RETUNING THE CPF

Order read for Resumption of Debate on the Prime Minister's Statement [28th August, 2003].

Question again proposed.

Ms Braema Mathiaparanam (Nominated Member): Thank you, Mr Speaker, Sir, for allowing me to join in this discussion.

I have a few points to make on the recent announcements on the CPF and I hope I will not repeat too many points here.

Firstly, I am of the opinion that the cut is not deep enough if we are really trying to meet our objective as spelt out in the Prime Minister's speech and that of the NTUC's chief, Mr Lim Boon Heng. If our reason is to make our workforce a more competitive lot from a wages' point of view, then I personally think that the cut could be deeper. A three percentage point cut can save employers about $1.3 billion a year. The bulk of this saving will be appreciated by the biggest employer, the Government and the Government-owned companies. The Government, as the Deputy Prime Minister has said, will save $175 million through this cut. Employers are mostly grateful but also cynical that these cuts will significantly reduce job losses or bring in foreign investments or stop the outflow of investments.

If this is the reality then, is this only a half measure? It would be a sorry day if employers bite the bullet only to make sacrifices for a short-term breather, a glitch on the globalisation radar screen. If we are seriously trying to lure MNCs back and be a serious contender against China and India, this CPF cut will only buy us a bit of time and slower the pace on retrenchments. But whether it will make us attractive enough is a moot point which I hope there will be further clarification on.

Secondly, on the issue of land costs, DPM has already reassured that prices have fallen since 1994 by as much as 41%. But are we still cost competitive with other countries around us? We have already lost big clients to Malaysia and the very example cited by Minister Lim Boon Heng of Philips having moved its manufacturing plant to Batam is also another case in point - cheaper land and labour costs in Batam. Land costs, I think, need to be buffered differently for different industries here. As our retrenchments are most deep in the manufacturing sector then it is equally important to see how land costs can be reduced for such industries to carry on their work in Singapore and provide jobs.

Another example is that if we aim to be the fashion centre of the east, then the retail sector needs a helping hand too. A Straits Times article last March showed that land costs for SMEs soaked up between 5% and 10% for the manufacturing sector while the bill for the retail sector was between 40% and 50%. Yes, land costs are coming down but we need to do more and be more creative too. We cannot afford to have any more white elephants if we can help it. An example in point would be to help small businessmen who are looking for cheaper rentals. Might it not be a better idea to rent out the old HDB HQ at Bukit Merah at a much reduced price or to also help the 49 aspiring business enthusiasts from the NTU's Technopreneurship Centre that Mr Raymond Lim spoke about last week? These are individuals who need a start-up hand or a helping hand with cheaper rentals. This Centre in Bukit Merah - right now I am not sure whether it is white or cream-coloured - can become a bustling centre, perhaps even called the Creative Business Centre, and who knows, in time to come, we might have a Sim Wong Hoo emerging with all credit going to HDB.

Next, I would like to comment on the $1 billion relief package. It brought on a great sigh of relief that we do know that in spite of the cut, the people in different sectors will be taken care of.

The Cut Waste Panel is an excellent idea and I hope the terms of reference here will include looking at processes and schemes and not just the smaller items, though they are equally important. Competition between health clusters and among hospitals has driven costs up, especially sometimes in terms of salary packages for clinicians. Competition among schools has also led to much out-doing of each other in terms of event management or brochure-ware to `sell' the schools. Competition among departments and across Ministries has also driven small launches into mini-stellar events.

The argument then that they are sponsored, in my opinion, by corporate sponsors' money, does ring hollow at this point in time when this valuable money should go into the coffers of Community Chest or any other charity that is crying out to help the less privileged in our country. I am heartened that the civil service salaries will be reviewed as it is hard to know right now which market is driving up whose salaries - the private driving up the public or the public driving up the private. A clear example has been given by Minister Lim Boon Heng last week on the benchmarking across different work groups in that international table that he shared with us.

On training, while we inject money to give more training for the vulnerable and the unemployed, may I also suggest that we redesign the job scope for Human Resource Departments. HRM and HRD (human resource development) in many companies are sometimes functioning as separate entities or entities with very loose links. HRMs need to be agile, imaginative and visionary. Often, they are still functioning quite primarily as hirers and firers when globalisation demands a new order that ought to include personalised career planning portfolios, constant job-redesigning and training. They need to be ahead of the curve like UPS and Hewlett Packard who have constantly redesigned jobs and offered the right kind of training so that retrenchment becomes hardly, if ever, necessary. It is an irony that our only natural resources - the human being, the worker - are led by HRMs that are sometimes not fast enough on the move and do not themselves have a clear job description on personnel enhancement, processes and outcomes and to remain ahead of the curve.

On the aid schemes that were spelt out, I share Mr Iswaran's deep concern on attitudes towards people in need. He has expressed his views so eloquently that I will just add this to the discussion - that as we render aid to people in need we need to suspend our own judgment or sense of values. None of us will ever know what it is like unless we walk in the other person's shoes, as what Atticus said in the book "To Kill a Mockingbird". I think that is a lesson we can all remember when, through our frustration, we start passing on some of our value judgments to the person in need.

Secondly, it is vital to implement aid schemes well, with consistency and with expertise. Mr Ahmad Magad has already spoken on this need to have financial counselling. I would just push it a bit further to ask that it be a one-stop financial planning and counselling service to families in need such that what needs to be done can be mapped out against a time-line and all the aid schemes that are being offered and pegged to the training that they should be getting, plus what I am calling unofficially a "de-tox programme" to get rid of the problems that are stifling them or making them more dysfunctional year by year. With this time-line and constant monitoring, I think we will be able to get quite a number of our various aid schemes under a proper system of implementation which eventually should have an outcome that the family must move on and be better off.

Thirdly, a query on the help schemes. The HOPE and the Small Families Interim Assistance Schemes have left the single parents in the cold. Then we ask why many among the single mothers do remarry and sometimes go on to have more children with their new spouses. Most of them, as data would show, are in the low income group. Many are also home-makers. Empowering such women takes time, training them for jobs will take longer when there is a conflicting demand on their time to look after the children. They also have a strong patriarchal mindset that men are the ones who should look after them. Given all these, it would be timely as social workers and VWOs work and get on with the educational programmes for these single parents. We should also back this with political will to help them to understand that people do come from different circumstances and not just review such cases on a case-by-case basis. In short, to me, the HOPE scheme and the rental policy do lack the vision in helping such families to get on and break out of the poverty cycle.

I now turn to the two most vulnerable groups, in my opinion, who are in our midst. We need to think more long-term for them so that they do not become a social cost to the nation and their self-esteem is not compromised. I thank the Ministry of Manpower for giving me a very comprehensive reply to my Question on active and inactive CPF holders. From that data, there are 1.1 million inactive CPF account holders, of whom almost two-thirds are women. Among the active account holders of 1.3 million male members, there is a gross balance of about $110,000 while women have about $80,000. Women tend to live longer than the men and they have much less in their CPF. Many have dormant CPF accounts as a result of unemployment or being employed in the informal sector or being home-makers. We need to look into the CPF scheme to prop this up with various schemes that have been mentioned by Dr Jennifer Lee so that we can help these women and help them through the later years of their life.

I would also like to ask if the CPF Board would like to consider perhaps an acknowledgment for this group of women who hold inactive CPF accounts that they be notified that their husbands are about to retrieve their retirement package so that at least they are aware how much money their husbands have accumulated and also plan with them, such that Batam becomes a figment of their imagination.

The other group of people that I think we need to pay a little bit more attention to are the men and women in their late 40s to 50s - the sandwich generation is what we sometimes call them. They have been responsible family members taking care of their children, parents and, in some cases, grandparents. The data from the Manpower Ministry shows that men and women above 55 have an average net balance of about $30,000 and $23,000 respectively. I wonder what is going to be left for them to see through their retirement and old age. Inter-generational transfer of CPF savings has led to its own erosion for this group of account holders. The savings of this group of people too need some kind of shoring up so that they can tend to their health concerns as well as retirement.

Lastly, I would just like to say that in this whole CPF phenomenon, there is a whole group of people who have upgraded themselves constantly and may be caught in a jam. There have been reports in the papers of some of them earning about $2,000 vying for or living in a 5-room flat, and wondering how they are going to cope. While we try and put in these packages, etc, for the current group who is coming in, I think the financial counselling at the HDB end and at other various ends needs to be propped up so that people are very much in the know. As Singaporeans, we too have to realise what is the value system that we are holding on to that has just led us to upgrade and upgrade, and now we are caught in not so wonderful a position, in some cases.

Mr Inderjit Singh (Ang Mo Kio): Thank you, Mr Speaker, Sir, for allowing me to join in the debate.

Today, I would like to address the issue of whether we have a real plan to address our economic woes and also how radical have we been in trying to address our economic problems that we are seeing right now. The Prime Minister mentioned that the CPF changes are the most radical ever made for a long time, but, with all due respect, Sir, I do not see the radical part of the changes. The lowering of the CPF rate by 3 percentage points is but a minor adjustment, in my opinion.

Sir, the real issue is one of total cost. I would like to take up the analogy used by the Deputy Prime Minister, and that is, of the frog in the boiling water. What we have done with the CPF reduction by 3% is just like reducing the heating device a little, but it is hardly the cutting of all energy sources which are boiling the water. What we need are bold moves which will allow the frog to be energised to jump out of the pot of water. Or what we need is to cut off all the energy sources that are boiling the water so that the water never gets hot, and the frog will never die. The changes announced will just prolong our problems, in my opinion, because along with the CPF changes we need to do many other things. The much needed radical changes are nothing new and have been brought up by many Members before and also in the House over the last few days.

These are: (1) the various Government charges and fees; (2) the cost of restructuring and retrenchments, which can discourage companies from wanting to set up base down here. And this is relevant because before companies come down here, they want to look at the whole life cycle and the day that they have to leave if they have to put up 24 months of retrenchments, it could discourage them from coming into Singapore; (3) rentals, utility charges, and many hidden taxes that I have talked about many times; and (4) the cost of regulatory compliance.

Sir, on the way back from USA yesterday, I read about DPM's comments that the Government has already adequately addressed these cost issues. While I agree that something has been done, the changes are however not radical enough. What signals are we giving to employers and potential investors about the Government's resolve to address the total cost issues in Singapore when we do not go far enough in reducing the costs related to the factors that I mentioned earlier.

Let me just take the cost of government as an example. The cost of government directly affects the Government charges and fees and also sets the stage for cost of doing business in Singapore. The Government is only now realising that there needs to be a cut waste system to cut waste in Government. In my opinion, cutting waste is not good enough. Waste, of course, should have been cut long time ago. We also need real cost reductions across the Government and its agencies, and not just in the area of waste. Even if it is just waste reduction, it shows that cost can be brought down some more. I am confident that if we look at the other factors, we probably can find opportunities for more cost reductions.

I would like to relate my personal experience so that everyone would know that I am not just talking theory down here. I have started a number of companies. The first major one was a semiconductor company which I started in 1998. It is a manufacturing plant that employs about 1,000 people in Singapore right now. When I started it in 1998, I believed that Singapore could still be competitive in that industry. That company which I left, because it was already successful in its own right, is still around with about 1,000 employees but it is struggling to be competitive right now.

In the year 2001, I started another semiconductor company. It now employs 1,500 employees but of these, only 11 are in Singapore right now; 350 in the USA, and more than 1,000 in the Philippines where we run our production, and about 60 in India where we do our design work. I tried my best to justify the setting up of a production facility in Singapore, but the other alternatives like Thailand, the Philippines and Malaysia were more compelling. I still hope to create another 1,000 jobs in Singapore, but it must make sense and it is not about National Service for us, because we have to be alive for a long time and the competition is fierce and the cost can be a killer in Singapore. Had my management team made the wrong decision of forcing ourselves to set up a site in Singapore, we may not have been around today. So, if the Government can address all the cost and regulatory issues, I am confident that operating a large manufacturing site in Singapore for quite some time to come is possible. I know we can do it, if the Government gets the right formula implemented for cost reduction.

Sir, the second issue is one of CPF, whether it should be compulsory or voluntary. If we look at countries which have gone through the same situation as Singapore before, particularly the developed countries that made their transition from not developed to being developed, I am sure we can get some good ideas, and one of them is a real radical move to make CPF less compulsory. Perhaps we can take the first step of breaking the CPF into two components - the first, compulsory; and the second, voluntary - supported by Government incentives to encourage employers and employees to voluntarily save for their retirement. At a 40% compulsory saving rate, employers have the flexibility to adjust only 80% of wages, which is what the employees take home. Also, about one-third of an employee's wage is compulsorily saved, thus reducing the amount available to drive the consumption part of our economy.

I therefore suggest that we should move away from forcing Singaporeans and their employers with the statutory and compulsory saving regime. By all means, we should encourage savings for the future and for retirement, but let us make this a market-driven practice and the Government can play its part, not by forcing, but by incentivising.

The truth of the matter is that while the 3% CPF cut is welcomed by companies, but when the companies faced the crunch over the last few years, they had already taken more aggressive moves like reducing wages by 10%, 20% or some, even 30%, depending on what it took them to survive in Singapore. This is the flexible part of the wages, while the CPF is the most inflexible part of the wage system because it is dictated by the Government. My opinion is that this issue of high forced saving rate is what is deterring companies from investing in Singapore. We have to change and follow what other developed countries do, and that is, to get away from this high forced saving rate and, therefore, reduce the Government's dominant role in determining the wage levels here. The market should be driving the decisions. Let us really cut the apron strings. Let us do away with the Government determining wages. Let us do away with the National Wages Council, which is another way of Government playing a dominant role in determining wages. Let it be market driven. It worked in the past, but it is not going to work in the future, in my opinion, for the changes that we are trying to make. The sooner we learn this new paradigm, the more successful we will be.

Sir, the next issue is whether there is a plan for us to solve all our economic problems. Why is the Government pulling its punches? Half-hearted and piecemeal changes will prove counter-productive. We need the right mixture of ingredients to produce the right medicine which can be administered in the right dosages to cure our unemployment and economic problems. In my opinion, the CPF changes are but just one of the component ingredients and are not the final medicine which is so greatly needed right now. And if we think that CPF changes are going to solve all our problems, we are going to be mistaken.

Sir, I fear one thing - two years down the road, after we have implemented the CPF changes, we will still be in the same position as today, because we did not make the other necessary changes. If we do not progress by then, Singaporeans will feel betrayed that the Government gave away their wages with no significant gain in return. Can we risk this happening in Singapore? The answer must surely be no. I hope that the Government is right. Time will tell if I am wrong about my assessment, and I hope I am wrong in this case. I urge the Government to reassess the situation with a much open mind. Please start believing the people and the private sector more, and I hope that we will find all the answers when they give their feedback.

People ask me: does the Government really have a plan to get Singapore out of the current set of problems? Many feel that there is no real plan because CPF changes alone will not fix our problems. This is the feedback I have been getting from the ground. In this respect, can I ask the Prime Minister to share with the House the reasons why companies are packing up and leaving Singapore? Surely, it is not because the CPF is just 3% too high. I am sure that there are many more factors which are forcing companies to pack up and leave. What are these factors and what are we doing about them? I know of a few multi-national companies which are still planning to exit Singapore today. They are still here, but they are planning their exit. The momentum of companies leaving Singapore has not slowed down and unless and until we address the cost factors adequately, we will continue to shed jobs and lose companies.

If the Government can share with all of us what these exiting companies are saying, perhaps we can be convinced that there is a good plan in place and that we can solve all of our problems. Currently, there are many sceptics - they are not yet convinced that we have a plan that will work.

Sir, in conclusion, I would like to urge the leaders to come up with a convincing plan which can assure and also inspire the people of Singapore to rally around the Government to solve all our economic woes. It is not just about waiting and seeing the outcome a few years from now, but to give confidence to everyone that we can do it. I am convinced that if we take all the necessary radical steps, we can do it. But I have not seen all the necessary steps personally. We need the Government to be bold and more entrepreneurial than what they have done before. I hope that we will not be disappointed and that the economy recovers fast enough so that jobs remain in Singapore and the unemployment situation gets resolved quickly.

The Minister of State for Defence (Mr Cedric Foo Chee Keng): Mr Speaker, Sir, thank you for this opportunity to join in the debate. I would like to share my views, especially from my perspective as Chairman, SPRING Singapore.

Many Members of this House have pointed out that the broader challenge confronting Singapore is not just about the retuning of the Central Provident Fund but how Singapore can continue to be competitive in the global marketplace. It is about our ability to create good jobs so that Singaporeans can chase their Singapore dreams.

Let me briefly discuss the CPF changes.

The 3% CPF cut and the lowering of the CPF contribution ceiling are significant to tackle our wage rigidity to respond to our immediate challenges but of greater significance are the changes that we are making to the withdrawal rules and Minimum Sums. The benefits of these CPF changes we are making now will largely be felt 10 years from now. For the first time, the CPF and Medisave Minimum Sums will be adjusted for inflation. They will provide a basic level of financial security for retired Singaporeans. Mr Inderjit Singh suggested that perhaps a part of the CPF contribution should be made voluntary. However, in reality, it is not so simple. Singapore's Total Fertility Rate (TFR) is at a 26-year low of 1.38. Soon, a small base of young Singaporeans will be supporting a very large group of retirees. This "inverse pyramid" will be very unstable unless we require that every Singaporean put aside sufficient funds for his own healthcare and retirement needs. Otherwise, the burden on our future generations will be untenable. And at that time, taxes will have to increase. Singapore can no longer be an attractive place to work or live in. Many of our more capable youths will be drawn to countries offering lower taxes.

The changes to withdrawal rules and Minimum Sums will underpin Singapore's competitiveness for the long haul and it is more significant than many have thought.

Let me move on to discuss what else may be needed for Singapore to enhance its competitiveness. Lowering wage cost with a new CPF rate is a necessary but insufficient condition to regain our overall competitiveness. From the perspective of labour cost competitiveness alone, the odds are stacked against Singapore. The Prime Minister and Minister Lim Boon Heng have cited the wages of a manufacturing worker in Singapore compared to other emerging and competing economies. To top it all, the number of registered unemployed in China's cities alone is 8 million people. The US State Department estimates that the total number of unemployed and under-employed in China is a mind-boggling 350 million people! These unemployed will act as a buffer against any future wage increases in China. So China will remain wage competitive for a long, long time. There is no way we can match our wage cost "dollar for dollar" and "cent for cent" against these developing countries. And as DPM Lee has said, neither do we want to regress to such wage levels. In fact, our long-term objective should be to raise the real wage of Singaporeans and to keep the Singapore dollar strong. These are ultimately the drivers that would determine the quality of life in Singapore. But we cannot blindly push up wages unless it is supported by higher productivity relative to competing economies. Without which, Singapore cannot retain or attract enough investments to sustain our wage premium and to achieve full employment.

Productivity improvement is the key to a nation's competitiveness. And it is a marathon without a finish line. Yet, we cannot let up. Some have suggested that we use our foreign reserves to prop up the economy and support our high living standard. But for how long? Our reserves are finite and can be depleted. The way I see it, productivity improvement is the only sustainable way for us to support a higher quality of life.

In the face of recent retrenchments in Singapore, most notably SIA and PSA, many Singaporeans are understandably concerned about loss of jobs. There is widespread belief that productivity improvements and employment creation runs counter to each other. It is argued that higher productivity leads to job destruction. On the one hand, it is true that one of the direct effects of productivity improvements in an industry is that fewer workers are needed to produce the same amount of output. But this view is too simplistic.

In reality, in a competitive environment, lower cost of production, as a result of higher productivity, will lead to lower prices for the products and will stimulate higher demand and therefore more products are sold. Soon, higher capacity is needed and more jobs are created. Even if the productivity surplus were distributed to shareholders, such surplus will be invested in other sectors of the economy or end up as higher consumption. All these lead to higher employment overall. The economic development in the US bears this out. In the 1990s, productivity and total employment were both growing in tandem at high rates. For Singapore, productivity growth rates averaged 3.5% per annum throughout the 1990s. During this period, total employment increased from 1.54 million in 1990 to 2.09 million in 2000.

Singapore companies have performed commendably in their productivity quest. Let me just cite two examples, one in the 70s and a more recent one. In 1975, SBS introduced computerisation of the ticketing system and did away with bus conductors. They went One-Man-Operation (OMO). Productivity doubled. You need only the driver. Then they went on to operate double-decked buses with twice the capacity but with the same one driver. Productivity doubled again. Trans-Island also operates the "bendy" - a stretched ultra-long bus with higher labour productivity. If not for their productivity efforts, the recent transport fare increases would be much heftier.

The other example concerns our cinemas. In cinemas of the past, at least one usher was used for checking tickets at each entry point. All employees were single-tasked. One is either the cashier, or the usher, or the snack bar attendant. In new multiplex cinemas, the layout is designed for only one ticket checkpoint for all cinemas and it is located near the snack bar. So that the jobs of ticketing, ushering and snack bar tending can be combined into a single category. These changes have enabled Golden Village to save about 40% in labour cost.

Productivity can be achieved in two basic ways. Firstly, companies can reduce input for a given output, which means consolidating to leverage on scale or improve operational performance. Secondly, companies can increase output with a given input; which is a less travelled path. This means selling higher-valued and more innovative goods or selling more goods to increase capacity utilisation.

When manufacturing cost index is adjusted for productivity, Singapore companies fared rather well. Singapore compares very well with the competing economies. The World Competitiveness Yearbook 2003 puts Singapore (with index of 100) as more competitive than China (with a manufacturing cost index adjusted for productivity of 113), India (122) and Malaysia (156). However, Singapore still lags behind Thailand (which has an index of 70.4).

Among the measures announced by DPM Lee, SPRING Singapore will administer the $45 million Domestic Cluster Development Fund. The primary objective of the fund is to raise the productivity of our domestic sector. The fund will provide assistance for the engaging of consultants for Business Process Re-engineering, training, the purchase of equipment and intellectual property rights costs. It will help innovation diffusion within cluster, thereby raising overall industry productivity.

One of SPRING's current priorities is to see how we can create jobs for Singaporeans through work re-design, which Ms Braema Mathi talked about. As Minister Lim Boon Heng said, Singaporeans may need to take up some of the jobs currently performed by foreign workers. If we merely replace a foreign worker with a Singaporean, we are unlikely to succeed. The job content currently performed by the foreign worker is low and these jobs typically pay low wages. I can understand that Singaporeans will not take up such jobs as they do not pay enough even for meals and transport. Well, why not just pay the Singaporean more for the same job? If we do so, we will be paying more for exactly the same job content, which means that the productivity level has fallen. Someone has to pay for it; either in terms of higher prices by consumers or higher taxes by taxpayers.

A better solution would be to redesign the jobs, possibly with the application of technology. If we can enlarge and value-add to the job, these jobs can then command higher wages and be attractive to Singaporeans. One good example is the cleaner's job at the upgraded Zion Riverside Food Centre. Our National Environment Agency (NEA) has redesigned these jobs. The cleaners there now draw between $1,000 and $1,400 a month (with overtime) which is much higher than the $800 that cleaners usually earn. These cleaners had been trained under the National Skills Recognition System. They wear smart uniforms, use specially designed trolleys and the plates and utensils are washed at a centralised location. We could also use dish washing machines to enhance the efficiency further. Although each stall now contributes $200 a month, instead of $150 a month, towards cleaning, the centre now serves about 500 customers a day compared to 150 customers previously. Stallholders appreciate the faster cleaning cycle and customers enjoy cleaner tables and plates.

We believe that there is scope to redesign work in other domestic sectors, like food and beverage, retail, healthcare, domestic/commercial cleaning and construction. The Domestic Cluster Development Fund will be used to seek out such opportunities.

SPRING also administers the LETAS (Local Enterprise Technical Assistance Scheme) and LEFS (Local Enterprise Finance Scheme) to help small and medium enterprises in Singapore improve their productivity. Since the programmes' inception in 1986 and 1976, respectively, SPRING has given out $481 million in LETAS grants and has helped local companies raise $8.6 billion of loans through LEFS.

SPRING conducted a survey of Singapore SMEs recently on their views towards the announced changes in the CPF. An SME, Aceford (a vegetable oil manufacturer) indicated that they are prepared to channel the CPF savings back to employees. Many SMEs, like "The Lighting Centre", said that they were prepared to help their employees should they face financial difficulties as a result of the CPF changes. These companies see the need to continue to reward talent. They understood that successful companies pay attention to all stakeholders (shareholders, suppliers, managers, employees and the community at large) rather than narrowly focusing on short-term shareholder value.

Many of the SMEs remarked that their staff should not be overly concerned with the CPF changes. In fact, they said that the impact of the CPF cut is minimal because they already have in place reward systems that are linked to performance. Thus, when the company performs well, contributing employees will end up with significantly higher income, despite the CPF cut. Such performance-linked reward systems are to be encouraged as they ensure that wage growth lags productivity growth. On the other hand, companies with seniority-based wages are at risk of becoming marginalised.

A prominent Singapore businessman recently visited a DVD factory in China and recounted his observations. This factory produces 8% of the world's DVD output. To his surprise, the factory is fully automated with the latest technology comparable even to those in the developed world, like the United States. The factory produces a small number of good jobs but have avoided employing a large number of production line workers, even though labour is cheap and in abundance in China. The factory owners did not merely resort to cheap labour but have set their sights much further, for much bigger and more sustainable growth. The jobs created by this factory will pay well and will continue to be around for much longer than traditional labour intensive production lines. The productivity level is very high and the consistency of high quality DVDs assured through the application of modern technology. And this is happening even in China!

We live in a harsh economic world made harsher through globalisation and as we speak, insurgents are drawing out plans to out-do the established players and unless companies in Singapore, including our leading companies, continue to innovate and up their productivity, more Singaporeans may lose their jobs.

I call on employers to work with SPRING to improve the industry's productivity. And, if retrenchments are inevitable, the Government, as DPM Lee has assured, will re-double its efforts to help place retrenched workers in new jobs. Workers, on their part, must adjust their expectations and be prepared to help themselves. Some jobs will never return, so continuous lifelong learning is the only guarantee of continued employability.

We have already heard a frog story from DPM Lee on Friday. I have another story about frogs which is adapted from a movie, "Catch me if you can".

Two frogs fell into a deep cream bowl. One was an optimistic soul, but the other took the gloomy view. "We will drown," he lamented without much ado, and with a last despairing cry, he flung up his legs and said, "Goodbye."

Quote the other frog with a steadfast grin:

"I cannot get out but I would not give in. I will just swim around till my strength is spent, then I will die the more content." Bravely, he swam to work his scheme, and his struggles began to churn the cream. The more he swam, his legs a flutter, the more the cream turned into solid butter. On top of the butter at last he stopped, and out of the bowl he gaily hopped.

The going will be tough and it is difficult to predict how long we would have to keep swimming. But, Singaporeans must have the same indomitable spirit as the second frog. Our fortitude and strength in adversity will see us through these trying times. We will not drown like the first frog. Some may need help to swim. The Government will provide the life jackets, but Singaporeans must continue to churn the cream.

Despite our competitive lifestyle, Singapore is still held up as a compassionate society. In Singapore, no one will go homeless, no one will be denied healthcare, and no child goes without an education. If we press on with the CPF changes and productivity improvements, we will soon hop out.

Mr Mah Bow Tan: Mr Speaker, Sir, the Prime Minister has spelt out how the CPF system will be restructured for Singapore's long-term economic competitiveness. Last Friday, the Deputy Prime Minister announced the package of assistance measures to help individual Singaporeans cope with those changes.

Today, I shall be elaborating on the details of the measures under the purview of my Ministry, namely, those on public housing and the construction industry. But, first, let me give an overview of the impact of the CPF changes on HDB flat owners and buyers. This was the result of a study which HDB did after the CPF changes were announced.

First of all, the impact on existing mortgagors. There are roughly 800,000 HDB households - to be exact, about 795,000. Out of these, 530,000 have outstanding mortgage loans with HDB. Of these, 82% service their loans using CPF funds. Before the cut in the CPF contribution rates, there were about 200,000 households with shortfalls. In other words, their monthly CPF Ordinary Account (OA) contributions were not enough to meet their monthly housing instalments. With the CPF cut, this number will increase by 45,000 to roughly 245,000.

The large majority will be able to cope using their accumulated CPF savings. However, about 35,000 or 4.5% or thereabouts of all HDB households may not have enough CPF OA and Special Account (SA) contributions and balances to completely service their HDB housing loans beyond a year. So, these households, ie, about 4.5%, will have to top up a small percentage of their repayments using other savings or cash. That is for the existing mortgagors.

What about new flat buyers? The cuts in CPF contribution rates will have a minimal impact on new HDB flat buyers, especially the younger households. HDB estimates that the time required for new flat buyers to accumulate the 20% down payment using their CPF savings will increase by six to eight months, after the cuts. The total time required to accumulate the down payment remains at about four years.

There will also be minimal impact on the ability of new flat buyers to service their mortgage loans. Those below 50 will need to use about 19-23% of their monthly household income to service their mortgage loans. This is quite close to the revised OA contribution of between 18-22% for this age group. So, 19-23% of their monthly income, after the cuts, compared to the CPF contribution of around 18-22%, ie, roughly about the same.

Short-term assistance and downgrading measures

Sir, while these numbers show quite clearly that the impact on both existing HDB owners and new flat buyers will be minimal, I can understand the sense of unease and anxiety among them. After all, the HDB flat is, to a large extent, probably the single largest purchase and asset of many Singaporeans. So, their concerns have been voiced by many MPs in this House - Mr Zainul Abidin, Mr Nithiah Nandan, Mrs Lim Hwee Hua, Mdm Ho Geok Choo, among others - who have all asked how HDB can help them.

First of all, HDB lessees having trouble servicing their monthly loan instalments due to the CPF cuts can apply for several existing financial assistance measures. These include:

1. extending the mortgage loan repayment up to a maximum of 30 years, subject to the age limit of 65;

2. conversion to a Reduce Repayment Scheme, ie, mortgagors can apply to temporarily pay a lower monthly sum ranging from 50-75% of their normal instalments, and this will help their cash flow;

3. they can opt for short-term deferment of the payment of the loan instalments;

4. they can apply to pay their loan arrears by instalments; and

5. they can apply to include other family members as co-owners, so that these family members can help them to service the mortgage loans.

Secondly, apart from the financial assistance measures that I have outlined, HDB lessees affected by the CPF cut can also draw on their SA savings to meet the shortfall in repayment after their savings in the OA have been depleted. Since 1999, when these schemes were put in place, HDB has assisted a total of 83,000 households under its various financial assistance measures. Over the same period, 92,000 individual HDB flat owners used their SA savings to finance their housing loans.

Let me now turn to the issue of downgrading. Many MPs have argued in this House that this is a sensible option for lessees who are in financial hardship. They can sell their existing flat and they can downgrade to a smaller flat. I agree. However, they have to occupy their flat for a minimum occupation period (MOP) before they can do so. Several MPs have asked HDB to waive the MOP period for resale. I want to assure Members that HDB will do so for deserving cases.

Some Members like Mr Yeo Guat Kwang have also asked HDB to facilitate downgrading for those in financial hardship. Today, the policy is not to grant a second HDB concessionary loan to those who are downgrading to a smaller flat. The purpose behind this policy is to limit the amount of subsidised loans given out, as these downgraders would usually have sufficient funds to finance the purchase of the smaller flat. I say "usually", and this is generally true. And HDB does not intend to change this policy.

However, the HDB will exercise flexibility and grant a second concessionary loan to downgraders who are in severe financial hardship arising from certain circumstances. These include retrenchments, severe pay cuts, business failures, prolonged illness or death of the sole breadwinner and so on. The quantum of the concessionary loan will be capped at the outstanding loan for the existing flat. So, if they currently have an outstanding loan, that quantum will be the quantum of the new loan, or it will be 80% of the value or purchase price of the next flat, whichever is the lowest. This temporary measure will help lessees cope with the CPF changes and the economic downturn during this period.

Sir, on the subject of flexibility, please allow me to take a little detour at this stage and comment on a case which seems to have attracted a little bit of attention recently. I refer of course to the case of this car wash company whose application to set up a car washing business in HDB high-rise carparks was initially rejected. And last week in this House, Ms Indranee Rajah cited this case, arguing for the use of common sense by Government departments. She noted that HDB rejected the idea because "It had not been done before". She added that if we use that kind of reason, we will never be able to do anything new. I agree with her.

I thought this was quite out of character for HDB, so I checked. Now, I am pleased to set the record straight and inform Ms Indranee that HDB did not reject the idea because "it had not been done before"; rather, it had valid environmental and safety concerns. For example, there were concerns over the improper discharge of chemicals and washing detergents which, if not properly handled, would have ended up in our reservoirs. As Members know, there are certain bays in HDB multi-storey carparks where the discharge goes into the sewage system instead of into the open drains. So, this was one concern. There were also concerns that the prolonged washing in the HDB carparks may affect the flooring, which is not properly waterproofed, and may affect the structure of the carparks. But once HDB was satisfied that these concerns could be properly addressed through certain measures, it issued the licence for the car-wash company very expeditiously. So, it had a happy ending and I thought, far from illustrating a tardy, inflexible HDB, the episode did show a careful, practical and flexible approach to administration.

Let us come back to mortgage loans. There have been other suggestions by members of the public on how we can help homeowners with their mortgage loans, and I thought I should also take this opportunity to address some of them. One suggestion was for HDB to reduce its concessionary interest rate of 2.6%. As Members know, HDB gets the funds for its concessionary loans from the Government at the CPF Ordinary Account interest rate, which is currently at the statutory minimum of 2.5%. The additional 0.1% is to defray HDB's cost of administering the loans. So, if we want to cut the HDB concessionary loan interest rate, we would, first of all, have to cut the CPF Ordinary Account interest rate. This would mean lower retirement savings for all members, regardless of whether they have outstanding HDB loans. And I think Members will agree that this is not a good idea.

Another suggestion was for homeowners to stretch the tenure of their mortgages. Under current financial assistance schemes, HDB mortgagors can already extend their mortgage loan to a maximum of 30 years, subject to a 65-year age limit. So, the question is whether we should allow mortgagors to extend their loans beyond 30 years.

Sir, I do not think this is either necessary or helpful because, in the first place, there are already many ways to assist HDB mortgagors who are in financial difficulty. As I have explained earlier, we can allow them to pay a reduced loan instalment, we can even allow them to temporarily defer their loan payments, which is really tantamount to stretching the mortgage payments.

Secondly, of course, if we were to really give them a longer loan repayment period, this would mean additional interest cost for them and, in some cases, it would actually mean a higher mortgage instalment payment. I would like to reassure the House that HDB will do whatever it can to help existing mortgagors who will be affected by the CPF cuts. No HDB flat lessee who is in genuine financial difficulty will lose his flat just because of the cut in CPF rates. HDB will work closely with them to advise them on the appropriate measures to help them service their mortgage loans. Long-term measures

Mr Speaker, Sir, what I have outlined are the short-term HDB assistance measures. I would now like to talk about the long-term measures in the HDB policies which have been announced by DPM last Friday.

One of the main social objectives of the CPF scheme is home ownership. Our public housing programme has given Singaporeans a good home, and a strong sense of community.

This year, in our National Day goody-bag, we received a little book entitled, "Things that make us Singaporean". It is an inspiring little book. It captures the feelings of Singaporeans about Singapore and what they feel connects them to this place. Let me read to you two of my favourites. On page 16, Mr Andrew Bok said, "Being Singaporean is when I say, 'Let's apply for a flat' and my girlfriend knows straightaway what I mean". I do not think you can say that in any other place in the world. On page 21, below a picture of an NS man sitting in a 3-tonner, Mr Lau Wai Leong, a pharmacist, said: "Looking out from a 3-tonner at the night lights of a HDB estate, and thinking: it's worth doing this for my country and my fellow Singaporeans." The HDB flat and National Service - these are two of the most enduring experiences of being a Singaporean - aptly captured in one sentiment.

Sir, many Members have suggested that the Government re-look its public housing policies, like universal home ownership and upgrading. I agree that we should regularly review our policies. Indeed, I have explained many times in this House that my Ministry has been reviewing various HDB policies to ensure that our public housing programmes remain relevant to meet the needs of Singaporeans. At the same time, it must be in line with the Government's overall direction to restructure the economy and remake our society. But, even as we do so, we should be mindful of the powerful role that it has played in nation-building, and giving Singaporeans, like Mr Lau, a stake in our progress and prosperity, and something worth fighting for. I shall now outline some of the changes arising from these reviews.

Subletting of whole HDB flat

First, we are relaxing the subletting rules for HDB flats. Let me explain the rationale.

Our economy and society are changing. In the new economy, there will be more workers who are on short-term employment, entrepreneurs without a steady income stream and young couples who are not ready to commit to a property purchase. As our people become more educated, they want to take greater responsibility, to make their own choices and be self-reliant. This is to be encouraged. And with greater individual responsibility, rules and regulations can also be relaxed.

For many Singaporeans, their HDB flat is their single most valuable asset. However, we know of the often-quoted syndrome of being "asset rich" but "cash poor". Some flat owners really feel this. As flat owners grow old, they want to have more flexibility to convert their housing assets into cash to provide for retirement. Others may want to seek to generate income from the flats because they are in financial difficulties as the economy restructures. My Ministry has been studying how we can help Singaporeans better monetise cash out on their flats, while ensuring that there is no abuse of Government subsidies - do not forget HDB flats are very heavily subsidised - in order to promote home ownership.

In January, we introduced bank origination of HDB market rate loans, another way to give HDB lessees more choice. And, at the same time, we relaxed the subletting rules for HDB flat buyers who took these bank loans.

We have decided to further free up the subletting rules. From 1st October 2003, lessees of all HDB flats, who have occupied their flats for 15 years or more, will be able to sublet them, irrespective of whether they are resale flats or subsidised flats with or without outstanding loans from HDB. In addition, those who have occupied their flat for 10 years can sublet their flat immediately if they do not have any outstanding HDB loan. This move will make about 250,000 flats, or about one-third or 30% of all flats, eligible to be rented out.

Some may ask why this restriction of 10 or 15 years? Why not 5 years? Why not remove the restriction altogether? We must bear in mind that the Government sells subsidised HDB flats for owner occupation. It is not for speculation. It is not, in the first instance, for income generation. So the minimum occupation period of 10 or 15 years serves to maintain the long-term owner occupation principle of our home ownership policy.

With the relaxation, lessees will be able to generate income from their flats, without having to sell them. Retirees will be able to rent their HDB flats to generate cash to supplement their monthly income from CPF. If you look at the current rental rates, even if we allow for some reduction in the rental rates, the rentals can form a very significant part of their retirement income. We are talking about anything from $800 to $1,500 to rent an HDB flat. Then again, those who are in financial difficulties can also generate some income to tide them over their problems.

Apart from the assistance to HDB lessees, this move will also enlarge the rental market for HDB flats and keep rentals reasonable. It will open up another housing option for those who are either not ready to buy or who are not able to afford a flat or who do not wish to be tied down by a mortgage at a certain point in their lives.

To preserve the good environment of our housing estates and to minimise nuisances that may arise from subletting, HDB will apply certain guidelines and conditions for subletting. It will also work closely with grassroots organisations and residents to ensure that subletting does not impact negatively on the living ambience of our HDB estates. Extending the Public Rental Scheme

The Government has always encouraged near universal home ownership and it has been successful. 85% of our people live in HDB flats, 95% of them own their homes. However, as our economy restructures, there will be some low-income households who may have difficulty sustaining home ownership. For them, subsidised rental housing may be a better option until such time that they are ready and can afford to buy an HDB flat. Today, the monthly household income ceiling to rent subsidised HDB flats is $800. Many Members, including Dr Maliki and Ms Irene Ng, have asked for the eligibility criteria to be expanded so that more can benefit from subsidised rental housing.

As DPM announced last Friday, from 1st October 2003, the monthly income cut-off for the Public Rental Scheme will be raised to $1,500. The rents charged for this second tier of households earning $801 to $1,500 will be higher than those earning $800 or less, but they will still be very heavily subsidised and very affordable. For this second tier, the rents are between $90 and $110 for a 1-room flat and between $120 and $150 for a 2-room flat. This roughly works out to around 10%, or between 9% and 12% of the average household income of those who are eligible for these flats.

While this move will make subsidised rental housing available to more people, we must be careful that rental subsidies are given to those who need them most. Tenants whose financial situations have improved should be encouraged to take up a home ownership flat instead. This will then free up more rental flats for the truly needy and will also prevent tenants from becoming entrenched in subsidised rental housing. This is a real problem. If you go to Hong Kong, you will see many tenants who have lived in their subsidised rental flats for many, many years, and inside their flats you can see plasma TVs, and we are told they own Mercedes Benzes, and so on. They have simply got so used to rental flats, because they are so cheap, and they just stay on and on.

We have to guard against this entrenchment problem. HDB therefore intends to convert all existing tenancies to term tenancies and to implement income-based rentals. HDB will take into account the economic conditions before deciding when to do so, and any adjustment will be done in phases to allow people to gradually acclimatise to this.

Mortgage financing policies for low-income families

In addition to the option of subsidised rental flats, HDB has the Special Housing Assistance Programme (SHAP) to assist low-income families to buy their flats. Today, households with monthly incomes of $2,000 and below are exempted from credit assessment and are granted loans of up to 100% of the flat purchase price. While the intention is well-meaning, this has led to some lessees buying flats beyond their means. I agree with the sentiments expressed by many Members that Singaporeans should be careful and not over-extend themselves when buying property, whether HDB or private housing.

Therefore, to encourage greater financial prudence, HDB will extend credit assessment to this group of flat buyers from 1st October 2003, just as it does today for all other flat buyers. HDB will also cap the quantum of mortgage loans according to the flat type purchased. I hope that these prudential measures will ensure that low-income families buy flats when they are financially ready and not over-commit themselves. I also want to assure that HDB will continue to assist this group to own their flats by selling flats at subsidised prices and before they do so, to give them financial counselling.

HDB will announce more details on the various policy changes to be introduced later.

New flats will continue to be affordable

Sir, I wish to assure Members that the Government remains committed to providing affordable public housing to Singaporeans, especially to first-timers. HDB flats are priced below their market values to enable many Singaporeans to own a flat. In fact, we peg the prices such that 90% of Singaporeans can afford to own at least a 3-room flat.

Many Members, like Mr Iswaran and Mr Ang Mong Seng, have asked many times whether HDB will build 3-room flats, either as entry-level housing or to meet the demand from downgraders.

Today, first-timers earning $2,000 or less can walk in to HDB and buy a 3-room buy-back flat at subsidised prices. They can literally, if they are not fussy, actually walk in and get their keys. There are about 150 units of such 3-room flats offered for sale every month. The demand is about 90 per month on the average. There are sufficient flats available for those who wish to buy a 3-room buy-back flat if they are earning below $2,000.

For second-timers, those who are downgrading, they can buy a 3-room flat from the open market. There are roughly 220,000 3-room flats available in the open market. I can assure the Members that there is currently no shortage.

However, HDB will monitor the trends closely and review the need to build new 3-room flats, if necessary. For a start, we can consider building some 3-room flats in our SERS (Selective En-bloc Redevelopment Scheme) replacement precincts.

As for new 4-room flats, we will be offering such flats for sale. There is a build-to-order (BTO) exercise coming up this month. These flats will be in Punggol, Sengkang and Sembawang, and they will be priced affordably. We have worked the numbers, we have done the sums and, roughly, households with an average monthly income will probably need to use about 20-22% of their monthly income to finance the purchase of these new flats. Again, just to remind Members, this is below the revised CPF OA contribution rate of 22%, and well within the 40% guideline which HDB and most financial institutions use as a basis for credit assessment.

Sir, let me now turn to private property owners. Many have expressed concerns about the impact of the CPF changes on their mortgage payments. When we cut the CPF by 10 percentage points in 1999, we implemented various measures to help people to cope with these changes. Firstly, CPF members could use their Special Account to top up any shortfall in the mortgage payments after they have made use of their OA balances. And then those who still had a shortfall could apply for a bridging loan. Very few people actually needed this extra help, but the schemes gave comfort and reassurance to many. These schemes will still be made available.

Based on our experience in 1999, the mortgage repayments should not be a major problem, as the cut is smaller, 3 percentage points instead of 10. Nevertheless, we will make sure that help is available to everyone who needs it.

I am also pleased to read that private banks have expressed that they will also exercise flexibility and restructure their mortgage loans to help borrowers cope. So, these schemes will further minimise difficulty for borrowers.

Mr Speaker, Sir, let me now turn to measures to help the construction industry. The construction industry is currently under a lot of stress. It has borne the brunt of the economic downturn. Annual construction demand has fallen from a peak of $24 billion in 1997 to $14 billion in the last two years. We expect that demand is likely to fall further this year to about $11.5 billion. As demand drops, competition becomes keener, more intense. Many contractors are cash strapped. Some have become insolvent. Sub-contractors are now complaining that they do not get paid or payments get delayed. Several public projects have been affected by work stoppages because contractors run into financial difficulty.

On the average, about 60% of total annual demand in the construction industry is from the public sector. The Deputy Prime Minister has announced that Government will bring forward about 60 public sector projects worth more than $600 million in FY 2003 and FY 2004. This will help to boost demand, safeguard jobs and revive business confidence in the industry.

Our records show that 92% of public sector project contracts valued between $10-$30 million were awarded to local contractors. As most of the projects to be advanced will be less than $30 million in value, we expect that local contractors will stand to benefit directly from this move, and it will help them to tide over this difficult period.

We will also be fine-tuning some of the Government procurement policies in order to help to further improve the situation for contractors. In the last three months, the Building Construction Authority (BCA) has been in serious discussion with public agencies as well as the industry on how we can fine-tune the system in order to help the contractors.

First of all, we will tighten the Contractors' Registry System (CRS) to better reflect the financial standing of contractors tendering for public sector projects. What we try to achieve with this is more timely financial health reporting which will then assist public sector agencies to select contractors who are capable of undertaking projects within their financial capacity. And, hopefully, this will minimise work stoppages and also the downstream problems of payment to sub-contractors and to suppliers.

Secondly, BCA will relax the track record requirements for construction firms to renew and retain their CRS grades. I remember that some Members in this House brought up the issue of suicide bids and we had this very lively exchange as to whether contractors actually do go in for suicide bids. Nevertheless, the point is that in order to minimise the possibility of them being pressured to make such suicide bids, BCA will extend the qualifying period from three years to five years, as well as include some ongoing projects, rather than just the completed projects. Hopefully, in this way, construction firms will be able to secure their place in the CRS system, and not bid at any price just to secure jobs and to satisfy their track record.

Measures under consideration to improve the payment system are also being considered. In consultation with Government and industry stakeholders, BCA will see how we can improve the payment system right across the value chain, and the aim is to improve the cash flow which, we all know, is the life-line of the industry. One measure being studied is to legislate a security of payment system, and the intention is to provide a fast and low-cost system of resolving progress payment disputes by adjudication. This is a complicated matter. It is not something that we will rush into. We have to consult closely with the various parties in the industry to ensure that all relevant factors and views are taken into account.

A multi-agency task force is also reviewing the Public Sector Standard Conditions of Contracts (PSSCOC). And for those contractors who are involved in public sector projects, I think they will know exactly what this is all about. Under this contract, all payments to main contractors are governed by certain clauses. The proposal is for payments to main contractors to be made known to sub-contractors, so that main contractors cannot then say that they are not being paid in order to avoid or delay paying the sub-contractors. This is a common complaint of sub-contractors. We are seeing how we can address this.

We are also looking to speeding up the valuation of variation works for faster progress payments and for settlement of final accounts. Again, another common complaint is that the Government agencies take too long to settle the variation orders and therefore progress payments are delayed. So, we will see whether we can expedite this.

Further, the current clause which provides for withholding payments to contractors in order to recover liquidated damages and debts is also being reviewed. In other words, we will see whether we still need to consider a set-off clause whereby we hold back some monies that are owing to the contractors because they owe the agencies some money. This set-off clause currently is causing some difficulties to contractors.

Sir, I will announce details of these measures in October. But let me stress that while we can take all possible measures to assist the viable industry players cope with the present difficulties, I must caution that, in themselves, they will not be sufficient. Companies must continue to improve their skills, consolidate their resources and upgrade their competitiveness. Those who are ready must seek opportunities overseas, and I am pleased that some of them are already doing so with some success. Hopefully, we can multiply this success further. We will help our companies break into markets overseas, like India and China. And as our economy recovers, so will the construction industry.

Mr Speaker, Sir, let me say, in conclusion, that the CPF changes that the Government is making are necessary to save jobs in the immediate future. And in the longer term, they will enable our businesses to be more competitive and to position our economy for a period of renewed growth when the external economic conditions improve. The measures, which I have outlined, will help Singaporeans and businesses, in particular, HDB residents and the construction industry, adapt to the changes.

Sir, thank you for letting me join in this debate.

Mr Low Thia Khiang (Hougang): Sir, may I seek a clarification from the Minister?

Mr Speaker: All right.

Mr Low Thia Khiang: Sir, earlier on, the Minister said that there are some 35,000 households who do not have enough funds either in the CPF Ordinary Account or the Special Account to service their mortgage loans after the CPF changes. Can I know what is the profile of these 35,000 households and what is their room type?

Mr Mah Bow Tan: I am afraid I do not have the profile at this point in time. I will be able to get it for him if he files a Question.

Mr Ang Mong Seng (Hong Kah): Sir, first of all, I would like to thank the Minister to allow the residents ---

Mr Speaker: Mr Ang, are you speaking?

Mr Ang Mong Seng: I just want to check about the deferment period. Usually, the HDB allows for six months or one year. But if a resident, within one year, is not able to secure a job, can the HDB extend the period a second time or even a third time?

Mr Mah Bow Tan: Sir, I think it was the Deputy Prime Minister on Friday who said that "HDB is forbearing to a fault." I think those were his exact words. I am sure that if a case like that comes up and if the lessee is genuinely unable to service his mortgage loan, HDB will bend over backwards to see how it can help him.

Mr Tan Soo Khoon (East Coast): Sir, nobody likes to take bitter medicine. But then if you have been to one great and long party, a strong dose is probably what you need to sober up. As far as I am concerned, the party for Singapore ended in 1998 when we first felt the impact of the Asian financial crisis. Years of strong economic growth came to an end, and that was the day the music died. Then, two years of economic growth - in 1999 and 2000 - masked the fact that fundamental weaknesses remained unresolved, and that all was still not well and, for a while, many of us thought that the good times were back. Many companies thought it was all right to go on a hiring binge. I read, for example, that SPH Holdings recruited as many as 1,000 new staff in the year 2000, only to find that it had to inflict painful job cuts in less than two years. Likewise for Singapore Airlines, whose handling of its retrenchment exercise this year, exemplifies how a company ought not to handle industrial relations. Sure, it may have lost $200 million in April, but nobody pointed out that this was a company that also made near to $5 billion in the past five years, and, in all probability, might still make money this year.

I have no quarrel with a company getting rid of workers if it is going to be financially crippled, only that in the modern day parlance of human resource managers, they cleverly called it a "pre-emptive lay-off" or they now use the term "rightsizing". They do not even call it downsizing because rightsizing allows the employer to lay off older and more expensive workers even when they are still doing all right, and then hire new, younger, and obviously cheaper workers.

One of the bitter lessons workers have, therefore, learned in recent times is that loyalty to their company no longer counts. Even as we tell them that in this era of globalisation, no job is guaranteed for life, companies then must also come to realise that the workers of the future would no longer have the same kind of commitment, dedication and emotional attachment they used to have.

Today, the bitter pill the Singapore worker has to swallow is the cut in the CPF. Two questions linger in this debate: is the cut itself enough to save jobs, and, if not, then what? Secondly, many Members have asked, how about doing more to make life more bearable in Singapore?

Sir, the first concern is understandable. We have seen how companies, after cutting wages and even compelling their workers to take no-pay leave, still end up firing people. So if we make this cut now, can we still save jobs, not to mention create new ones? I do not think even the Government can give us a definite answer on this one. To be certain, no investor comes here purely with the aim of giving us jobs. They come because they believe that we can provide them with the means to enable them to make profits, and only then do they give us the jobs. So this cut in the CPF, as has been put up by the Government, is a signal of the Government's recognition of the competitive environment that we are now in and that we are prepared to be flexible and nimble. But is this a strong enough signal? Many businessmen do appreciate the savings that they would derive but they ask, why settle now for a range that will fluctuate with the economic cycle. In fact, this would be no different from what we had been doing in the past, where the CPF rate was adjusted along with the ups and downs of the business cycle, and what was missing was the certainty that businesses needed to base their long-term calculations.

Sir, another view to this question has also been raised by some economists. The Government has said that the CPF cut would save employers $1.3 billion a year. I read that some economists have pointed out that the biggest beneficiary of this cut will, in fact, be the Government. This is because the Government and its GLCs form the single largest employer in Singapore, employing what they estimate to be 40% of our workforce. This means that the Government is, in fact, saving $520 million. With the increase in GST next year, the Government will rake in - it has been estimated, I do not know how correct it is - another $400 million. So if you add this $400 million to the $520 million, you get a total of $920 million that will actually be transferred out of the system back to the Government, and that leaves many of the economists to express the concern as to whether what is left in the private sector would be meaningful enough to create the new jobs that we badly want.

Now, Sir, if past cuts in the CPF rate have still not solved our dilemma, then it must beg the question of what else. Like many other Members, I too share the view that Government can do much more to bring down costs. Sometimes, I believe that the problem with this whole issue of Government costs may lie in the way Government does its costings. How else can you explain why the Government charges 2% of the value of a car when you want to transfer ownership? And this value of your car is not its market value, not the price you sell and someone buys it, but a value determined by the LTA, which then, of course, turns out to be much more and, as a result, if you buy a second-hand car, you end up paying hundreds, and sometimes even thousands, of dollars to the Government just to register it. Now I bring this up because many SMEs buy second-hand vehicles for their operations as they cannot afford new ones, but they do not know why they have to pay so much just to have someone at the LTA press a few buttons on the computer and register them as the new owner.

Then, last year, during the debate on the Medical Registration (Amendment) Bill, the House heard that it costs between $170,000 and $250,000 to train a doctor in a university in Sydney, Oxford or Cambridge - I think it was Dr Lily Neo who pointed this out - but educating one medical student at our own NUS costs about $400,000. Now this again begs the question of how Government arrives at such a cost, and how do we end up being double that of a world class institution like Oxford?

Now, what about the point of making life more bearable in Singapore? Many of us do appreciate that Government has done a lot to lower various charges and given us rebates and Economic Restructuring Shares. But judging from what I have heard in the past few days, it seems we have not done enough. To make deep cuts that will make a meaningful difference to costs will mean re-examining the philosophies behind some of our policies. Sir, many of our policies were formulated to achieve certain social needs and while some may have succeeded in achieving the social needs, they have also turned out to be valuable cash cows for the Government. But if it is a cash cow for the Government, it translates to a burden for the people.

Take for example the foreign maid levy which was introduced to moderate our reliance on foreign domestic workers. But each increase in the levy has added to the burden of many tens of thousands of households - and we still have not been able to curb the rising demand.

Another example - transportation policies. They have always been controversial ones. We took fiscal measures to prevent our tiny island from being clogged with vehicles enmeshed in gridlock. But, in the process, we gained the dubious honour of being the most expensive place in the world to own and drive a car. In our desire, Sir, to have a world-class transportation system, we may have overlooked the fact that all that the Singaporean wanted was a system that could get him from point A to point B, without any of the frills that have actually resulted in higher fares.

So, Sir, quite often it is this pre-occupation with wanting to be world-class in many things that sometimes has me worried. Sure, we do not want to be in the backwaters of nations but we also do not want to end up with a world-class cost of living, as a writer to the Forum page said last week, that is comparable to New York, Stockholm or Frankfurt. He was quoting from a cost of living index survey conducted by The Economist Intelligence Unit.

Someone - I cannot remember who, but someone in this House - said that if you want the quality of a Jaguar, then do not expect to pay Toyota prices. Well, I think under the present day circumstances, Singaporeans will not mind being a bit more humble, and if we really want to be nimble and travel light, perhaps a ride on that nifty little Toyota will do just as well. Maybe it is not so classy, but if it does the same job, I think we can be quite happy.

All of us - Government and people - have to have less expectations of one another. But were we all, in fact, everyone of us here, not responsible for asking Singaporeans to pursue the ownership of properties like there was no tomorrow? 3-room flat not enough? Well, upgrade to 4- or 5-room. HDB flat not good enough? Buy private property. One home not enough? Well, buy 2 or more, if you can afford it. And now we are even asking the Minister to release more flats for rental!

Sir, this is going to be a rough ride ahead, but I think the people will accept the cuts even if it is with reluctance. They are prepared to take this journey with the Government, out of the valley of gloom to the promised sunny highland. Nobody likes to have his wages cut, particularly when we cannot even promise any restoration. So, I must say that while the announcement that a further cut in salaries of the political leadership and of top civil servants recently does show that we are prepared to lead the way, perhaps we should not be too hasty to say that this cut is only for one year. Why only for one year? Why not just leave the cut alone? I think at a time when we are asking everyone to tighten his belt, we should not be too fast in talking of restoring our own pay until we really reach that sunny highland.

Sir, I believe that when the chips are down, the Singaporean is willing to face up to the difficulties. The party may be over, but we have not switched off the lights in Singapore yet, and someday, I hope, not too long, the music will start to play again.

Dr Tan Cheng Bock (Ayer Rajah): Mr Speaker, Sir, I do not want to lament the past, like my good friend Mr Tan Soo Khoon. I want to see the future. I want to make sure that Singapore succeeds.

According to a survey by the Feedback Unit, 70% of Singaporeans have accepted the need for the CPF cut. Now this figure of 70% was before DPM announced the help package. So the figure could have been higher. And I do not intend to bore this House with the reasons why we need to cut CPF any further. PM, DPM and Members of this House have given reasons why this cut is necessary.

This debate is about the livelihood of Singaporeans today and the future. It is about labour market flexibility. Are we prepared to change to meet the new challenges of doing businesses in the world? It is also about capability and cost. Are we competitive? But above all, this debate is about jobs and job creation. To the Singaporeans watching us on television every evening, what they are looking for is whether we are able to provide them with jobs, and if they have got no jobs, they want to know what help lines are we giving them. And this is where I will approach this whole issue. These are very serious thoughts in their minds.

The House is very familiar with the movement of white-collar jobs, from the US to India, especially in the area of IT outsourcing and business process outsourcing. These are very modern terms but these are very, very important terms for the business world. Other countries are having a slice of this business because of this outsourcing. And, therefore, we see countries like the Philippines and India having a slice of this business cake.

Let me tell you, in the Philippines, Proctor & Gamble has already processed its payroll, travel, invoice processing and other work at offices in Manila. While it would be best if such works have been assigned to the Singapore office, like what Citigroup is doing with their cash, securities, and credit cards, Singaporeans may have to go and work in offices away from home. In other words, our share of the service business pie is getting smaller, and moreover competition from China has also affected our manufacturing side. Now what do we do? Surely we must do something to prevent this loss of jobs. We have never sat idly by. We have faced problems before, and only recently we fought SARS extremely well and gained worldwide recognition for our efforts to contain SARS. This debate would send clear signals to investors that the Singapore Government is seriously urging its people to stand up and face the new realities. The Government has got practically everybody involved - grassroots organisations, unions, employers, politicians like us, all together. And judging from the feedback, this wave of change in mindset, in attitudes, and even in our ego, is beginning to sink into the population. And this would bear well for our country. The pain that many will face is cushioned by the help package that DPM announced last Friday. It may not please all. But it must be managed well at the ground level, by our own grassroots organisations and by our CDCs. So everyone who needs help will be helped.

Singaporeans want to know where the jobs are created. So looking at the help package of $1 billion, a substantial sum of $600 million comes from some 60 public sector infrastructure projects. These are mostly small projects, like development and improvement works for roads, schools, community clubs. These would definitely benefit the local contractors. But will the jobs find Singaporean takers? I hope so, especially in these bad times. We will have to wait and see because this sector of the economy has been primarily taken by foreign workers.

The relaxing of the subletting rules will help some families, as this will provide some older Singaporeans another source of income. The $40 million Work Assistance Programme will help and encourage low income unemployed Singaporeans back to work.

Tourism forms an important source of revenue for our country. And tourists bring a lot of income for the retail sector, the hotels and the tour agencies. This sector suffered tremendous loss during the SARS period. I was part of the "Cool" team that tried to help the tourism industry. I can tell you my first meeting at the "Cool" team was so depressing. The hotels were reporting 10%-20% occupancy rate. The retail sector was down. Tourist companies, tour agencies, were closing down. So I think the present $100 million Tourism Fund that has been allocated to them will definitely help the industry, at least to bring back the tourists and the jobs that have been lost.

We have no choice. If we cannot find jobs in Singapore, we must go out to find them. With our brand name "Singapore" and an internationally recognised disciplined labour force, we have to chase for the dollar outside Singapore. So an understanding of world business practices by young Singaporeans is very important. Being educated, young and mobile is helpful.

The MNCs now work differently. They are outsourcing IT, and world business practices have changed a lot. And this would require a lot of mindset change among our young Singaporeans to understand how they work. Big companies, as you know, are outsourcing to India, Thailand and the Philippines. And even our local banks, like DBS, also do a lot of outsourcing. So this International Enterprise Incentive scheme, which was proposed last Friday by DPM, will go to help local companies build the capabilities to venture abroad and thus provide more jobs.

Mr Speaker, Sir, I read very carefully one interview that was given, and there was an exchange actually between our Minister Lim Swee Say and the IBM boss. It appeared in the Straits Times and, in that page, it included a column on the warning by IBM. There were a few tell-tale words that kept cropping up and I know they were meaningfully and carefully crafted words. The first word is "reconstruct", meaning simply change. The second is "deconstruct", meaning remove the old ways of doing business. And the third is "re-deploying" the supply chain. But two words captured my attention and also captured the headlines of the Business Times - capability and costs.

The emphasis given to costs, especially in this economic climate, is very telling. This interview encapsulated the essence of how and what the MNC business strategy would be like and young Singaporeans entering the job market must fully understand this and be prepared to do overseas assignment.

Singaporeans must have faith and confidence in the Government. The way we handled SARS was admired by many. It revealed a disciplined people with a strong will to overcome the odds. But we are in a better position today than in 1965. This was pointed out to us by the Senior Minister. This time we have assets in the form of our reserves. The reserves reveal our high standing internationally and that capability to tide over, if the worst happens.

And, two, our FTAs. The FTAs would generate and guarantee us tax- free access to the United States, Australia and those countries who have FTAs with us. Many countries, in the earlier times, criticised us for all these FTAs. But I think they realise the importance of the FTAs and we must make full use of the FTAs. They are already beginning to negotiate for FTAs, but we have a headstart.

So Singapore companies, especially our SMEs, must take advantage and leverage on the FTAs to help them better understand this very important premium. We should organise seminars and even set up a special bureau accessible to our SMEs and local companies to exploit our FTAs to enhance our business and to create jobs.

Mr Speaker, Sir, there is one area which I share concern with Minister Cedric Foo. He spoke this afternoon about productivity, and I fully agree with him. I think our productivity has got to be looked at again. Minister Lim Boon Heng's chart on productivity revealed that we are not that productive, especially in our services side. Two things that MNCs are looking for, as I said earlier, are capability and cost. How capable is our workforce? I know we have a disciplined workforce, as I said, but this is not enough. We must have high productive workers, or what is so different between a Chinese worker, a Malaysian worker, or a Thai worker. We must have that premium. Our workers must be really productive because we cannot compete with their workers on cost.

Productivity in services, as shown by Mr Lim Boon Heng in his chart given to the House, is significantly lower than in many countries with a population of less than 20 million. We are ranked 20th. I remember the strong emphasis by Senior Minister Lee Kuan Yew many years ago in one of his National Day speeches. It was, I would recall, a landmark speech. Because he emphasised the importance of productivity for Singapore's future. I think we must revisit that speech because it lays out the reasons why we must have a very productive workforce to meet the challenges. That was many, many years ago and yet to see the chart that we are ranked No. 20, I think, is a disappointment.

I am not saying that we have not done enough about productivity. Minister Cedric Foo had highlighted what SPRING has done and all the productive work that they had put into getting Singaporeans to be more productive in so many sectors. But I still think much could be done.

Let me give you an example that we are all very familiar with. Look at our construction site. It is always messy, noisy and housekeeping is poor, with materials thrown all over the places. I was having a holiday in Perth, Australia, and I was staying in a relative's house. The first day, I noticed a vacant plot of land adjacent to this house. The second day, three or four workers came and started working on it, and there were only three to four workers. But by the seventh day, I could see that at least the bottom half of the house was already constructed. No noise, yes, I could hardly hear any noise. The materials were well-stacked and put neatly away. Of course, they used a great deal of prefabricated items, and there was hardly any mess. The few workers seemed to know exactly what to do and no one seemed to get into each other's way. Later, I discovered that each of the workers is actually a professional builder and he reads the house plan. I think if you are able to read the house plan, you will not get into each other's way because you know what to do. But, unfortunately, for our workers, I do not think they even know how to read the plans. And that is why we get such shoddy work in our homes.

So if Singaporeans want the jobs back in the construction industry, they must be more productive for the construction company's boss to hire them. They are no match against the foreign workers, in terms of pay. They must be more than just simple workers. They must work smart. They must be able to read the house plan. They must be multi-tasked people and can be paid higher for their job.

When I was renovating my house, it took the local contractor four times to fix my wash basin. I thought his workers were all foreign workers. But when I heard that they were all Singaporeans, I was very, very disappointed. They are not even Malaysians. They are all Singaporeans. After the second time, I asked his worker whether he was proud of the job. His reply was, "Every one also does like that." But I said, "I am not every one. You do it again." And I told them, "Don't blame the Government if we approve more foreign workers because you are only as good, but more expensive. And that is not enough." After the fourth attempt, I was satisfied. So I asked them what they thought of the final result. They liked it. They agreed they should have done it at the first attempt, if they took the trouble to read and understand the instructions, and not assumed that they knew how to fix a wash basin, because some wash basins can be a little different.

My point, Mr Speaker, Sir, is so much time was wasted and productivity was zero. Similarly, you walk into a restaurant and you try to get information from the menu. The waiter will be probably walking three to four times to the Captain about the items you have asked or enquired. This is bad, unproductive service. Can we blame the waiter? I think the manager is also to be blamed. Singaporeans shun such jobs. But if proper upgrading is done in this services industry, more Singaporeans will work.

How? DPM Lee again has announced the Domestic Sector Productivity Fund last Friday. We have got to use this fund to develop systems, guidelines and workflows, because no one, no matter how good he is, if we have a lousy system, he can never perform. So, productivity is linked with the way we do things, the way the company plans the job work. We have to empower that individual with knowledge to be able to be productive. So, let us get this fund to improve the image of our services sector, so that the jobs now taken by foreign workers will eventually go back to Singaporeans. Of course, this is only one sector I have highlighted. I am sure there are many, many sectors which were also highlighted just now by the Minister of State for Defence, Mr Cedric Foo, and we should all look into them in more detail.

Finally, Mr Speaker, Sir, this time round, the expectations of many Singaporeans have been dented. Egos have been hurt, but there is no shame in enjoying a lower cost of living, a lower level job with a less than expected salary, a different lifestyle. But all is not lost. We will bounce back. We must use this rough patch in our economy to consolidate our position, internally and externally, so that we can weather the future with even more confidence. We have done it with SARS. Surely, the team that fought SARS well will also bring us out of this jam. We must have confidence in them. But we must also have confidence in ourselves, so that we can try to put everything into shape and move on. I believe this team can make it.

Mr Speaker, Sir, I support the Prime Minister's retuning of the CPF.

Mr Ong Ah Heng (Nee Soon Central) (In Mandarin): Mr Speaker, Sir, ever since the Prime Minister's announcement of an impending CPF cut in his National Day Rally speech, the NTUC has spared no time in meeting with its affiliated unions to discuss this problem.

The union leaders are very rational and they are bold enough to face the facts. They have agreed to the cut in the employer's CPF contribution rate to lower business cost, so that workers' jobs could be safeguarded. It is hoped that the savings as a result of the CPF cuts could be used to augment production facilities to expand their business and to safeguard the jobs of the workers, and even to create new jobs. They also appeal to the employers to have a conscience, and not to put all the savings in their pockets and have a fling in life. They should share these savings with the workers.

Trade union leaders are worried about members not being able to cope with mortgage payments, healthcare, transport, utilities and conservancy charges, and they hope that the Government can empathise with their plight and lend them a helping hand. The $1 billion assistance package has brought a sigh of relief to the workers although these measures cannot satisfy everybody. This is understandable. Why do I say this? In my chit-chat with the constituents in the coffee shops, they would invariably tell me, "Heh, do not be too depressed. In this age, it is difficult to be a God. It is even more difficult to be the Government." They also said that, if it rains every day, housewives will grumble that their clothes will not get dried. If it does not rain, workers who are working under the hot sun, find that the wages they earn are not enough to buy the drinks needed to quench their thirst. Clerical staff who work in the office complain that the air-conditioner is blowing hot air and not cool air. It is not easy to be the Government. No matter what the Government has done, the people will find some fault with it. I asked them what they thought of the assistance package. They said, "Very good, what more can we ask for? Unless someone can bless me with a winning number so that I can strike the 4-digit lottery."

Mr Speaker, Sir, an old friend, a transport union official in Taiwan, told me over the phone: "Mr Ong, your workers are wonderful. They are very adaptable, whether in good fortune or adversity. They are even prepared to suffer wage cuts and CPF cuts. Your Government is remarkable - so much subsidies (assistance measures)!" I asked him how was the situation over in Taiwan. He said, "Over here, who cares? The government is busy with the presidential elections next year."

Mr Speaker, Sir, it is not easy to be a good government, because the better the government, the higher would be the expectations of the people, and more people will complain. A bad government finds it easy to run a country because the people would have got used to it. What can you ask for? Consider yourself lucky if you do not starve to death. If you ask him why he does not look for a job and earn a living for himself, he would reply, "Do you think it is so easy to find a job? You must have money to get a job."

In contrast, Singaporeans are very fortunate. If they work, they can get money. There is no need for them to use money to buy jobs. The Government has worked out a Work Assistance Programme to help the retrenched workers and to help them find new jobs. Older people do not have to worry, because the Government has set up a "job matching and training scheme" for them. As a trade union leader, I am proud to have a Government that is so concerned about the welfare of the workers.

DPM Lee also stressed the need to cut waste in the Government. The Acting Minister for Health has also said that hospital charges will not be raised. However, the Singapore Sports Council (SSC) has decided to raise admission charges to public swimming pools. With effect from October 2003, charges for those under 18 years of age will be raised from $0.50 to $0.80 and by July next year, they will be further raised to $1.10. As for adults, the present fee of $1.00 would be raised to $1.50 with effect from October 2003, and then to $2.00 from July 2004. For senior citizens, the admission fees will be raised from $0.50 to $1.00. During weekends, the $0.70 for under-18 will be raised to $1.10 and by July 2004, to $1.50. Adult fees will be raised from $1.30 to $2.00, and then to $2.70. As for the senior citizens, the fees will rise from $0.60 to $1.10, and then to $1.50.

Mr Speaker, Sir, those who live in condominiums are already having swimming pools at their door-steps. Those who are well-off can go to their clubs to swim. The Singapore Sports Council has more than 20 swimming complexes, spread over the various housing estates. These are for the middle and lower income groups to use. At present, if a grandfather takes his two grandchildren to the swimming pool on a week-day, he pays $1.50. By October, he has to pay $2.40, an increase of $0.90. During the weekends, he will have to pay $1.30 more. Those who live in the vicinity of the swimming pools told me that the swimming pools are idle during weekdays. According to SSC, the increase in fees is aimed at balancing the cost and revenue. What I worry is that when the fees are increased, the swimming pools will be idle and they will become breeding grounds for mosquitoes.

To balance cost and revenue, I have a novel idea. There are two swimming pools in each complex. We can rent out one pool to Qianhu Fish Farm, a tropical fish company, to breed their fish. Therefore, with this rental income, there is no need to raise the admission fees. Is this not good for the people? While swimming, we can also watch the tropical fish! Is this not wonderful?

Mr Speaker, Sir, while the people are supporting the Government's reform programme, what has the SSC been doing? Reforming the CPF is a painful decision. It is also painful to the people. However, what is most important is that we should change our mindset to face reality, to be pragmatic and to face life honestly.

Let me quote from my bus captain. The bus captain told me that we were lucky that we had the CPF to be cut. If we do not have any CPF to cut, then it would be pretty bad for us, because it would mean that we do not have a job. Therefore, we should face the CPF cut calmly. Though poor, we should be contented and happy. When one is wealthy, one should be compassionate towards others who are less fortunate. If the Government is compassionate, and we are united, our future is bright, and Singapore will be a place where people would like to live and work in. When winter comes to an end, spring will be around.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 4.05 pm.

Sitting accordingly suspended at 3.42 pm until 4.05 pm. Sitting resumed at 4.05 pm