or not? I would sound like a broken record." He said, "No, you must speak." And he will also be speaking on Monday.

Last night, on the way back home from this House, I tuned in to the Chinese radio programme, FM95.8. I urge all Members to listen to the feedback programme around 5.30-6.30 pm. It gives honest feedback from Chinese-speaking HDB heartlanders. I heard my friend, Kwek Teng Swee, who said that this 3% CPF cut does not cut any ice with SMEs. In fact, I read in Zaobao today and he was quoted to have said that the CPF cut will save him a few hundred dollars but, in turn, he has to pay a few thousand dollars, because of the 1% GST increase next year. Then the DJ decided, I think, to get more employees to speak on the channel. One employee said that he did not agree with these employers as they were looking at their perspective. 3% was a lot to him. As he was a wage earner, a few hundred dollars cut sometimes means life and death, whether he could send his child to school or whether he could cut back on his tuition.

The debate goes on in spite of comments by some newspaper analysts. One in Today saying that it was almost a non-event, when people expected a 6% CPF cut, the Prime Minister announced 3%. The debate in the House yesterday simmered down to a low ebb.

Sir, the debate goes on outside this House. 3% is a lot of money to many people. When PSA retrenched the workers earlier this year, I was one of the MPs who was involved directly. Not only was I the advisor to the Singapore Port Workers' Union (SPWU), many of the retrenched workers actually live in Tiong Bahru and the Tanjong Pagar GRC area. In fact, one of my RC Chairmen was retrenched. Another Vice-Chairman was also retrenched. Many residents were also retrenched. I feel very sad for them because many of them are in their 40s. And in their 40s, as my friend, Mr Nithiah Nandan said, it is quite hard to find a job because jobs are hard to come by and the cost of doing business is high.

Madam, I decided therefore that instead of going through many of the comments that Members of the House have spoken on, I would look for something inspiring. I do not know whether you have heard this story. But a few months ago, a true life human story of courage and endurance made the headlines around the world. An accomplished mountain climber was climbing a mountain cliff. Unfortunately, he got one arm caught in the crevice. He was unable to extricate himself from the mountain face. So he waited and waited, waiting for help. Days turned into nights, nights turned into days. Help did not come. People were looking for him but they could not locate him. Hope turned to despair. He was cold, he was hungry, he was tired and his body was beginning to weaken. He knew that if help did not come within one or two days, he would be a suspended corpse on the mountain face.

He hallucinated very often. But in his moment of sanity, he decided to do one thing. He decided that only he could save himself. So he took out his Swiss army knife and decided to cut away his arm. Cutting the skin was the easy part. Then, he began to cut his flesh. When he reached the bone, the pain was excruciating. The Swiss army knife was a very blunt instrument for cutting an arm. But because he wanted to live, survival was on his mind, his family was on his mind, the pain was nothing. His will prevailed. Eventually, he freed himself. But that was not the end of the story, because he was still in the middle of nowhere. He had to walk for miles in the snow. He crawled, he limped and, finally, help came. Today, he lives to tell his tale with a smile. Tomorrow, he will climb another mountain.

Mdm Deputy Speaker, I would like to tell this real life human story to people who are worried that the proposed CPF cut will cause pain and suffering. Certainly, there will be pain. In fact, even without the CPF cut, employers can always cut salaries. So, it is either CPF cut or a cut of total wages through salaries and bonuses, or through variable bonuses. And we all have to make adjustments. All of us have committed our CPF to housing loans, to our children's study loans and so on and so forth. Therefore, we have to rearrange our finances. But this is not the end of the world. It might be if we do not do anything.

The key question we have to ask ourselves is similar to the question which the mountaineer had to ask. He asked, "Would cutting my arm off save my life?" We have to ask a similar question, whether cutting the CPF will resuscitate the economy. To the mountaineer, the answer is obvious. Similarly, the answer stares us in the face. The analogy is not quite complete because we do not lose an arm. He cannot grow back his arm. He can only use an artificial arm to climb the next mountain. But, collectively, we can recover our losses. If cutting the CPF restores the economy and the economy grows over time, then total wage would rise and 33% of a higher base would probably recover the 3% loss. So, the faster we implement the CPF cut, the faster we can extricate ourselves from this economic quagmire.

The analogy of the mountaineer is useful. If the mountaineer had been indecisive and cut off his arm later, he would certainly have bled to death or he would have starved to death. To him, it was a very small price to pay - an arm for a life.

For us, the consequences are not so severe. Over time, I am sure the economy will restore itself. And we must not forget that we had it good for a long time. The 40% CPF was riding on the back of endless waves of economic tsunami. So, in absolute terms, we have been getting a lot more from our employers. In percentage terms, it had always been 40% for some time. But the question is: how soon can we recover?

First, the good news from my perspective is that we have not reached the point of no return. Our official unemployment rate is 4.5%. They say it might go to 5.5% later this year or sometime next year. But this is still a small figure by developed world standards. Let us look at Hong Kong, the worst case in this part of the world. Hong Kong's unemployment rate, officially, is about 8.7%. It is in a severe recession. Of course, that is no comfort to us, comparing Singapore to Hong Kong.

Let us look at somewhere down south - Australia. Many Singaporeans have been making a beeline to go to Australia for holiday. Indeed, many have emigrated there in the last few years. Australia is one of the few bright economic spots anywhere in the world today. Its currency has gone up by something like 25% to 30%, depending at what point we compare.

Sydney property prices have really shot through the roof. In fact, they sold more million dollar homes than we have ever sold in the last three years. Yet, it may surprise Singaporeans to learn that unemployment in boom town Australia is 6.2% today. They are at the height of economic prosperity and yet unemployment is 6.2%. We are almost at the trough of the recession, but our unemployment is only 4.5%. So, we can only improve on 4.5%. It might go to 5.5%, but I think we can improve on this very soon.

The second good news is that we truly have all the resources. What we lack today is the resolve. All our infrastructures are first class - our roads, power stations, airports, housing. Everything is first class. They have all been paid for and they are all sunk cost. Once we adjust the CPF, total wage costs for employers go down, and when Government adjusts its fees downwards, I think we will become very competitive. And our neighbours better fear for their shirts. Because whatever we earn belongs to us. We do not have to service interest payments which our neighbours have to do. Hence, I am very confident that cutting the CPF is the right policy. Even though using the CPF to adjust total wage cost is a very blunt instrument, as Mdm Deputy Speaker had spoken yesterday, it is effective, like the mountaineer who used a Swiss army knife to cut off his arm. The Swiss army knife was a very blunt instrument, but it worked at the right time and at the right place.

Madam, I am supporting this policy, not just because I am in Government - I have supported many Government policies - but on this point, I am supporting it for my children. I am supporting it for our children, for our friends and for our relatives. I know of people - friends, colleagues, relatives - who have been unemployed for a long time.

About two years ago, one of my very good MPS helper told me, "Mr Koo, I can't help you any more."

So, I said, "What happened?"

He said, "I am going to Australia."

I said, "Why would you want to leave?"

He said, "Actually, I have been unemployed for a long time. I have been looking for a job but I can't find a job. I wound down my business. I sold my car. I sold my flat. I am left with a little bit of money. My children are studying there. They are working there. It's cheaper for me to go there and rent a small flat."

I have lost him, but he has not migrated because he does not qualify to be a migrant. He is not rich enough. So, he is on a social visit pass. Every time he comes back to Singapore, he comes to my MPS and helps me. And he has asked me whether I can help him to get a job. I have been trying and I cannot. All the companies I know are actually retrenching people because business has been poor.

Three days ago, I had lunch with two ex-colleagues. One is a 42 year old ex-General Manager of Tanjong Pagar Town Council. Another is an ex-colleague in the Public Works Department, going back almost 20-something years. I cannot remember the vintage. The younger ex-colleague told me that he was clearly worried whether his children would have a future in Singapore, with so many people leaving Singapore or giving up hope.

The older colleague has two children in Australia - one studying in Melbourne University and the other in Queensland University. But he told me that his children had told him, "What should we do if we don't get jobs in Singapore? Should we stay in Australia?" He is clearly worried because he and his wife want their children to come back to stay in Singapore. When we grow old, we all want our children to come back and stay with us. We all want friends to be around. When our children and friends have to leave Singapore, not because they are quitters, but because they need to earn a living for themselves, we should sympathise with them. But at the same time, it is hard for us to accept that the people closest to us are forced to leave the country because they cannot find meaningful jobs here.

In the 60s before I got a scholarship, I was very tempted to go to the Philippines for my undergraduate studies. Because at that time, in the 60s, the Philippines was the second most developed economy in Asia. The first was Japan. Today, the Philippines is among one of the poorer countries in Asia.

When the Iraq war broke, the Philippine government was worried about two things. They were worried about the lives of the Filipinos in the Middle East, but they were just as worried over the loss of foreign income from that part of the world, because the Philippine economy is now heavily dependent on remissions from their own workers in the Middle East and across the world, including a major component from Singapore.

This reversal of fortune should not be lost on us. Today, we are a rich country. Tomorrow, we should be a rich country, but history has a way of turning hopes upside down.

Madam, many of us are clearly worried about our future. We know that Cabinet, in particular the senior leadership in Cabinet, had sleepless nights agonising over this policy change. PM and DPM have revealed that Cabinet agonised for at least two months over this decision. We are sure that some of the senior leaders in Cabinet must have agonised long before they even broached the subject to Cabinet.

The leadership ought to be worried. And this is a good leadership that worries. The PAP leadership lives by its honour code. What it cannot deliver, it does not promise. What it promises, it had delivered. And on this, it has fallen down. There was a commitment to restore the CPF to 40%. To break a commitment like that and reverse it must have weighed heavily on them. It could not have been an easy decision for Cabinet. PM, DPM and several Ministers have come here to explain, and in their explanations, we can feel their sense of burden and their sense of worry. Obviously, they have worried a lot before they made the policy pronouncement. The Chinese have a saying. A good leader first worries and then enjoys last - sian tian zhi xia, you er you, hou tian zhi xia, le er le.

Clearly, we can see the agony written all over their faces. While we should be worried about going forward, how to readjust our finances, we should also spare a thought for the senior leaders, because history will have to write the final chapter. But I am convinced that history will vindicate them. And I have no doubt that history and historians will vindicate this policy U-turn. This policy U-turn is a mark of political conviction. It is not a course of political convenience. I urge this House and all Singaporeans and those who speak to jiu wu ba (95.8) to support this proposal.

Mdm Deputy Speaker: We will stop here today. Mr Mah.