RETUNING THE CPF

Debate resumed.

5.12 pm

Mdm Cynthia Phua (Aljunied): Mr Speaker, Sir, thank you for the opportunity to join in the debate.

The Government should be applauded for coming out with a comprehensive and directed dosage of measures to help those who are affected by the adjustment in CPF contributions, and also for the additional package to assist businesses, particularly the construction, tourism and SMEs. DPM Lee's announcement, in fact, does address many of the concerns of the people and businesses. It is a reflection of our commitment to look after the interest of the country and the people.

The measures introduced will have very long-term benefits for our workers. Yes, they have to tighten their belts now, relook their financial planning, but their future will be better secured. The measures will help the workers to stand up and proudly move forward. It is our policy to teach and equip a man to catch his own fish, rather than to give him fish every day and he does not know how to fish.

However, there are a few concerns on the Work Assistance Programme for the unemployed, and the People-for-Jobs Traineeship Programme for older workers. Many do have family problems that come along with unemployment for a period of time, eg, family violence, potential legal proceedings for traffic and parking fines, credit cards, utilities bills, or even bankruptcy suits. We need more than a case manager to assist the unemployed and the older workers. We need a comprehensive network of social services to deal with these family matters. And I suggest that the localised Family Service Centres, with the support of the CDCs, work together with the case manager to extend professional guidance to these families.

Secondly, these schemes should also look into providing additional financial schemes during the period of training. For example, get them involved in the child/student care financial assistance scheme, where they can put their children in the child/student care centres, and parents would be more willing to go for skills upgrading knowing that their children are taken care of.

As for the setting up of the Public Transport Funds for the lower-income families, I would urge the Government and NTUC to extend this help to the marginal groups of families which hover between the low and middle income. I have in mind especially the cases where the breadwinners are in the older age group and they are hardest hit by the CPF adjustment. These families tend to have children in the teenage group, where they are socially active and need public transport to move around, and many of these families have also supported the Government's call to have more than two children. We sincerely hope that the qualifying family income level eligible for the transport fund assistance be realistically set to readily help those who need help, rather than by an exception to the prescribed guidelines.

On the Government's help for businesses by extending the statutory lifespan of omnibuses and taxis, may I also ask the DPM to consider extending the 10-year cap for motorcars to 12 years so that the man-in-the-street need not scrap his car within a short period of time. Often, Singaporeans take good care of their cars and with improved technology, the cars are still roadworthy after 10 years. It is an argument that DPM has used for the extension of the lifespan of buses and taxis. It is a waste to have to scrap the cars. A change in this 10-year cap will help many people, who need a car for their businesses and work. This has also been thoroughly argued by Mr Tan Soo Khoon earlier on the high cost of owning a car.

I am particularly pleased to note that the Government is setting up a Cut Waste Panel. A lot of Members have said why not a No Waste Panel. I believe that the coverage extends to the civil service and statutory boards. Government Ministries and statutory boards should not lose sight of their basic objective, that is, what is their mission. Their task is to provide a very noble service, ie, to provide public service at an effective cost.

One arena is the development cost of public offices, which includes the buildings, fixtures and fittings to house the Government offices and the other is the operating and running costs. "The Seven Wonders of Singapore" were stated by Mr Tan Soo Khoon in this House before and we have to ask: can an efficient public service be delivered without spending millions of dollars on buildings, fixtures and fittings in the offices? Looking at our Government offices now, many are in first-class buildings, with extensive glass curtain walling, granites and marbles, with high-grade fixtures and fittings. They cost millions of dollars to build, and they have to spend just as much to maintain these dazzling glasses, marbles and granites. It is not to say that Government and its related agencies must always be housed in run-down looking buildings. By all means, progress and advance by having modern Government buildings, but this should not be extravagant.

Last Thursday, while waiting for DPM Lee to arrive at Dhoby Ghaut station in the NEL train, I was marvelling at a five-storey high glass atrium and was wondering if the atrium had been lowered, would it help lower the charges of the NEL fare? We can have brilliantly sculptured stations, but if they cause transport cost to go up, it would leave commuters with a painful souvenir. Remember also there is a high depreciation cost for all this infrastructure which has to be paid annually.

The important thing to remember is practicability. Does it make sense? Look at the Corrupt Practices Investigation Bureau. It is doing an effective public service but it is humbly housed in a recycled school building in Cantonment Road.

Can these development costs be made more transparent for the public? I was searching through the HDB's annual reports for the current construction cost of HDB flats to ascertain a feedback given to me that the construction cost of a HDB flat has risen from about $40,000 in the 1990s to about $80,000 now. But I could not ascertain the cost from the annual reports. These are cost figures that the Cut Waste Panel should regularly monitor. HDB should also go back to the drawing board and ask what is its basic function. If its role is to provide good, quality public housing, then do so. Do not try to compete with the public sector and incorporate luxury into public housing. We have just recently debated in this House and spent time asking why the tempered glass shower screen cracks but we still have no answer. We cannot beat the private sector, because the prices are different and it is also for a different target market. Worse, we give luxury that is not luxurious, and the new flat owners hack out what we give and replace them. It is a waste of public funds. It only raises the cost of housing.

Each Government department must look into how it has to manage its budget by cutting wastage, job enlargement or simplifying procedures. Do not look for easy solutions, for example, like closing down the swimming pool because you cannot cover overheads, especially during the SARS epidemic, or argue on the basis that there was no crowd, or intending to raise the entrance fees for use of sports facilities because of smaller Government grants. This intention to raise the entrance fees has been passionately argued by Mr Ong Ah Heng just now. The questions are: have you given enough publicity before you act? Did you carry out sufficiently good programmes to attract the crowd? Maybe, MCDS should adopt Mr Ong Ah Heng's suggestion to co-use the pool by fish and man. There may be no need for the change of use because it is a co-location. It does not mean that because the swimming pool has been in existence for a long time and the people are aware of the existence of the programmes that they are running. Passing on costs or making up for the shortfall in income by reducing the service and squeezing the public is not the way to deliver public service. I sincerely hope that the end result would not also be the ultimate Cut Waste Panel's review result too. Please do not give our people additional pills to swallow for the provision of public service, especially in this hard adjustment period.

Competition is good in business and society. We all know that. It is meant to encourage efficiency and keep a check on prices. But sometimes competition can also have its bitter pill. Take the case of the healthcare services in Singapore. We have competing groups, each jealously guiding its own turf. The result is that each group has to invest heavily on infrastructure and equipment when, in fact, it would have been more cost-effective if these expensive high-tech equipment could be commonly shared. Take, for example, if SGH has an expensive specialist equipment, patients who are in NUH cannot benefit from it because of the cluster. So, NUH has to duplicate SGH and buy its own equipment. This is another area where the Cut Waste Panel could look into. Service in public health must not be allowed to suffer because of competition. This feedback is given by the medical profession.

The second example is the running of the NEL line. Yes, we wanted competition for the operation of the MRT lines. Has the competition brought in lower cost and better transport service for the people? Where is the benefit of the integration of the bus and MRT lines? Is there no such thing as affordable fare after we have privatised our transport services? Do we need more transport companies for competition or should we revert to one company for the train and another company for the buses?

If this review is not under the Cut Waste Panel, maybe another committee should be set up to review this basic infrastructure on competitiveness of our public services that are no longer considered as state provisions.

I applaud the Government on the early release of infrastructure projects to boost the construction sector. However, on productivity, the construction sector must seriously look into how their productivity can be improved. Where are they lacking compared with developed countries? Why? How can these be improved? We have also seen some local construction companies going bust doing Government infrastructure projects. Why? Are we administering the contract effectively? Have our civil servants been too kiasu and added to the latent cost?

I am very glad that Minister Mah had informed the House that BCA is looking at improving the payment procedures to the contractors doing public sector works, including the progress payments, the variation orders and reviewing the withholding payments for liquidated damages.

I have been told of this by two contractors consecutively. A contractor is required to prepare for at least three to four, and sometimes five, inspections in the course of handing over a completed HDB project. I understand that the cost to prepare each inspection is about $10,000 and hence five inspections would be $50,000. It was argued by one of the grassroots leaders that this is the latent cost which is not even an open Government administrative cost. Another example is that one minute scratch, which is not a crack, would require a change of the whole piece of glass, regardless of the size. This is how costs have escalated!

We have to examine all these issues and address them. The success of our future lies in our hands today. The seeds we plant will germinate and grow, for us to harvest on a sunny day.

[Mr Deputy Speaker (Mr Chew Heng Ching) in the Chair]

5.27 pm

Assoc. Prof. Chin Tet Yung (Sembawang): Sir, thank you for allowing me to join in this debate.

Hon. Members will be pleased to note that after so many of them have spoken and covered so many points, my speech is now reduced to a single point. Indeed, I cannot even claim credit for such a point for it is phased in a discussion with some young working Singaporeans about the CPF changes.

Sir, Mr Inderjit Singh earlier spoke on the need to make the CPF more voluntary, both from the point of view of business and employees. I also want to echo this call but for the purpose of encouraging Singaporeans to be more independent and responsible for their own future.

Several of the young people I spoke to were, in fact, dismayed at the increase in the Minimum Sum and at the abolition of the right to withdraw 50% at 55. Many in fact said that they have no interest in what happens when they are over 70 or 80. They see the new rules as Government's kiasuism and some even suspect that the Government wants to keep their money longer for reasons unknown to them. They argued that if the Government wants to cultivate an attitude of financial independence, prudence and entrepreneurship amongst young Singaporeans, this is not the way to do it.

Very simply, Sir, these young Singaporeans want a more flexible CPF system after the Minimum Sums have been accumulated. No one objects to the principle behind the CPF. As the Prime Minister says, it is our only social safety net. Everyone welcomes the DPM's speech on measures to help needy families tide over the problems caused by the cuts. But what the young Singaporean wants to see is whether he or she can be responsible for the use of his or her money after the Minimum Sums have been accumulated. It is suggested that once the Minimum Sums have been reached, an option should be given to the member to either reduce his contribution rate, withdraw the sums in excess of the Minimum Sums, whatever his age, or to choose not to continue with the CPF contributions altogether.

Some already think that the current rule of withdrawing 50% at 55 is too restrictive. They see the current uses allowed as far too restrictive. For example, it cannot be used for starting a business or for retraining themselves or educating their children. As Mr Inderjit Singh said, they want more discretion on how to use their earnings.

Sir, many young professionals feel this way and I think they deserve an explanation as to why the rules are the way they are. Otherwise, as one of them said to me, "Why stay in Singapore to work where nearly 40% of your salary is not within your control?" I hope that as we retune the CPF to be more responsive to business conditions worldwide, we will also tune in to be more responsive to members' concerns.

Sir, I support the measures introduced to retune the CPF.

Mdm Ho Geok Choo (West Coast): Thank you, Sir, for allowing me to join in the debate.

The Straits Times of 30th August carried an article by investment guru Dr Marc Faber, also known as Dr Doom. The gist of his views is as follows:

(1) The Singapore Government should allow firms to fail and set up new sectors;

(2) A more effective move to reduce cost and increase competitiveness would be to move all manufacturing operations to low cost countries, even at the expense of job losses here;

(3) That it is desirable that wages decline and that the price levels in Singapore decline, but he feels that the Government should not interfere in the market to cut wages;

(4) That Government intervention in wage levels may lead to unhappiness and create an unfriendly social climate to the extent that it creates a bigger divide between the have and have nots.

I would like to comment on the longer-term application of his views. I am concerned on his short-term do-nothing prescription which may send the wrong signals to Singaporeans.

Sir, the Government is responsible for Singaporeans' well-being and the country's progress and has been proactive in charting Singapore's path to recovery, cutting costs of doing business and sustaining Singapore's competitiveness.

As the custodian of a country, if the Government did nothing and allow companies to move away at the expense of more and more job losses and let nature take its course, Singaporeans are bound to doom. That the Government should do nothing at all is untenable. Singapore is a small nation and our cohesiveness is our strength. The Government is right in setting the tone and form for the longer term perspective of our CPF system which will allow wages and prices to move down and, ultimately, to allow market forces to determine future wage and price levels. All these are in line with Government's effort to re-make Singapore and to lessen direct Government's involvement in the marketplace.

Sir, I am more concerned with Dr Faber's observation that Government's intervention in the wage debate is causing unhappiness and social divide. While this is a reality not to be taken lightly, I am also happy to note that Government has always shown compassion and care to help the weak and those who are badly affected by economic circumstances.

I agree that wage cuts alone are not enough, but the move to retune our CPF is to give the lower income and above 40 Singaporeans time to sharpen their capabilities to ride the global economic landscape.

Being in the first world, Singapore and Singaporeans will have to increasingly contend with the challenge of investments going into cheaper operating environment, jobs being lost to another individual who is better equipped and can offer value add contributions at the same or cheaper wage cost.

It is in such a flux that the Government has to put in place the path finding process that will ultimately give us the right strategies and formula to continue to compete and sustain our economy.

In fact, Dr Faber's recommendation that Government should stay out and not interfere with the wage situation reminds me of an article that I came across. The article, written by Adam Cohen, is entitled "When life offers a choice between the White Wall and the Brick Wall". The story goes this way:

When Bartleby, the scrivener, is asked by his boss to help with some law-office drudgery, Bartleby says, "I would prefer not to." Despite his employer's attempts to change his mind, and to learn his reasons for turning down assignments, Bartleby never says much more. "Why do you refuse?" his boss asks. "I would prefer not to," Bartleby replies placidly.

Melville wrote Bartleby, the Scrivener 150 years ago. This novel has what all great literature has: timelessness, and a depth that allows readers to find new things when they come back to it.

When Adam Cohen first read Bartleby, with the 1960's faintly lingering in the air, it struck him as a meditation on freedom, against oppressive social structures. But re-reading it now, in a world full of bad options, it feels like a cautionary tale.

Bartleby's approach to life is pure, but untenable: simply because, even when our choices are bleak, we have a duty to make the best ones we can.

The grim options offered by Bartleby's office begin with the views: a white wall "deficient in what landscape painters call 'life'", and "a brick wall that offers at least, a contrast, if nothing more."

His job of scrivener, since made obsolete by the Xerox machine, involves copying legal documents by hand. When he is not duplicating other people's words, he and his fellow scriveners are reading their copies back to one another to check for errors.

Even Bartleby's stodgy boss concedes that it is "very dull, wearisome, and lethargic" work that to people with "sanguine temperaments" might be "altogether intolerable."

At first, Bartleby completes his assignments energetically. But before long, when his boss asks for help with a small legal document, Bartleby responds with the phrase that will become his mantra, "I would prefer not to." Before long, he refuses to leave the office at all, and starts to make it his home. Rather than fire his recalcitrant employee, the boss keeps trying to persuade him to get to work.

In time, the boss moves his law firm out of the offices that Bartleby haunts day and night. When a new lawyer moves in, Bartleby is taken away to the Tombs, New York's aptly named prison.

Bartleby continues his calm resistance there by refusing the food. "I prefer not to dine," he tells the cook. His passivity eventually kills him.

Sir, the story of Bartleby truly reflects the essence of our times. In this globalised economy where change is the only certainty, Singaporeans must be responsive and be flexible, as that is the only path to survival. To remain apathetic and do nothing, as Bartleby did and as Dr Doom prescribed, would be like the contented frog who dozed off and was eventually boiled to death, that DPM Lee spoke about.

In this impending change and high unemployment situation, Singaporeans and Singaporean companies can either do nothing or make good of the opportunities that the Government is offering on a platter.

In today's world of bleak alternatives, Bartleby's story is a sobering reminder that what life requires is remaining engaged, ie, preferring and acting on those preferences. Contemplating Bartleby's sad end may give us some strength, as we continue to stand up for painful policy options and settle for long-term victories and vote for the lesser of the two, or more, pains.

It is in this light that proactive organisations took upon themselves to engage in the developments around us. Therefore, the likes of SIA and many others carried out a review of their operations to better sharpen their competitiveness, and the review was premised on restructuring for relevance and performance. In the process, redundancy arose. However, every effort was made to compensate and reskill the excess employees to be employable again. This, I know, was well managed by SIA and the likes of HDB.

I would like to share that, generally, the state of human resource and industrial relation practices in Singapore is above global average index. If IR and HR practices are deemed responsible for the stories we hear, it is because the story is often told half truth, or is half told.

Sir, I ask to be excused for my impertinence to cite this example as an illustration. If I were to say that I saw Mayor Heng Chee How at Desker Road last night, it tells one story. But if I were to go on to say that he was at Desker Road last night carrying out his duty as Mayor of Central CDC where Jalan Besar happens to fall under, and he was there to check out on certain complaints, it tells another story. So, it is important to tell the whole truth.

Sir, our vision is to create a future where Singapore, embedding the physical, intellectual, social and spiritual spheres, continues to remain attractive to stakeholders. These stakeholders include the investors, talents, both local and foreign, as well as the old and the young in this multi-religious and multi-racial society.

The Government's tenacious job is the ability to balance the Chinese weighing scale. Pull it one side higher and tip down the other side, you upset those on the bottom of the scale.

In this whole debate of making it affordable for businesses and possible for the Singaporean competitiveness, the Government has shown its astute capability of striking a balance and, more importantly, its compassion and humane touch.

The announcement by DPM Lee of the other cost saving measures that the Government will embark on, in particular, cost of doing business with the Government, has reinforced the gotong-royong spirit that all stakeholders must possess. He has also driven home the message that it is through thick and thin that we will go through together as a team. And I agree here that we should extend beyond pre-emptive lay-off to pre-emptive motivation that DPM Tony Tan spoke about.

At this point, Sir, I would like to make some observations with regard to the CPF retuning and the relief package and urge the Government to do more for Singaporeans, especially the PMETs. Sir, I have asked for permission to distribute a table to illustrate my point. [Copies of Table distributed to hon. Members.]

Prime Minister Goh spoke of the PMETs who constitute 43% of the retrenched employees. They seem to be the more vulnerable group and, for the above 40s, they also take a longer time to be re-employed. By and large, the above 40s PMETs are the ones who would be financially squeezed with prospect of no or lesser CPF contributions to service their mortgages and other mid-life commitments. The retuning exercise will hit this group most drastically and hence they are deserving of help. The illustration that ensues explains clearly.

For a person aged above 50 but below 55 now, the effective CPF cut is 3% per year over the next three years. However, a person who is 48 years old now and on reaching the age of 51, will see a 6% cut in CPF on reaching 51 years of age. Sir, this group at 48 and below will face a double whammy when they reach age 51.

The Government has put in place various relief packages and assistance schemes for the lower income groups. It demonstrates PM Goh's and DPM Lee's promises to assist every Singaporean affected by this major wage restructuring process.

What about Singaporeans from the professionals, managers, executives and technical group (PMETs) with salary ranging from $3,000 to $6,000? This cohort has been growing since the shift in our economy to a more knowledge-based one. The feedback from many in this group is, "Why are we always left out? Many of the schemes are targeted at the lower income groups. We are the new poor Singaporeans."

From experience, we know that this group is capable of making short-term lifestyle adjustments according to their individual financial circumstances. They have managed and weathered well in the past financial crisis without much help, living largely from their savings. This time the circumstances surrounding them are different. Like all other major economies in the world, jobs are lost to comparatively lower cost countries.

We agree that professionals, managers, executives, even businessmen and the self-employed should be more capable of taking care of themselves. Nonetheless, we have to take cognisance of this difference from previous downturns this time round. What recourse do professionals, managers, executives, businessmen and self-employed have besides seeing their MPs to pour out their predicament?

Sir, the relief package is clear on schemes such as WAP to assist the lower income group but silent on its eligibility for PMETs in similar plight as the lower income group. The PMETs, mostly in their 40s and 50s, constitute a substantial segment of the workforce, and the remote chance of reemployment in the next 6 to 12 months spell anxiety and despair for many of them. I urge the Government to spare them a second look and specify how they can be helped and consider extending assistance schemes to the more deserving ones.

I also urge for more assistance to be extended to not-for-profit outfits, like SPEC, that was the first to champion the cause of PMEBS when it first encountered symptoms of their challenges and plights. SPEC had, since 1997, been engaged in facilitating the employability and addressing the concerns of PMEBS, together with MOM.

Of the several schemes announced by DPM Lee, there is only one that has direct bearing on PMETs, and that is the People-for-Jobs Traineeship Programme. For the others, it is unclear how PMETs can benefit.

Sir, another scheme that throws hope for the PMEBS is the $90 million International Enterprise Incentive Scheme to help Singaporean businesses venture abroad. These businesses would need expertise and experienced PMEBS. I would like to urge the SMEs, together with IE Singapore and the SWDA, to explore jointly setting up a scheme to encourage and facilitate the employment of the unemployed PMEBS in these operations overseas or locally.

Besides the SMEs, I understand that many of our GLCs are also considering investments in overseas operations and I urge that they too would draw on the pool of unemployed PMETs for their overseas operations.

Sir, this scheme could be like the Training for Employment Scheme (TFES). As it stands, TFES is silent on its applicability to convert unemployed PMEBS for expert contribution and gainful employment.

Sir, I have been told that CareerLink at SPEC has a database of some 5,000 PMETs registered, looking for job opportunities, and this could be the starting point for SMEs and GLCs to offer jobs and tap on their expertise and experience. An important consideration is streamlining and integrating job creation and employment opportunities with the relief package and needs of the SMEs respectively, as well as that of the GLCs.

Besides the impact of a double-whammy CPF cut for those who reach 51, gainfully employed PMETs, with outstanding mortgage loans, could be sitting on two potentially possible financial time-bombs.

The first potential financial time-bomb is their job security and pay package. If ever retrenched, these PMETs face the prospect of being unemployed with no pay or re-employed at a lower pay. When that happens, their ability to service their mortgage and other family commitments would be further eroded. No doubt, Sir, Minister Mah Bow Tan has assured that assistance schemes are available from HDB for mortgagors, but the fact is that the financial ability of these PMETs is eroded.

The second financial time-bomb is the prospect of future increase in mortgage rates. Interest rates are at their all-time low and the prospect of increase is real. Those vulnerable to an increase in mortgage rate would be those who have maximum financial commitment to a mortgage loan based on the current low mortgage rate and are at their best ability to service the loan. The illustration that follows clarifies this.

For example, for every 1% increase in mortgage rate, the home owners who take a 25-year $360,000 mortgage loan would have to incur an additional monthly cash payment of about $200 in interest payment.

Sir, there may be nothing much that HDB could do here except again to further extend its assistance scheme. Sir, from these two illustrations, we recognise that the financial plight of the PMETs cannot be glossed over. Their financial burden would require a bit of a lifting by extending the scope of some of the assistance schemes to them.

Sir, the Government's relief package on accelerating the infrastructure projects to the tune of $600 million is the largest item of the $1 billion package. Would this translate into jobs and more business opportunities for Singaporeans? How can the Government and the relevant agencies ensure that unemployed Singaporeans are targeted at? I am encouraged by Minister Mah's assurance that many of the projects would be eligible to local contractors based on the scale of the projects. I would also urge that for the bigger scale projects where foreign contractors' expertise is necessary, then we should facilitate a local partnership so that local partners will continue to have a place.

Sir, it would be beneficial to put in place a tracking of the numbers and types of jobs created and of the numbers of unemployed Singaporeans taking up the jobs and the issues encountered in the process. This should similarly be done for the tourism industry where the Government will be pumping in $100 million in the Tourism Recovery Fund.

Sir, we are indeed encouraged by PM's compassion and understanding of the need to restore the cut CPF to Singaporeans during better times. This is important as we must never look at this round's CPF cut as a permanent cut. Singaporeans have already accepted the fact that going back to the 40% contribution rate, which the Government had supported in the past, is a foregone conclusion. We have, in our midst, realistic Singaporeans who are flexible and prepared to sacrifice for the long term good of the country and cost competitiveness of the economy. Giving up the 40% CPF contribution is a gesture of sacrifice on the part of the employees. Keeping to its promise to restore CPF to 36%, when in prosperous times, is a commitment that we must not fail our Singaporeans.

There has been much talk that there is no longer trust and loyalty in organisations today with the shift to bottom-line driven objectives. I would argue that the pursuit of such commercial objectives does not mean doing away with loyalty and trust.

Sir, I am heartened by what DPM Tony Tan has said, as reported in the newspapers, that we should start looking at companies like Walmart whose corporate culture has bred trust and loyalty. As MOS Cedric Foo has reinforced, productivity and preparedness of employers to review their operations through work redesign will facilitate value-add contributions of employees, and convince employers to look at their employees as an asset and not as a cost of doing business.

Sir, man sacrifices for his belief when he can see and experience the trust and loyalty. On these fundamentals, in the last 38 years, our political leadership has nurtured a nation that is imbued with the motivation to overcome challenges and set ourselves ahead in every competition.

Sir, the Singapore spirit has pulled us through several crises in the last 38 years and we have found that the formula was going through thick and thin as a team. I believe Singaporeans will have the resolve to support the Government's move to regain our competitiveness through this same formula of going through thick and thin as a team.

Trimming the CPF waistline down from 36% is a healthy exercise. And, on this note, I support the motion.

Mr Sin Boon Ann (Tampines): Sir, last week, my honourable colleague, Mr Nithiah Nandan, spoke of his meeting with union members to discuss proposed changes to CPF. I too was at that meeting. There was a general consensus at the meeting that we need to retune our CPF in order to enhance our competitiveness and to ensure the continuing survival of our country. I need not say that the prospect of further cuts in our CPF was no morale booster for the workers and, in fact, after a string of bad news over the last six months relating to corporate restructuring, the weak economy, SARS and Iraqi war, the proposed changes to the CPF have been seen as yet another blow in the stomach.

But, Sir, like all good citizens, the workers understood the need for these changes in order to preserve jobs and to keep the economy going. I can feel the concerns of the workers at a time like this. There is much uncertainty which hangs around them as there is no guarantee that reducing CPF contribution by 3% is going to assure them their jobs and future employment. I am glad, however, to learn of last week's announcement by DPM Lee of the package of measures to mitigate the harshness of the proposed reduction to the rate of CPF contribution. Any form of relief will always be welcomed at this time and will certainly be appreciated.

Sir, we have always spoken of the need to bond with the workers in order to ensure their commitment and loyalty. This need to bond with the workers is perhaps, in part, a reflection of a broader need on our desire to want to bond the people to the country. Whether you like it or not, a reduction in the salary, a restructuring, or a retrenchment exercise is always an emotionally traumatic experience for the workers. If you believe, as some companies do, in the principle that the employees of any organisation are the most important assets, then how you manage the process of bonding with the people will be critical to the outcome of the organisation.

Sir, the truth of the matter is that even in this economic climate, not all companies are equally affected by weak economic conditions. Some have been able to ride through this tough time better than others and have, in fact, out-performed themselves in the past. For these companies, I hope that they would not use the excuse of the present CPF restructuring exercise to increase their profitability further at the expense of the workers. Such measures are opportunistic and I am sure will be made obvious to the employees in no time. I certainly hope that the employers in this category will find a way of ploughing back the savings from the CPF to the employees for their benefit.

At the same time, there is another category of employers who are genuinely suffering. Although the reduction in CPF contribution cuts across the board for all employees who are CPF account holders, the question which we have to address is whether or not more could have been done by way of cost reduction to ensure that that pain is fairly borne by all. Let me explain.

For the very high income earners, cutting the CPF by 6% does not matter very much as compared to one who, say, earns $1,000 a month. Our present rule does not require anyone to contribute that part of the salary beyond $6,000 into the CPF account. So if your pay is $30,000, your CPF take-home will be $960 from your employer and with a cut of 10%, it will be just $600. What difference is this $360 to someone who is looking at about $28,000 cash flow a month. But for a worker who earns $1,000, a 6% cut will be quite substantial indeed in terms of cash flow.

While I do not expect any regulatory intervention to lower the salary of these high income earners, it will be good if companies and managers can take a serious view of their own salaries and are prepared to voluntarily take a deeper cut in order to sustain viability of the company and also the employment of others. At a time like this, if the workers can perceive that their managers are prepared to bite the bullet with them, and to take the tough journey together, then I am very sure the bonds between the managers, the owners and the workers will be better established and this will augur well for the company in the longer term.

Sir, the Government has spoken of the need to restructure to face the demands of the changing times. While I can understand the need to reorganise to help companies improve their profitability, there is a question which remains as to whether or not this is a good time to reorganise public agencies that are not similarly motivated by the same concerns of profitability. The workers can understand if Motorola and Seagate have to lay-off workers to remain competitive and profitable. But, at a time like this, when jobs are so scarce, one questions whether or not it is appropriate now to trim the size of public agencies.

On one hand, we hear the cry of Government for more jobs to be created in Singapore for the workers, yet, on the other hand, I am given to understand that many public sector jobs are being made redundant because of outsourcing. We have a contradiction on hand here, a situation of the Government calling for more jobs to be created and yet, at the same time, have many Government agencies outsourcing many of the job functions to others. This is not a problem if these outsourced jobs go to Singaporeans but, unfortunately, many of these outsourced jobs go to foreigners in the process.

Sir, in case you get me wrong, I am not against the principle of hiring foreigners who can contribute to this country. What I am saying is the timing judgment by these non-profit oriented public sector organisations to undertake restructuring exercise presently, knowing full well how scarce jobs can be particularly for those who are in the middle age group.

Let us not forget that these middle-age workers are the ones who carried the economy on their backs at a time when we were industrialising and trying to build up this country. It is to them that we owe our gratitude and these are the people whom we must not abandon in this hour of need.

I would, therefore, urge the Government that, if they are thinking of further downsizing involving redundancies or outsourcing, such plans be put on hold until such time when the economy and employment situation have significantly improved.

With that, Sir, I support the Prime Minister's statement enunciating the Government's policy on CPF changes.

Dr Amy Khor Lean Suan (Hong Kah): Mr Deputy Speaker, many Singaporeans are indeed relieved by the light touch the Prime Minister has applied to the CPF retuning and also generally pleased with the good dose of pain reliever prescribed by DPM Lee. It seems that the Cabinet has taken note of the anxieties at the ground when the subject of CPF retuning was first broached and offered a finely balanced policy package. While some analysts have expressed disappointment that the changes do not go far enough to cut costs and bring in or, at least, retain investments and jobs, the social dimensions of the CPF retuning must not be forgotten.

Before commenting on the details of the CPF changes and the aid package, I would like to comment more broadly on our wage cost. After all, an uncompetitive wage structure has been identified by the Government as the key reason for the current changes to the CPF system.

Mr Deputy Speaker, Sir, complaints by local and foreign businesses of our high cost of doing business have been bandied around for some time now. As DPM Lee reminded us, back in 1985, CPF rates were seen as one of the main culprits for our economic predicament then. Eighteen years on, the Government has again named it as a major source of our economic woes.

DPM Tan recently brought to attention a PERC report dated 2nd July 2003 on "Comparing Business Costs in Asia". In this report, Singapore is not only perceived to rank as the fourth highest labour cost country among the expatriates surveyed, its labour cost is also rated higher than those of Australia and US, which is the largest and strongest economy in the world. To quote DPM Tan, ". When according to PERC's calculations, it is more expensive to hire a worker in Singapore as compared to hiring a similar worker in the US, or Australia, we have a major economic problem."

Given PERC's high standing in international circles, I have no reason to doubt that their conclusions would likely bear up to MOM's scrutiny. But, for this very reason, Mr Deputy Speaker, Sir, I am deeply troubled by this latest revelation. This is so even though Minister Lim Boon Heng has clarified in his speech on 29th August that, according to the IMD's World Competitiveness Yearbook 2003, it is in specific managerial, executive and professional jobs in engineering and human resource, etc, and not manufacturing itself where the Singaporean worker's wages are comparable to first world levels, but without the corresponding levels of productivity.

The question troubling me, and I am sure many others, is: does the Government not keep close track of our labour costs in comparison with those of our international competitors in order to ensure that we do not price ourselves out of the market? To reiterate, was not high labour cost one of the chief causes of our recession in 1985/1986? To quote Prime Minister Goh in 1986, when he was then First Deputy Prime Minister, he had said during the debate on the Presidential Address regarding a cut in the CPF contribution that ". When confronted with the sobering thought that our wage costs are so high that we are going to lose our international competitiveness, we have no choice but to thaw our position." The position then DPM Goh was referring was the sacred cow of our high CPF contribution rates. Sir, history seems to have come one full circle.

How is it that we have now, 18 years later, come to this belated conclusion that CPF is the same culprit causing mischief, so much so that we need again to take such drastic measures as to cut CPF rates? Sir, I appreciate DPM Lee's explanation as to how events unfolded so quickly and unexpectedly that the Government had to agonise over the decision for two months, and led to a major rethink. Nonetheless, Sir, I believe that wages and wage levels do not change overnight and the levels we are at today not only reflect the good economic conditions of the past but also the consequences of previous actions and policies.

Sir, I and, no doubt, many other Singaporeans would like to know how the Government keeps track or intends to keep track of Singapore's labour costs to ensure that these are not out of sync with our competitors. Does not the National Wages Council also have such information? How else would it make recommendations about wages if the Council does not have access to such information? This is especially important in Singapore as, over the years, the pervasive civil service and statutory boards' pay structure has become the barometer of wage levels for the private sector. The private sector has to compete with the public sector for employees and can only attract the best talent, all else being equal, if they pay comparable salaries.

Going forward, Sir, I urge the Government to keep a close watch on our wage and other costs to ensure that Singapore remains competitive, if this is not already being done. Better still, MOM can publish this information for our workers at different levels and in key sectors (as some HR and recruitment agencies do and as what MOH plans to do for health costs) so that they are aware of how we fare against the competition. In supplying such information periodically, MOM would be able to moderate the unions' and workers' salary expectations. We can then avoid having to jam our brakes suddenly again in future and throw everyone else off balance.

Now, I will comment briefly on three points related to implications and concerns of CPF changes and the relief package. Firstly, the floating CPF rate. Using the CPF as a macro-economic cost cutting tool is not new, as this was first done in the 1985/1986 recession and then, again, in 1999. What is different this time is that the Government has decided that the CPF rate would be a range, instead of a single target rate. Although it gives rise to uncertainties, I concur that this is a good strategy as it gives more flexibility to our overall wage system. After all, the mantra for success in this era of shifting global competition, fraught with uncertainties, must be "Flexibility, Flexibility and more Flexibility" - agility and deftness to adjust to the rapidly changing circumstances.

In the past, analysts, economists and businessmen have commented that the CPF rate cuts lagged behind the broader economy. For instance, by the time the CPF cut was implemented in 1986, the US economy was already in recovery mode. This again happened in 1999. Analysts noted that the market recovery had already started way before the CPF cut was announced in 1998. Of course, I believe that the Government should never rush into such changes, given the many and complex linkages between CPF and the major social needs of the population, like housing, healthcare and retirement. Any tinkering will have ramifications on all of these, in ways we may be unable to foresee.

But notwithstanding this, it is vital that future adjustments, which PM has noted, will only be made when necessary, should be made as timely as possible, and in this regard, inputs from the private sector, who are closer to the ground, would be helpful. Like my parliamentary colleague, Mr Inderjit Singh, I urge the Government to pay heed to private sector feedback and not do so only when a crisis occurs.

Hence, in view of this, I would propose that the Government look at having a panel comprising mostly private sector businessmen and economists to review the CPF rates on a periodic basis so that it can more accurately and in a more timely fashion determine the need for any rate change. The CPF Advisory Council can then make the appropriate recommendations to the Government for consideration, much like what the NWC does.

My second point relates to the aggrieved middle aged, middle income workers. Sir, as my parliamentary colleagues before me, Mdm Ho and Mr Sin Boon Ann, have noted, the aid package announced by DPM Lee, in terms of utilities rebate, public transport funds, etc, would soothe the pain of the lower income earners and unemployed. Businesses, particularly those in the construction, tourism and transport sectors and SMEs, in general, will also welcome the reprieve. But the group that will have to bear the brunt of the CPF cuts are the middle aged, middle income earners, particularly those aged 50 years and above.

This is the baby boomer generation who have lived through the tumultuous 50s and 60s, and who perhaps have contributed the most to the economic progress we have enjoyed. But this is also the group who will see their CPF contribution rates fall from 33% to 27% in 2006 with the possibility of falling even further to 24%. They are also likely to be the ones with the heaviest financial commitments - school-going children, some in tertiary institutions, housing mortgage commitments, car loans and ageing parents taking a bigger and bigger chunk of their monthly budgets, and eating into their own Medisave accounts. Many could be living in 5-room HDB or private properties and are thus unlikely to have benefited, if any, from the utilities rebate, GST top-up or New Singapore Shares. Many of them are probably white collar workers who are also subjected to increasingly higher risk of retrenchment if they have not already been retrenched.

This is small wonder why a recent Straits Times survey found that the older Singaporeans aged 45 years and above are least confident about the future of Singapore. In fact, of late, they are quite a disillusioned lot, judging from the feedback from my residents and friends who are in this age group and income level. As a recent feedback session participant lamented, "Becoming old is becoming a sin in Singapore!" Thoughts of migrating also seem to be most acutely felt by this group of Singaporeans. With the proceeds from selling their assets, they are able to migrate to countries, such as Australia and New Zealand, which have a lower cost of living. In fact, I personally know of two of my grassroots volunteers whose wives and children are living in Australia with no thoughts of returning, and at least three friends who have recently migrated to New Zealand. All of them are in the age 45 years and above category and are professionals.

Sir, I am pleased that DPM Lee has announced that older workers will get extra when the Government gives back surpluses to the people in the future. This is what I raised in my Budget speech regarding the ERC's proposed CPF changes in July 2002 that older workers be given special treatment in the next wealth sharing exercise.

While this would go some way to mitigate their anguish and sense of betrayal many middle-aged, middle-income earners are feeling, more tangible and immediate measures should be considered to address their concerns, help them cope and lift their spirits. After all, the proportion of workers in the 50 to 59 years age group, which has been increasing over the years from 9.3% in 1991 to 14.5% in 2002, is set to increase further as our population ages. This, coupled with the fact that, as at the end of 2002, professionals, managerial, executive and technical staff comprise approximately 42% of the total workforce, implies that there is a sizeable middle aged, middle class workers category who is bearing the brunt of the recent wage cut, retrenchment and CPF cut regime.

The older worker phenomenon is here to stay, both as a demographic reality, and as more and more Singaporeans are compelled to work beyond 55 to support their own retirement. As analysts have rightly pointed out, while CPF cuts hurt every Singaporean directly, the relief package is targeted, comes with strings attached and may not benefit all.

This leads me to my next and final point, that is, lowering costs. For the middle aged, middle income workers, what would be a more concrete and effective relief would be to try and lower the cost of living to offset the fall in income they are currently facing. Reducing the cost of living is a point which many of my parliamentary colleagues before me have urged the Government to look into.

According to the latest EIU report, Singapore remains one of the 15th most expensive cities to live in. We are ahead of many highly-regarded cities, like Sydney and Melbourne and even several American cities, like LA and San Francisco as well as Stockholm. Furthermore, there are genuine worries that the Government's plan to proceed with the increase in the GST by a further 1% in 2004 may raise the cost of living, and could even be contractionary.

I am comforted that DPM Lee has announced that the Ministry of Finance has launched a civil service-wide Economy Drive to review all discretionary expenditure. Furthermore, the civil service strives to cut waste through a Cut Waste Panel. While these are laudable efforts in response to calls for the Government to do its part to cut fees and charges, to make a real, tangible difference to the people on the ground, these efforts must translate to actual reduction of costs to workers and businesses.

Hence, the Government should, in tandem, also review its fees and charges, such as ERP charges, taxes on cars, licences and even maid levy with a view to realigning them to what would now be tantamount to a lower wage regime. This would go some way to lowering our cost of living and doing business, which would benefit all.

To illustrate, the current maid levy was set during a period of strong wage growth. Since the CPF cut is de facto a wage cut, the maid levy could be cut in tandem, even though we all understand the aim of the levy was to employ a market mechanism to regulate the foreign maid population with its attendant social problems.

Another example would be for the Government to further review its vehicle ownership policy. For instance, one of my grassroots recently told me that now only businesses are allowed to buy panel vans. He says that this is against the move to encourage entrepreneurship. This is because whilst registering a company is relatively inexpensive, it is all the attendant additional regulations and compliance costs that come with registering a company that pose a hindrance.

Sir, I realise that there are major fiscal implications if many statutory charges, such as maid levy, etc, are reduced, and this could well worsen the budget deficit, but following the principle of equal misery, this might well be the price the Government has to pay in order to signal its empathy with the people.

Sir, some of the measures announced go even beyond the ERC recommendations which were only released about a year ago. The mantra then was "re-focusing" the CPF. Now, it is "retuning". What is evident though is that the CPF is destined to remain a major plank of Singapore's social as well as economic policy, a sacred cow slaughtered, but also resurrected in a slightly modified form.

That some austerity is called for now will inflict pain on the population and even a sense of betrayal on the part of workers, especially the middle aged and middle income workers, although I must add, a sense of relief as well that the cut in the CPF rate was not as much as feared.

Sir, while I fully support these changes which the Prime Minister has announced in order to restore our competitiveness, I urge the Government to exercise great compassion and understanding, and to be sensitive to the people's concern and feedback. I note that this is precisely what has been attempted both by the announcement itself as well as the help package DPM Lee has put to this House.

Sir, I therefore support the changes. 6.15 pm

Dr Lily Neo (Jalan Besar): Mr Deputy Speaker, Sir, I would like this House to revisit the policy set out in 1994 on "asset worth" and "asset enhancement" with regard to "encouragement of home ownership for Singaporeans". At that time, the emphasis was on enhancing the assets of Singaporeans, increasing their commitment as Singaporeans and seeking their support for the political, economic and social systems which make owning these assets possible. Today, however, it would seem that Singaporeans will support policies on the basis of security of their jobs and on whether the Government that they have voted for will give them peace of mind concerning their present and future livelihood, not on whether they can own their homes quickly or whether they can upgrade to bigger homes.

Today, 92% of Singaporeans already own their HDB flats, and Singapore is tops in the world in terms of home ownership percentage. In the early 1990s, Singapore's growth rates were often more than 9%. This phenomenon has passed and the expected growth rates for Singapore will be much lower in the years to come. It would therefore seem that the 1994 policy needs to be moderated, especially for young couples.

Notwithstanding DPM Lee's announcement last week that encouraging home ownership remains a fundamental objective of the Government's Public Housing Policy and a key purpose of the CPF, I feel that retuning this policy will be timely under our present circumstances. I am suggesting that Singaporeans give up this dream of ownership mentioned earlier by the Acting Minister for Manpower, but I am saying that there is no hurry.

It is timely for us to look at the following issues as examples where we should adjust according to our present needs in addition to what had been announced earlier today by the Minister for National Development.

Young couples should be able to have the choice of rental flats rather than buying new flats. Less commitment in the early days of joining the workforce means greater flexibility in the ability to adapt to the working environment, which can be very fluid in these times of a globalised economy. They are also less bound by commitments and, therefore, are able to take more risks, should they want to venture out on their own. This augurs well, especially amongst our young, for our strive towards being a more entrepreneurial nation. It has been argued that HDB rental flats are very heavily subsidised, and are meant only for those who are in dire need. Those in difficulty should continue to be subsidised heavily through means testing. Flats catering to the needs of young families should be made available for rental, so that they have that choice of renting HDB flats until such time when they are more sure-footed with their commitments. Presently, there are only about 60,000 rental flats available, and there is a long waiting period for an allocation. It would be good if more HDB flats are built to cater to the rental needs of young couples. Moreover, the choice of starting a family should be encouraged, and this priority for young couples should be assisted.

Some Singaporeans may have to downgrade now because they are unable to meet the monthly instalments resulting from a reduction in CPF, pay cuts or uncertainty of job prospects. More than 5,000 families moved to smaller flats in 2002, a 23% jump from 2001. This trend is unlikely to ease soon when the economic growth forecast for this year has been slashed to between 0% and 1%. The granting of HDB loans to downgraders is not permissible presently, although the Minister for National Development said earlier that his Ministry would consider on a case-by-case basis for those in great difficulty. I would like to urge for a change in this HDB policy. Those who want to downgrade are being prudent here and should be helped.

Mr Deputy Speaker, Sir, I feel that it is now time to relook and revamp another of our "sacred cows". Sir, I mean our Medisave accounts. In our heavily human resource-dependent economy, our economic health has to go hand in hand with good health of our people. The present Medisave system, where we save and pay as we go, financing for healthcare, is becoming less adequate to serve our needs, especially when our society is fast aging and people are living longer. By retirement age, healthcare costs are expected to be higher. Medisave has a low rate of return within the CPF mechanism and has inadequate real growth to be sufficiently available when needed in old age. We need to make drastic changes here and now for a better tomorrow. Risk pooling in health care finance is a good consideration. Currently, we have individual medical savings accounts (Medisave) with no risk pooling, and a national catastrophic illness insurance scheme (MediShield) which covers prolonged and expensive treatment which does pool risks but minimally. In addition, there is a complex system of co-payments and deductibles, which involves direct out-of-pocket private payments. It is timely to convert savings in the Medisave into more risk pooling insurance schemes with co-payments.

Mr Deputy Speaker, Sir, Japan has achieved the lowest infant mortality rate and the highest life expectancy in the world. Long-term observers of the Japanese healthcare system have concluded that Japan achieved these healthcare outcomes at a comparatively small price: "Japan's healthcare system helps to keep its population healthy at an exceptionally low cost. They rate the Japanese system as excellent in cost control and access, and very good in equality." Universal health insurance coverage has been key in bringing about these results. Japan started its health insurance expansion in 1961. Today, Japan's healthcare system has universal health insurance coverage that covers the entire population.

The World Health Organisation defines risk pooling as "the practice of bringing several risks together for insurance purposes in order to balance the consequences of the realisation of each individual." Risk pooling is the health system function, whereby collected health revenues are transferred to purchasing organisations. Pooling ensures that the risk related to financing health interventions is borne by all the members of the pool, and not by each contributor individually. Its main purpose is to share the financial risks associated with health interventions, for which there is uncertain need. Risk pooling is required because of the large uncertainty in the magnitude and timing of an individual's healthcare expenditure needs. It implies the redistributive functions from the healthy to the sick, and from the productive to the unproductive stage of the life cycle. The arguments in favour of risk pooling in healthcare reflect equity and efficiency considerations.

The World Health Report 2000 puts emphasis on the role of government in terms of "stewardship" of the health sector. According to this report, this attractive vision of a far-sighted and public-spirited regulatory capacity is hard to envisage in the absence of a strong risk-pooling function, which is a necessary one for a wider range of health service functions that we associate with developed health systems, such as rising health expenditure, demographic change and technical innovation.

Sir, the role of preventive care and keeping healthy cannot be over emphasised in any healthcare issues. In our health insurance expansion planning therefore some incentives should be incorporated to rally Singaporeans towards keeping fit and healthy.

The other issue in health insurance expansion is to also ensure coverage for Singaporeans when they are in dire need, such as when they are without jobs and in between jobs, in view of our present and future trends of unemployment.

The two key features of Japanese healthcare financing are:

Firstly, universal coverage that is achieved through a multi-tiered insurance system with varying degrees of subsidisation according to the perceived economic vulnerability on the part of the population insured; and

Secondly, on the provider payment side, healthcare financing in Japan is characterised by reimbursement according to a nationally uniform fee schedule.

It is the combination of universal coverage with strict enforcement of the uniform fee schedule - preventing balance billing, etc - that has been critical in avoiding some of the problems of cost inflation observed in other countries. The Japanese experience thus indicates that the main risks in healthcare insurance, "incomplete coverage of the population and rising costs", may be manageable.

Sir, I would like to conclude that good health insurance expansion encompasses a national coverage involving the entire population with dependable coverage year after year, and stable premiums and benefits. We should, therefore, explore ways to achieve these objectives.

I beseech Prime Minister Goh and Deputy Prime Minister Lee to set on this path of embarking on health insurance expansion.

Mr Gan Kim Yong (Holland-Bukit Panjang): (In Mandarin): Mr Deputy Speaker, Sir, thank you for allowing me to speak on the "Retuning of CPF Rates".

Firstly, the Government has decided to lower the employer's CPF contribution rate by 3%. I believe many Singaporeans would feel a sense of relief because this is lower than the expected 6% cut. However, some employers may be disappointed.

The issue is whether the 3% reduction is sufficient. This is like taking antibiotics. If you need a dosage of 6 ml, but you take only 3 ml, it is not going to work. Whether the 3% reduction is sufficient is really dependent on what the objective of the adjustment is. If it is just to ease the burden of the businesses so that they can stay afloat, then the 3% is certainly helpful. However, if the adjustment is to fundamentally enhance our national competitiveness, then the answer may not be that obvious. In fact, this may not be a question of numbers after all.

Let me elaborate. First, even with the CPF adjustment, our wage system remains rigid. Perhaps, we can take this opportunity to push ahead with fundamental changes in our wage structure. Since our people are psychologically prepared for the 6% adjustment and the actual reduction is only 3%, is it possible for us to transfer the other 3% to the Monthly Variable Component (MVC)? In that way, we can give MVC a headstart.

Secondly, the Prime Minister announced that the long-term target for our CPF contribution rates should be between 30% and 36%. By giving it a range rather than a fixed rate will undoubtedly give the Government more flexibility. However, this will lead to uncertainty. People will be concerned that the Government may adjust the CPF rates from time to time. It would therefore be difficult for the people and the businessmen to make financial planning. For example, when the economy picks up, some employers might not be willing to raise the salaries of their employees for fear that the Government may raise the CPF contribution rate later. I think it may be better if we can set a more definite CPF rate, and allow the businesses and the people to make their own adjustments.

Thirdly, some employers are concerned that this 3% cut may not be effective. Compared to labour cost in the developing countries, this 3% seems to be insignificant. Obviously, we cannot compare our wage cost with that of China and India. In fact, be it 3% or 6%, it is not going to bring our wage cost anywhere near that of these countries. The issue is not about the quantum of the adjustment. In fact, we should not look at these countries as our competitors but as strategic partners. While they compete with us, they also offer us new opportunities. Therefore, I feel that we should have a comprehensive strategy, not just to lower our business cost, but also to enhance our macro-economic environment. We must build a strategic network with these economies so that we can play a significant role in their economic growth. I believe it is necessary for the Government to explain this strategy to the public, so that the people will have more confidence in the Government and will not lose heart.

Now, let me move on to the relief package. The $1 billion relief package announced by DPM Lee last week was most reassuring. It is an indication that the Government is aware of the difficulties faced by the people, and that it is willing to extend a helping hand whenever necessary. I would like to highlight three areas for the Government to look into.

First, education. Many low-income families may have difficulties meeting the cost of their children's education. Other than the school fees, other expenses such as books, miscellaneous fees, school bus, uniforms, etc, can be quite costly too. I hope that the Government would consider providing schools with more bursaries or welfare funds, and make appropriate adjustment to the qualifying criteria for such subsidies.

Secondly, I believe that the adjustment to the CPF contribution rate will also result in some savings to the Government. I hope that the Government can pass on some of these savings to the people through reduction in tax rates and fees. DPM Lee has confirmed that the GST will go up as scheduled next year. Although we are somewhat disappointed, we can understand the Government's position. However, we hope that the Government will consider lowering some of its charges, such as the conservancy and service charges for the HDB flats, so as to send a signal to the people that the Government is willing and prepared to share weal and woe, joys and sorrows, with the people.

Thirdly, I am glad to see that the Government has proposed a $600 million package to pump-prime the domestic economy, specifically for smaller-scale projects, so that our local contractors would have the opportunity to participate. What I am worried is that many local contractors are already financially stretched. They may need more time to prepare the tender documents and raise financing. Some may even have to be restructured first. I hope that the relevant departments will take these problems into consideration, when they call for tender.

Now, with the lowering of our wage cost, we have no choice but to bring down our standard of living and our expectations. As we adjust, we must be prepared that there will not be without pain.

Let me conclude my speech with 3Cs. First of all, we must have "Confidence". Our battle against SARS has strengthened the confidence and bonding between the people and the Government. I believe that Singaporeans now have greater confidence in the Government's judgement and decision-making. Only when we have confidence in the future, will we have the courage to face the challenges ahead.

The second C is "Commitment". We must be committed to implementing strategic measures. To endure a short pain is far better than to suffer a long agony. We must act fast to reform our wage structure and to turn our economy around.

The third C is "Common goal". In order to effectively resolve our economic crisis, we must stay united as one people and one nation with a common goal and move towards a common direction. If we have the confidence, commitment and a common goal, we will be able to bring our economy back on the road to recovery, create more job opportunities and bring back prosperity. Then, we can all truly feel relieved.

Dr Teo Ho Pin (Holland-Bukit Panjang): Mr Deputy Speaker, Sir, I support the CPF changes as proposed by the Prime Minister. These changes are indeed drastic, but are necessary to prepare Singapore for its future challenges. Faced with increased competition and a fast ageing population, the proposed CPF changes will provide an impetus to sustain economic growth in Singapore.

The CPF changes and relief measures sent out three clear signals to boost the confidence of our potential investors, our existing businesses and our people. To the potential investors, it shows that our Government is always prepared to take tough measures to keep our business costs competitive. This will attract more investments, thus creating more jobs for Singaporeans. To the existing businesses, the three-point CPF cut will provide an essential lifeline for businesses to improve their capabilities to sustain their businesses. This will save jobs and allow businesses to source for more business opportunities.

As for Singaporeans, the changes will boost their confidence in terms of better job security and more job opportunities. At the same time, it sends a clear signal to all Singaporeans that we must save more for our retirement, and be more prudent in our financial planning.

Sir, Singaporeans understand and support these CPF changes, although it means a reduction of their CPF savings. These are painful measures which affect their quality of life. But Singaporeans are confident that the Government will lead them out of the present unemployment situation. With lesser CPF savings, I hope the Government can do more to help Singaporeans "stretch the dollar value of their CPF savings". In this regard, I would like to suggest three areas where the Government can help Singaporeans.

First, CPF for housing. Sir, to overcome the situation of Singaporeans being "asset rich but cash poor" upon retirement, we need to review the HDB housing policies. These include the development policy for different flat types, pricing formula for new flats, debarment periods for those who sold their flats, and also the rental flat policy. We must provide more housing options for retirees to liquidate their assets and cash out their savings for retirement. We must give retirees more options to either own a smaller flat or rent a flat at affordable prices upon retirement.

The relaxation of HDB rental policy to allow those who own their flats for 15 years to rent their flats is a welcome move. But with the present string of restrictions by HDB, it may not be easy for these flat owners to find cheaper alternative accommodation if they were to rent their flats. As such, only a small fraction of the 250,000 flat owners will be able to benefit from this relief measure.

Sir, we must also review the affordability criteria and pricing formula of HDB flats. The pricing of HDB flats should not be on the basis that 90% of Singaporeans could afford a 3-room flat. HDB has stopped building 3-room flats since the 1980s. As such, I do not know what is the price of a 3-room flat, which the formula adopts to work out the affordability index.

Since HDB flats are liberalised, we should adopt a market pricing mechanism whereby HDB flats are priced not according to affordability, but on market prices with Government subsidy. For example, a new 100 square metre 4-room HDB flat with a 99-year lease can be priced close to a private apartment without condominium facilities of the same size based on its location, design and floor height. Thereafter, the net sale price shall be determined after deducting the market price with a prescribed Government subsidy for 4-room flats. This would better reflect the Government subsidy and the market value of new HDB flats.

With a growing ageing population, it is crucial for the Government to plan and provide more housing options for the elderly. Elderly couples with grown-up children prefer to live near their children, but may not be able to purchase a 4- or 5-room flat based on market prices. Today, the 4- and 5-room housing mix, especially in our new towns, does not facilitate elderly couples to stay near their children. Thus, I would urge the Government to consider developing a better housing mix of different flat types (1, 2 or 3 bedroom flats) as in private condominiums to offer more housing options for Singaporeans.

To help retirees to liquidate their assets, HDB should explore reverse mortgage schemes. It should also provide more rental housing flats for the elderly.

With lesser CPF savings, young couples may take a longer time to save for their HDB flats, especially if they face certain periods of unemployment. In order to encourage more young Singaporeans to form families earlier, HDB should reduce the downpayment for new flats for first-time applicants. This is especially so for 4-room flats which are within the means of the working class Singaporeans.

Second, CPF for healthcare. Sir, I fully support the efforts by the Health Minister to lower health costs in Singapore. Many Singaporeans, especially the heartlanders, are indeed concerned about healthcare costs. The risk of individuals or family members depleting their Medisave accounts is high if one of their family members falls critically ill. The safety net for medical expenses is presently inadequate.

We need to keep medical costs affordable and encourage more Singaporeans to save for their medical needs, as they grow older. Sir, I support the adjustment of the Medisave Minimum Sum of $25,000 to cope with the inflation of health costs. I would suggest that the Government should develop an inflation index to measure and monitor health costs and healthcare expenditures of Singaporeans closely.

The Health Ministry should also adopt a holistic approach to promote healthy lifestyle among Singaporeans more aggressively. We should provide more facilities or avenues for Singaporeans to keep fit. In this regard, I hope the Government would accelerate the development of park connectors, upgrading of sports complexes and provide more support to encourage grassroots organisations to organise more keep fit activities, such as brisk walking, tai-chi, qigong or silat for Singaporeans.

Third, CPF for retirement. To many working class Singaporeans, the CPF saving is probably their only saving for retirement. Singaporeans earning less than $2,000 will not be able to save much if they need to pay for their housing, medical care and support their children. As such, the Government should help Singaporeans to increase the returns of their CPF savings. The CPF Board should adopt clear performance benchmarks and invest in a wider portfolio of investments to maximise the returns of its funds. The returns to CPF savings should also be based on a formula, which is regularly updated, so that CPF members can benefit more from their savings.

Sir, based on the CDC's experience in helping Singaporeans to find jobs, we find that three groups of job-seekers have much difficulty in finding jobs. They are: (1) Singaporeans who are medically unfit or require regular medical treatment, such as kidney dialysis treatment; (2) those suffering from mental illness; and (3) those with criminal records. I would urge the Government to do more to help these people to make a decent living. The Work Assistance Programme may not help these Singaporeans to secure jobs as employers are not keen to employ them. I hope the Government can consider creating some jobs to help these Singaporeans.

One area which the Government can create jobs, and at the same time improve its customer services, is to remove the automated telephone system for all public agencies and the Ministries. These automated telephone systems are often inaccessible or engaged at all times. To promote excellence in public services, the Government should consider training Singaporeans to be customer service officers, manning these frontline operations, at least during office hours. This would not only create jobs but also improve the image of Government agencies. It will also enable many people to make enquiries through the phone instead of wasting time to come down to the various Government agencies.

Sir, I support the CPF changes.

Mr Deputy Speaker: I intend to stop here. Mr Wong.