ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL, 2005 TO 31ST MARCH, 2006 (Paper Cmd. 2 of 2005)

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ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL, 2005 TO 31ST MARCH, 2006:

(Paper Cmd. 2 of 2005): Order read for consideration in Committee of Supply [7th Allotted Day].

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[Mr Speaker in the Chair]

Head S - Ministry of Manpower

12.40 pm

The Chairman: **** Head S - Ministry of Manpower. Mr Yeo Guat Kwang.

Occupational Health and Safety Legislation

Mr Yeo Guat Kwang: Sir, I beg to move,

That the total sum to be allocated for Head S of the Estimates be reduced by $100.

Sir, the Minister has mentioned in his statement about the new safety framework. The labour movement has always been advocating for a better and safe workplace for all. As union leaders, we strongly support and welcome MOM's proposed new framework. For those in the last one or two decades, we have put in all efforts to try to make incremental improvement in occupational health and safety in Singapore. It is time for us to improve further and do more to ensure that we all enjoy a safe workplace.

If errant employers continue to risk the lives of the workers by ignoring our repeated calls for more stringent safety measures, then MOM has to seriously consider what we need to do more to ensure that the employers carry out their duty.

We have to learn from other countries' experiences. I am happy to note that the Ministry is going to do so. In Sweden, as I know, the emphasis is placed on analysing the work conditions that promote human error and risk taking behaviour. The main responsibility for the working environment lies with the employers. And the OHS authority in Sweden goes for less prescriptive safety rules and regulations and encourage employers to

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meet the safety standards in various practical and more innovative ways. The authority also minimises the costs of compliance and takes particular care to work with particularly the small and medium enterprises. This is something the Ministry of Manpower here should also consider. We cannot be only targeting at the big factories and to ensure that the big factories are in compliance with all the safety regulations and did not look at the small companies.

One concern is that, like my colleague, Mdm Halimah, has just now mentioned, the union leaders are also concerned that if the safety regulations are less prescriptive, then they also worry the employers will end up by keeping just their fingers crossed, hoping nothing will happen and not sure what to do. This is also a concern that the Ministry should consider.

In France, incentive is given to companies with best records. It is something that we do not have here. These companies pay less contribution to the centralised insurance, and those with high accident compensation claims are asked to pay more. This is also a scheme which we can consider.

Last, but not least, at the same time, I would like to once again urge the Ministry of Manpower that, after we have reviewed, revamped and made the safety rules and regulations and legislation more effective, we still have to consider extending the scope of the OHS legislation in Singapore to provide protection to all workers in the workplaces, including non-industrial workplaces. Under the current legislation, the Factories Act only protects one-third of the overall workforce, that is, 700,000 workers. I hope the Ministry can seriously consider this point as well.

The Chairman: Mdm Ho Geok Choo is not here. Mr Yeo Guat Kwang.

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Manpower Challenges

12.45 pm

Mr Yeo Guat Kwang: Sir, in view of the sudden massive retrenchment carried out by Maxtor, I would like to say that, whether it is management or rank and file, employers or employees, they are all human beings. They are not machines or merchandise. We do not want to see the employees being left at the mercy of their employers, just like a hunter, as described in the Chinese saying, going

hunting with his dog, captures whatever he wants, then he kills the dog and eats it. We must bear in mind, be it employees or employers, their rice bowls are interconnected and cannot be separated. Both the employers and employees should share the fruits of success and the prosperity of their enterprises. People in the personnel departments should adopt an open-mind towards all workers, particularly the ones more at risk, ie, the older workers. More importantly, all the people in the company should feel that the contributions and efforts put in by the older and mature workers are rewarded accordingly. Therefore, I hope that the Ministry will work with the management to try to make the management foresighted enough to warn their workers to prepare for the challenges and put in place adequate training for these workers at risk, so as to help them to meet the challenges ahead. They should be committed in looking after the welfare of their employees, particularly the mature workers, and give them due protection and a sense of belonging.

Structural unemployment is unlike other forms of unemployment in that the primary reason is a mismatch between skills sets that workers have and what employers demand. The main factors causing the problem of structural unemployment are: many old and lower educated Singaporean workers do not have the necessary skills that jobs in the current market demand, while many only

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possess obsolete industry-specific skills. In addition, low education and lack of knowledge of where and how to obtain these relevant skills are also impediments in solving the problem of such a skills mismatch.

Retraining has been cited time and again as a solution. But are there any statistics to prove that it leads to more people getting jobs or how they still cannot find jobs? I would like to ask the Minister what is the progress of the various schemes that the Ministry has put in place to help workers cope with such challenges and ensure that the workers, particularly the mature ones, could continue to be employable. I think there is a need to educate the HR practitioner and the management as well to change their mindsets against mature workers.

Some Singaporeans think that MOM's policy has facilitated employers to take in more foreign workers and end up with more local workers being displaced. There is also a sense that MOM does not appear keen to fine-tune the ratio which has increased to allow companies to bring in more foreign workers in good times but has been very sticky downwards even in bad times. Would the Ministry consider providing the statistics of the employment situation of the local and foreign workers over the last five years? Did the Ministry study the impact of the low birth rate of about 1.4% on our labour market in the next 10 years? We also need to ensure that the employers would not abuse the flexibility given, as we have reviewed and revised the dependency ceiling.

The Employment Act was enacted on the assumption that executives can look after themselves whereas the lower educated employees would need the protection. However, the executives also encounter employment problems and need assistance. Take the salary dispute as an example. The existing way of engaging

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lawyers to pursue their claim against employers is often costly and time consuming. It is necessary now for the Ministry to review the EA coverage, ie, would we be able to consider allowing the executives to be also covered by the EA? If the objective of the Employment Act is to protect and enhance the welfare of all workers, then would the Government consider how we could also strengthen the protection for contract and part-time workers?

We need to also review some of the existing labour market practices that actually create the problem. With higher demand for workers in expanding sectors of the economy, the higher pay of these newly-created jobs will incentivise workers to retrain and take on these jobs. However, some training programmes are tied to formal qualifications. For example, an NTC programme has a pre-requisite of at least two O-level subjects. Many of these tie-ups are unnecessary as they are not linked to the ability to perform the jobs which the employers need the employees to do so. The Government needs to work with the employers to cultivate practices that identify skills and talents beyond just pure academic qualification requirements.

The Chairman: Mdm Ho, you are just in time to speak. You have six minutes.

Occupational Health and Safety Framework

Mdm Ho Geok Choo (West Coast): Sir, we are just into the third month of 2005, and there are already a total of eight industrial accidents, mainly from negligence, non-compliance and/or a lack of understanding and knowledge of safety procedures.

It seems to me that we have yet to evolve a culture on industrial safety and health. To inculcate such a culture, all stakeholders, from Government to employers, unions, employees as well as

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Singaporeans in general, must take self-ownership and responsibility for the safety of their living environment. I applaud MOM for its timely announcement of kicking in a safety culture movement in Singapore.

Sir, despite calls by the authorities for greater safety compliance and educational programmes to promote safety awareness, especially in the last one year, we are still bombarded by frequent outbreaks of industrial accidents. There seems to be a lack of discipline and self-will by stakeholders. This is often contributed by our "bo chap" attitude, eg, "It would not happen to me. It is too ' ley chey' to follow the procedures. Rules are meant to be broken. It is about working smart, not hard, or else how to achieve the KPIs that management has set for us?"

Sir, stakeholders must be responsible for minimising and eliminating risks. To complement our educational approach towards inculcating a safety culture, we need to move towards an enforcement approach where the "carrot and the stick" may be necessary. It is timely for us to make a determined effort to break through our lethargic safety culture mindset and embark on a pro-active effort in managing safety in Singapore.

A culture does not evolve instantly, although I know in Singapore we have a knack for instant solutions. To evolve a safety culture, we need to tackle the source, identify the key owners and establish a performance management framework where we must instil disciplinary actions as well as freely dispense incentives for rewards of exemplary behaviours.

Sir, the Government, in reviewing its legislative framework, should establish working committees with industry stakeholders for constant feedback and sharing

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on safety issues. In fact, the copy-cat approach is a very powerful approach for people to learn. Very often, being aware of what others are doing will spur us to emulate. As such, it will be good if we can learn more of how other countries go about managing their safety culture. Without doubt, embarking on a safety culture movement in Singapore will mean investing efforts, time and resources.

How can we ensure that companies will do this? Will MOM provide financial incentives to encourage companies to embark on this safety culture movement? What will MOM do for those companies that do not comply? What process would be put in place for auditing the safety procedures so as to sustain the safety culture movement in Singapore? How can MOM involve stakeholders in reinforcing the education of stakeholders on safety awareness? Is there a timeframe and a standard that will be set for stakeholders to achieve? How will MOM go about attaining these KPIs?

Sir, I would like to ask whether MOM would be reviewing the Factory (Safety Management System) Order (SMS), which is an important prerequisite for a successful establishment of the OSH Framework. I note that the current SMS is not all encompassing, as not all the factories are covered. What is the rationale for only covering these three categories of factories and limiting to only 100 or more persons for factories engaged in the manufacture of metal products? In fact, I urge MOM to consider instituting a parallel OSH framework for non-factory type of workplaces, such as shopping malls, hawker centres and the markets.

Next, I note that section 72 of the existing Factories Act is silent on the participation of unions in safety committees. Section 72 merely states that:

"The occupier of a factory, in which 50 or more persons are for the time being employed,

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shall establish a safety committee on which both employees and management are represented for the purpose of keeping under review, circumstances in the factory which affect or may affect the safety or health of the persons employed therein."

This means that in unionised environments, both the unions and management can reserve the right to decline the unions' membership in the Safety Committee.

Sir, the success of the OSH framework in an unionised environment will hinge on the equal participation of unions in Safety Committees so that unions can partner management to ensure compliance of safety measures and outcomes and to jointly manage cases of non-compliance. Can the Ministry clarify the intention of section 72 in keeping silent on union participation for unionised environment?

Sir, I had mentioned earlier about the greater costs that would be incurred as a result of driving a safety culture movement. One important constituent that we must not leave out in this whole exercise of inculcating this safety movement are the doctors. One of the stipulations by MOM for Workmen's Compensation claims is that all injuries incurred by employees whilst at work resulting in four or more days of medical leave will be classified as industrial accidents.

Sir, there are reported cases of small index finger cut or fracture that have resulted in medical leave ranging from three days to 30 days prescribed by doctors. One wonders on what basis did the doctors involved prescribe that range of medical leave. Obviously, there are differing standards of integrity and vigilance from doctor to doctor.

Every day of absence from the workplace results in double cost to the

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organisation, in that the absent employee is still being paid a salary and somebody else has to take over his job. So, I would like to check whether MOM will indeed be involving the Medical Council in this aspect.

Dr Ng Eng Hen: Sir, because the Occupational Safety framework which I announced is important, I would like to restrict my first reply specifically on that subject. I thank Members who have spoken during the COS as well as in response to the Ministerial Statement and, in the light of their comments, let me elaborate on some of the changes and answer their specific queries.

I agree completely with Mr Yeo who said that we need to take a new approach to create a safer working environment for our workers. If you remember, in the chart that we have distributed, Chart 1 clearly shows that our current approach has reached a limit in improving the accident frequency rate. In other words, our improvements have tapered off. We cannot break through that floor if we just do more of the same. This has been the experience of other countries and they too had to change their framework before they saw improvements. Their experience is consistent with our present situation, where continuing with what is commonly known as a prescriptive legislative framework and one dependent predominantly on the regulator will have diminishing results. In other words, you wait for me to tell you what to do before you do it, it will have diminishing results. You can get very good results when you started on a very low safety base, low standards, and you need this prescription. But up to a point when systems have been in place, it really is about ownership. Therefore, we need to put in place a radically different framework based on the three principles which I had earlier outlined in the Ministerial statement.

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(1) We must involve all stakeholders to reduce the risks at the source;

(2) Industry must take greater ownership of safety outcomes; and

(3) There will be higher penalties for poor safety management, not only after accidents occur, but even before accidents occur, so that you are encouraged, facilitated and incentivised to bring your safety systems up to the mark.

Past accidents are clear examples why the old framework has its limitations. Take explosions arising from hot works in oil tankers that come for repairs, as an example to start. We have very strict systems, and you can well imagine why - to prevent explosions when they are doing welding works and when they are trying to clean the inside of an oil tanker. But ask yourself this: do we really need laws or regulations to tell you - the worker or the management - that you might cause an explosion when you are operating a naked flame in an enclosed space that was just previously filled with oil? It is intuitive. Any company and its workers with an ingrained corporate culture that really puts safety first would take all necessary precautions because they recognise the inherent risks. Some would sensibly even choose to go beyond the prescribed regulations. To protect themselves and their colleagues, the workers themselves would take all steps practicable to ensure their own safety. They would certainly exercise self-protection and make sure that the oil sludge has been cleared before starting hot works.

Or an innovative company would seek new ways and technology to reduce the risks, ie, can you weld with other techniques or under different circumstances? We can have laws, regulations, prescriptions and inspections, but out of a thousand times, if you do that work and you

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slip in vigilance once, that is it. An explosion is caused and deaths have occurred. Without that ingrained safety culture, that is the reason why our fatalities will reach a particular point - we need to move beyond that.

1.00 pm

A second example - this time it is not of a big company. Some may say big companies have good systems, so if you prescribe laws, they will follow. Let me give a second example of a small company. This time, one that dealt with making signs. It happened in Toa Payoh Industrial Park in January last year - four died, two injured. The operator was using an oxy-acetylene torch that had an oxygen cylinder contaminated by flammable gases. The gases mixed, went back into one tank and blew up. A flashback occurred which led to the explosion of the oxygen cylinder, because an effective safety device to prevent this was not used. Again, this is a risk commonly known. It makes sense that you do not mix the two. Clear written regulations, you can have laws, but until all workers take ownership for their own safety, accidents will occur. Would it have helped if we had regularly said that we want to inspect that safety device, every six months? It might. But what about in between the six months? How about three, two or even one month? Even if we inspect the device, if you do not use it properly, are you sure that accidents can be prevented? It cannot, unless it is internalised by workers, until they recognise that there is a safety culture that is required.

I agree completely with Members who have said that we need a framework that shapes the correct mindsets and behaviour. If I may use the problem of construction workers falling from heights, which is one of the leading causes of on-site injuries in Singapore. This New Occupational Safety and Health (OSH)

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framework will get industry to think more fundamentally to achieve the outcome of zero falls, which some Members have called for. Instead of just complying with regulations which say that you must have sufficient barricades, harnesses, scaffolding requirements, developers and contractors should be instead asking: in the first place, why does the worker have to work higher above than the ground to do his job? Is he doing something that can be done on the ground, then hoisted up? Has he been given the proper training in a language which he understands? Is the safety equipment adequate to protect him and enable him to do this job? These questions I have asked go beyond prescriptive legislation by the Government. To be more effective, we will have to involve all stakeholders and get them to take ownership of outcomes and reduce the risk at source.

Some Members have painted a rather not so charitable view of employers. Is this wishful thinking? Can we get employers, management and workers to behave like this? Are we just over-shooting these airy-fairy ideas? Not at all. I mentioned about the last study trip to a few countries. During our trip, my delegation spoke to leaders in the construction industry. I was completely impressed by their safety records and their attitude to safety. Many of them, on their own, have gone beyond the law. They operate what we call zero tolerance policies towards accidents, not because the law requires it, but because it is being internalised, even though in some circumstances, it means that they have to increase the operating costs.

For example, one UK company informed us that on their own, they initiated a comprehensive safety programme in the 1990s called "incident and injury free", not "fatality free". Incident and injury free which does not tolerate any level of accidents, no matter how minor or infrequent. Their company, not only for themselves, also requires similar levels of

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commitment of their sub-contractors by making a good safety record an important aspect of the tender requirements. When they sub-contract, their sub-contractors must also adopt this zero incident and injury free record. In addition, this company's policy is to seek a commitment of their safety philosophy from clients as well, not only of those whom they put out contracts to. They say to their clients, "If you want us to work for you, you too must adopt this policy." So that there is a buy-in and support from their developer. If the developer says, "I want you to tender for this project." They say, "I have to build in a safety margin." The developer says, "No." They would say, "Then I would not tender for it." That is that. They are still profitable. In fact, they are one of the leading companies in the world. Because of ownership and a correct mindset that respects life, they have gone beyond the prescribed law.

Another company we visited shared with us - this was a clear and unequivocal commitment that was exercised daily. It tested their commitment. They just basically said, "We will withdraw the bonus of the manager of any site with a fatal accident." That is it. There is no need to give reasons. As long as there is a fatality, bonuses are withdrawn. And yet, these companies are profitable and secure a significant market share of contracts. This tells us they are serious about incorporating a safety culture. Dr Amy Khor mentioned about what it does to business cost. This tells us that incorporating the safety aspect into a business model does not make a company less viable. In any case, it may not impact on the business cost of the company if it does not have high safety standards. That cost has to be borne by others. It affects employees as the morale dips, workers delay, property is damaged, bad publicity affects future contracts.

For example, take the Nicoll Highway collapse. Did it not cause disruptions to

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our routines? Did motorists not have to go through other ways and pay ERP? That cost was absorbed by others, perhaps not by the companies. We need companies to internalise that cost. Our local companies need to take this on-board and learn from them on how a progressive safety culture can be achieved.

Did these companies that we visited always start with this premise? The answer is no. They were no different 10, 15 or 20 years ago, ie, the framework changed the culture. If you like, it is like our anti-littering laws or queues in bus-stops. After a while, we internalised that culture and we have to start. Mdm Ho Geok Choo is spot-on when she says that the rate of industrial accidents would only fall significantly if all stakeholders in the work process have a safety culture. And this new framework will foster a change in culture and mindsets. It will take time but it can be done. The new framework will get all players moving in the right direction.

First, the legislation will facilitate this culture change. Members have asked how does the framework work. Legislation will facilitate this cultural change. It is not a paper exercise. We will replace the current Factories Act with the new Workplace Safety and Health Act later this year. This new Act will clearly define responsibilities and, more importantly, accountability. Simply put, those who create the risks will be held responsible to reduce the risks. The present liability regime is centred on the occupier of a factory or the main contractor of the construction worksite. And liability is only incidentally placed on other workplace parties such as employers, designers, suppliers, etc. When we change the law, we will expand this accountability framework following the regime in other developed countries. Every person at work then becomes responsible for his

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own safety, for those under his charge and those he affects through his work. Let me just say that safety, after we change it, cannot be relegated to an after-thought or a staff function. It will become integral to every person's work and has to be part and parcel of the line functions.

The construction industry, in particular, poses unique challenges to health and safety as each site involves many contractors, suppliers, designers, etc, for each phase of work. To further reduce and mitigate risks along the whole process chain, from design to maintenance, we will begin with the construction industry where we will require health and safety plans. The health and safety plan is an actionable plan. It tells me what you are going to do, with specific targets, taking into account the operational schedules of the project. These plans will be checked by qualified safety professionals to ensure comprehensiveness and compliance even before your project can get started.

Mr Yeo has urged me once again to extend the scope of the legislation to cover more industry sectors. I agree and the new Act will allow us to extend the coverage to all sectors in phases. The pace and timing will be decided in consultation with industry partners and unions and, sensibly, we will start with the sectors that have the most fatalities and accidents.

Second, self-regulation is the main tool to instil ownership. In order to build and ingrain a safety culture it would not evolve spontaneously. No country has seen it where businesses say, "Let us be safety conscious." You really need a framework to ingrain this. And we will put in place the following structures to strengthen self-regulation:

First, a Workplace Safety and Health Council with executive powers. The Council will comprise industry practitioners and it will set, continuously update

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health and safety standards and practices for each industry sector. It will evaluate accidents when they occur and suggest new ways to improve. It will make safety records of employers available to the public and insurance companies. The Council, as I have said, will produce regular safety reports, provide more information to industry for their own self-regulation and track Singapore's progress in reducing our occupational fatality rate. Once we have set those targets, they will not be forgotten because there will be someone putting up a report card every year, every quarter or every month.

Second, we will mandate risk assessment safety management systems and health and safety plans. Workplaces will have to specify their safety outcomes, identify the risks, set out customised plans, systems and resources to mitigate the risks. Mdm Ho Geok Choo has called for legislation for safety management systems to be reviewed, to include workplaces other than those currently covered under the Factories Act. I agree. The Workplace Safety and Health Council will be tasked to identify the sectors that require this and recommend how it can be done effectively.

Third, more responsibilities and powers for safety officers. MOM inspectors will leverage on the current system of safety officers to help detect and prevent safety problems. We will give safety officers more powers to stop work. If you think that it is really unsafe, stop it. Duty will also be placed on them to report certain lapses to the Ministry. So if they are fearful of stopping, tell us and we will stop it.

Step up training and evaluation for workers on safety. I agree that this is integral. MOM will work with industries and unions to enable both foreign and local workers to have appropriate skills and knowledge to do their jobs safely. I

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want to make it clear because Mdm Halimah has asked whether this means that we are pushing responsibility. The answer is an unequivocal no. I want to make it very clear that strengthening self-regulation and moving towards a goal setting legislation does not mean that we will leave it to industry to independently set up their own standards and practices. MOM, in consultation with the Workplace Safety and Health Council will have to set high standards in order to meet our aims of reducing fatalities. We will set the target and even the pace in consultation with them. But as much as Government wants or wishes to, we cannot improve safety standards alone. We have to get industry practitioners to take ownership and under this new system, management and workers must show proof that their safety plans and systems have adequately addressed and reduced risks at their workplaces.

Neither will self-regulation mean that MOM's involvement will be reduced. I want to categorically assure Members of this. Indeed, this new framework will require MOM to devote more resources to safety, as it must have. MOM will increase our enforcement force and build new capabilities. This is related to the third point that enforcement will have to keep pace with changes within the industry. MOM currently has 100 inspectors, regulating about 16,000 workplaces. I know some Members will be very quick to say, "Why do you not increase to 10,000 inspectors and create jobs at the same time?" We will increase it to what is practicable. But work processes have become more complex as we dig deeper and build higher and as technology and manufacturing and services advance. The range of chemicals, biological and other hazardous materials in use has also increased.

So in line with the new framework, our new enforcement philosophy will not only focus on non-compliance with technical requirements, instead we want to raise

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the overall standard in partnership with industry, by helping workplaces identify their systemic weaknesses. We will also upgrade training of safety officers within the industry. We will need to set new performance benchmarks to professionalise this industry to help in our enforcement. MOM officers will leverage on the network of safety officers to extend our reach to workplaces.

1.15 pm

But, as always, appropriate penalties can help shape behaviour. We should not only wait until an accident has happened before we impose hefty penalties or jail negligent offenders. This would put employers out of business, or cause employees to lose their jobs. While this may still be necessary to punish negligent persons, it occurs after the damage has been done. Rather, we would need to impose stiff penalties for workplaces with safety systems that are not up to the mark. This will help them to improve over time and prevent accidents. But I want to assure the House that we will calibrate our enforcement actions, including the use of composition fines, according to the circumstances of each case. While, as I have said, personal accountability will be strengthened, this will be done in a considered manner to ensure that the responsible parties who have taken reasonable steps need not be unduly alarmed.

The intention is to punish, as Mdm Ho calls them, " bo chap " management that really do not put into place safety systems. For certain employers who are not quite " bo chap ", which means "don't care", but rather " boey heow ", "don't know what to do", and this may be in some small enterprises, we will ensure that there is sufficient expertise on the ground so that they too have no excuse not to comply.

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I think Mr Yeo Guat Kwang mentioned a particular aspect about SMEs and I agree that this is a particular sector that we may need to focus on because they just may not have the capability - a few men operation. We have looked at how other countries, which too have SMEs, have regulated it. There are a number of ways they could do it. We will actively reach out to SMEs. First, for example, companies that lack the resources, we will devise safety methods and practices, regulations and codes, that they could follow. Second, we will ensure that they are represented in the Workplace Safety and Health Council, so that they could take ownership. Third, we will ensure that there is effective training and information available to them.

In UK, for example, the Health and Safety Executive, the equivalent of our Workplace and Safety Health Council, employs mobile exhibits to go to these SMEs and teach them how to do it. Such measures could help to spread the OSH message. We will also study other options.

Employers in Singapore, as some Members have mentioned, would be concerned about how this new framework will affect business cost. As I said, for those that have spent time and resources building up good safety and health practices, I do not expect cost to be increased much. The new requirements will increase business cost for unsafe workplaces, as it should, because they should have paid attention to the poor safety management in the first place. These increased costs are necessary to safeguard lives and property. They would level the playing field for all companies to compete fairly for contracts. In other words, companies should get the message that when they bid for contracts, safety standards and practices cannot be compromised. This is the right way to do it.

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Should we also build in incentives, as Mr Leong Horn Kee and Mr Yeo Guat Kwang have suggested? I think that is eminently sensible. As I mentioned, LTA already has this in principle. LTA has a safety performance scheme which rewards contractors with an additional 0.5% of the contract sum, subject to a cap of $1 million, if their safety performance and management are assessed up to the standards of expectation. So the principle has been set. It is already in practice. We should expand this.

I have so far concentrated more on employers' responsibility in my statement earlier this afternoon, and I want to balance this by enunciating the role of workers. Some Members have talked about training.

The Swedes, when we visited them, shared an interesting observation with us, which is that, by and large, safety records of workers from a particular culture stay with their workers wherever the worker is working. For example, Swedish construction workers working in other countries carry their good Swedish safety records and culture with them, even though they may be working in a country with even less developed safety laws and where enforcement of the rules may be more lax. The point is that true success is not measured by the number of laws we enact, regulations we prescribe or how high the penalties are, but by the level to which safety standards are understood and internalised by those whose lives are at risk. In short, only if we achieve a change in the safety culture among our workers and even the foreign workers amongst us.

I acknowledge Mdm Halimah's point that it is more difficult to inculcate a safety culture when a large proportion of the workforce is made up of foreign workers. As she said, there are language difficulties, different work custom practices, and they have been used to a different standard. But let me just say

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this. Whether they have been used to low standards makes no difference. If the building collapses, people would be injured or killed. If accidents occur, all who are in the path get injured. So we must ensure the safety and health of every worker, and this is possible. Some construction companies in Singapore, like Foster Wheeler, have very good safety records. They operate in Singapore with foreign workers, have a very high percentage of foreign workers and they are able to do better than other companies.

Members, especially the labour MPs and NMPs, have asked for more focus on developing our workers. I agree. For this, I would want to seek their active involvement, with the support of unions and other employee organisations to educate their workers, not only on the technical aspects, but also their right to a safe environment and their responsibility not to endanger the lives of others.

My Ministry will look at ways to encourage employers to keep more experienced and skilled workers who have the proper attitudes towards workplace safety. Mdm Ho asked whether we could entrench the union's right to participate in Safety Committees. She wanted an elaboration of section 72. The principle in section 72 is that workers need to be on the Safety Committee, and I think that is right. It has been silent on unions because it has taken the larger framework of workers, unionised or not. I think on principle, that is correct. Even the unionists would agree with me. Even for those who are not in the unions, they do not say that they should have less rights. They are saying that they could represent their rights better. All workers should have equal rights.

Currently, employees are given the right to nominate their representatives in the Safety Committee. And for workplaces that have unions, I think it makes eminent sense that the unionists should

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be on the committee since they would be more effective in mobilising other employees in disseminating important information. I would strongly encourage this. But for the Act, it rightly is principled that workers need to be represented. As mentioned, we will step up training and evaluation for both local and foreign workers to ensure that they have a satisfactory level of safety knowledge.

For specific work processes where workers need to handle combustible or potentially explosive materials, mandatory safety courses and tests would be required. For this, I hope that the unions will take a more proactive role in safety training and testing. With their wide reach to members which cover the entire span of industries in Singapore, I feel that they are ideally positioned to perform this effectively.

We have set a time frame of 10 years to halve our occupational fatality rate. Some Members say, "Why so timid? Why not move faster? Can we achieve it earlier?" I sincerely hope so. But realistically, as I said, these radical changes in our framework will take time to filter through the entire system. As Mdm Ho Geok Choo says, "We are all used to an instantaneous culture". I would not underestimate the challenges. I have given you some examples. Until and unless I can reach to that last small factory in the Toa Payoh Industrial Park, to get them to change, where there were four deaths, it would occur and it may occur again, unless we get them to internalise. So, yes, I, above all, want this to become a reality. Realistically, this time frame helps us to match and to evaluate our progress. I certainly hope we could do this faster.

Looking at our past record, we took more than 10 years to halve our industrial accident frequency rates to what we have today. The top European countries, as I mentioned, took 30 years, much longer.

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And to halve our current occupational fatality rate within 10 years is a stretched target. But I agree with Members fully that we need to improve our safety standards as quickly as possible to prevent the further loss of precious lives. I am confident, as we have done to meet many other challenges in the past, with the collective efforts of employers and unions, we will succeed.

Job Opportunities for All

Assoc. Prof. Koo Tsai Kee: (In Mandarin) : Mr Chairman, Sir, last weekend my heart was heavy when I read a letter written by one Dr Lim to Weekend Today . She is a PhD holder from an Australian university. When she returned to Singapore to look for a job, she wrote more than 1,000 letters, but still could not get a job. She lamented that Singapore did not want her and she had no choice but to go back to Australia. She remarked that she is no longer wanted in Singapore. I would like to console her that tomorrow will be better. For that matter, today is already better than yesterday. In fact, today's economic situation is much better than what it was a few years ago.

I live in the university campus and I have a lot of contacts with the university students. Before the year 2000, the graduates left the university with heavy hearts because their job prospects were very dim. But in 2001 and 2002, it was still difficult but they somehow managed to get a job. Right now, it is much better. Most of the graduates managed to secure a job within six months of their graduation. They have a lot of chances to be called up for interviews. To Dr Lim who wrote more than 1,000 letters without receiving a reply, I would like to console her. I have a resident who came to see me at the meet-the-people session and told me that she had written some 1,000-2,000 letters, yet remained unemployed for 2 1/2 years. Last month, I met her and I asked her whether she had found a job. She replied in the negative. But she

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managed a smile and said that the situation seems to have become better. She was, at least, called up for interview on several occasions. She has not come back to see me nowadays and I believe she must have found a job already.

I think the economic situation is in a better stage now and I think credit must be given to the Government, NTUC, the Minister for Manpower and his officers for all the good things they have done. I am quite sure our Minister has a lot of tricks under his sleeves. He would have all sorts of measures to improve the situation even further. In fact, there are a lot of professionals in the 40s and 50s who are not without skills or experience, and yet are retrenched. It is a bit more difficult for them to find alternative jobs. Does the Minister have any policy to help them? They are specialists. They do not need to be retrained. They just need the opportunity.

Thirdly, I would like to ask the Minister what is the projected unemployment rate this year. Dr Lim said that she wanted to return to Australia, but even advanced countries like Australia do not enjoy good employment rate, even though their economy is not bad. Their unemployment rate is about 6-7%. In Singapore, the unemployment rate is just 3-4%. I would like to know what is likely to be the unemployment rate in Singapore this year.

Local Workforce Competitiveness

Mr Ong Ah Heng (Nee Soon Central): (In Mandarin) : Sir, experience tells us that, as the economy progresses, there is always a group of people who find it difficult to catch up in their workplace or rejoin the workforce. A man-in-the-street would tell you that this is not a new problem. It has been in existence since a long time ago, but it is just that the situation is more acute now. He would tell me, "My father used to tell me the same problem. As you get older you tend to be

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slower in all aspects. You are not as agile and as skilful as the young people, and yet you are more expensive. Of course, the boss does not want to employ you any more. So what can we do? This is life!"

I think it is better to have some money in the pocket now because you do not know when you will be retrenched or retired. As the Chinese used to say, "The waves at the back push the waves in front ahead", or as the older worker would say, “The world today belongs to the young." In fact, older workers of every generation will say the same thing. I think we all take turns to say this as we grow older. So as our economy becomes more competitive and the pace of change faster, structural unemployment will become a serious problem, as it is the case now.

It is the same group of workers - the older, less competitive and yet more expensive ones who are reaching the age of late 40s and early 50s. The less educated or skilful ones are the most vulnerable workers. If the pace of change continues to quicken, structural unemployment would happen even to younger workers in the early 40s and late 30s.

To the rank-and-file workers, the Re-employment Assistance Programme (REAP) and the ComCare Fund introduced by the Government in January this year are important programmes to know. I think more efforts are required to publicise these programmes so that they can really serve their purpose. There are basically three ways to tackle the structural unemployment problem. First, we must find good jobs locally, and not just those low-end jobs, that would suit the physical conditions of older workers. At the moment, we have identified 12 areas where the jobs could be redesigned to suit the older workers. I think this is a move in the right direction. Secondly, we need to work with the employers to redesign

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these jobs so that they will pay better. Thirdly, we should also consider whether the pay of these jobs is adequate for the workers to meet their basic family expenses.

Of course, these are no easy tasks, particularly to ensure that the workers have enough to meet their cost of living. It is easier said than done. I suggest that for those workers who are willing to help themselves let them have access to the ComCare Fund to tide over the transition period. And then they can stand on their feet as they progress to better salary scales in their new jobs.

1.30 pm

As for those who are still unable to cope with the cost of living with their meagre salary, I suggest that we set up liaison groups or committees comprising grassroots leaders at each constituency to act as mentors to give advice and moral support, keep constant contacts with them and understand their needs, and to follow up with the necessary aid from the appropriate agencies, such as CDC, ComCare Fund, grassroots associations, welfare fund or some financial grant.

I think we need to boost their morale and confidence so that they can have the determination to stay employed and to accept training so that their families would have a better sense of security.

Workforce Development Agency

Mr Alexander Chan Meng Wah (Nominated Member): Sir, the Workforce Development Agency (WDA) was formed as a result of one of the recommendations of the ERC to address the retraining needs of many Singaporeans who lost their jobs. Many of these retrenchments happened during the economic recession when

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many companies down sized, right sized or relocated their operations to lower-cost regions. Although a significant number of such unemployed workers came from manufacturing, no segment was spared. Blue and white-collar jobs, production operators to senior managers, younger and older workers, both local and foreign, were affected. So the WDA now serves as a new age adult education board, an agency that we had in the earlier time. Would the Minister for Manpower enlighten us how has the WDA performed since its inception and share where it has met with good success and where it faces challenges?

Sir, while the recent past job losses arose from global economic conditions affecting MNCs and their local supply partners causing many to shed parts of their workforces, I anticipate that the future structure of the economy in Singapore will be one weighted less on MNCs and more towards local companies. Under this scenario, many more Singaporeans will be working in local companies, many of them starting life as young entrepreneur-led profit-seeking organisations. By their very nature, they will have to develop their own business systems largely from scratch, not imported from parent headquarters as the foreign MNCs gave us in the 70s and 80s. Singapore companies will also have to learn to grow from small to medium to large, learn to address domestic, then regional, then global markets, and learn to handle the key functions of business, manufacturing, marketing, product development, logistics, administration, etc. In a very real sense, Singapore will be forced to remake its economy at the firm level and redevelop all these company skills again. It is going to get worse before it gets better.

The training needs of Singaporean workers will shift from training provided by larger companies to training where the individual employee has to do more by

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himself or herself. Our manpower training expenditure experience clearly shows that large firms which have mostly been MNCs, GLCs, publicly-listed local companies and the Government agencies themselves are the better people developers, spending more per head count than smaller local companies. We need to anticipate this possible change in the structure of the manpower scenario of the future. Is it therefore possible that the WDA and other private and public training agencies will have to deal not just with training of more mature displaced workers like now but also new job entrants and even management staff as well? I wish to ask the Minister whether MOM has begun to anticipate what would be the future strategies and areas of emphasis for WDA, and how we can use the opportunity to enhance the success of entrepreneurship in Singapore.

The Chairman: Dr Ahmad Magad and Mr Ahmad Khalis are not here. Mr Low Thia Khiang.

Training for Employability

* *Mr Low Thia Khiang (Hougang): Sir, the Prime Minister stated on Sunday that, going forward, we must expect higher unemployment, amidst a backdrop of loss of 5,500 jobs from Maxtor. The economic growth of the past brought jobs and sense of security. The economic growth of the present brings structural unemployment and fear. To put things in another perspective, the job losses in Maxtor in one day in 2005 equal almost 50% of the total job losses in the previous year 2004.

Sir, I would like to seek clarification on MOM's report on the employment and manpower situation. It was stated that a total of 66,200 jobs were created in 2004, according to MOM's preliminary estimates. However, it was also estimated that many of the jobs created which grew to 23,300 in the final quarter of 2004

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were in services and were due to seasonal hiring. I would like to know how much of the job growth will disappear once the seasonal hiring is over.

Next, we all recognise that older and lower-educated workers are most vulnerable to retrenchment and structural unemployment. We also know that training plays an important role in re-employment. However, in the 2004 labour survey findings, there were a number of factors that were considered as motivations or barriers to older workers' participation in skills training. Some of the factors are affordability of fees, location of training centres, information on the courses, convenience of the time of the courses, relevance of the course to the improvement of their career prospects, pace of the course and, more importantly, also the language used in the training.

I would like to ask the Minister what measures have been taken so far to mitigate the adverse factors of taking up training and to address the needs of the older workers. Sir, these older workers in the 80s and early 90s helped to build the Singapore that we have today. We owe them much more than to leave them to the fate of the market. If creating opportunity is to mean anything beyond political platitudes, it must mean more employment opportunities for this particular group of Singaporeans.

Foreign Worker Levy

Mr Seng Han Thong: Sir, in most policy changes, it is difficult to please everyone. In the case of the foreign worker levy, it is just impossible to please anyone. If the levy goes up, employers will complain about business cost going up. If it is adjusted downwards, workers are concerned that their jobs will go to foreigners. PM Lee has assured this House that even if the new $500 levy for companies exceeds the current ratio, there would be a limit in the new

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dependency ratio. So, is this latest increase of foreign worker levy too soon, as the employers claim? In my view, it is not an issue of timing. It is a question of whether we have enough local skilled workers. If we do not, then employers should be allowed to get more foreigners, as they are here to create growth and jobs. If we do have enough skilled workers, then employers should simply employ local workers rather than foreign workers.

Sir, the real issue is this. There are jobs, but there are not enough skilled workers in certain sectors. And there are the unemployed who cannot find a job in any sector. We call this a "skill gap". In Chinese, it is said, you ren mei zuo gong, you gong mei ren zuo. Thus, NTUC, with its tripartite partners, has embarked on work redesign and work recreate, so that there are more jobs available for Singaporeans, especially the unemployed. So the theme of NTUC May Day celebrations this year is "Creating Opportunities for More Jobs".

To create opportunities, we need to be creative and flexible. In this respect, I must commend the good work done by the Singapore Teachers Union together with the WDA. With their concerted efforts, creativity and flexibility, the Teacher Assistant Scheme has been launched, and 74 older unemployed Singaporeans have been trained to be Teacher Assistants, and they are being placed at schools near their homes. This is a good example to show that as long as we have a heart to help Singaporeans find jobs, jobs can be created. If we continue to be creative, if workers continue to be flexible, more jobs could be redesigned and recreated. Then the foreign worker levy will not be such a sensational issue at all. It will just be a simple issue of supply and demand. Thus, I would like to urge the WDA to continue to be flexible

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and creative, and work closely with the unions so that more jobs could be created for Singaporeans.

Mdm Ho Geok Choo: Sir, here, I would like to declare that I work in the MRO (Maintenance, Repair and Overhaul) industry.

Sir, foreign workers have either unique skills that are not readily available or they take on jobs that Singaporeans shun. Nonetheless, given a choice, companies would prefer to hire locals, because they do not have to comply with complex and time-consuming immigration procedures. I note that the underlying purposes of the foreign worker levy are really to control the number of foreigners in Singapore and to prevent the foreign workers from depressing wages of Singaporeans. However, there are many companies, more specifically in the aviation industry, that are highly dependent upon specialists from overseas. These might include aircraft technicians and engineers.

In the MRO industry, the skilled aviation personnel from overseas will help the booming aerospace companies to meet their increased manpower needs and grow their business. At the same time, such an interim measure will allow MRO companies to hire the locals who meet the criteria and train them to be aircraft technicians or engineers. Therefore, for an exclusive sector like the MRO with its special requirements, there is a void at the moment with regard to local talent and where wages are not low for skilled talents. I hope MOM will review its policy on the foreign worker levy for this group differently.

Sir, to ensure that there is no abuse, the MRO companies can be monitored to ensure that efforts are made to train up locals to fill the vacancies. The problem is that the gestation for training up a competent aviation skilled talent takes a long time. It takes about 1-3 years to train

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technicians and engineers to become skilled aircraft technicians and engineers respectively. Following this, they will have to undergo at least six months OJT before they are fully competent. Hence, for companies that have rapid expansion plans, the reliance on immediate foreign specialists is extremely acute.

MRO companies are looking into various innovative ways of churning out skilled personnel. In this instance, it takes the form of wooing polytechnic and ITE graduates to apply for these positions with the promise of putting them through inhouse programmes to train them up for the necessary skills. Another way is to tie up with ITE and polytechnics for tailor-made syllabus that would train interested students for a career in the MRO industry.

Some companies even go to the extent of providing scholarship for their final year programme. Attempts are also made to convince CAAS on the need to waive certain requirements for additional examination type courses that CAAS typically administers before issuance of any certification or licence to these personnel.

Sir, there is a whole host of options that MRO companies have tried to beef up our local talents for these jobs in the MRO industry. But to-date, we have seen little success because of the tough environment that these jobs reside in. Here, I would like to call on the agencies to do more in terms of financial support for the conversion training of local personnel. Although there are various programmes in place, unfortunately, they come with various conditions that make it difficult for the MRO companies to tap them. For example, schemes are targeted at building up skills in cutting-edge technology, rather than in training new entrants on the specific skills set required by the MRO companies.

Sir, I am heartened that WDA, EDB and the Association of Aerospace

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Industries (Singapore) have formed a partnership to drive local workforce development in the aerospace industry in April last year. However, given the long lead time to train skilled workers and until we find a solution locally, there is need for foreign talents for this particular industry. So the decision to increase the foreign worker levy from $50 to $80, eventually rising to $100, as well as the higher levy of $500 for companies that exceed the dependency quota, will have an impact on the business cost of these companies. These industries contribute to Singapore's GDP. The imposed levy hikes will undermine their profit margins. For these reasons, I would like to propose that the levy should not be imposed across the board. Instead, I would urge the Government to consider a fencing-out approach as an alternative to raising the foreign worker levy across as a blanket policy. This would mean that for such companies: (a) the total increase in the levy hike could be spread out over 3-5 years so as to enable these companies to better cope with the increase and to identify locals to be trained up; and (b) the 'exceed quota' dependency levy of $500 to be waived for these companies.

In summary, I strongly

urge that the Government will consider alternative options for some specific industries, as in the MRO. No company, or indeed society, that seeks to be globally competitive can afford not to seek a competitive option to meet its business growth. Can MOM review its foreign worker levy accordingly for these specific industries?

1.45 pm

Dr Ng Eng Hen: Sir, I thank the Members who have highlighted some of the manpower challenges that have resulted as the economy restructures. Members have asked what the Government can do to help Singaporeans overcome these challenges as well as provide information on what opportunities exist.

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First, let me thank Assoc. Prof. Koo Tsai Kee for his comments. He was optimistic and rightly so. Because I agree with him that while competition is tougher with globalisation, Singaporeans can face the future with optimism. The good news is that the sacrifices we have made through wage restructuring and CPF cuts have made the difference. It has not been a jobless recovery.

Mr Yeo Guat Kwang asked for the data on local and foreign employment changes for the past five years, and I have circulated the charts. I think it would be instructive. Because the figures over the last few years tell us at the macro economic level, what has been going on and what our policies have been doing. Many Members in this House would agree that 1998 to 2004 were not exactly easy years. They were difficult years. But even through this difficult period, net jobs were added.

As Mr Low Thia Khiang says, the preliminary estimates show that our overall employment in 2004 grew by 66,200 jobs. Locals took up two-thirds of these jobs, while the remaining one-third went to foreigners. As you can see in the graph, total employment went up: from 1999, local employment went up; foreign employment went down. These trends indicate that our policies, including our foreign worker policy, are working - jobs have been created for Singaporeans. As the chart shows, this is due to a large part through our judicious use of foreign workers, which means that, in difficult times, as less foreign workers were needed, their population shrank; while the local workforce, if you see in the chart, continued to grow, albeit at a slower pace. So even in 1999 to 2002, the local workforce grew. As Members remember, there was September 11, the Bali bomb blast, SARS. Even through these difficult periods, there was net employment

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creation for locals. Foreigners took the brunt of job losses. When the economy rebounded, it allowed companies access to foreign workers to meet demand. So in both difficult and good economic circumstances, the majority of jobs went to Singaporeans.

Overall unemployment has now also fallen to 3.7% as at December last year. This is a substantial improvement from the peak of 5.7% in September 2003. We have mentioned that consistently they are preliminary estimates. But the labour report will come out as per international convention, not later than 15th March, where we will show that improvements were generally across the board, affecting most age and educational groups. Even for the elderly, whom we keep speaking about, unemployment has fallen across the board.

In September last year, job vacancies rose to a three-and-a-half year high. Private sector companies that were surveyed had about 18,900 job vacancies. This was about 5,800 more jobs compared to a year ago.

As a result, our school leavers this year have found jobs soon after graduation and starting salaries have been maintained. Many of you would have read this. Last year, 91% of our polytechnic graduates found employment within six months of completing their examinations. Their average monthly starting salary for full-time permanent employment was about $1,620. This has been maintained. Our ITE students fared extremely well. 84% found employment within three months of completing their examinations, and had an average monthly starting salary of $1,200. Graduates from our universities are also getting employed faster. About 90% of NUS and NTU graduates have already found jobs, with starting salaries of about $2,370 for NUS and $2,500 for NTU graduates. As for SMU, it reported that its entire first

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graduating cohort (100%) had found work. So the improved labour market has filtered down to employment opportunities and the numbers are real. It has not been a jobless recovery. Singaporeans have benefited.

These positive results, even in difficult years, tell us that our labour policies have been flexible enough to adapt to economic challenges. But it is never a perfect formula. As Mr Seng Han Thong says, whatever you do, you are going to make somebody less happy. And, indeed, it is the nature of the game. Because from time to time, we will have to adjust the levies and quotas to maintain this fine balance, and it is a very fine balance of access to foreign workers and maintaining jobs for Singaporeans.

Some MPs have voiced opposite camps, as I expect. In fact, I would be worried if too much in one camp was happy. That tells me that there is imbalance. Whenever I change, I hope both sides would be equally happy or unhappy. That will tell me that the balance has been achieved. Some MPs have voiced concerns during the Budget Debate about the announced levy increases - Dr Wang Kai Yuen, Dr Ahmad Magad, Dr Teo Ho Pin, Mr Lawrence Leow, Mr Chiam See Tong and Mdm Ho Geok Choo who just spoke during her COS cut - fearing that this will dampen our economic recovery. Others have said that it is too much of a liberalisation.

Sir, I want to assure this House that the increase is justified and will not affect our recovery. I really do not want to get into a debate about whether our foreign workers add or subtract. The foreign worker levy and quotas are meant to regulate numbers. It is a macro economic tool. And following the footsteps of the Minister for Health, I try not to micro manage as well. We are macro managers. In 2004, the stock of work permit holders increased by slightly above 4% whereas local workers increased by just below 3%.

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In short, we have more foreign work permit holders and it is growing faster than local workers. You can say that at the individual level, economy is patchy and recovery is patchy. But at the aggregated level, there is more demand, which means that as the rate of growth of work permit holders has been growing faster than local workers, it is timely to restore the foreign worker levy. This will promote the productive use of work permits. Otherwise, the total number will rise disproportionately as employers bring in more foreign workers than they need. Local wages, as Mdm Ho Geok Choo rightly pointed out, will be affected. If you have greater access because they are cheaper, it must drive down all wages.

But the increase will be graduated, as we announced, from $50 to $80 on 1st July 2005, and, subsequently, to $100 on 1st January 2006, to allow time for companies to adjust. I would like to remind Members, who have quickly forgotten, that this increase is a partial restoration to previous levels. The skilled levy rate was $200 in 1996. This rate was reduced substantially in 1998, again in 1999, to help companies tide over the economic downturn. But our economy grew by over 8% last year. And this new total levy that companies have to pay after the increase remains a small percentage of overall business operating costs.

Mdm Ho Geok Choo suggested that we should not impose the levy on certain sectors. As I said, this is a macro economic tool. It is not for Government to decide which sector should benefit. All sectors, I am sure, and indeed all companies, can justify that they needed more than company B, and therefore we should help them. It is difficult. We have other schemes to try to help, but it is certainly not through the levy. I understand her passion for the aerospace industry, as she calls it the Maintenance, Repair and Overhaul (MRO) industry, and I recognise their problems. We will work with them

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to ensure that there is a steady pipeline of local workers who can fill these jobs. Because these industries are growth industries, and she is quite right, it is important to our GDP. But it also represents a very viable career choice, a long-term career choice for Singaporeans. It is high-tech, high value, high earning, high skills, that all these four attributes spelt to me - Singaporean, Singaporean, Singaporean, Singaporean. So when we started the industry and we did not have workers to do this, we allowed these companies to bring in foreign workers. Some companies brought in as many as 90% foreign workers. It was a special dispensation to be given for a specific time. But as in most things, what is given is considered an entitlement, and when you want to claw it back, albeit at a very snail pace, there is much noise. We started training polytechnic graduates for this industry many years ago. And I am happy to report that those graduates will be graduating soon. I think the first batch is graduating this year. I accept that it will take an even longer time to help them have the experience. But we must start so that it represents viable opportunity choices for Singaporeans. Yes, we will work with her. She mentioned the partnership scheme, where EDB, WDA, the industries and professional organisations work together. But let us see how we can make this a viable career choice for Singaporeans.

Let me also elaborate on the changes which the Prime Minister had announced in his Budget Statement: in allowing companies to hire workers beyond the current dependency ceiling. Some MPs have asked for clarification on this higher levy of $500, which Mr Seng Han Thong has also brought up.

Sir, I want to explain to Members and the public that this specific change of $500 is not to allow, at a broader scale,

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all companies more foreign workers. The operative words are "all companies", "more foreign workers". It is really to allow those companies who have reached their current ceiling, what we call the dependency ceiling (DC), to respond to surges in demand. We are not liberalising our foreign worker policy. As I said, it works well. We will maintain that fine balance. We are upping the levy and that is on a broader scale. But for specific companies that need more workers than anticipated, under the old scheme, what happened? Under the old scheme, we set, let us say, for manufacturing, a dependency ceiling of 50%; in other words, if you have 50 local workers, you can hire 50 foreign workers, (50:50). If you reach that limit and suddenly your business is good - nobody has predicted that the electronics sector does well - you apply for more foreign workers because it is hard to get local workers or for whatever the reason, under the old scheme we say "no". You can remonstrate, jump up and down, we just say "no". Or we say "yes", but it would be after a laborious process where the company would lobby many agencies, justify with thick letters why they need it; how they are important to the GDP, which we agree; and how it would bring more jobs to the locals, which we agree. But it would be a very reluctant "yes", because we knew once we said "yes" to one company, others could equally justify their needs. It wasted a lot of time, not only of the parties involved, but also of the companies and economic agencies. So I do not think it is a good system. Even after that laborious process, few companies were allowed to hire foreign workers beyond the DC. So they just could not meet business demand.

So instead of this cumbersome system, MOM has decided to use the $500 levy to control the use beyond our current DC. In other words, there is no need to justify. I will just set it at a higher price. If you really need it, then I will give

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it to you, but you pay this higher price. In other words, companies that really need it will pay and use it because the demand may be temporary. But this increase is not unlimited. From 1st July, the new dependency ceiling (DC) will go up to 60% for manufacturing companies, which is now 50%. The DC for services companies will go up to 40%, which is now 30%.

In essence, there will be a new higher tier above the existing DC. If you are not already confused, I will confuse you even more later. But let me try to explain to Members simply. Companies which have not reached the current dependency ceiling, whether they are in the manufacturing or services sector, will not be affected by this $500 levy. In other words, they will just be subjected to the new $80 or $100 skilled levy. Currently, some 93% of manufacturing companies and 75% of service companies who hire work permit holders are operating under their DC. In other words, even if you say 50% for manufacturing companies and 30% for service companies, they hire workers way below their DC. So the $500 levy will not affect them at all. They still have some capacity and they only pay the new levy, whether it is $80 or $100, which the chart shows. The higher levy only affects the remaining companies that are operating currently at their DC and wish to take on more work permit holders. So if you want to go beyond, as the chart shows, for those extra, you pay $500. Some businesses say, "Well, 50-60% or 30-40%, this is a very small increase. You load a high levy and yet you don't give us increase in capacity." This is where I have to explain patiently using Singapore new Mathematics. You know that we are No. 1 in the world, and I come from the Ministry of Education, so I will explain it to you.

A 10% increase in DC actually translates to a potential increase of 50% in foreign workers. I will give you some time to absorb that. This is new Mathematics.

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If you look at the chart, the DC reflects the number of foreign work permit holders that a company can hire as a percentage of its total workforce. So, if the DC now is 50%, you can hire 50 foreign workers for 50 local workers. When you say it is 60%, you can actually hire 75 work permit holders, the lower bar, because your workforce is now 125. If you do your Mathematics, 75 divided by 125 is 60%. It is no sleight of hand, it is true Mathematics. But I can well understand why if Members say this is quite hard to understand. And I agree with you that dependency ratios are actually easier, which means that manufacturing companies now with a DC of 50%, the dependency ratio is one to one, ie, you can hire one foreign worker for one local worker. When we change it to 60%, it is 1.5 to 1, a 50% increase. Henceforth, we will change the dependency ratios, because we really do not need to be exercising our minds about ratios and then have to do extrapolations. It will give us a clearer picture.

But as I said, the raised skilled levy to $100 is to control the numbers; $500 is to give the flexibility. We are doing this because business cycles have become less predictable. Companies need greater flexibility to take advantage of new opportunities quickly. Ensuring that employers get the skilled manpower that they need - which is the point that Mr Seng Han Thong made - will, in turn, help create more jobs for Singaporeans over time when businesses grow. Is the $500 levy cast in stone? No. As the PM mentioned, it is to control numbers. We will watch what happens. If too many people use it and our foreign worker population grows rapidly, we will increase it. If we find that nobody uses it, then it is a wrong figure and we may have to reduce.

The raised DC only affects the manufacturing and services sectors. The marine industry is not affected because it already has a higher dependency ratio. It can hire three foreign workers for every one local

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worker it employs. For construction, the dependency ratio is 1:4. They can hire four foreign workers for every one local worker they hire. But for construction, the main limitation has been the man-year entitlement (MYE) system, which Mdm Cynthia Phua talked about in the Budget debate. She said it was too restrictive and rigid, and we are making it too difficult. You set a quota and companies cannot respond. I agree with her. I have therefore decided to loosen controls to allow the construction industry better use of their manpower resource.

Currently, contractors need to produce MYEs when they renew the work permits of their existing workers or when they take over workers from other contractors, even if these workers have existing work permits. With effect from 1st April 2005:

(1) Contractors will no longer need MYEs when they renew the work permits of foreign workers who have worked with them for six or more years. In other words, the MYE system will be lifted for this particular group of skilled workers who have worked for them for six years or more. They do not require MYEs. The renewal will be capped at one year at a time, and restricted to those involved in on-going projects. The reason is that this will help the industry to retain a core group of experienced and skilled workers, which would also contribute to better safety in the construction sector. A trained worker is a safer worker. Going one step further, in line with this philosophy, MOM will also no longer allow the employment of unskilled foreign workers in the construction sector, with effect from 1st December 2005. The impact on the sector will be very small, since the vast majority of the construction workers now, ie, 97%, are already skilled. So, we are just saying, it is only 3%, you do not need the unskilled workers, let them all be skilled.

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(2) We will also allow contractors to take on transferred workers - which we did not allow before - ie, change employers for the remaining validity period of the work permits. When they take on these transferred workers, no new MYEs will be required from the employer receiving the workers under the transfer.

(3) We will allow contractors to temporarily "loan" their foreign workers to other contractors during lull periods, that is, there is no change of employer in this case, they can work for another employer. Workers must consent to this arrangement and be paid accordingly, and must be involved only in construction work. Their official employer remains responsible for their management, housing, salary, well-being and levy. In other words, we will allow this only if the worker agrees. The idea is, once you are in the system and you want to work for another employer because this employer has a lull in his business, we should allow it; and

(4) Contractors can use up all the MYEs allocated to them for a project as long as the construction project is still on-going. Previously, MYEs expired three months before the end of the project. This will no longer be the case.

I am well aware that reducing upfront these rules to allow industries to utilise manpower more efficiently is the right thing to do. But there are concerns about the potential abuse of the system. These changes are to allow optimal use of manpower. I think it will benefit us all. There probably will be no disagreement on this. But I would like to caution those who abuse these relaxations and illegally deploy construction foreign workers into other sectors. In line with these changes, my Ministry will double the size of our enforcement team from about 70 officers to about 130 in the coming financial year. MOM will intensify its enforcement efforts to police deployment of construction

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workers outside the sector and contractors who violate the law will be taken to task.

Let me categorically say we will not hesitate to punish errant contractors. Current penalties, I would like to remind everyone, include a lifetime ban from employing foreign workers - what it means is that you might as well give up the industry if you are in it - fines and jail sentences. I also want to urge contractors that the well-being of foreign workers needs to be ensured. Salaries must be paid on time, and their well-being looked after. In tandem, MOM will educate construction foreign workers on their rights and act on complaints. We will increase their accessibility to tell them which numbers they can call and, as I said, let me reiterate, we will not hesitate to punish contractors who abuse their workers.

Sir, I like now to move on to medium and long-term challenges which Members have brought up. While our present policies have helped us ride through these difficult years, we need to prepare now to face future challenges. Members have asked for projections. Prof. Koo Tsai Kee asked what is the long-term and medium-term outlook like.

Even after taking into account the unemployment peak in 2003 due to SARS, we still averaged about 3.4% over the period 1997-2003 - those were difficult times - lower than other developed or developing countries. If you look at the chart - compared to other developed countries - Taiwan, at 3.7%, is higher than us; even in this difficult period, USA, UK, Hong Kong. I would like to remind Members that the specific circumstances which hit Singapore and Singapore only and spared the other countries, and even in that context, Singapore did fairly well in comparison. Over time, as our economy experiences technology-driven productivity improvements, and shifts to higher

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value-add activities, we will require fewer but more skilled workers. It is the nature of our industries. Other developed and developing economies have also faced the same situation. Japan has posted negative employment growth since 1993, ie, 12 years of negative employment growth. Similarly, whilst Korea, Taiwan, Australia and Hong Kong enjoyed a slight rebound in employment in recent years, their overall employment growth trend since 1991 has been negative.

Like other developed countries, fewer jobs will be created for the same level of GDP growth. Let me explain to you and give you numbers to illustrate. When we last had 8.0% growth in 1995, and about 8.2% in 1996, that growth created some 109,000 and 103,000 jobs respectively. Last year, as Members will remember, when we had 8% growth, our economy created 66,000 jobs, ie, fewer jobs created per percentage growth, but higher value, higher skill added. We are unlikely - and this is not the forecast that we will grow 8% every year, because we are developed - with slower growth, and lower rates of job creation, to see unemployment fall back to the 2% levels of the early 1990s.

For 2005, our economic growth rate is expected to be within the 3-5% range, well below the 8% experienced last year. So, job growth this year might not be as strong as last year, and unemployment will remain at about 3.5-4.0%. Even at these levels, I want to remind Members, our unemployment rates remain lower than most other countries.

Looking ahead, our workforce faces the challenge of increased globalisation. To continue to grow, Prof. Koo Tsai Kee asked what tricks do we have up our sleeves. I wish I was a magician. But we stick to fundamentals. We must maintain our cost competitiveness. Over the past 10 years, I want to report to Members of this House that our cumulative increases

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in wages have outstripped our productivity.

Even during the recessionary years after the Asian crisis and during the dot-com bust and September 11 - in other words, when the economy went down - our wages did not fall, as the chart indicates. That orange line has always been above productivity. Only now is the cumulative increase in productivity “catching up�? with the increase in real wages. The adjustments were made because of reductions in CPF and wage restructuring. So, it was the right thing to do. When the economy was difficult, we took decisive steps and it has made the difference. Now, as you can see, these cost-cutting measures have worked - the blue line is above the orange - and we have brought our wage costs in line with productivity growth. But the Government cannot keep on reducing CPF, without adversely affecting the retirement security of Singaporeans. Even as our economy improves, we must ensure that our wages do not again move at a faster pace than our productivity increases. Companies must also continue with wage restructuring so that our wages can respond more flexibly to changes in market conditions.

Sir, I am optimistic that so long as our tripartite partnership is strong and we collectively take adequate measures to face our challenges ahead, our economy will grow and jobs will be created. We are in a far better position than countries which have chosen to be protectionist and, as a result, have fallen far behind. Even these countries have had to adjust. Members would have read how some countries with traditionally confrontational labour relations have come to realise that it is unsustainable. The government of the eastern German town of Leipzig persuaded BMW to locate there instead of the neighbouring Czech Republic, and managed to take nearly 500 unemployed

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persons off the dole and onto BMW's assembly line. How could they do it? The unions played a great part by agreeing to longer working hours during peak phases and to cut hours when demand is low. This would have been unheard of years ago - flexi-time in a predominantly German socialist tradition. This shows what can be accomplished when companies and unions work with the government to turn things around. And we have already moved far ahead. So, we are in a good position.

Sir, we cannot shield ourselves or Singaporeans from changes, but we can prepare them to adapt. I share the concerns that Members raised during the Budget debate, eg, Dr Ong Seh Hong, Mayor Teo Ho Pin, that we need to look at skills, security and jobs. MOM and WDA will do more to help Singaporeans know where the job opportunities are. That is one area where we should give more information. We should give assessments of the employment outlook. We currently have vacancies in jobs such as finance and administrative managers, electronics engineers, IT personnel, aerospace technicians, sales representatives, customer service personnel, sales and service workers, security guards, and a host of other occupations. The public sector has another 3,100 job openings for teachers, management executives and for the uniformed services. But it gets very complex. So, what I have told staff to do is: can you improve this communication effort so that the information is packaged into useful, actionable and digestible bite-sized nuggets for specific sectors, targeted so that people know and say, "OK, this is what I want to plan for in the next few years"?

Looking ahead, the services sector will continue to create a substantial number of jobs. In the manufacturing sector, most of the growth will be in areas such as biomedical sciences and petrochemical industries. Employment in the electronics

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cluster is expected to remain stable, with new jobs created in the higher-end semiconductor and wafer fabrication balancing jobs lost

in other areas. On the whole, we expect to see employment in the sector changing its mix towards more skilled manpower.

2.15 pm

What about business outsourcing? Despite the immense competition posed by China and India, we were still ranked the fourth most desirable location for business process outsourcing (BPO) by AT Kearney last year. In another recent study by the Economist Intelligence Unit, Singapore ranked as the top location for outsourcing, with 22.6 projects per million people, well ahead of China and India, and other countries like Ireland, Netherlands and Hong Kong.

While the world comes to Singapore for business process outsourcing, Singapore is also going to the world, like other small countries such as Switzerland, Denmark and Sweden. We will need people with international skills and capabilities to fill these jobs whose companies must find external markets to survive. Maersk, for example, the Danish shipping company, sends its people wherever it sends its ships. Likewise, so does PSA and SIA, to operate their international port and air networks. My Ministry will work with other agencies to internationalise Singaporeans' mindset and prepare them for these opportunities.

I agree with Mr Alex Chan and Mr Yeo Guat Kwang that Singaporeans will need to have new skill sets. Mr Chan will recall his involvement in the ERC where we strongly recommended a champion agency for this task. This was indeed the reason that WDA was set up.

The WDA recently launched the employability skills system (ESS) to help all workers at all levels, including executives and managers which some Members have

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asked for, to enhance their foundational or soft skills, which Mr Seng Han Thong talked about. WDA will push ahead with workforce upgrading in specific industry sectors to raise skills competitiveness and to support Singapore's restructuring to higher value-added activities. We will also work with SMEs to step up workforce development.

These CET programmes give our workers opportunities to upgrade and enhance their employability. Some Members have talked about older workers, whether they have adequate access. This is a particular area that we are looking at. I agree with Mr Yeo Guat Kwang and Mr Ahmad Khalis during the debate on the Budget Statement that we should reduce barriers as much as possible. Some of these barriers have been mentioned by Mr Low Thia Khiang. I agree with him that as far as possible, we cannot use paper qualifications. If I ask him, "Do you have an "O" level certificate?" - where he did not have that opportunity - and you say, "You need this certificate before you can upgrade." It is a Catch-22 position. He needs that paper certificate so that he can upgrade. That is why we have only required minimal formal entry criteria for our programmes. So be rest assured that the lower skilled who have not completed formal education before can benefit.

Our idea is not to keep people out. The key point, as Members have pointed out, including Mr Low Thia Khiang, is that it must translate to more employability, better pay, more value for the job. That is the key. If you can demonstrate that, then I do not care what you have done before. I want to start with a new slate, and push on.

On developing other areas like entrepreneurship, WDA will build on its efforts to help job-seekers take up self-employment in retail businesses. Members have asked for a report on how we are doing. If you ask me how WDA, in

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partnership with many of our Distributed CareerLink Network partners - NTUC, the CDCs - is doing, I would say that we are much better than we were two years ago. There is room for improvement but our capabilities have improved. More importantly, we have managed to segment the population. We may have started a bit naively, in that we assume that as long as you got training, you were better off. So we trained thousands upon thousands. We would have been indeed naive to say that if you failed in one job training - in other words, you trained in one course and it did not lead you to another job, I should train you in another course - we would train you in multiple courses and allow you to fail multiple times. So triage is important; customised effort, what does this person need? Some basically just need a pat on the shoulder and you say, "Charge on, you will get a job", and it works. It will cost you less and it will work. Some really need hand-holding.

Members would have heard of the enormous efforts Mayor Matthias Yao had to do. Not only did he have to find them job training, find them work, he had to hire a bus to bring these workers to the workplace. Is he overly sympathetic? No, he is realistic. His officers told him that they tried before but these people did not even go to their workplaces. They got lost taking the bus. Others have said that if they can get lost in Singapore, using the public service, then maybe they should not get the job. But his officers realised that they need to deal with the problem.

I would say that we have increased our capabilities. But let me give Members some statistics. We have helped place more than 27,000 Singaporean job-seekers into jobs through our Distributed CareerLink Network (DCN) partners, of whom 17,600 were lower-skilled workers with secondary education or below, and 15,000 of these workers were above 40

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years old. I think we are helping the right group.

Under our Place and Train programmes, we move away from training for training's sake. I want to find you a job, then I train you. Under our Place and Train programmes, WDA has placed some 1,800 unemployed Singaporeans in new jobs, of whom 45% of these workers are above 40 years old. It is not that we are targeting the easiest group. We can actually target the easiest group to report to you good results. But we are targeting the ones who need it most and where we find that they will benefit more. For example, we have a programme called TextiLE, where we are working with Mr Yeo Guat Kwang, that will benefit older and lower-skilled workers. Some 124 unemployed Singaporeans have been placed and trained at the start of this programme. From this programme, we know that older Singaporeans can be seamstresses and have a steady job in this career. In this programme, about 68% of workers were aged 40 years and above, and 95% were lower skilled. Another 1,400 unemployed Singaporeans have been retrained and placed into jobs in sectors such as healthcare, under the Strategic Manpower Conversion Programme and other retraining programmes. These are mid-career ones, eg, executives, technicians, professionals, etc.

We will also help those employed workers upgrade their skills. The SDF did support some 600,000 training places of which 36% went to older workers and 28% went to lower skilled workers, with less than "O" level qualifications. In particular, the Skills Redevelopment Programme, jointly promoted by NTUC and WDA, supported some 37,000 places in 2004. Again, 60% went to those above 40 years old and 61% went to lower skilled workers with less than "O" level qualifications. I take that we are targeting the right population. Can we do more? Yes. Can we improve? Definitely. We

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need to build capability with our partners. Previously, we never needed this capability when we had a 2% unemployment rate. It was just frictional unemployment. We had more jobs than job seekers. What we have done with our partners is to say that we will fund them over a longer term, and build up the capability of their individual officers.

Mr Ahmad Khalis asked during the Budget debate whether there are barriers, echoed by Mr Low Thia Khiang in this COS. We recognise that they need to be customised. We need to improve access. We will customise our training programmes into bite-sized models, and we will facilitate access and shorten training duration. In other words, we actively want to overcome the hurdles that others face.

But these schemes and programmes are not just about statistics. They are about real people, and knowing how we can make a big difference in the lives of fellow Singaporeans will spur us on. Let me just give you two examples. Ms Cheong Leng Sin, 50 years old, a former bank supervisor, had been with the company for 23 years before she was retrenched in 2003. A very faithful worker, she stayed with the company for 23 years. Undeterred after her retrenchment, she decided to explore new job opportunities. Subsequently, she attended the NTUC/WDA STEER programme and took up a Nursing Assistance course. Leng Sin's performance during the Nursing Assistance course impressed the National Heart Centre so much that they offered her a scholarship for a full-time nursing course. She now earns less than what she did before, but derives immense job satisfaction in her new career as she is able to reach out and help patients at the Centre.

Another example is Mr Lum Hon Cheong. He worked in a shipyard for almost 13 years before he was retrenched last May. He decided to sign up for the

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Trainee Charge-Hand (TRAC) Scheme which places retrenched or unemployed Singaporeans into shipyard jobs as trainee charge-hands or supervisors. He has been working with Jurong Shipyard for the past four months. He had to take a $600 pay cut and bear his own transportation costs. But he is now undergoing a string of certifiable upgrading training sponsored by the company and he can be assured of a promotion to project supervisor if he performs well. On completion of the traineeship, he will be drawing about $1,300 to $1,400 a month.

Adapting to changing circumstances is not easy, but many have succeeded with the right attitude and persistence.

I agree with Mr Ong Ah Heng that we must give Singaporeans hope through better and stable careers. He mentioned that the elderly said to him that they are like waves, and their movement is controlled by waves behind them. I agree with him. We cannot control waves, but, at least, we can make our shores and beaches inviting. I was cheered when I read Ms Carmen Tan's letter in the Straits Times' Forum page yesterday, when they were talking about menial jobs. Ms Tan's mother works as a cleaner in Tan Tock Seng Hospital and does so with pride, even though others may think that cleaning or street-sweeping jobs are menial or dirty. Ms Tan said, "Such jobs may be dirty, literally, but they are decent jobs that should be valued". How right she is! There is dignity in an honest day's work. We can help further by improving the productivity of current jobs. Members would have read, as mentioned by Mr Ong Ah Heng, about the Job Re-creation Programme and, as Mr Seng Han Thong mentioned, the Teachers' Aid programme. There are opportunities. We can raise productivity, we can improve the image and work conditions of existing jobs and we will do so in many sectors - cleaning, horticulture, healthcare, marine, textile and education.

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Mr Ong Ah Heng mentioned whether we could tie the ComCare Fund to work assistance. Indeed, there is a principle. He also asked whether we could have mentorship schemes. WDA will be more than willing to work with advisers who want to have their own grassroots members to be mentors. We will train them. We will tie assistance schemes to staying on a job, ie, if you stay in the job for three months, there is an adjustment allowance and we can work with you.

Mr Yeo Guat Kwang also proposed covering executives under the Employment Act. He is right that the Employment Act does not cover executives and managerial staff because we believe that they are in a position to negotiate their own terms and conditions of employment with their employers. If he remembers, the Ministry amended the Industrial Relations Act to allow representation for executives by the rank-and-file union in the same company on issues relating to unfair dismissal, retrenchment benefit payment and the breach of employment contract. My Ministry's Labour Relations Department will also provide voluntary conciliation service to executives to assist them in settling their disputes with employers.

For contract and part-time workers, contract workers in Singapore enjoy the same statutory job protection as their permanent counterparts. Our records show that the percentage of contingent workers who lodged claims to MOM is not higher than the proportion of contract workers. This suggests that the employers of contingent workers generally comply with statutory employment terms stipulated in the Employment Act.

Sir, there are challenges to be met. The competition is getting tougher but there is more than ample reason for optimism. We have built up our capability and we have increased our resources to help

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those who are vulnerable to structural unemployment. As our economy grows, jobs will be created, restructuring will continue and our focus should be to continue to grow our economy and jobs and help as many workers as we can adjust.

Mr Low Thia Khiang: Sir, what is MOM's projection of the estimated job growth for the current year, in the light of the end of seasonal hiring and some retrenchments, such as in Maxtor? What is the estimated net growth?

Dr Ng Eng Hen: Sir, it is easier for me to compare to what we need to absorb our new labour entrants every year; in other words, what is the number of jobs. We have about 32,000 new net labour entrants in our labour market. To absorb that, the projection shows that we need to grow 3%-5% of GDP. 1% GDP will create, roughly, 10,000 jobs. If we grow 3%, we will create 30,000 jobs. That is the ballpark figure. We projected that it will grow 3%-5%, and we will generate enough jobs to absorb the new labour entrants.

Mdm Halimah Yacob: Sir, two short points for clarification from the Minister. The Minister talked about the need to control wage cost, which I do not disagree with him. But I also feel that it is not just wage cost that we should look at because there is a limit to how much one could go on cutting wages. Employers must also look at other ways of increasing revenue. And, of course, it is the responsibility on the part of the Government to ensure that business costs are kept down. So I would like to seek a response from the Minister on that.

2.30 pm

On the second point, I think whilst we focus on getting jobs for people who were retrenched, it is a lot harder once a person is retrenched, particularly if he has to overcome this difficulty of structural unemployment. So our strategy must

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continue to focus, as much as possible, on upgrading the skills of the existing workforce. For the 94% or so that are still employed, one of the difficulties we face is that employers are sometimes not too keen to train people outside their immediate job needs, and that is an obstacle, in terms of releasing and supporting them, or even just releasing and not having to support them. Does the Ministry have any strategy to assist us? Upgrading of the 94% of the people employed is absolutely critical to prevent them from going into the area of structural unemployment.

Dr Ng Eng Hen: Sir, Mdm Halimah is quite correct. From the point of cost competitiveness, it cannot be due to wages alone. For example, in manufacturing, wages only form 10% of total operating cost. So she is quite right there. In terms of the figures I have shown, where she said that wages are sticky, she is quite correct in that there is a limit to which you can cut wages. But as I showed her, even in a recessionary time, wages were increasing. My point is, we ought to stick to NWC guidelines where wage increases should lag behind productivity growth.

Yes, we have to do more in controlling other factors of production, in terms of land, transport, utilities costs, and for employers to be more productive.

On workers who are finding it harder to find work once they are retrenched - it is the case. And, indeed, we should focus on in-employment training. The question is, how much we balance it in terms of the funds we allocate from the funding that we have for training? What we have done at WDA or MOM is to parcel out aggregated sums, that is the first cut, where we decide to put in-employment. What we have found is, for those who become retrenched, that you really need to put a lot of resources, in terms of getting them into stable careers. So I think that is quite right.

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One of the ambiguities in in-employment training is that, yes, 94% of them are employed. They need training because once they are unemployed, it is hard to get them a job. But it also works against you if there is indiscriminate training, or you are not sure whether the training helps them keep the job or create value. So I think this is not something that WDA or MOM can decide alone. I think we have to work with the employers and unions and decide how we can make training of any sort, whether it is in-employment or employment for the retrenched, count for more. I think all of us want to seek efficiency and effectiveness, and we have to decide how we can do this with the limited funds that we have.

Mr Yeo Guat Kwang: Sir, I want to thank the Minister for teaching us new Mathematics so that now when I look at the new dependency ratio, I am a bit worried. What it means is that, in this case, the dependency ratio and ceiling is now up to 60%. It means that for a company which needs to expand their workforce by up to 25%, they can resort to just employing foreign workers instead of making efforts to employ Singaporeans.

Dr Ng Eng Hen: Sir, obviously I have to undergo NIE courses because my lessons were not quite clear. The dependency ratio is 1:1.5 now, which means that if a company has 50 local workers, previously he could hire 50 foreign workers, but now he can hire 75 foreign workers, 25 more, which is a 50% increase. So on that score he is quite right. Yes, they can do so, but they must pay a hefty levy of $500. The principal mechanism for control is not, in this case, the dependency ratio. It is really the levy. And, indeed, if at the aggregated level, our foreign worker force increases disproportionately, we will raise the levy higher as we said.

Mr Alexander Chan Meng Wah: A point of clarification regarding safety culture. I fully agree with the Minister in taking a

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cultural approach to improving safety. I also agree that the 10 years for halving the fatality rate is a reasonable set of targets. In order for the country to approach that, I think individual firms would have to probably adopt zero defects, zero fatality targets. So I do not think it is a compromise. My question is: in order to encourage this, would the Minister consider incentives for firms to either train up on new kinds of discipline, like zero defects? Even for building contracts, would the contractor with zero defect be given a bonus for zero defect?

Dr Ng Eng Hen: Sir, I certainly think that the suggestion would be seriously considered. As I have said, the LTA does have this scheme in-built and what we want to do is to expand the principle of this scheme to more areas that the Government has control of, both regulatory, administrative and contractual reach.

I am glad that he agrees that the 10-year timeframe is realistic and, indeed, companies should go beyond that and adopt zero fatality and zero injury policies, as I previously illustrated that other companies in the UK and Sweden do. If more companies do that, I think our targets can be achieved.

Mr Low Thia Khiang: Sir, I understand that most of the training programmes are conducted in English and there are a lot of older workers who could not even speak English. So how does the Ministry overcome the barrier? In fact, I understand a lot of workers hesitate to go for training because of the language barrier.

Dr Ng Eng Hen: Sir, as far as I know, training is conducted in multiple languages, with interpreters. Even in our mandatory courses, we do that. But let me look into this. If what Mr Low says is true, if that is the feedback, then this area certainly needs to be improved.

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The other aspect is just not training, it is evaluation. Evaluation should be done such that one knows that the person knows what a safe procedure is, and that should be language-independent or language-neutral. So I do not think just training is adequate. We should also require, especially those, for example, who deal with explosives or combustibles, that they can demonstrate that they have adequate knowledge of safety principles.

Mr Low Thia Khiang: Sir, the other point of clarification is on WDA's matching jobs with people seeking jobs. Sometimes they match people with employers who cannot speak the language. I have cases coming to me to say that they dare not even go for interviews because the employer speaks only English. So I wonder whether this is something the Ministry can improve on.

Dr Ng Eng Hen: Sir, Mr Low Thia Khiang's example is quite believable. I am sure that somewhere out there, among the many that we helped, we matched wrongly not only in terms of language but skill sets. And as Mr Matthias Yao said, working places too far, perhaps, and so on. So we need to do a better job. The way to do this is really to build capabilities of and sensitivities in the officers dealing with the interface. In this House, we can debate lofty ideas, but when we want to operationalise it, at the end of the day, we are limited by the people that we have on the ground that deal with those who are vulnerable to structural unemployment. So we are spending more resources in capability building. It is not something that will evolve naturally. We have to send them for courses and constantly have proper SOPs that are refined with our DCN partners in the CDCs and our Job Centres. So, I think we can do better, and will strive to do better.

Employability of Older Workers

Mr Seng Han Thong (Ang Mo Kio): ( In Mandarin ): Mr Chairman, the older workers find it very

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difficult to find an alternative job and this is an undisputed fact. When they are old and have no skill, it would be even more difficult for them to find a job. That is why they said it is easier for an old man to wed a young foreign wife than to find a job in Singapore. Of course, it is encouraging to find that the situation for the workers above 50 years old has improved in recent months. The unemployment rate has been reduced from 5% in 2003 to 3.5% now, and more older workers can find jobs because there are more jobs that are suitable for the older workers.

But just about four days ago, Maxtor retrenched 5,500 workers. This is worrying. The Maxtor factory is in my constituency and a lot of my voters work there. When this news came, I cannot help thinking of the future of their family, their children, their PUB bills, etc. If the company wants to restructure, there is nothing we can do to stop them. The question now is how to put in a concerted effort to help the older workers to find respectable jobs. Just now, the Minister mentioned about respectable jobs for older workers. I am glad that a tripartite taskforce has already been formed to look into the matter. It is important that we find soft but respectable jobs for them. We should make use of their strength and not their weakness. So, when offering the jobs to them, it should not be a "take it or leave it" kind of attitude. I think we must change our mindset. We should respect them. The old people were also young once. For us, we are young now, but we are going to be old later.

I understand that the Government has a lot of plans to help them. The Government has done a lot, but the problem is whether these people are aware of it. Do they know how they could gain access to their assistance schemes which are meant for them? I think we should uphold our lifelong training plan, ie, you have to learn

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as long as you live. I would like to ask what courses are actually designed or tailored for the older people. As the Minister has said, the training courses are multi-language but I heard that many of them are in English and the older workers could not fit themselves into the courses. I think we have to have more publicity. We should encourage them. We can have Mandarin, even Hokkien courses for them. I think this will help the whole society and benefit everybody.

The Chairman: Mr Arthur Fong is not here.

Mr Ang Mong Seng (Hong Kah): ( In Mandarin ): Mr Chairman, at the moment, our economy has yet to be fully recovered and the job market remains very competitive. I would like to urge the Ministry to reserve some jobs for our Singapore citizens, particularly the older citizens, in areas like food and beverage, cleaning and service industries. The Government should make some regulations requiring that at least 70% of the jobs be reserved for Singaporeans and the remaining 30% could be taken up by foreign workers. This is to reduce our reliance on foreign workers.

I support Minister Lim Boon Heng's suggestion to reserve some jobs for our local senior citizens. This should be an inter-ministry project. There are many jobs in the various sectors, including the public sector, which are suitable for senior citizens. The Government must take the lead in this initiative. There are quite a variety of jobs that could be considered. For example, the MCYS childcare centres could employ senior citizens to be baby-sitters and the People's Association may employ senior citizens to be administrators in the Residents Committees and Senior Citizens Clubs. The schools could also employ retirees to be traffic wardens. I remember when I was in primary school

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I used to see some old people carrying a "Stop" sign to direct traffic, but nowadays, some young parents, in order that the children have priority in enrolment to the school, would volunteer to become traffic wardens. I think MOE could employ some retirees for this job. The Ministry of National Development could employ some senior citizens to be gardeners and environment inspectors in HDB estates.

When these retirees return to the workforce, most of them work on a part-time basis and the monthly salary is not much. After deducting CPF contribution, their take-home pay is really very little. Can they be exempted from contributing to CPF, both on the employer and employee sides, so that both parties will benefit?

The Chairman: Mr Iswaran is not here.

Retirement Age

Dr Ong Seh Hong (Aljunied): Mr Chairman, Sir, I have in this House raised the issue of artificially setting a ceiling on retirement age. I argued and still stand in the firm belief that chronological age is no indication of a person's psychological, physiological and mental well-being. A person at 62 years could still be very healthy in all aspects and he could expect to live longer if he is actually working.

I have also argued that it is not helpful to have a retirement age as it would neutralise the person's economic productivity. This is especially painful to his loved ones as his dependency on them will start the moment he loses his job because of age.

Artificially removing a productive worker because of retirement age will also worsen the labour market in the light of our dramatically falling fertility rate. Given that the life-expectancy of Singaporeans is now 77 years for men and 81 years for

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women, retiring at 62 years would mean that the dependency of this person on someone else's income would be 15 years or more. In addition, retirement would also mean a downward spiral of inactivity and stagnancy, which could lead to many problems including poor health and depression.

Let me take this opportunity to challenge the Ministry's view that the prescription of retirement age is a floor, ie, the minimum age whereby a worker can retire and not the ceiling. More often than not, both workers and employees view this as a ceiling. So I would hope that the Ministry would change this erroneous view.

I ask the Minister: is it not good to keep a person working? Because if someone could continue to work beyond 62 years, he would continue to contribute to the society and depend less on the family and the state. His savings for old age could also last longer. By working, these older workers could also lead a more dignified and meaningful life in their twilight years.

CPF as Retirement Savings

2.45 pm

Mr Low Thia Khiang: Sir, according to the Lianhe Zaobao of 26th June 2004 report, only about half of the present CPF retirees could meet the Minimum Sum requirement. For the next 10 years, the situation will remain the same. The scenario printed in the report is worrying, especially of the volatile economic situation caused by globalisation and the depressed income from employment. I think there is an urgent need to reform the way CPF savings are invested in order that they yield better return on the savings. If we do not tackle the problem now, many Singaporeans may either find their CPF savings insufficient for retirement, or may even face financial difficulties not too long after they retire.

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The Government has allowed CPF members to invest their CPF on approved investment instruments of the members' choice. But based on data released by CPF and also by Prof. Mukul Asher of NUS, the following outcome is unsatisfactory.

(1) As at 30th September 2003, $20.1 billion was invested through the CPFIS, and the rate of return obtained on the whole portfolio under the Ordinary Account was a negative 14.77%. And for the Special Account, it was negative 6.87%. If transaction cost including investment management cost and tax included, it could have been more unfavourable.

(2) Insurance products have been the most favourite form of CPF investment scheme among the members. However, for insurance products, the unrealised loss was $802 million, equivalent to about 5.77% of total investment.

Sir, I believe that we need a more coherent and comprehensive system to invest the CPF savings. The Government should look at ways to invest the CPF savings by pooling the funds together so that CPF members can enjoy economies of scale and, at the same time, individual members can avoid paying hefty financial charges should they invest on their own.

I understand that the Government has put on hold the proposed private pension fund for CPF members. Would the Minister care to explain the reason? Is the Government looking for other forms of investment schemes?

I would also like to ask whether the Government will consider setting up a statutory board to act as an asset management company for CPF members, like the Hong Kong's MPF system, where individual members can select the proportion of retirement savings they

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want to allocate to different financial packages available to them. This would allow members to formulate unique financial portfolios with different risk factors and expected returns according to their different risk adversity.

Sir, alternatively, since the Singapore Government Investment Corporation (SGIC) has achieved consistent investment returns, higher than international benchmark, would the Government consider allowing SGIC to directly manage the investment of CPF savings in order to achieve a higher rate of return for Singaporeans?

CPF Transfers to Homemakers

Dr Geh Min (Nominated Member): Sir, one of the greatest fears that we all share, as had been aired in the House many times, is a dependent and decrepit old age if our lives should outlast our savings and our health. The Government has recognised this and made provisions in the latest Budget to try to allay these fears.

Government also recognises that many young Singaporeans are concerned about the financial responsibilities of starting a family, and it has also done much to create an attractive baby bonus package. But what I feel is lacking, to a certain extent, is more policies or provisions that address the link between these two concerns - the concerns for old age and starting a family. True, these two problems do not arise at the same time. They arise at different ends of our adult life, but the concerns will overlap.

Because choices we make when we are young determine what options are open to us when we are old. For example, a young woman of child-bearing age can choose to concentrate on family at the expense of her career or could do the reverse, or she could try and have it all

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and juggle both to the best of her ability. Some people manage to succeed than others.

But whatever choices we make, they involve trade offs, and I think it is fair to say that in the existing system for a woman, one of the trade-offs is that if she concentrates on career, she will have greater self-sufficiency and financial independence. If she concentrates on family, this will result in greater financial dependency on her husband and subsequently her children.

Therefore, if Government wishes to encourage Singaporeans to plan in advance both for their own old age and also to give young Singaporeans more incentives to have children, I think we should seriously consider certain modifications to the CPF. Firstly, we should allow that a portion of the CPF of the salaried spouse be channelled into the CPF account of the homemaker or worker without CPF at any time, not just after 55. Of course, this should be by choice and not compulsion. But why are there so many restrictions? After 55, the CPF account holder has to have more than double the Minimum Sum.

To my understanding, the CPF is not meant just as a personal pension fund or a life jacket for one. It is meant to be more family friendly, to be a survival kit for the whole family. So I do not feel that the present conditions are sufficiently family friendly or promote any form of family bonding.

Secondly, could we consider additional incentives or tax reliefs be given to spouses who contribute to the CPF accounts of their spouses whose CPF balances are below the Minimum Sum, by perhaps topping up or a matching scheme?

Thirdly, we could give families the choice to treat the husband and wife's

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CPF as a joint family CPF rather than an individual CPF owned solely by the income owner. Of course, the rights for withdrawal and investment would then have to be jointly exercised. I believe that this would promote for greater self-sufficiency, not just for the individual, but for the family as a unit.

Young women today - thanks to wise policies, better education and greater job opportunities - have far more options than their grandmothers or even their mothers had. They would not choose to be in the same position as the majority of older women today, as the Tsao Aware report which was published recently showed that the majority of older women have the prospect of an insecure old age with an inadequate CPF and savings and are dependent on their children or welfare rather than on themselves.

What is more disturbing is that between 1980 and the year 2000, there was an increasing gender disparity in CPF, in actual figures between men and women. In our society, the man is considered the head of the household, but I believe that women exercise a greater say in the size of their families.

Therefore, these modifications to the CPF should:

(a) promote better and more effective long-term planning by and for families;

(b) they should give fair recognition to the contributions made by a homemaker from both the spouse and from society at large; and

(c) they should encourage couples and women especially to feel more secure about starting or enlarging their family without excessively compromising their own ability to provide for their old age.

The Chairman: Prof. Ong Soh Khim is not here. Mdm Halimah Yacob.

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Mdm Halimah Yacob: Sir, not all CPF contributors are savvy investors. Many invest their hard-earned CPF money in the hope of making more than the interest that they would otherwise earn if they were to leave the money in their Ordinary Account. Quite a number had their fingers burnt and lost money instead.

One particular investment of concern is the investment-linked insurance plans. Press reports highlighted the predicament of one Kelvin Yeo who was shocked to discover that his policy could lapse as he grew older, or if the investment value of his underlying fund is very poor.

Sir, CPF money can be used to purchase investment-linked insurance plans (ILPs). This is a matter of concern as instead of a healthy account, workers may end up depleting their hard-earned money on such financial products. I urge the CPF Board, as the guardians of our CPF money, to do more to safeguard CPF members' interests, so that they do not fall prey to such schemes. Otherwise, instead of a comfortable retirement income, they will have nothing left.

I am certain that even among the hon. Members in this House, not many know that there are two types of ILPs; one based on a single premium and the other based on yearly premiums. Nor do many understand how the ILP works. If we have difficulty understanding, I can imagine the difficulties faced by the average Singaporean. And yet they are allowed to use their funds to invest in ILPs.

I also urge the CPF Board to do more to educate CPF members who want to use their CPF funds to invest. Right now, I feel that there is little being done to educate CPF members. Many may be blinded by the chance of making money without realising that this also carries risks. So I think there is a need to educate our CPF members on the pros and cons of using CPF funds for investment.

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I urge the Minister to do more to safeguard the interest of CPF members. Can the Minister also provide information on how much money from the CPF is invested in ILPs? Is there something that the Ministry can do to help those who are affected to get out of this difficulty?

Dr Ng Eng Hen: Sir, Mr Seng Han Thong, Mr Ang Mong Seng and Dr Ong Seh Hong have spoken about older workers. Before I answer specific queries, I think it would be instructive for us to look at this issue against the entire backdrop of the changes that will affect our workforce over the medium term.

I would like to refer Members to this simple chart which I have asked the Clerk of Parliament to distribute. [Chart distributed to hon. Members.] Simply put, our declining birth rates over the past years will have a significant, long term impact on our workforce profile and growth. If we look at the chart, in 1988, we had a Dragon Year. In 1990, it was the Year of the Horse, and we experienced a baby boom, which continued until 1998. The lower graph is when they grow older and the demographic echoes are heard. So, from 1998 onwards, the number of births a year fell sharply. This precipitous drop from 1998 will be mirrored later and result in fewer new entrants into our workforce.

Our Dragon Year babies of 1988 are now 17 years old and going to junior colleges, polytechnics and ITE. Some will continue with their education, others will start work. As they and the cohorts following join the labour force, we will experience a mini-labour force boom. It is a five-year projection. So you see the 44,000 figure which has been rounded off . But thereafter, the new cohorts entering the labour force will diminish. There is another five-year projection - 24,000 new labour entrants per year over the period 2010-2015. It is a precipitous drop. It is a sizable drop and the reduction

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in new labour entrants is likely to continue. Even if our recently introduced procreation measures work, improvements will have to wait till these new babies join the workforce some 20 plus years later. And it is still "if".

But there is another major factor driving the profile of our labour force. As Dr Ong Seh Hong said, life expectancies have been rising and will continue to rise with better medical care. Today, men can expect to live till 77 and women to 81. Many Singaporeans have a future of a further 15 to 20 years after their retirement age, and they can still contribute economically if they are able and willing. Already, older workers aged 50-64 are the fastest growing group in our labour force, for both the employed as well as unemployed workers. 29% of our labour force will be aged 50 and above in 2015, as compared to 13% in 1991. These two major structural shifts due to falling birth rates and more older workers will impact our local workforce.

Singapore has often reminded itself that our most important resource is our human resource. Well, with these demographic changes that I have just described, our most important asset - our local workforce - will grow slower and older. So it is within this context that we must plan our strategies to stay competitive, especially against our regional competitors with younger and larger working populations.

3.00 pm

Because of falling birth rates, we will need to increase the labour force participation rate (LFPR) of local workers, to maintain the size of our labour force.

This must mean helping people to work longer, and for certain groups like women, which Dr Geh Min alluded to, where the labour force participation rate has been

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relatively lower, you must encourage more to enter and remain in the workforce. The labour participation rate for those aged 50 to 64 has improved. It was 49% in 1993 and went up by 10 percentage points between 1993 and 2004. But I would say that other countries with ageing populations have done better than we have. For example, in Japan, it is 72%, which means that 72% of those aged 50-64 are working. In the United States, it is 70%, and South Korea, 65%.

As our workforce ages, we will need to address employment and workplace issues faced by our older and local workers. The key problem is not so much that they are vulnerable to unemployment. In fact, the unemployment rates for older workers is no different from the general population. The problem is, as many Members have said, that once they get unemployed, it is really harder for them to get re-employed. For those aged 50 and above, only six of 10 retrenched in the second quarter of 2004 were re-employed within six months, and this is compared with 70% of those aged below 30. Correspondingly in June 2004, their risk of long-term unemployment was higher, at 2.1%, compared to the overall average of 1.7%.

As Members have been notified, the Ministry has set up a Tripartite Committee to examine this important issue and it is not just that we want them to work longer. We have to facilitate older workers working longer. The Committee is chaired by my Permanent Secretary, Ms Yong Ying-I, and comprises our tripartite partners, with the employer representatives led by Mr Stephen Lee, President of Singapore National Employers Federation (SNEF); and employee representatives led by Mr John De Payva, President of NTUC. The Chairman for the GPC for Manpower, Mr Yeo Guat Kwang, Madam Halimah, Nominated MPs Mr Alex Chan and Mr Lawrence Leow are also members.

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I welcome suggestions from other Members in this House. Some, like Dr Lily Neo, Dr Ahmad Magad and Mr Sin Boon Ann, have spoken passionately about this during the Budget debate because they care much about the elderly and their needs. I thank them for their ideas. The Tripartite Committee will look into all these suggestions in greater depth.

But let me take the opportunity to respond to these issues broadly to three challenges that the older workers face. The first challenge is really on job redesign and re-creation, that we need to expand and facilitate opportunities for older workers. Going forward, we can expect job creation, as our economy continues to grow. But the type of skills and jobs will be different, as many Members have alluded to. For example, the number of clerical job openings has diminished considerably, compared to 10 years ago. Ten years ago, there were about 6,000 clerical jobs. Today, there are only 1,600 vacancies. Simple office applications have become a basic skill for all, it is no longer an occupational skill just for clerks. We cannot promise workers that we will have the same jobs as we used to do in the past.

As Members have pointed out, we have introduced certain schemes, the Re-employment Assistance Programme, and Re-employment Support Schemes to help Singaporeans adjust. The key is in job redesign, whether old or young, male or female, so that they can do it with the same efficiency. This is an important programme not only for lower skilled workers but indeed vital for many businesses around the world. I am especially proud that NTUC are pioneers in this effort. They have been pushing for this appropriately. NTUC will spearhead this Job Re-Creation Programme.

You would have read about some successes that we had, particularly, the Conservancy Job Redesign Committee led

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by Mr Ang Mong Seng, where a total of more than 550 job vacancies were created over the past six months and 80% of those employed were above 40 years old with below secondary education. We will look into other sectors - cleaning, horticulture, healthcare, marine, textile and education.

Mr Ang Mong Seng asked whether we could restrict the proportion of foreign workers to 30% in these sectors. Our current foreign worker policies already restrict the proportion of foreign workers through dependency ceilings. However, in specific sectors where Singaporeans are willing to take up long term careers after job redesign, we can progressively tighten up foreign worker access.

Mr Seng Han Thong asked whether the Lifelong Learning Fund (LLF) could be made more accessible and favourable to older workers in terms of skill upgrading. Indeed, we do. Such programmes, as the Employability Skills Systems, do give preference funding rates to those above 40 years old.

The real issue is one of cost competitiveness. The demographic changes that I have mentioned will result in an ageing workforce with the proportion of older workers increasing as fewer younger workers enter the workforce. Even as our workforce grows older, we must make sure that our competitiveness is maintained. Otherwise, our competitors in the region with younger working populations will have a distinct edge over us.

Employers will have to face market realities and compete against other companies who view our ageing workforce as an advantage for them. Because of competition, employers will generally be reluctant to implement programmes for older workers unless they can build up a business case on how older workers can contribute to the company in areas such as its strategic directions, culture or

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bottom line. Take job redesign as an example. A job redesign will not take off if it is simply about changing work processes to accommodate older workers. To convince employers, it will have to make economic sense and yield benefits to the company, in terms of higher productivity or lower staff turnover.

Some companies have shown that simple changes can improve outcomes even as their workforce ages. A local company, Singapore Food Industries (SFI), for instance, has more than 60% of its bargainable workforce aged above 40 years. SFI used to deliver food to its customers in cartons with a delivery order printed in English. Because of the large number of products and many of the cartons were identical, mistakes were made. SFI then added pictures to the delivery order which made it much easier for delivery attendants to identify the contents of the cartons. It is a simple change. But this simple change helped the company to reduce errors in deliveries and cut down the time it needed to train its delivery attendants. It also benefited all its delivery attendants, including some of the older workers with low literacy.

Another example, International Truck and Engine Corporation, which manufactures trucks in the US, reviewed its manufacturing process and concluded that building trucks from underneath was awkward and caused frequent work-related injuries. To create a safe and comfortable environment for employees, it redesigned the workplace by turning the chassis upside down and replaced heavy hand-held tools with more ergonomic suspended tools and they were productive. I am not suggesting that all work processes would have to be turned upside down. Surgeons would still have to operate the right side up. But these examples should force us to consider afresh, innovative ways to improve

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incomes, outcomes and help our workers adapt and remain productive.

I agree with some of the comments which were made during the Budget debate. Dr Ahmad Magad spoke about wage restructuring. The seniority-based wage system works against older workers as it makes them more costly to hire and to retain compared to younger workers. That is why we must continue with our wage restructuring efforts. Even as we ask employers to adjust their mindsets, older workers must also adjust their expectations towards wages and benefits as we seek to raise the effective retirement age.

The third challenge is about changing mindsets, as many Members talked about. Some have pointed out that employers may discriminate against hiring older workers because of negative perceptions, and I agree that that exists, as Mdm Halimah alluded to.

Mr Iswaran suggested that the Government take legislative action on age discrimination. But other countries that have done so have found that discrimination is generally difficult to establish even if legislation exists. Few employers will tell you that they are not hiring you because you are older or if you are a particular gender or particular race or ethnic group. They will find other reasons to do it. So to prove it is quite difficult, as other countries have found out. So reliance on just legislation may not achieve our desired end. The Tripartite Committee will study how to deal with this challenge of employers' perceptions. It will also address the perceptions of older workers themselves towards taking active measures to increase their own employability. We will certainly highlight positive examples, as I have done, and will continue to encourage employers to take an enlightened view.

Some Members have suggested fiscal incentives. The Tripartite Committee can

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study these but, as I mentioned, 30% of our workforce would be over 50 years by 2015. So they are no longer the minority and, therefore, fiscal incentives cannot be the sustained basis for helping older workers maintain their competitiveness.

On the issue of retirement age, the Retirement Age Act was introduced in 1993. It was a strong signal to employers and employees that the retirement norm should be higher. Dr Ong Seh Hong asked whether we should abolish the retirement age altogether or otherwise raise it. The legislation is still relevant. The progressive raising of the retirement age has yielded a rise in the participation rates. In other words, it has worked.

But legislation has a diminishing impact the higher the retirement age is mandated. In other words, if you raised the retirement age from 50 to 55, as we did previously, you might see a significant jump in your labour force participation rate. But the effect is much smaller when the retirement age is raised from 60 to 62 and will be even less beyond 62. To raise the effective retirement age, we still need to examine the deeper and fundamental issues related to their employability and employment of older workers.

In Singapore, our participation rate, as I have mentioned, is 59% for those aged 50 to 64. We can learn from countries, such as Japan and US. They have more experience and better HR policies in implementing various measures targeted at older workers such as training programmes, job facilitation, wage subsidies, employment incentive schemes, and anti-age discrimination measures.

Obviously, not all the measures adopted by other countries will be suitable for Singapore. But some key lessons are obvious: the challenge of helping our older workers retain their employability requires the effort of the Government, industry and workers alike. The Tripartite Committee will need to review these ideas,

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and see what works in our context. But for these new ideas to take root in our work culture and practices, we will need everyone to play a part.

Some Members, Dr Ong Seh Hong and Miss Penny Low, earlier in the Budget debate, have asked about retirement adequacy and Mr Low Thia Khiang has also spoken on this. The CPF provides a means for many Singaporeans to save for their retirement. The CPF Board will study ways in which we can enhance members' savings through better returns. But, first, let me state categorically two limitations on CPF adequacy. First, in order for members to save enough, they must put aside enough for their retirement and work longer. A generation ago, most would work about 30 years, you would start work in your early 20s stopped in your late 50s, worked for 30 years, and the average life expectancy in the mid 60s. In other words, the economically active period of 30 years was somewhat equal to the inactive period of 30 years - 50:50. But today, many take longer to finish their education before working, and are living far longer after they stop work. If you start work at 25 and retire at 60, or hope to retire at 60, 35 years of working and live till 80, the ratio has been inverted, it is now 40:60. You work for 40% of your lifetime; 60%, you are not working. This ratio is inherently consumptive. It means that parents must support their children longer before they start work and workers must put aside more for their retirement. So we can talk about enhancing return but the real key issue, whether it is for households, spouses, non-working spouses, or families, is that they must work longer and put aside more for retirement.

Secondly, when it comes to increasing returns through investments, potentially higher returns always come with higher risks. The risk and returns come as a package and are indeed indivisible. This is why we decided to shelve plans for the

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proposed role of privately-managed pension plans (PPPs). Mr Low Thia Khiang asked why. Because most of the feedback from Ministries and the public was that many members would underestimate their risks and make unwise investment decisions. We are now studying other possibilities to increase returns for CPF savings within risk levels which members should tolerate and for which the majority can benefit in the longer term.

Whatever the framework, it cannot be a quick way to make a fortune. There is no free lunch. If you promise people that you have a framework which promises high returns, you must also tell them that there are high risks and that this would be a financially imprudent way of managing our pension funds.

3.15 pm

CPF Board has been active in its public education and we need to do more. I agree with what Mdm Halimah spoke about, to educate CPF members and help them make informed decisions when they buy a home or invest their CPF savings. These initiatives include an enhanced website, as well as seminars and roadshows, which have proven to be very popular. We can do more. We are increasing the Minimum Sum required to $120,000 in 2003 dollars by 2013 and, together with the phasing out of the 50% withdrawal rule from 2009, this will increase the provision for retirement.

Dr Geh Min spoke about putting aside some portion for the non-working spouse. The Government sees the family playing an important role in providing social and financial support to their dependants. Thus, the CPF allows members to top up the accounts of their parents, grandparents and non-working spouses above the age of 55. Tax relief is also given for cash top-ups, subject to a certain sum.

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The hon. Member said she did not see her CPF funds as a personal pension fund. Indeed, it is. That is the primary principle. Our approach remains that individuals have to be responsible for their own retirement, but we will facilitate CPF members to help other family members when they have enough to meet their own needs. This approach is fair, because each person draws out what he has contributed over his working life. It is also sustainable because the scheme is fully funded for each person's own needs.

This year, the qualifying conditions for topping-up will be relaxed. More members can do top-ups, and more older members will be able to receive top-ups. The Government will also simplify the rules on the contribution caps on the Supplementary Retirement Scheme (SRS) to allow those who earn below the CPF income ceiling and the self-employed to set aside additional savings outside of CPF.

Dr Geh Min asked whether the CPF transfers could be allowed for those below 55. Tax incentives for younger members to contribute to their non-working spouses do not really address the problem of the retirement adequacy of the whole family, since it merely effects transfers from one to the other within the same family. As mentioned earlier, to help households increase their income, we will need to facilitate more non-working spouses to work.

Similarly, mandating CPF transfers from working to non-working family members does not improve the overall income of that family. Moreover, Singaporeans are generally responsible towards their family members. Of those CPF members who have made a nomination, only 2% do not nominate family members as their beneficiaries. And, of this group, half are single.

I would also like to highlight that CPF savings is just one type of asset. It is a

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predominant asset but it is not the only asset. Non-working members may have other assets, such as property. Dr Geh Min will be interested to know that of the 592,000 married couples who own HDB flats, the female spouse is joint owner in 91% and sole owner in 3% of them. In other words, the female spouse in 94% of these instances owns the asset. Thus, the majority of wives do own assets, even if they are not working.

Mdm Halimah asked about investment-linked products. She raised a concern, and she rightly pointed out that many invest even without knowing the increasing charges as they grow older. I would like to assure her that the impact is limited as it pertains only to regular premium insurance-linked products.

Since 1st January 2001, the CPF Board has stopped allowing the purchase of regular premium policies under the CPFIS. In other words, we only allow CPF members to purchase single premium ILPs. As at 31st December 2004, about $700 million or less than 8% of the $9 billion of CPF savings invested in ILPs are regular premium ILPs. So, it is a small proportion. We have stopped it anyway. The CPF also imposes additional safeguards in place to ensure that excessive premiums do not go towards insurance costs.

Firstly, the maturity date for ILPs bought with CPF savings must not be later than the member's 62nd birthday. In other words, you cannot have a policy that extends indefinitely and raise the premiums for older members. Hence, they will not be affected by the increased insurance charges as members age.

Secondly, for a given premium, limits have been placed on members' basic sum assured to ensure that a greater proportion of the premium paid is for investment. So, upfront, we have asked the insurance companies to cater for the basic premium as assured.

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The Chairman: Order. I will take the break now.

Thereupon Mr Speaker left the Chair of the Committee and took the Chair of the House.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.40 pm.

Sitting accordingly suspended

at 3.23 pm until 3.40 pm.