RETUNING THE CPF

[Mr Speaker in the Chair]

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

Question again proposed.

Miss Penny Low (Pasir Ris-Punggol): Mr Speaker, Sir, I concur with the Prime Minister's statement on the urgency to transform our wage and CPF systems so that we can save jobs, so that Singapore can continue to shine on the world stage, and Singaporeans can enjoy the desired standard of living. But it appears to me that the CPF is like the Singapore version of a Swiss knife. It is multi-purpose and has a sharp blade. A 3% cut in CPF cuts like a knife for the workers, but may not be magical enough for businesses. Most of all, a CPF cut in itself will not be sufficient to give us the competitive edge. In fact, businesses do not look at wage cost alone to determine where to do business. They will study the costs and rewards through the four factors of production, being land, labour, capital and entrepreneurship, as well as the ease of doing business and even the quality of life in Singapore. In other words, it has to be a holistic look at our competitiveness, and not just wage cost alone. Hence, the slew of initiatives unveiled by DPM Lee on Friday, if anything, is a signal to the world at large that we are prepared to bite the bullet and push on. But the question remains: how far and how effective will these measures be?

In the past year or so, I visited many SMEs and trade associations to hear their cries. Four buckets of tears were quickly filled up. The four buckets are SME financing, rental cost, jobs and job applicants, and red tapes and bureaucracy. Much has been said about these four buckets of cries in previous debates, and I would choose to focus on the last, being red tapes and bureaucracy.

As such, I am delighted at the setting up of the Cut Waste Panel announced by DPM. I applaud the setting up of such a brilliant committee and I would like to quote a few instances where rigidities and procedures hinder businesses. I spoke with a Mr Renaud Semerdjian, General Manager of Clear Channel (Singapore) Pte Ltd. Clear Channel is a Fortune 500 company which has invested $100 million in just hardware cost for the bus shelters and taxi stands, and I understand that more investments are on the way. In addition, they are committed to paying LTA $232 million in rental for the entire contract.

Mr Renaud reflected to me that up until August this year, they were receiving as many as 1,583 invoices per month in 1,583 separate letters with 1,583 reply envelopes from Singapore Power. Why? Because they have built, to date, 1,584 bus shelters, and each one of them is individually billed. They spoke with Singapore Power about consolidating their bills so that they can receive one bill for all the bus shelters in a consolidated account, so that he does not have to assign a staff for the purpose of opening envelopes, sticking stamps and sending them back. Unfortunately, Mr Renaud was very disappointed because he had to spend time engaging consultants and lawyers to speak with the relevant people before this decision of not allowing them to have a consolidated billing was reversed. I understand that he got positive news from Singapore Power only on 28th August.

Mr Renaud told me that he was willing to pay six months of the average total bill in advance, just to cut down on the administrative hassles. But what he also highlighted was that if a Fortune 500 company with financial muscles and substantial investment in Singapore has to go through 18 months of negotiations and incur legal fees and huge administrative cost, then what chance has an SME to survive the bureaucracy and the procedures? He also pointed out the opportunity cost forgone for the entire process. The energy could have been more productively used in creating more business opportunities.

Similarly, I was told by some representatives from the Singapore Food Manufacturers' Association that some of them experienced having to apply for separate certificates for their export to various countries, in particular, the agriculture and fishery exports to the EU. I understand that EU does have some requirements but was told that the certificates issued by a neighbouring country exporting to the EU has a much more efficient process and allows many items to be listed within the one certificate. I also understand that the cost of such a certificate is about four times that issued by other countries. They hope that the Government can look into some ways to help them smoothen this process and reduce the cost.

Next, I have come across some statistics on our civil service sector. Perhaps it is time for us to also take a look at cutting waste within the civil service sector. From the year 1992 to 2001, I noticed that there has been an almost 100% increase in the Division I officers over the last 10 years. In fact, out of the four Divisions of our civil service, Division I officers make up about 40.6% and Division II officers 29.9%, which means about 70% of our civil servants are in Divisions I and II, whereas Division III, 22.6% and Division IV only a mere 7%. My sense is that it could be that we have outsourced a lot of the lower ranking jobs, thereby reducing the need for Division III and Division IV officers. Perhaps we have employed more people to think and to plan for us, and perhaps teachers are also included in the Division I officers.

My question is: are we getting too top heavy where there are too many Generals and not enough soldiers? How do the Generals keep in touch with the heartbeat of the heartlanders and ordinary Singaporeans? Most importantly, how has the quality of the civil service improved as they become planners and thinkers, meaning top heavy? I think our people need to know whether our tax dollars are well spent.

Let me now turn my focus back to CPF itself. My hope is that we do not need to revisit the CPF issue again for the purpose of trimming business costs. While the CPF cut may help boost a few businesses, it certainly means a reduction in retirement nest-egg. The purpose of CPF remains that of, first, a retirement nest-egg, then a housing fund and a medical fund. With the proposed fine-tuning, Singaporeans will be saving less for their nest-egg through CPF. They are encouraged to do more through self-help, such as financial planning. I think, like entrepreneurship, Singaporeans would benefit from the Government's help to boost consumer financial literacy. I have spoken on this topic many times. I shall not repeat too much. But I would like to point out that even Mr Low Thia Khiang did not appear to understand the concept of financial planning, and he linked it to fixing long-term CPF rates so that there is certainty in planning.

I would like to point out that financial planning is necessary precisely because there is uncertainty in life. In fact, the purpose of financial planning is to help people realise their financial goals. And because goals are unlimited, whereas resources are limited, therein lies the need for optimum planning. And because each route to achieving one's goal is not a smooth one, therefore you need to build into the plan shock absorbers and do periodic plan reviews to factor in personal changes, career changes, family changes, economic changes and unforeseen circumstances. Any good planner worth his salt would advocate the use of a slightly more conservative assumption and the establishment of an emergency fund to take care of events like job loss or emergency use of cash, which is why I support the Prime Minister's statement and advocate using a band for flexible CPF contribution.

Mr Low also mentioned that the changes affect many Singaporeans' financial plans. He is only partially right. The truth is most people do not even have a deliberate plan to start with and, therefore, the urgent need to educate Singaporeans to help them to become self-reliant. In addition, I also hope that Mr Low realises that unless there is inheritance money or long-term financial contributions from friends and relatives, a person cannot even start planning because, basically, if there is no job, there will be no money, and there will be no meaningful plan. And this is why the emphasis is on cutting business cost, so that the existing businesses will stay and more investments can flow in to help job creation. Let me reiterate that only when there are jobs can there be meaningful financial plans.

In addition, Mr Speaker, Sir, with the cut, I am also concerned about the viability of some workers in continuing with some of their own initiatives that they have already started. In the past, when the CPF was liberalised, many workers invested their money into financial products like annual premium endowment policies. These are saving plans that require members to pay their annual premiums through their CPF Ordinary Account. The objective is to realise a sizable lump sum from their policies at retirement. These efforts should be applauded. However, with the cut, they may default on their annual premiums because of fewer dollars going into their CPF accounts. If they stop paying, they may suffer a substantial loss on these policies. I would like to point out that these members have prudently set aside the money systematically on an annual basis because of our encouragement. They have planned for their retirement proactively and I think we owe it to them to help them to fulfil some of their payments. As such, I advocate that we allow the use of their CPF Special Account to top up the differences if they are caught in a bind. This would mitigate their losses and, at the same time, allow them to achieve their retirement goals and objectives.

In addition, many articles have been written about the impact of the CPF cut. In today's Straits Times, Ernst & Young had a report about the group of 50 years old and above being the most critically affected. This group of people will have less tax sheltered dollars and increased tax liability. My sense is that we do have a vehicle in place that could help them, that being the Supplementary Retirement Scheme (SRS). The SRS is a deferred tax shelter. Unfortunately, under the current regime, it is not an attractive instrument. Hence, I hope that the relevant authorities would relook at the Supplementary Retirement Scheme and fine-tune it, to incentivise people to invest into this scheme to beef up their retirement dollars.

Next, on the housing fund and the use of Special Account to top up for any differences. I am heartened to hear that there will be a change of rules to help people keep the roof over their head. However, I am mindful of the implementation blues. Here, I would like to quote a case of my Punggol North resident, Mr Ang Tock Chye. Mr Ang lost his job where he commanded a salary of about $1,800 in the past. Today, he works in a supermarket, taking home about $800 to feed his family, working from 10.00 am to 10.00 pm, six days a week. Because of the reduction in salary, he could not pay his mortgage loan. What he did was to write to HDB asking to use his Special Account to pay his instalments. However, he was told that he had purchased his home after the CPF cut in 1999, which meant that the CPF cut in 1999 would already have been factored into the mortgage loan calculation. As such, he was not eligible for the use of his Special Account to repay the loan. In addition, he was greeted with another letter from HDB titled, "Late payment of charges of mortgage loan instalment".

I think this is where the implementation blues could set in. I believe that HDB has a heart to help, but it has to do more to ensure that its implementation meets its policy intention.

Yesterday, the Minister for National Development also mentioned that the additional 0.1% charge (being the difference between cost of fund and HDB subsidised loan rate) for the loans issued under HDB is to cover administrative cost. I understand that the total mortgage loan outstanding is $64 billion. At 0.1% per annum, it means that the interest cost is $64 million per annum. My question is: is that a reasonable sum to cover the yearly administrative cost? Obviously, I would like HDB to verify the above figures and also explain why it takes $64 million per annum to administer the loans.

Last but not least, going back to the final objective of CPF, which is that of setting up a medical fund, there is a need for more insurance schemes to be allowed under Medisave. The current MediShield policies and long-term disability policies are not adequate to address the range of medical needs, especially if people are to live to 100 years old. It will be almost impossible for hard cash savings to catch up with the cost of medical needs, given inflation and rising needs. Hence, a good way to pass on the cost would be the pooling of risks via insurance. I advocate a more diversified menu of plans carefully selected by the Government to augment these long-term needs.

Mr Speaker, Sir, indeed the CPF cut is a bitter medicine, but it is a necessary though painful bitter medicine. My sense is Singapore can only continue to be competitive if the people, the private sector and the Government stay together, and stay as one. My sense is the music has not died. It has perhaps become much more sombre than before. But if the three `Ps' - which is the people, public and private sector - could stay together, ie, whenever we hear someone singing to the Beatle's tunes of "Help! I need someone", that they are not so self-assured these days, I hope we could, whether as individuals or as Members of Parliament or the Government, respond with John Lennon's "Stand by me", so that Singapore can continue to compose and churn out our own music, and let the lion's roar we hear be alive and strong.

Mr R. Ravindran (Marine Parade): Sir, the retuning of the CPF was a landmark decision. Unlike past changes which primarily affected the contribution rates, the present changes touch on withdrawal amounts, the contribution quantum and how much will be channelled into the Special Account. I must commend the Government for its brevity and honesty in addressing our short-term and long-term problems openly and rationally.

The people's reaction is mixed. Employers are naturally happy and wish they have more. Employees are worried as they have to reorganise their finances and cut back their consumption. I have received feedback from the public and my grassroots leaders and I do hope that the Government can address the issues raised.

The first one is on wage policy. It is clear that we have a rigid wage structure in Singapore which becomes particularly acute during recessions when wages do not adjust downwards fast enough. While the National Wages Council has been pushing for the AVC and MVC for the past few years, there are few takers in the unionised sector and even fewer in the non-unionised sector. In fact, MNCs and other businesses find it cumbersome to implement them. A one-size-fits-all national wage policy may not be suitable for our economy which is facing structural problems. Is it the right time to let go of the NWC and instead leave it to employers, unions and employees to work out wage matters? This may be a better approach to wage matters than the Government using a blunt tool, like the CPF, to macro manage the economy at the workers' expense. Is it the right time to explore whether we could arrive at a laissez-faire model, which is more nimble, responsive and adaptable to our fast changing economic environment?

The second issue is on whether it is the right time to make the CPF changes. With the prospect of the economy recovering in the second half of the year, many have asked whether this is the right time to retune the CPF, particularly the CPF contribution rates. The reality on the ground is that many companies and firms have already cut the salaries of workers over the past few years because of deteriorating economic condition. Some are already working alternate days. The wage market was working its own equilibrium and determining Singapore's competitiveness. The latest CPF cuts are a further cut of workers' salaries. The jobs that have left Singapore left solely not due to wages. Some of the technologies have become obsolete. Some wanted to be close to their MNC customers. Some wanted to be in growing markets. Some are not convinced that the small cut in CPF will help keep some of the jobs from migrating to cheaper labour cost centres.

I am of the view that the Government's decision to cap the future CPF employer's contribution at a maximum of 16% is a strong signal that we intend to cap wage and business costs, and that it will certainly help the companies to consider staying here. But as to whether it will help save costs or businesses to stay here, I am not convinced. Perhaps the Government could have provided a better case with more detailed studies rather than tell this House that they rely on gut feel.

Sir, the third point is on unions. I am truly impressed by the way our unionists have come out to support the CPF cuts as measures needed to save jobs and create new jobs. My sense is that some workers are questioning the relevance of unions in an era where employers hire and fire at will. These are tough times for our union leaders. I support them for being frank and discussing the problems with their workers openly. But I would like to remind our union leaders that just as they support the Government on these CPF cuts, they have an equally important job in getting the best for the workers when the economy recovers. I would like to call upon our unions to be equally fervent and demand appropriate wages and bonuses when the economy recovers, and not let employers off lightly when they make good profits. It is important that unionists be seen to be championing workers' rights and fair demands in good times in as much as they call on workers to make sacrifices during bad times. Workers are very discerning, and how unions represent them will determine the future of unionism in Singapore. I sincerely hope that our unions will get the best deal for our workers when the economy turn-around comes about.

Fourthly, Singapore companies. Sir, I would like to urge Singapore companies locating overseas or starting businesses overseas to see how they can provide employment for Singaporeans. My message to them is: do not all of you abandon our Singapore workers. Many of our workers have worked many years in Singapore and have valuable experience. I am confident that they can help pass on some of their skills and experience to foreign staff. I would like to appeal to these companies to bring along some of these workers with them and, in the process, help reduce unemployment in Singapore. In doing this National Service, I am confident it will exemplify these companies as good corporate citizens.

Fifthly, brain drain. Sir, I would like to ask the Government as to whether making Singapore a low wage cost centre might make Singapore inadvertently a less attractive place to work for expatriates and, hence, drive them elsewhere. In the long run, I wonder whether even Singaporeans may choose to settle overseas as they may find that the disparity in the wage levels and the cost of living is more manageable in other countries as compared to Singapore. We must ensure that we do not encourage reverse brain drain due to lower wages but high cost of living. This brings me to the main issue of cost of living.

Sir, businesses can easily choose to migrate to cheaper cost centres but, unfortunately, Singaporeans are unable to. Some try to save by going to Johor Baru and Batam for cheaper shopping, but for the more daily expenses they are unable to run away from. I wish the Government could do more to reduce the cost of living for Singapore. While the consumer price index shows that inflation is low, the reality is that costs are arbitrarily raised in Singapore.

Let me give you an example. The SGX raised its fees arbitrarily in Singapore and nobody could object because you either use the SGX or you go somewhere else, because it is a virtual monopoly. We have many GLCs and other businesses that will claim that business conditions are tough and that they are helping their customers. But yet they will report $1 billion profits or $500 million profits when their annual accounts are presented. Perhaps performance-based and profit-based remuneration package is making the management of these organisations ruthless in its pursuit of profits at the expense of ordinary people and businesses. In fact, the joke among professionals is that when we deregulate a particular market, the price of the goods or service goes up contrary to conventional economic theory. We seem to have a market where deregulation means higher prices for consumers.

I sincerely hope that we can set up an Anti-monopoly Commission, something like the Anti-trust Commission in other countries, that can scrutinise all monopolies and oligopolistic market practices and see whether they are colluding or charging unreasonable charges for their goods and services. This commission should also audit many of our Government regulators to see whether they are doing their jobs competently and have the public interest in their decisions, and not always give the excuse that they have to make the public service providers make decent returns on investments.

While I am glad that the DPM highlighted the case of the Land Transport Authority reducing the fees for taxis, I am quite sure more can be done by the Government. I look forward to the Cut Waste Panel being transparent and highlighting cases within Government and statutory boards of wastage and over-charging. These cases will certainly make other organisations take note and work towards doing the same. The inequitable situation in Singapore is that Singaporean workers can take losses in their salary cuts but public service providers can make good profits even in tough times, and this only happens in Singapore. While I am dissatisfied with the market practice of some of the public service providers, I do not have kind words for our own local businessmen who squeeze Singaporeans in these tough times, and I would just highlight an example. I patronised a goreng pisang stall in Pasir Ris housing estate. In the past, they sold three goreng pisang for $1. But suddenly, last month, they sold three goreng pisang of the same size for $1.50. I am not going to the stall again.

There are many businesses in Singapore who are greedy and raise prices arbitrarily. Somehow, my sense is that these price increases are not caught in our Consumer Price Index. In fact, with the confirmation that GST will be raised next January 2004, we can expect businesses to raise prices. I would like to appeal to businesses in Singapore to help their fellow Singaporeans to bring down the cost of living, settle for smaller profits, and not to make life miserable for Singaporeans by squeezing them. Perhaps NTUC FairPrice can take the first step by transferring the CPF savings arising from these CPF cuts to a 5% discount on all their products. That should herald measurable immediate cost savings for many Singaporeans.

Let me talk about the relief measures, Sir. While I am glad that the DPM announced some relief measures to help those affected by the latest CPF cuts, unfortunately, if one takes away the amounts set aside to help the construction sector and the other specific programmes, the amount actually reaching the worst hit people is very minimal. In fact, in some cases, nothing. My middle income residents have given me feedback that the relief package has very little for them. They are the ones worst affected by these changes. I do hope that the middle income Singaporeans will receive some good news in the next Budget, in terms of greater tax relief and other benefits.

Next, on the CPF figures that were provided yesterday. Sir, I would like to seek clarification on the data that was released by the Acting Minister for Manpower yesterday as regards the amounts that the 25th percentile worker would have accumulated in his CPF accounts. The withdrawal amounts at age 55 were also given. We all know that many workers will use their Medisave before they reach 55 years of age, either for themselves or their families. I would like to ask the Minister how much a worker can withdraw at age 55, if he had used up all his Medisave account monies by then. What percentage of members would have adequate Minimum Sum in this scenario?

Lastly, on tinkering the CPF scheme. Sir, I would like to ask whether the Government can indicate whether it intends to stop tinkering with the CPF system, or whether CPF would continue to be a regular tool of economic management. This question is raised as it makes it difficult for Singaporeans to plan their financial future, as the basic premise for their financial planning is adjusted by the Government far too regularly. To be candid, I also find it confusing to plan for my long-term retirement plans. Employees above the age of 40 years are confused, as regular changes are confusing them in how they should plan for their old age. Perhaps the Government should state that there is a base amount which will never be changed and a variable range which can be altered. Can the Government give an assurance that the 30-36% range would be the final figure? Or should we be looking at lower figures? Some clarity would certainly help guide our people.

Sir, in conclusion, I would like to say that the CPF changes are tough measures, but hard times call for tough choices. As a people, we have never failed to confront challenges realistically and squarely. The way forward is to work together - Government, people and businesses - to bring new investments and new jobs, and these I am confident we can achieve. These short-term sacrifices by our people to make Singapore competitive will certainly help bring growth to our economy and greater prosperity for all in Singapore.

On that note, Sir, I support the Government on its new CPF policies.

The Senior Minister of State, Prime Minister's Office (Mr Matthias Yao Chih): Mr Speaker, Sir, Mr Ravindran has a suggestion for NTUC FairPrice to consider. I will bring the message back to FairPrice. May I assure Members of this House that NTUC and its family of cooperatives are considering measures to help those who are needy, especially the lower income, and announcements will be made in the course of time. And I can even ask FairPrice to sell goreng pisang, if it helps.

Sir, some workers ask: with these CPF changes, how many jobs will be created? How many will be saved? They are disappointed that there is no road map for economic recovery. They do not feel secure. They want to see a plan that says: do this to get to point A, then do that to reach point B, and all will be well.

Unfortunately, there are no precise answers to what the CPF changes will bring. Technology and the world economy are changing too quickly for anyone to be able to draw up blueprints that come with a guarantee. That does not mean there will be no jobs created or saved. What it does mean is that the right economic environment will lead to the creation and saving of jobs, even though there are no mathematical models to give us the exact numbers.

This is a bit like planning to build the bird sanctuary at Sungei Buloh. If people asked at that time: how many birds will come? What type of birds will come? How long will they stay before they fly away? - then the bird sanctuary might never have been built. No one could have given those answers. But the designers who understood bird migratory behaviour knew that if we built a sanctuary with the right environment, the birds would come. And they did.

So is it the same with the economy? Get the economic and investment climate right, and the jobs will come. Precisely what jobs will come, or how many will come? No one can tell. But even as we debate the CPF changes in this Chamber, decision makers around the world would have read about our strong effort to make Singapore a good place to invest in. We may not even know who those investors are. The products and services they might bring here may not even have been announced yet. But they have heard of us and they will make enquiries. If we can bring our labour and business costs down to a level that gives good value for money, more investments will come, more jobs will be created and more jobs will be saved. That, we can be confident about.

Among the companies already in Singapore, some are doing well. They do not need the CPF cuts to survive. As Mr Ravindran said just now, they should give some, or all, of the savings back to their workers. The SBF and SNEF have bluntly dismissed the idea. But I am glad that, since last Thursday, when the Prime Minister made the announcement, several companies have already indicated to the union leaders they will share the gains with their employees. Such enlightened managements are to be applauded. I urge companies that are doing well to follow their good example in being fair to the workers.

Dr Ong Seh Hong and other MPs pointed out that one reason workers will have low retirement savings is that the rate of return on the CPF savings is low. In this climate of low returns on fixed income instruments, it is difficult to get higher returns. Workers should not risk their hard earned money on high risk investments to seek higher returns. They may lose much more than they can gain.

The NTUC will do what we can to help. NTUC has a savings cooperative, NTUC Thrift. Its social mission is to help workers put aside small sums of money every month for a rainy day. Since its formation, NTUC Thrift has consistently given an interest rate on the small savings higher than what the banks give on their savings accounts. With this renewed impetus to ensure sufficient retirement savings for our workers, the unions will work with employers and NTUC Thrift to encourage more workers to open accounts with NTUC Thrift.

Employers who wish to give the gains from the CPF cuts as lump sum payments can help the workers deposit the money into NTUC Thrift accounts. To the individual worker, it may not seem a large sum at first. But if workers can continue to set aside small sums every month and keep their money untouched for long enough, NTUC Thrift will work hard to grow their money at better than bank rates. In the long run, the money will be useful for retirement, or to help cover a period of unemployment.

Sir, I support the CPF changes.

The Parliamentary Secretary to the Acting Minister for Manpower (Mr Hawazi Daipi): Sir, the rationale and objectives of the CPF changes have been well explained by the Prime Minister, Deputy Prime Minister and Ministers. There is no need for me to further elaborate. While the CPF system has been re-tuned with a lower contribution rate, the fundamental objectives of the CPF to meet the basic housing, medical and old age needs will continue to be preserved. In other words, the basic social safety net for our workers will remain intact.

However, with the lower contribution rate, Singapore workers need to make adjustments to their financial commitments, particularly on housing, so that they all could better manage their needs and expectations. This requires a mindset change on the part of CPF members and workers. Employability of older workers

I would like to make reference to the problem faced by our older workers. As highlighted by the Prime Minister, workers aged 50 and above face greater difficulties in securing re-employment after retrenchment. This will be a growing problem because of our ageing population.

Our workers must therefore take skills training seriously and continue to upgrade themselves to remain relevant. But skills alone are not enough. Due to our seniority-based wage system, our older workers are more expensive than the younger ones doing the same job. To help enhance our older workers' cost competitiveness and enable them to remain employed, a further reduction on the employer's CPF contribution rate for workers aged 50 to 55 is therefore necessary. This will help to reduce the cost burden of employers in retaining older workers arising from our seniority-based wage system. Some workers may be depending on their full CPF contributions in the Ordinary Account for their mortgage instalments. They may experience shortfall in their monthly mortgage repayments as a result of the CPF changes. To these workers, measures will be put in place to help them overcome their difficulties. These assistance measures have been announced earlier by DPM.

Phasing out the 50% withdrawal rule

Currently, 42% of active CPF members who have turned 55 are able to set aside the Minimum Sum of $80,000. The proportion of CPF members who are able to meet the Minimum Sum requirements is low, partly because of the 50% withdrawal rule. Under the rule, CPF members can withdraw 50% of their combined Ordinary and Special Account balances. Hence, most members do not set aside enough savings in the CPF for their retirement. The revision of the 50% withdrawal rule is to help CPF members set aside their Minimum Sum.

Some workers may be disappointed by the change in the 50% withdrawal rule. However, CPF members who reach 55 over the next five years will not be affected. Even when the withdrawal rule starts to be phased out from 1st January 2009, it will be done gradually over five years. Also, members will still be allowed to withdraw the first $5,000, or lesser amounts, in their Ordinary and Special Accounts when they turn 55.

Assistance measures

I hope that workers understand the need to keep CPF contributions as low as possible to help companies remain competitive and preserve jobs. As assured by PM, DPM and Ministers, this will be done without undermining the fundamental objectives of meeting the housing, healthcare and retirement needs and, indeed, preserving the social safety net for our workers. Changes to the CPF will also be introduced gradually and assistance measures will be put in place to help workers who are affected by these changes. Hence, workers need not be unduly worried by these changes but continue to upgrade themselves so that they can continue to be relevant and employable.

Need to restructure wages apart from CPF changes

Making changes to the CPF system would be insufficient without at the same time pushing for wage restructuring. Although our wage system is more nimble than before, it is not responsive enough for companies to closely link their wage cost to corporate performance. Due to our seniority-based wage system, individual performance and contribution are also not adequately recognised and rewarded. Changes should be made to replace the seniority-based wage system with a performance-based wage system. With the impending changes to the CPF, companies should therefore quickly embark on wage restructuring, so that they could put in place a highly responsive wage system to better meet their needs in a rapidly changing business environment.

To help expedite the implementation of a nimble wage system which could link rewards closely to company and individual performance, the Ministry of Manpower has set up a Tripartite Taskforce to study the issues and make recommendations. As has been reported in the House before, it is headed by the Permanent Secretary of the Ministry of Manpower with representatives from employers and the trade unions, and its study is expected to be completed at the end of the year.

Sir, let me now turn to the question raised by the hon. Member, Mr R Ravindran, concerning the amount of money a worker can expect to withdraw at the age of 55, if he has used up all the money in his Medisave Account before reaching 55. Mr Ravindran is quite right that, based on the table distributed by the Acting Minister for Manpower yesterday, the withdrawal amounts assume that the 25th percentile worker has not touched his Medisave Account. This was stated in the footnote below the table distributed yesterday. If the worker uses up all the money in his Medisave Account, then at age 55 he would have nothing to withdraw. In fact, he would only have accumulated $50,000 for his retirement account and would not have reached the $60,000 cash component for the Minimum Sum. The annuity payouts per month would be correspondingly reduced to $362 from $433 per month. If we assume no transfer from the Medisave Account to the Special Account, then about 76% instead of 80% can reach the Minimum Sum. This figure may in fact be lower, as many members consume all the money in their Medisave Account and then would have to top up the $25,000 from their Ordinary Account and Special Account. These numbers reiterate my Minister's point yesterday that our CPF system meets basic requirements for housing, medical and retirement. We have not over-provided.

Sir, I would like to touch on some comments made by Mr Ravindran on the tinkering of the CPF rate. Members should be aware that the CPF system is an instrument for us to safeguard our workers' interests in three main areas: housing, medical care, as well as for retirement. And this instrument has to be guarded very zealously. But, from time to time, when economic and business conditions change, we may need to take a relook at our CPF system to ensure that the long-term objectives for our workers, to provide for their social safety net, will always be safeguarded.

Mr Ravindran also asked whether we should liberalise the wage system and leave it to the unions and the companies to determine wage level. Sir, we have to bear in mind that only 23% of our workers in Singapore are unionised. So, a larger proportion of our workers is not unionised. The tripartite National Wages Council is, therefore, a very important institution to help provide the guide for determining wage levels. Indeed, what the NWC was doing in the past years was to provide guidelines, rather than to give quantum increases or adjustments to our wages every year.

But, more importantly, as a former official of a trade union, it is for us to remember and to appreciate the larger contributions of unions in Singapore. If I can elaborate on this, beyond negotiating for good wages and working conditions, our unions are also able to safeguard the workers' long-term interest. In a changing business and economic condition, the three key areas that I think most unions and union leaders concern themselves with remain intact:

1. Fair wages;

2. Fair play; and

3. Job security.

The changing business and economic conditions necessitate employers as well as unions to look at all these three issues differently. Yes, we can expect that there is no more lifelong employment for most workers, if not for all workers. But, at the same time, despite the changes in the business and economic conditions, our unions are working hard to ensure that some form of job security can still be enjoyed by our workers, even though there would be constant churning in the economy. So, we should not look at the role of the unions only to fight for the maximum benefits in terms of pay and salary for our workers. They are doing more than just that. In terms of training, which is to provide the most important tool for our workers to be relevant and employable, our unions actually spearheaded the birth of the Skills Redevelopment Programme (SRP). I remember that in 1996, the NTUC, together with unions in Singapore, looked at the issues of structural unemployment in Europe and came out with the idea of starting the SRP which was taken up by the Government as a national programme a year after that.

At the same time, Sir, as mentioned by Mr Matthias Yao, our unions have also been very active in helping manage the cost of living in Singapore. NTUC's family - FairPrice, Healthcare and other cooperatives - has helped Singapore workers stretch their dollar. And, during the difficult times in the past, the union family in Singapore has given away a lot of benefits to our workers through the cooperatives.

So, while Singapore workers feel that their wages have shrunk and that retrenchments may be looming, it is important for us to help them understand that the unions have played a very important role in helping them to keep their jobs by agreeing to measures like CPF rate cuts, promoting training and ensuring that fair play and job security continue to be practised in workplaces.

Sir, I would like also to thank the hon. Member, Miss Penny Low, for her suggestions for more insurance schemes, using CPF savings. I am sure the CPF Board and the Ministry of Manpower will look into her suggestions.

Mr Steve Chia Kiah Hong (Non-Constituency Member): Mr Speaker, Sir, thank you for allowing me to participate in this debate.

When I first listened to PM's speech on the CPF cuts last Thursday, I was aghast and taken aback by the Government's intent on placing the burden of high business cost solely as the responsibility of our workers. This was very unfair. I was pretty troubled and upset that our Government likes to slice and squeeze the earnings of our workers at the first instance of any economic trouble. This is especially so, when PM gave no announcement of any intent to cut the civil service and his bloated Government bureaucracy which, as Dr Marc Faber said recently, that the Republic's costly bureaucracy and expensive Government add to the high cost of doing business here. This expensive Government places an unnecessary heavy burden on the people of Singapore and our society.

Thus, I had prepared a very bitter critique of our Government last Thursday night, many of the points of which were brought up and very well expressed by Mr Low Thia Khiang, the MP for Hougang, on Friday.

However, after listening to DPM Lee's comprehensive relief and cost-cutting packages, I must say that I am much consoled that this Government is not that callous and unfeeling to the difficulties and problems of our people. At the very least, it intends to reach out to the jobless in our society and teach them how to fish. This I am much satisfied, and thankful that the results of growing political competition are pushing our Government to be more attentive and sensitive to the feelings and aspirations of our people. I therefore discarded my original plan for the very biting criticism of our Government and rewrote this speech.

Mr Speaker, Sir, I shall now go to my first point. This 3% cut in CPF alone will not ensure that Singapore stays competitive. Neither will it bring in new jobs. My gut feel is that small employers and bosses are going to take the 3% saving on salaries to upgrade their own lifestyle and luxuries. For example, if you are the boss of a small struggling company with a salary cost of about $100,000, a 3% cut in employers' CPF contribution will result in a saving of $3,000. There is nothing much you can do with this saving, and chances are that some bosses will use this $3,000 windfall to buy a new Mercedes Benz or upgrade to first-class seats and hotel rooms when on business travel. I hope employers will not abuse this sacrifice of the workers for their own consumption gain.

Sir, this 3% cut will only slow down the exodus of jobs to China and India. This is because the target market of these MNCs is not in this region but in China and India. Unless Southeast Asia bucks up and improves on its economy and purchasing power as a region, we are going to miss out on the investment flows.

My proposal is for the Government to spend more effort and resources to help promote the economies of our immediate ASEAN neighbours and expedite the establishment of a single common ASEAN market. In this way, when the ASEAN economy improves its purchasing power, the tide of investment will return to Southeast Asia and we will all float higher. I hope the Minister for Trade and Industry and the Minister for Foreign Affairs can be more productive in pushing for an earlier date than the stated 2020 for the single market of 530 million people to be established.

Mr Speaker, Sir, my second point concerns the investment return on CPF savings. The CPF Board should seriously look into how it can increase the investment returns for its members. Simply buying Government bonds at 2.5% interest and then lending the money to HDB for mortgage loans is not doing justice to our retirement funds. CPF members with money locked in for the long term should not be forced to do National Service by lending the money to the Government to lend to the HDB for its social objective at the measly 2.5% interest rate.

I believe that the Government and the GIC can do more in this area to provide better expertise for CPF members. My suggestion is to consider and encourage the regular investment of the CPF money in a group of tracker fund indexes of the developed and developing economies around the world. In this way, the investment return is pegged relative to the economic performance of the global economy. And, if the economy stagnates, we will not be too far off, and vice versa.

While on this point on CPF and HDB mortgage, I feel that the HDB has failed in its duty to source for its best loans for its mortgagors recently. If commercial bank mortgage rates for HDB are going at 1% to 1.5%, how can the HDB be charging its mortgagors 2.6% and still call it a subsidised rate? I do not understand. I feel that the HDB should be more proactive and be free to source its funds from cheaper lenders (other than the CPF Board), especially if the market provides lower rates than what the Government charges HDB at 2.5%.

Going to my third point, Mr Speaker, Sir, I feel that the Government, the civil service and the statutory boards could still do much to help reduce overall business cost. As freelance journalist, Lee Han Shih, suggested in an article for the Government to cut its expenditure by 30%, and which DPM Lee had on Friday said absurd, I wonder why!

I think DPM owes it to Singaporeans to explain why it is absurd for the Government to cut its expenditure and reduce the budget by 30%. If it is not 30%, then 20%, and if it is not 20%, at least 10%. Is it because wages of civil servants, Ministers and political appointees are sticky and cannot be cut? Is Government too top-heavy and over-staffed? Why cannot the Ministers be given dual appointments and portfolios like in the past and cut down on the number of Ministers in the Prime Minister's Office?

In the table distributed by Mr Lim Boon Heng, Minister without Portfolio, on Friday, I am surprised to see that Singapore CEOs are earning around slightly over $200,000 per year. If that is so, does that mean that our Ministers are overpaid and their wages have gone out of line with market rates? Has their productivity risen to make them wage competitive? Maybe the Prime Minister would like to address these concerns in his reply.

This is the time for the Government to show moral leadership and solidarity with the people, by giving a strong signal to investors and citizens alike that it is willing to cut down its own fat to help trim overall business and living cost. Just like a Straits Times Forum writer on Friday said, "I am appalled by the excessive use of plasma TVs in the civil service and statutory boards, and this money saved could go a long way to trim the excessive expenditure in Government services." This will be my first proposal for the Cut Waste Panel to look into.

Also, on behalf of many Singaporeans, I want to express support and thanks to our new Acting Health Minister, Mr Khaw Boon Wan, for cutting cost and the budget of the Health Ministry. I hope the Ministers in other Ministries will follow in his footsteps to cut cost and budget. Like he has said, "It can be done." Please do it.

On to my last point, Mr Speaker, Sir, I believe I speak for many businessmen, retailers and Singaporeans alike in asking the Government to delay the GST hike for another year. I will agree with DPM's argument that GST taxes the rich more than the poor, and that the proposed 1% increase next year will raise about $650 million for the Government in 2004.

But, Sir, what is $650 million to the Government? It is small, like ikan bilis - as what DPM said in his Budget reply to me. A $2.3 billion deficit is tiny compared to the size of the Singapore economy, and we can well afford to go for this small fiscal deficit for these few lean years.

And when the economy recovers, do we believe that our economy will recover? Does the Government believe that we will see more good years after the heavy rain? I do, and I believe when the economy recovers, the fields will blossom and everyone will have a good field day. By then, nobody will seriously object to the Government wanting to collect more in GST to prepare for another rainy season. And after giving a good fiscal stimulus to the economy, the Government can expect a bigger catch with the 1% GST than the current ikan bilis that it is expected to net.

Therefore, I beseech the Government to give more time for the small ikan bilis to grow bigger. Do not be in a haste to balance the deficit and weaken any prospects of growth and recovery.

To sum up, Mr Speaker, Sir, the people of Singapore expect more substantial policy initiatives from our world-class Ministers than a simple reduction of employer's CPF contribution. CPF cuts should only be taken as a last resort when all other alternatives have been considered and implemented. Our people cannot be expected to take on the low salaries offered in China and India. Neither can they be expected to bear the main brunt of any cost cutting measures consistently.

The Government and GLCs are also required to make sacrifices by going for deficits and losses in bad years, hopefully to recover back in good years. This is the cycle of life and investing.

To end off on a brighter note, I would like to urge all Singaporeans to look up. The dark clouds will pass because present-day Singapore has two biggest resources that will see us through any major difficulty, and that is, our talented people and our huge capital reserves. We should not be afraid to seize this opportunity that a crisis has brought.

The Minister of State for Education and Community Development and Sports (Mr Chan Soo Sen): Mr Speaker, Sir, firstly, I would like to thank Members of the House for their suggestions and points made on two of the schemes that MCDS is managing, that is, the Work Assistance Programme (WAP) as well as HOPE.

Dr Wang Kai Yuen and Dr Warren Lee have suggested that we help unemployed Singaporeans to train for new jobs and provide them with financial assistance. Some Members have also given encouraging examples of Singaporeans who are determined to find jobs and be self-reliant.

Mayor Mrs Yu-Foo Yee Shoon shared her CDC's experience and her observation that Singaporeans are increasingly prepared to make the necessary adjustments and to take up low-income jobs. NMP Mr Nithiah Nandan has also mentioned some of the examples that he has come across.

The Work Assistance Programme (WAP) is, in fact, designed with these resilient Singaporeans in mind. The programme, announced by DPM Lee last week, is really aimed at helping these Singaporeans seek employment and transit quickly back to work. Financial assistance is only an interim measure while our recipients look for jobs under the programme.

WAP beneficiaries will receive job placement services and short-term financial assistance to help them tide over this difficult period. Those who have tried, but are still unable to secure jobs over a three-month period, will be given more personal attention by a case management officer. With this support and the Singaporean spirit of self-reliance, we feel that the majority of WAP recipients will find jobs and be independent within 3-6 months.

Mr Gan Kim Yong has proposed that we should do more to help affected families cope with their children's schooling assistance. Let me assure him that under WAP, provisions are available to help deserving families pay for schooling expenses. This will cover school and transport fees and a one-off grant to cover miscellaneous expenses, such as uniform as well as textbook expenses. There are also other sources of help available in the community, for example, the School Pocket Money Fund.

I am pleased to inform the House that the CDCs have been gearing up to implement the WAP programme from October this year. The Government has provided more resources to beef up their employment-related services. A total of 83 officers will be stationed at the CDCs to provide employment services. 53 of these staff are being trained with case management skills. They are taught skills on motivational counselling and techniques to help the unemployed identify barriers and needs. This training would enable the case management officers to be more effective in helping WAP beneficiaries work towards employment.

We expect the job placement services in the CDCs to be given a significant boost with these additional staff. We are aware that apart from financial and employment assistance, some of the families could have other problems that need to be addressed, for example, family violence, as Mdm Cynthia Phua has pointed out. The case management officer will also look into the needs of the family and link the family up with the appropriate agencies, for example, the Family Service Centres, for assistance and support.

The CDCs are also fine-tuning their work procedures to ensure that all social assistance applicants who are fit to work will be referred for job placement services.

There are Singaporeans who have already lost their jobs and need help immediately. Between now and October, they can approach the CDCs for help and advice. Those who are assessed to be eligible will be assisted under the existing employment and social assistance schemes first. They will be given short-term interim help and be transferred to WAP come 1st October 2003. Likewise, Singaporeans who are interested in HOPE can also approach the CDCs for details.

Home Ownership Plus Education (HOPE)

A few Members also spoke about the Home Ownership Plus Education (HOPE) programme. I would like to thank Mr Ahmad Khalis and others who have expressed their support for the programme.

We have also received feedback, particularly on the eligibility criteria. Many felt that the criteria should be relaxed to allow more low-income families to benefit.

Mr Speaker, Sir, let me reiterate the objective of HOPE. It is designed as an upstream programme to target young, low-income families. The objective is to enable their children to get a better headstart in life. To do so, we are encouraging the couples to keep their families small so that they can concentrate their resources on their children. The benefits given are meant to help them earn a better living, perhaps buy a home, and keep their marriage strong so that they can provide a stable and supportive family environment for their children to benefit from educational opportunities offered to them. This will provide the best chance for these families to break out of the negative poverty cycle.

NMP Mrs Fang Ai Lian commented specifically on the educational criteria - that a poor family with 4 GCE 'O' levels would not qualify for HOPE. Currently, the criterion is 2 GCE 'O' levels. The 2 GCE 'O' levels criterion is meant to target couples whose opportunities for skills upgrading are potentially limited by their lack of educational qualifications. The entry level requirement for polytechnic courses as well as higher ITE Nitec courses is 3 GCE O' levels. Hence, those who do not meet this requirement, ie, 2 GCE O' levels and below, are likely to face difficulties advancing their training and education in post-secondary institutions and therefore need additional help. That is how we set the criterion at 2 GCE 'O' levels.

We have received suggestions to extend HOPE to cover poor families with more than two children as well as divorcees. Ms Braema Mathi has also made an appeal for HOPE to cover single parent families. I would like to reiterate the objectives of HOPE, ie, to encourage young couples to keep their family strong and intact so that the children can grow up in a stable environment.

Our policies should not encourage behaviour that goes against our family values. Notwithstanding this, I agree with Ms Braema Mathi that some of these families are genuinely in need and not all can be assisted under HOPE and WAP. For example, there are Singaporeans who are unable to work because of old age, illness or care-giving responsibilities.

Apart from WAP and HOPE, there are, in fact, many existing schemes to help people in need. My Ministry has compiled a list of social assistance schemes provided by the Government. I am requesting the Clerk of Parliament to distribute the list for Members' reference. [Copies of list distributed to Members.] This is just for Members' reference because many of these schemes are public information. Many Members already know about many of these schemes.

These schemes cater to Singaporeans with different needs - those who require long term assistance, those who need interim help with rental and utilities arrears, and those who need support with child and student care.

Ms Braema Mathi may be pleased to know that single parent families may be eligible for the interim financial assistance scheme, the rent and utilities assistance scheme and the centre-based financial assistance scheme for childcare. Single mothers who are not ready to seek employment due to care-giving responsibilities, could also be given some short- to medium-term help. Those who are ready to seek work will be placed on WAP. They will also receive financial support to place their children in childcare centres. This is to ensure that the children are taken care of while the mother may be working.

A few Members have expressed concern about those who are not covered by the financial assistance schemes. Mr Zainul Abidin Rasheed mentioned the middle income, Mr Iswaran highlighted the `sandwiched groups' who are marginally above the income ceiling criteria, and Mdm Ho Geok Choo even referred to those earning between $3,000-$6,000 a month.

We empathise with the struggles of these families and recognise that they too need help when the main breadwinner is retrenched. For this group of Singaporeans, work is still the best form of welfare. In the process of seeking re-employment, one main barrier faced by this group is their expectations. If these Singaporeans are prepared to make the necessary adjustments and moderate their expectations, and some Members of the House have indicated that many of them are willing to do so, we will do our best to facilitate their job seeking efforts.

I have mentioned earlier that the CDCs have beefed up their employment service capabilities with more than 80 additional employment officers. I believe that with this enhanced capability, we can help more Singaporeans, including those from the middle income group, to find jobs.

I would also like to remind the House that the Government schemes are not the only source of help available to Singaporeans. The CDCs and grassroots organisations have also come up with their own programmes to complement the Government schemes. Singaporeans who are genuinely in need can find help either from the Government or in the community. This is in line with our 'Many Helping Hands' approach.

Mr Ong Ah Heng and Mdm Cynthia Phua have raised concerns over the increase in fees for sports facilities. Frankly, I am a little bit surprised because this has not been formally announced yet.

Today, the Singapore Sports Council (SSC) heavily subsidises the use of sports facilities. For example, the average cost of operating the swimming pool is $3.50 per user, excluding depreciation cost. But today, each adult pays only $1.00 per entry with no limit on the number of hours used. So, that is a subsidy of $2.50 or 71%. Children and senior citizens pay even less, ie, 50 cents.

The subsidy for all the SSC sports facilities amounts to approximately $18.8 million a year, excluding depreciation costs. This level of subsidy is, in fact, very high, and is a significant proportion of the cash grant given by MCDS to SSC, which stands at about $117 million this year. So, more than 20% goes to subsidise sports facilities. It is not right for MCDS to do nothing about it.

Even after the two-phased increase, including the second increase in July 2004, SSC will still be subsidising some 60% of the total cost of operating the sports facilities. We will formally announce the increase soon. But let me say that even with the increase, we will still be subsidising 60% of the total cost of operating the sports facilities.

SSC last revised fees and charges for its sports facilities in 1997, six years ago. The increase that time was about 10%. SSC actually considered revising fees in 2000 and 2001. But on both occasions, MCDS decided against it because of the economic situation. Sir, increasing fees is not something that we do lightly. In fact, we do it very reluctantly. Our problem is that there is really no good time to increase fees. However, if we continue to defer doing so, the quantum of increase will be greater when we eventually have to do it.

To minimise the impact of the fee revision on the public, SSC will be implementing the revisions in two phases. The first phase will take effect from 1st October 2003 and followed by a second revision on 1st July 2004. The details will be announced in the next few days.

There will continue to be concession rates for children, senior citizens and schools. Furthermore, SSC has introduced stored value cards for the swimming pool users which will allow some savings for regular customers.

The other option to control costs is to close facilities that are under-utilised. Mdm Cynthia Phua mentioned the closure of swimming pools. In June this year, we closed six swimming pools, including one in Mdm Cynthia Phua's constituency. We did bring forward the closure because of SARS which had resulted in a severe drop in attendance. The grassroots organisations were notified one month in advance.

I agree that we should cut costs and increase revenues from other sources. In the past few years, SSC has cut manpower costs by employing part-timers, installing ticketing machines and coin-operated lockers. It has also reduced utility costs by cutting down the number of pumps running during the night and using rainwater for backwash at swimming complexes.

SSC has also tried to increase other sources of revenues from its sports facilities, such as renting parts of the premises to retail shops. We recognise that we may not be enterprising enough and, therefore, we are open to explore other ideas to increase revenues. I am happy to explore further with Mr Ong Ah Heng his idea of rearing fishes.

Mr Speaker, Sir, Mr Steve Chia said that he had moderated his speech after listening to the relief measures that had been announced. He said that at least the Government was aware and was in tune somehow with the feelings and aspirations of our people. Let me assure him - he has left - that the Government is always in touch and in tune with the feelings and aspirations of our people. Otherwise, it would not be possible to come out with all these well-targeted relief measures.

There is no doubt that our days ahead are going to be brighter. Our people are united with the Government, partly because we are in touch with the feelings and aspirations of the people. The Government was able to mobilise the whole nation to defeat SARS. If we talk to the workers and the grassroots leaders, all of them acknowledge that the CPF cut is very painful. But, on the other hand, all of them understand why it has to be done. Nobody likes to receive less money in their accounts. But if it is necessary to preserve jobs, they will do it.

Another reason why I said that the days are going to be brighter is, I do agree with Mr Steve Chia that we have talented people and we have got financial reserves. After I came to Ministry of Education, I went to NUS and NTU to visit the laboratories to look at the R&D work that is being done. They introduced me to many projects. To be honest, the projects are so complex that I did not understand them. But I fully understand one thing that our universities told me. They said that top US and European universities, after looking at their projects, have come out with proposals to work together. To me, it means three things. Firstly, our R&D initiatives are on the right track; secondly, the quality of our research workers is high; and, thirdly, there must be the possibility of breaking through. Indeed, with world-class universities coming in, the probability of breaking through will be even greater. And if there were to be significant breakthroughs, then the investment that has gone into promoting R&D will pay off.

Two weeks ago, I went to give away prizes to some JC students on a programme called the Science Talent Search. They presented their proposals and projects. Again, I could not understand. They are JC students. I did study Science up to "A" level. Yet, I cannot understand their projects. But one thing I heard from the chief judge, a young American Professor, and he was very clear. He said, "You ought to be proud of your young people. These projects are simply fabulous. How I wish my chaps would also do the same."

Sir, we have talented young people. These talented young people have been given space to grow. I have no doubt that they will be able to find their feet and we will be able to do well. How can this be achieved if we are not in tune with their feelings as well as their aspirations? I do not understand.

The Government is aware of the fact that every cent counts and, therefore, we have established a Cut Waste Panel. We have also talked about reviewing salaries of civil servants. All these will be put in place in due course. I will urge Mr Steve Chia to look at the results before coming out to accuse us of having an expensive Government. In fact, if he has any specific proposal for the Cut Waste Panel, I think he should put something out more clearly so that we can take a look at it. This is a time for us to be united to face the challenge as a nation.

Sir, I am somehow surprised by Mr Chandra Mohan who suddenly talked about merger. I may not have got him totally right, but I think he talked about the possibility of making merger easier. I do not know why he feels we should look at merger just because we face some setbacks. In fact, I raised his comments with my grassroots leaders yesterday. All of them were quite shocked. This is the time to be united as a nation to overcome the current difficulties. So my message to Singaporeans is this: Together we shall overcome. There is a Chinese proverb that says that the moon is there, except that it is covered by dark clouds. The clouds will disappear. We will see the moon again. The moon has always been there and the best is yet to be.

Mdm Cynthia Phua (Aljunied): Sir, I want to make a clarification. I think there has been a briefing conducted by the Singapore Sports Council to the grassroots leaders, as well as members of the Constituency Sports Club, regarding the increase in the entrance fees for the sports facilities. So I think the Singapore Sports Council has not briefed him properly.

Mr Ong Ah Heng (Nee Soon Central): Mr Speaker, Sir, I want to say the same thing. Why did the SSC officer not tell him the truth that they did conduct a briefing? The second clarification I want to make is: is the Minister giving the message to all Singaporeans that the swimming pool admission fees will increase with effect from 1st October despite DPM's call on Ministries to cut cost and not to increase fees? I just want to make a clarification whether the increase in admission fees will be implemented with effect from 1st October.

Mr Chan Soo Sen: Mr Speaker, Sir, I thank the Members for the clarification. Our plan is to implement the increase with effect from 1st October 2003.

Mr Chay Wai Chuen (Tanjong Pagar): Mr Speaker, Sir, thank you for letting me join in the debate. At this stage, where so many speakers have spoken, I just want to highlight a few points.

The Prime Minister identified the critical cause of this slack growth in Singapore last week as that of demand. He said that we have to cut costs in order to be competitive with the other growing economies in Asia, such as China and India, and in the neighbouring countries. Assuming that wages for SMEs and smaller businesses constitute 50% of business cost, I think, overall in Singapore it is nearer 30-40% for the average business unit in Singapore, which includes a lot of MNCs, a 3% reduction in the CPF rate by employers as proposed will only lead to about 1-2% of overall savings for businesses. Hence, it is not likely to be the solution for employment generating growth in the economy that we have to tackle.

Of course, other costs - rentals, statutory costs, transport - have to be adjusted downwards as well, and many of these cost packages and reductions have been mentioned by DPM a few days ago. As my colleagues have argued, no doubt these have to be reduced significantly to have any major impact, but it is only half the solution. The other possibly more important half has not been addressed in this debate, and it is how to generate more employment growth.

What the current measures as proposed can do is to buy us some time. There is a window of opportunity for us to adjust and to retune our economy. And we have to make good use of that time that we are buying for companies to postpone giving up and closing down and moving overseas to China or the neighbouring countries, or even moving some processes to India.

I had actually visited the Tata Consultancy Services Company of India four years ago in Chennai (Madras) India, and knew that they were doing back-end process work for a certain Western European airline there. The Western European airline company is still around. There were rows of tables for young Indian men and women, some of them, not all, are graduates. I did not get the impression of active productivity, but it was very cheaply done. Cost advantage was evident to me. That is why competitive airline companies and others move there to do their labour intensive and routine work. I am sure by now they would have made a few good notches up in productivity because companies from other industries have also moved there.

What we can hope from this exercise is a window of opportunity to readjust our costs and to generate demand in the economy so that more growth can take place in the economy, especially employment generating growth. We cannot talk glibly about the jobless growth in the economy and pretend the problem, like the poor, will always have to be with us. We have to solve it with so many talented people that we have.

This window of opportunity we have to battle is a passing window. If what we can achieve with these proposed CPF cuts is to buy time, then we must seriously ask what we must do to raise demand. It may be that some of our economy's investments in the past few years have been in sectors that are slackening away, like electronics and construction, and we have to raise demand across the board. For demand to be raised, in order to generate growth, consumer spending must be raised, as well as investments, local or foreign. Tax burden accordingly, including statutory costs, have to be lowered. I believe many of the investments we have been attracting in the past few years are very sizeable plants employing few workers. Have we forgotten to attract perhaps less lumpy, high-tech investments, or smaller firms who may have niche processes and have special technologies which need not necessarily be in big billion dollar plants? Such medium-size investments may use more labour and have more linkages with the economy.

Although we may not have so well-educated older workers, we must not forget that they were the workers during the period we made the most rapid growth. We can still employ our older workers usefully and it would be wrong to think that they cannot contribute to the economy. Of course, there has to be training and retraining, which should be specially tailored for them. For example, have we asked ourselves why and how our shipyards, ship-repair and offshore sectors are still doing fine in spite of all similar problems of wage costs and demand they have been faced with for so many years? Of course, there had been consolidation in that industry earlier. Which industry does not face this kind of consolidation problem of players at some stage or another? But they are still hiring now.

We need business investments from more diverse sectors with their own special niches. But these investments we need must help us in employment for workers. Diversity in investments in size and industry sectors will give Singapore an added insurance and buffer in its future growth strategy. Because we are a small open economy and a nation-state, we need this diversity to balance off sectoral risks. We are unlike a big country or any economy where they can aggregate out the risk by different regional developments within their country.

If we are always looking at how we compare in wage costs with other countries, whether it is the United States, China or India, we are missing out the other more important half of the picture of economic growth. Costs alone cannot determine business and prosperity. It is the creation and the unlocking of values from the conjoining of ideas, technologies and entrepreneurship, whether high-tech or low-tech, that lead to business, employment and prosperity for all.

The Prime Minister identifies the problem faced by the economy as demand. The CPF and other reductions in costs affect demand for investments. As we have lowered costs, the demand for investments will increase. However, the demand that is necessary for addressing our economic growth and employment in a competitive world economy must be raised by other efforts and other policy changes. It is the typical 101 economic problem of discriminating between a slide along the demand for investment schedule versus a shift of the demand for investment schedule. The tools for the job are different and not quite the same. What we need now is a shift upwards of the demands for investments. We must have sufficient policy instruments to tackle the required policy objectives and we must assign them correctly.

I would like to highlight two important concerns by many ordinary Singapore people. The first concerns the adequacy of the CPF savings for the future when they retire. Many of them are quite worried that they may not have enough. One suggestion, as proposed to me, was whether the Government would allow employees voluntarily to contribute more into their CPF. There is a tax benefit for them as well. The second is whether red tape in the bureaucracy can be minimised in order to facilitate more entrepreneurial activities for business, either in starting up new business from novel ideas or to speed up existing requirements for approval, which can really be trying as many of us running businesses have all experienced. Perhaps we should have a Cut Red-Tape and Waste Committee, which will really be more productive - killing two birds with one stone.

I want to share some anecdotal experience with Members. Two weeks ago, I was in China in Henan Province. Henan is in the central part of China, with a population close to 100 million, more than the population of France, UK or Germany. The people are engaged mostly in agriculture and in primary production. It took about 12 hours from Singapore to reach this place, including inter-modal transport and transfers. I was in the area bordering Shanxi Province, with the Yellow River flowing in between Henan and Shanxi. You cannot get more provincial and heartland in China than there, which is the fons et orgio - the fountain and origin - of the Chinese people. There are people who live there in caves today, dug out of the yellow-earthed hills, which are supposed to be warm in winter and cool in summer.

I was not there for a vacation but I was there looking for business opportunities for NTUC Fairprice. The people were mostly farmers, and poor by Chinese standards. But, in this provincial heart of China I saw no hunger. I saw no idle people on the roadside or the villages, and I was travelling for four days. I was not staying in a hotel room and having meetings. Everyone seems busy, planting and harvesting, digging roads and canals with hammers and shovels, transporting things or doing petty hawking. I have almost forgotten the meaning of petty hawking in agriculture until I saw it again - a few pieces of vegetables and fruits from a garden patch by the village path. I mean a few pieces. I also saw European traders there in this, I thought, god-forsaken place. This is globalisation at work on its feet.

Although I have read in newspapers and journals about the extent of rural poverty and unemployment in China, I am convinced, now it is full steam ahead for the Chinese. From the Central heartland of China - and the Chinese call this place the Tang Yuan area - perhaps they need to rely on us for capital, some skills and modern management for about five years or less - that is, if we are fast enough. An expressway runs from this heartland of China to the port of Lianyungang, on the Yellow Sea, a distance of more than 1,000 km. Chinese trucks filled with goods ply this route day and night. Very soon it will be trucks with international containers. This tide is inexorable in spite of the many problems in the Chinese economy.

This anecdote is to underline my concern that we must address the larger issue of employment generating growth urgently. This passing window of opportunity for us to retune and catch on to the mainstream of employment generating growth is a very short one.

Assoc. Prof. Ngiam Tee Liang (Nominated Member): Mr Speaker, Sir, thank you for the opportunity to speak on the statement. Being the last person among the backbenchers, after almost four days of parliamentary sittings, obviously has its drawbacks. Much of what I had in mind to include in my original speech has already been well covered by hon. Members earlier. I am also aware of the pressure to keep my speech short and succinct. Therefore, I shall be brief and focus only on the CPF issue, in the interest of time, although I am just as interested with the other social safety net measures discussed in this House.

Retuning the CPF actually provides a silver lining among the dark clouds. The CPF reforms need not bring about unnecessary insecurity over the social security changes. In effect, we are really undertaking the retuning of the psyche of Singaporeans in the light of dynamically changing times. How so? In my observation, there are four related practices leading to the present predicament.

(1) We have over-relied on the CPF scheme as the main lever to fulfil a number of social objectives;

(2) We are not happy with the past high overall CPF contribution rates as they reduce the cash component of our salaries for discretionary use;

(3) We have over-estimated our ability to use CPF funds to become affluent through speculative property and other investments, at the expense of building sufficient capital for our retirement years;

(4) We make incremental changes to the CPF scheme or tinkering with it, as some say, when in fact a major overhaul of our social security system is needed and overdue.

Speakers before me have explained these factors, so I need not elaborate on them. Instead, I have the following suggestions, most of which were also brought up by Members of this House. The suggestions are intended to bring about are mindset change for every Singaporean, especially for younger CPF members.

(1) Modify the proposed CPF-based model of social security to include a mixed model of CPF and private sector arrangements, as recommended again by my fellow MPs.

(2) In addition to having pre-assigned contribution rates and maximum ceilings for the Minimum Sum and Medisave scheme, introduce a separate category called Home Financing Scheme, with appropriate maximum contribution rates also. This would prevent CPF members from over-using the Ordinary Account for housing purchases.

(3) Stress to CPF members that their CPF retirement funds are meant for minimum sum of expenditure and that they should supplement them with additional means of financial support.

(4) Moderate our expectations about our own standard of living, be realistic about them, have financial planning for ourselves.

(5) Review our life priorities, be less materialistic and less obsessed with making money as main goal in life.

(6) Strengthen our relationship with our families and community for therein lies our real strengths and resilience.

With a major remake of our social security system, we should be able to move forward with renewed trust, hope and having the warmth of the sun with us again. This requires us collectively - Singaporeans, the Government, the unions, the corporate sector and the community - to stand side by side with each other at the crossroads of change to meet the challenges of globalisation and to fulfil a new Singapore Dream together as a nation. I believe that this is possible.

At the end of the day, Sir, we do have a credible and competent Government that will not let us down. And to paraphrase the Acting Health Minister in his press releases and speeches, however, the Government cannot do so on its own. We Singaporeans must also be willing to cooperate and do our part.

With that, Sir, I support the Prime Minister's Statement.

Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 3.45 pm.

Sitting accordingly suspended at 3.20 pm until 3.45 pm. Sitting resumed at 3.45 pm