ANNUAL BUDGET STATEMENT: Order read for resumption of Debate on Question (17th February, 2006),

"That Parliament approves the financial policy of the Government for the financial year

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1st April, 2006 to 31st March, 2007." - [Prime Minister and Minister for Finance].

Question again proposed.

Dr Ahmad Mohd Magad (Pasir Ris-Punggol): Mr Speaker, Sir, allow me to first congratulate the Prime Minister and Finance Minister, Mr Lee Hsien Loong, for presenting a Budget hailed as generous, compassionate and inclusive for all Singaporeans. "$2.6 billion help package for all" was the headline of the Straits Times on Saturday, 18th February, in addition to having a special "Progress Report" segment. The Business Times captioned its publication with "Rewarding work, promoting growth", but acknowledged it was less generous for corporate Singapore in its editorial. The Today paper flashed "Windfall for all", while Berita Harian dubbed it as " Belanjawan 'murah hati' ". Similarly, the Lianhe Zaobao impressed with " Zhen Zhang Pei Tao; Yu Suan An - Er Shi Liu Yi Yuan Quan Min Fen Hong ".

It is indeed a Budget aimed at balancing between sharing the fruits of success with Singaporeans while also recognising that growth stimulants are needed for the longer term health of the economy to keep ourselves in tandem with the rapid changes of globalisation.

Generous as the Budget may be for the people - one critical thing needs to be borne in mind: The ability of the Government to allocate such a substantial package to the people is only possible because of our policy of fiscal prudence. Without the funds generated from two years of successive economic growth, such a comprehensive social package could only remain a dream. And good economic growth can only occur with witty economic and fiscal management by a responsible Government - this is something that Singaporeans must always bear in mind.

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Looking through the Budget book, one could not help but noticed that projected operating expenditure at $24.48 billion (as compared to $21.59 billion in the current fiscal year) and the generous handouts coming from special transfers totalling $3.59 billion is setting the Government back by $2.86 billion - the largest budget deficit as far back as one could remember. Election year as it may be, it highlights the Government's willingness to periodically share the fruits of economic success with its citizens and doing so in such a manner that the lower income strata and the needy will be the primary beneficiaries of the handouts. I am proud as a Singaporean that we are in a position to be able to conduct such an exercise to the envy of many nations in the world that can only afford to dream about.

Sir, the key question here is whether this year's landmark Budget represents a departure of our budgeting policy in that the Government will continue to narrow the widening income gap by way of such top-ups at the expense of budget imbalances. I know the money has to come from somewhere but our goal must be to continue to find ways and means to pull the lower income strata up so as to prevent the emergence of a community that lives on the fringe - an underclass that loses hope entirely. Hence, the Progress Package is appropriate from time to time if there is money in the kitty to be distributed but what is important is to ensure that we continue to invest in schemes and put in measures that will enable all Singaporeans to remain relevant to the changing needs of the economy, as we fit and flex ourselves to the ever shifting profile of globalisation. It is about skills and knowledge upgrading so that employability is sustained and enhanced, and also job creation and redesign so that low paid workers can upgrade their jobs and be kept motivated to remain employed. Money spent for such causes for sure will not go to waste.

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Sir, let me now turn to what the Budget means for the business community. In the several meetings my GPC had with the Resource Panel and industry groups, there were some murmurs of disappointment but overall, the majority of them expressed understanding that the budget focus this year is about sharing surplus with Singaporeans, particularly those who are most in need of help. Furthermore, a large number of measures and incentives have been put in place in the past few years to strengthen our economic foundation, whose effect has yet to permeate through the economy.

On taxation, Sir, many SMEs were hopeful for a tax break, arguing that the tax savings could be ploughed back into the business for more meaningful purposes. However, the Prime Minister highlighted that Singapore's headline corporate tax rate of 20% is already among the lowest in the region and the effective tax rates of 5.8% for manufacturing and 6.6% for the service sector are near the lowest in the world, based on the 2005 Tax Competitiveness Report of the C.D. Howe Institute. In fact, Singapore ranked lowest with a 6.2% average with Hong Kong, our regional competitor being third lowest at 8.1%. Turkey was surprisingly second lowest, in spite of having a 30% headline tax rate.

In this regard, I would advocate that Singapore should capitalise on this as a major selling point to foreign investors, beyond the multitude of advantages that Singapore has to offer as an investment location.

The tax rate averages are obviously based on aggregated data. I would also like to propose that the Finance Ministry break this down into sectoral tax statistics to understand the tax effect on various sectors and especially the SMEs. We

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should endeavour to understand the extent of how well our SMEs are benefiting from the many schemes and measures devised specially for them and educate them of how these can translate into tax savings for them.

Sir, notwithstanding our low effective tax rates, I would like to draw attention to the fact that we are behind Hong Kong, in terms of the fiscal burden ranking, based on the Heritage Foundation's 2006 Index of Economic Freedom . This means that companies that are here or are intending to locate here, which could not benefit from our host of tax measures and incentives, are subject to headline tax higher than that of Hong Kong's.

While this is not the most efficacious issue, it is a significant link in the decision-making process. I would like to propose that the Ministry of Finance take a protracted approach to reviewing this matter by projecting this over a period of, say, five to 10 years, to understand its medium to long-term impact on the fiscal burden of companies operating on our shores.

Sir, more significantly, the Budget did not introduce any increase in tax in spite of its large projected deficit. On the contrary, it is worthy of mention that a slew of changes and measures were crafted with the aims of (i) strengthening our foundation as a knowledge and innovation-driven economy, and (ii) preserving our competitiveness amidst increasingly aggressive regional and global competition.

If one studies each of the 30, or so, elements in the newly announced changes and refinements of the existing taxation frameworks closely, it is apparent that they are targeted at maintaining "our first mover advantage as a nation and increasing the gap between the first

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mover and the second mover", if I may quote Pok Soy Yoong of Ernest and Young. I am comforted that over the last week after the Budget was unveiled, there was significant analysis being done by the finance and accounting fraternity about the benefits that lie behind the Budget, and it is my hope that these are cascaded down to the business community, particularly the SMEs.

The budget adjustments this year also demonstrate the Government's readiness to adjust and implement innovative changes not only in response to the competitive landscape but also to continually position Singapore as far ahead of the curve as we can get. But, Sir, beyond the much welcome changes, there are improvement suggestions to some of the measures that I would like to make here and a few more specific ones during the Committee of Supply debate.

First, in spelling out the main objectives of the Budget, I am pleased to note that a slew of measures have been announced by the Prime Minister to propel our economy forward. Tied to positioning Singapore to become a knowledge hub in Asia is our extensive investment in research and development (R&D). Apart from the announced $5 billion R&D Trust Fund, the current Science and Technology Plan 2005 has $6 billion set aside,

which includes $4 billion to boost local R&D capabilities and $2 billion to promote local private-sector R&D. In the very recently released S&T Plan 2010, the Government is earmarking a whopping $13.55 billion to several agencies to propagate R&D at various levels. This is truly serious business to set us ahead in the economic marathon that has no finish line.

While this pursuit will undoubtedly make Singapore an increasingly attractive knowledge hub and create high-end activities and correspondingly high-quality jobs, my concern again is how our SMEs could reap a fair share of these huge

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funds set aside. MNCs know very well what to do to take advantage of the funds, but how do we make the schemes more easily accessible to our SMEs so that more could become the MNCs of the future? We must never forget that they form an integral part of our enterprise ecosystem and provide significant employment to our workforce.

I know there are the long-standing LETAS and LEFS schemes to support technical upgrading and provide low-cost financing respectively, and the more recently introduced schemes, such as the GET-UP Programme and the Operation and Technology Roadmapping (OTR) and the Technology for Enterprise Capability Upgrading (T-Up), to help SMEs develop Technology Roadmaps and enable them access to researchers in research institutions. But let me ask: how many have taken up such schemes, particularly the technology-related ones? I am quite confident the numbers are low.

We need to do more for the SME sector to have them leverage on technology so that they remain relevant in this increasingly competitive business environment. I would like to propose that we establish a coordinating body where SMEs could readily approach to assist them in assessing their technology gaps and pairing them with appropriate research institutions to help them move up the technological ladder. Strong incentives should be given in key technology areas, such as precision engineering, food manufacturing, photonics and logistics, to spur them to innovate and deepen their capabilities. The incentives should extend to include product and process development and commercialisation of their R&D efforts.

Considering that many SMEs are supporting large MNCs in many aspects, the centre could also play a catalytic role in bridging collaboration between the two parties in terms of participating in some of

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the R&D needs of MNCs, so that our SMEs could continue to meaningfully support the needs of the MNCs.

Sir, the PM also mentioned that IPR protection is a crucial factor for R&D to sink deep roots here. I agree with the PM that Singapore has built a name for itself as a trusted party for foreign businesses to locate their high content activities in our country. I have no doubt that this will further boost high-end activities here but, again, my concern is for small and budding entrepreneurial businesses here. The IPR concept is alien to many of them. With the Government strongly emphasising entrepreneurship as an alternative to jobs, the education on IPR should also begin at the school bench and permeating through the rest of the SME community.

To foster and speed up innovative activities among new entrepreneurs, it would be beneficial to provide an IPR infrastructure that is relatively inexpensive, less cumbersome and accommodative of inventions with short commercial life. This will help to promote and support a culture of innovation and enterprise and assist start-ups.

Australia has two systems of second-tier patents: petty patents and innovation patents. The development of the Australian second-tier patent protection is premised on the need for a quick, less expensive and more easily obtainable patent protection for product inventions with short product life cycles. I would like to suggest that we look at these models and modify them to suit Singapore's evolving entrepreneurial needs.

This brings me to the subject of entrepreneurship per se. The economic difficulties we were confronted with as we entered the new millennium have encouraged many young Singaporeans to try new and different approaches. This is encouraging because, as our economy

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matures, the job market profile will change radically and, therefore, entrepreneurship should be looked upon as a serious alternative to full-time employment. I am encouraged, for example, to note Douglas Foo's Sakae Sushi chain of restaurants has spread to cities like Beijing, Bangkok, Jakarta, Surabaya and Manila. This is an example of a Singaporean capitalising on a market niche. Owing to their limited resources, we need to equip our small companies with the skills to focus on very specific areas where they can develop sustainable competitive advantage in. They can develop strong competencies when their resources are focused in narrow areas.

I know the Government is creating as supportive an environment as possible to foster entrepreneurship. But if we are serious in wanting Singaporeans to take on entrepreneurship as a career option, we must make sure that, from secondary school, our students learn to think beyond Singapore due to our small market. As Minister George Yeo puts it, "Our minds must be much larger than our geographical confines. If we are too home-bound in our thinking, we will not succeed."

Sir, recognising the need for entrepreneurs to look beyond Singapore, they have to put up with greater risks when venturing abroad and, more often than not, will require financial staying power to get their ventures to take off. In this regard, Sir, they could certainly benefit from more tax reliefs, such as more generous treatment of carry-back of tax losses beyond the $100,000 relief that was granted in last year's Budget.

Sir, let me now move on to the subject of retirement funding. With increasing life expectancy of Singaporeans and the Government's position of steering clear of state welfare programmes for

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retirement, it is imperative to ensure that Singaporeans have sufficient funds to carry them through this uncharted phase of their lives.

The majority of Singaporeans can only look up to the CPF - for whatever little there is to look up to - for their retirement. It is now more evident than ever that the CPF, with the lowering of employer CPF contribution ceiling caps based on salary level and contribution rates based on age, has resulted in reduction in retirement saving rates as a percentage of salary for many employees. Similarly, the Supplementary Retirement Scheme (SRS), unless revamped, is stagnating, because its contribution cap is stringently tied to declining CPF contribution and it is also stifled by its own complex mechanisms and restrictions.

Several Members of this House, including Miss Penny Low and myself, spoke on the need to thoroughly review this scheme and proposed the urgent need to set up a task force, but our calls went unheeded. With this second call, I hope that at least some attention could be given to the SRS which, in fact, started as a promising scheme but now appears to be heading for a natural death.

Sir, the adequacy of the retirement nest-egg for Singaporeans is in a serious state. Looking at current demographic trends, it can only get worse, if nothing is done at this juncture. With this current state, we are not even referring to provisioning for retirement enjoyment, save those in the high-income bracket, but merely having enough to survive the twilight years.

It appears that the main way forward to ensure sufficient provisioning for retirement, other than people undertaking to save more for their own future needs, is to encourage employers to contribute to it. In this regard, several employer groups

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that my GPC members and I met with, strongly advocated that existing legislation governing tax approved schemes are widened and made more flexible so as to enhance their appeal to both the employer as well as the employee.

This would entail a re-examination, Sir, of section 5 of the Income Tax Act. The lack of implementation of schemes at the company is attributable to seemingly complex approval procedures and the high establishment and administrative costs. It also currently prescribes that each company implementing such a plan operates its own trust fund, which makes it expensive to manage.

Basically, I would like to propose that this section be amended to permit companies to establish retirement schemes that will allow employers and/or employees to contribute directly to a retirement savings plan. It could be loosely modelled after the US section 401(K) scheme. The contributions would be in addition to CPF and should be structured such that employee contributions are simple to make, are tax-exempt, and that the accumulated benefits are portable. To keep costs low, companies, especially SMEs, should be allowed to pool their funds under a common trust manager for economies of scale. Participation of the fund should also be extended to foreign employees, especially executive talent, as such people cannot participate in the CPF scheme.

Sir, as I noted last year, if the SRS could be repackaged and section 5 could be revamped taking into consideration the points that I just raised, these could draw economic benefits beyond just meeting the needs of Singaporeans. They would have positive implications on the wealth management industry as well. If long-term products with attractive tax benefits could be offered, they would not only attract foreign talent who would be

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satisfied with a flexible pension package available to him, but also foreign nationals who are always on the look-out for safe and tax-incentivised environments to park their funds.

I would like to repeat the proposal made last year, that a Special Task Force be formed to conduct a holistic review of the SRS and section 5 to enable more channels to be opened for retirement savings.

Sir, reverting back to the other changes unveiled to improve the competitiveness of our tax regime for businesses, many of these changes were hailed as innovative and forward-looking. However, some of them could be tweaked for better clarity or to make them more attractive.

First, Sir, on Islamic finance and banking. I am glad that there has been quite intense activity in this area since the Minister for Finance announced the removal of double imposition of tax duties on Islamic transactions involving real estate, and also accorded concessionary tax treatment on Shariah Bonds during last year's Budget. Senior Minister Goh's several visits to the Middle East, coupled with a series of signing of FTAs with a number of Middle Eastern and Gulf state countries, further underscore our seriousness in seeding Islamic finance and banking in Singapore.

The recent Budget further proposed relaxation of tax treatment of qualifying Islamic financial products, which is certainly laudable. However, Sir, the gains or profits earned by the financial institutions in lieu of profits will be recognised as interest. Unfortunately, the concept of regarding them as interest in the books of the financial institutions is insensitive to the belief of Islam. Interest or riba is haram or forbidden in Islam. It may be quite all right for a conventional bank with an Islamic finance window to

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record such earnings as interest, but I would like the Minister to consider being more liberal in allowing pure Islamic institutions desirous of setting up here to use another suitable terminology other than "interest" without changing the accounting treatment. Such flexibility will go a long way in attracting more Middle East funds to Singapore.

Next, under Qualifying Foreign Trusts (QFTs) which are taxed at the concessionary rate of 10%, while the incentives would be enhanced in the proposed change, the current position is that a trust would be regarded as a qualifying foreign trust if its settlers and beneficiaries are individuals who are neither Singapore citizens nor resident in Singapore, or foreign companies. I feel the current definition of QFTs is rather restrictive. Its expansion to include other forms of legal entities would further enhance the effectiveness of this incentive in exempting income derived from trust arrangements.

On Foreign-Sourced Income Exemption (FSIE), the proposed change would grant tax exemption to the current FSIE regime, if they are remitted under certain scenarios or circumstances, with details to be announced in due course. The expectation is for the specific scenarios or circumstances to include:

(1) Dividend income remitted from foreign holding companies which, although not subject to foreign tax at the holding company level in the foreign country's jurisdiction, is subject to foreign tax at its subsidiary level in that jurisdiction. Consequently, the underlying income would be subject to double taxation, both at the foreign level and, once again, at the Singapore parent level, on remittance to Singapore;

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(2) Foreign sourced income, which is not subject to tax in the foreign jurisdiction but significant business activities are carried out in the foreign jurisdiction.

Sir, these are just a few examples where further fine-tuning or removal of uncertainty would help in the process of creating a higher degree of dynamism in the wealth management environment here.

Being the most politically stable country in the region, coupled with our diverse language ability in English, Chinese, Malay and Tamil, Singapore is well-positioned to reach out to the rapidly increasing number of wealthy people throughout Asia who will want to invest their excess funds to generate good returns.

Increased vibrancy of the wealth management industry which is robustly regulated, will also bring with it a whole spectrum of ancillary services such as more sophisticated legal and accounting functions, custodian services, etc, and also with it, the much sought after top talent that will develop and equip more Singaporeans with a new set of financial and corporate management skills. It will generate higher business volume, bring greater critical mass, which translates to higher corporate tax collections, increase in the pool of wealthy people, which in turn would enable the Government to collect more individual taxes and, therefore, hopefully contribute to budget surpluses in future years.

To conclude, Sir, I would reiterate that this Budget is indeed a landmark budget in that it delivered on the Government's promise to plough back the fruits of the past two years' economic success while at the same time, it introduced innovative initiatives to develop fresh industries and build on our country's own intellectual property.

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I am confident that it would go a long way in reinforcing to Singaporeans of the Government's endeavour to build a strong, caring and inclusive society as we forge ahead to enhance our relevance to this globalised world.

On that note, Sir, I support Prime Minister Lee's Budget Statement.

1.02 pm

Mr Inderjit Singh (Ang Mo Kio): Sir, this year's Budget is indeed a people's Budget and rightfully so.

After many years of restructuring the economy, it is time that we did something to address the impact of the economic restructuring on the people of Singapore, and, as expected, the impact of the restructuring exercise on the people has been very significant. We have seen people losing jobs, especially manufacturing jobs, rendering many of our semi-skilled and lower-skilled workers having unusable skills for the jobs we created in the last few years. Our professionals, especially the middle-aged, have lost jobs in multinationals which have restructured or relocated and our older workers have not found the favour of employers. All these are permanent structural changes which cannot be addressed by the one-time initiatives like the ERS or the New Singapore Shares or CPF top-up schemes. We need a more systematic approach of solving these problems to help people affected by the restructured economy on a longer term basis.

While other countries have a social welfare system to give comfort to the workers that should they lose their jobs, they have something to fall back upon, in Singapore, up to now, it has been every man for himself except for the low-income or needy Singaporeans. I am therefore glad that we have finally devised a system to systematically help Singaporeans for

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the longer term. The Workfare Bonus and the Opportunity Fund are the two most exciting developments this year and are very well-targeted so that we derive the maximum gain that we intend to. We all commend the Prime Minister for this.

The Budget, however, did miss out on one important group of Singaporeans and these people have been called the sandwich group or the "asset-rich and cash-poor" group, a generation of those who bought into the Government's asset enhancement policy. Many of them live in bigger flats or in private apartments. It was an era where we all encouraged everyone to aim for the Swiss standard of living and go for upgrading of our properties every seven years, as one Minister once told me. It was an era where we were told that we should continue to aspire for greater things. Throughout the prime of their lives, from the ages of around 25, when they started working, till the time they became about 45, that is about how old I am today, everyone aimed and stretched their incomes to pay for the high prices of the bigger properties than what they should have bought. Worse still, the fact is that many of them are on negative equity on their properties right now, which means that they cannot lighten their burden by simply selling and downgrading their properties.

So while the Budget seems to be a broad-based one, it missed out on this significant group of people. This group is a growing one and many have been hit by retrenchments or are potential targets for retrenchments as the economy continues to restructure. We know of many cases where double income families have suddenly become single income for prolonged periods of time. Employment remains elusive and they find it difficult to land jobs because of their age. They will have little benefit from the WDA's schemes and they will become the more difficult group to retrain and to deploy to

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new jobs. Because they are "asset-rich and cash-poor", they will not be getting very much from the schemes that we have devised. While I fully support and agree that the schemes will help about 45% or so of Singaporeans, we should have taken the opportunity to be a bit more generous with the Progress Package to help this group of people because they are not living in three or four-room flats. These days, when I sit around with a group of people of my age, the conversation is one of fear of losing their jobs, about the bleak future for the middle-aged and also about how they will have to struggle upon retirement. This is definitely not a healthy sign and we need to find a way to give greater confidence to this group of middle-aged Singaporeans.

What about businesses in this year's Budget? The Budget seems scarce, in terms of initiatives to help companies, as my colleague, Dr Ahmad Magad, has mentioned. But I expected this year's Budget to be a non-event for businesses and many businesses also felt that way simply because over the past three years, after we released the Economic Review Committee's recommendations, the Government has implemented many measures over the years and these have helped us restructure the economy, the impact of some which we have already felt, like those addressing the cost and tax issues, while the impact of others has yet to be fully felt. Therefore, I think businesses did not expect much this year.

However, because of the low expectations for companies, I am quite happy that the Prime Minister continues to fine-tune our system of taxes to make them more effective in terms of reaching the target areas. Examples like the zero-rating of tools for sub-contractors, the zero-GST warehouses and in anticipation, the fine-tuning for the Foreign Source

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Income, should be considered a bonus for businesses. I therefore agree with the Prime Minister that we have done quite a lot in the last few years, especially after the ERC's recommendations and we should wait and see the impact of all the measures and then make a review in a couple of years to gauge the effectiveness of the measures and then think of new things that we can do to further strengthen our economy.

Sir, I would like to touch on three topics today and many of them have got to do with the ERC's recommendations. First, Government-linked companies (GLCs). While Temasek is actively going abroad with its multi-billion dollar spending on acquisitions, and this is one of the recommendations that we made about GLCs expanding their external pies, I also notice that GLCs remain active locally. The question is: how successful have Temasek and other GLCs been in growing their external businesses? While I am not advocating a sudden scale down in Singapore, I want to be sure that GLCs can really become effective when they face real market competition outside their comfort zones in Singapore. I am, however, encouraged by the results shown by some companies, for example, SingTel, but there is less than obvious success for most other GLCs. I worry about the example of DBS having to write-off a huge amount as a result of the acquisition that it did recently. Perhaps, the Prime Minister can share with us the other success stories of GLCs which might not be so obvious to all of us.

Sir, one of the recommendations in the ERC was for Temasek to focus its stable of companies to aggressively grow the global businesses and I am encouraged that it is doing this directly by making those big ticket items and we should continue to do this. While on the topic of GLCs, I notice that we continue to have high level of involvement by our political leaders in GLC business activities,

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including listed companies. A case in point is the recent involvement by Minister Mentor with SIA, suggesting to the board and management on what business directions to take. Sometimes, I wonder why we have such high level board members appointed to such companies when they, the board members and management, still have to be guided by the likes of MM Lee, who has many other things to do too. MM suggested that SIA should spin off some of its businesses which seems very odd to me, especially when such issues are price-sensitive for listed companies. In this particular case, for SIA, I recall the share price of SIA sky-rocketed as a result of this recommendation.

Sir, the specific recommendation that we made in the ERC was, and I quote, "Ensure GLCs are commercially run, with no interference from the Government". I guess we have failed in observing this practice and I suggest that we do something about it. Perhaps, we should just appoint MM and some of the Ministers permanently onto the boards of some of these GLCs that still need guidance to avoid such adhoc disturbances by Government in such companies.

Sir, the second topic is on the issue of promotion of entrepreneurship. There has been a significant shift in mindset which the ERC proposed and the outcome was the formation of the Action Community of Entrepreneurs or ACE. The progress made by ACE has been encouraging and we managed to get the buzz about entrepreneurship going, and why has this been possible? This is because we have developed a unique model where ACE is mainly a private sector-driven initiative chaired by a Minister-in-charge of entrepreneurship, who in turn acts as a champion for ACE, or the private sector, in Government, especially at the Cabinet level, where it matters most in decision-making. So we have been able to make

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many changes and implement many new initiatives which ordinarily the old approach of governance would not have been able to achieve. This unique private sector and Government partnership has allowed us to achieve things like rule changes through ACE and also the good work of the pro-enterprise panel, another private sector-Government partnership. We have managed to introduce many new initiatives in the area of financing to support start-ups as well as SMEs, all again driven primarily by the private sector. So what is it that made things work for the promotion of entrepreneurship which the Government could not do well in the past? The answer must lie in the new approach of getting the private sector to drive things, with the support of Government agencies, which placed a greater faith in the private sector, believing that the private sector too can think and help shape policies and help develop the economy and the country and it is not the responsibility of the Government alone. And if we believe in this private sector contribution to policy-making, perhaps, we can take it to the next level and have private sector input at the highest level of decision-making - have nominated Ministers, who are not elected but appointed from the private sector at Cabinet level. I am confident that the quality of decision-making will further improve if we do this.

Sir, many have asked about the success of ACE and our success of promoting entrepreneurship. My answer is: please have patience. Rome was not built in a day, as they say. We have not created many world-class companies but are getting there. I ask the Government to have patience and have faith that the process is the right one and eventually the results will be good. We have been very late in our entrepreneurship promotion efforts. We should have started in the mid-1980s when we saw the first signs of stresses on our economy. We still have issues with some Government agencies.

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Those who understand what it takes to develop an entrepreneurial economy and in supporting smaller companies, like SPRING and IE Singapore, have been doing many right things and have been pro-actively supporting the initiatives in the promotion of entrepreneurship and local companies while others remain closed in mindset and in efforts to help in the process. An example is the effort which I undertook last year to review the various Government

incentive schemes, the 60 plus or so schemes which exist today. We had a very good start in reviewing the schemes, which was reviewed by a task force I formed, composed mainly of private sector people. We managed to identify weaknesses and improvements for a number of schemes, a report of which we submitted to MTI for review. Of the 60-plus schemes, my committee managed to look at eleven so far. The outcomes have been encouraging and also encouraged us to look at the rest of the 60 schemes. But we did face roadblocks in that some agencies did not want to cooperate with us and we could not get the process going further, causing us to miss our deadline of reviewing all the 60 or so schemes that we had hoped that we could review. Therein lies the second problem affecting our efforts to create a pro-enterprise environment and that is the reluctance on the part of some civil servants at best, and civil servants, becoming obstacles in the worst case. We need a collective effort and everyone to become believers if we want to succeed in this effort. But, on the whole, we have made very good progress in the promotion of entrepreneurship and we should not slow down our efforts. We still have a lot of catching up to do and I am quite happy that the Government has been very supportive at the overall level of activities.

Sir, the third topic is on the tax structure and CPF. We have now reduced

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our headline tax rate to 20% and this has been effective in attracting some businessmen, entrepreneurs and companies to locate in Singapore. But I urge the Minister to continue to watch the changes going on around the world. In Europe, for example, tax rates are starting to come down. In Ireland it is already at about 12 1/2%. Hong Kong just made a small change a few days ago. So we have to be prepared to make reductions if there are further reductions around the world. I know that this is a tough balance of income and expenditure and if we want to continue to have Government-driven programmes for the good of the nation the key thing is that we need to remain competitive. And if some day, others can manage to live with lower tax rates, we must also learn to do so.

One issue I have about the tax incentives, and for that matter the way many Government incentives are administered, is the preference typically given to foreign companies, whether intentionally or unintentionally, because of the way the schemes are designed, for example, the various pioneer tax status of global or regional HQ status. One of the most unfair schemes is the Global Trader Programme where many of our local traders cannot qualify although the type of activities they do is no different from that of foreign traders who are attracted to Singapore because of this Global Trader Programme tax incentive. On technical grounds, local companies fail to qualify for this tax status. I should perhaps, at this point, declare my interest as the owner of a local trading company. This issue has been brought to my attention not because of my company, but through discussions in the feedback sessions that I have with some of these companies and local traders who actually have relocated out of Singapore into places like Dubai because of their feeling that Singapore is becoming less attractive. So if we can relook at how these schemes are designed and do some fine-tuning, our local companies too

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can feel that they are fairly treated. All they need is a level playing field.

Sir, I believe that the CPF system is also due for another review and while the ERC did put in a commendable effort to make good recommendations, it was limited by what it could change because of the boundary conditions that it was given. Specifically, because the mindset was that the CPF remains primarily a retirement scheme, the changes recommended are not good enough to address the changing needs of Singaporeans. In fact, it is no longer effective as a retirement scheme. It looks more like a scheme for housing and investments. Over the years, we have lost the effectiveness of the CPF so much so that we are in trouble because Singaporeans will not have enough for their retirement. The CPF, therefore, needs some revamp for us to effectively achieve all the traditional objectives and the new needs to help the sandwich group of Singaporeans.

The first issue is on the returns we get from the CPF. We all know that we will not have enough money to support our lifestyle upon retirement for most Singaporeans and, especially with life span increasing, it is indeed a matter of great stress for many of us. One of the first things that we need to do is to source for better returns on the funds that are being managed on behalf of the CPF. While the interest that we receive from the CPF savings of around 2.5% looks better than some bank savings rate, if we compare the CPF returns to the returns of pension funds from around the world, the 2.5% is a very low rate. Then, if we look at the returns that Temasek and GIC are making for the funds which they invest on behalf of Singapore, the returns are much higher than the 2.5%. So something needs to be done to liberalise the CPF funds closer to private sector fund management like pension funds in other parts of the world or perhaps the

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Government should return more than the 2.5% since the funds it manages through Temasek and GIC yield much higher than the 2.5%. If we can increase this percentage perhaps we may have a better chance of having enough money to spend upon retirement.

Sir, the second thing I suggest on the CPF is that it should now switch its role from a primary retirement scheme to a dual role. This would help address the issues I raised about the sandwich group of Singaporeans. The primary roles, instead of being primarily to serve the retirement needs of Singaporeans, should perhaps include the need to address retirement as well as retrenchment. The operating principle of our Government has been for Singaporeans to help themselves in times of need and also be responsible for their own retirement. I agree with this basic principle. In order to effectively achieve this at the operational level, every Singaporean must save for their retirement as well as for a rainy day and this rainy day includes medical needs and, lately and increasingly, potential retrenchments and extended periods of unemployment. The Government cannot possibly take care of everyone and, therefore, the programmes at WDA and Workfare cater for the lower income and the lower skilled Singaporeans. But what about the sandwich group of Singaporeans?

Many of us in this House have over the years suggested the use of CPF as an alternative retrenchment benefits scheme where members borrow from the CPF. While this is an attractive proposition, the Government's argument has been that it is impossible as the CPF system is already overloaded with needs like housing, medical care, investment and education, including retirement, being fulfilled by the CPF system. Also, how do we possibly do this given that even the basic treatment needs cannot be fulfilled by the CPF? So unless we start with a new

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mindset that there need to be two equally important roles of the CPF, we will never be able to find an amicable solution. If we can think in the new mindset, then perhaps we can have additional savings made compulsory during productive employment years to help during years of unemployment, or a national unemployment insurance programme being implemented as a an integral or a subsidiary part of the CPF. I do not intend to talk about the perfect solution but how we can get to a solution by rethinking the role of the CPF as having dual objectives of retirement and retrenchment. I am quite confident that we will have the right solution once we can settle this issue. I support Mr Ahmad Magad's recommendation that we form a panel to just look at this retirement issue.

Sir, in conclusion, this year's Budget is indeed a people's Budget. It has rightfully helped the people badly hit by the restructured economy. Many Singaporeans will continue to be affected as the economy continues to restructure. We have not ended it yet. We need to have in place the right support measures to help Singaporeans if and when they are hit by retrenchments and when they face prolonged periods of unemployment. We have entered a new era where we need to be realistic about our expectations in that we should not unrealistically commit to more than affordable assets like houses and cars. A greater proportion of our disposable income should go towards retrenchment and retirement support and the Government could play a role by formalising this support structure through changes in the CPF system or any other system. Sir, on the business front, we should keep our momentum of transforming our economy to an entrepreneurial economy. We should not think that things will be back to normal again. The world has changed and we must continue to change fast. We have

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all the right ingredients and now it is for us to make it work for us.

Sir, I am very happy that with the series of Budgets that we have seen over the last three years, since 2003, which were intended to restructure the economy and now the final touch of taking care of people who have been affected by the restructuring is a master touch at the right time for all of us. Sir, taken as a package, the Budget over the last three years, we have one of the most enlightened Budgets in a long time.

Sir, I support the Budget.

1.22 pm

Dr Wang Kai Yuen (Bukit Timah): Mr Speaker Sir, like Mr Inderjit Singh, I also agree that this is a budget for the people. In fact, I suspect most of us who stand up would say that it is a people's Budget. In this Budget, we took care of the people, in particular the poor and the down-trodden. I congratulate the Prime Minister for this very generous Budget. I too want to congratulate the Ministerial Committee on Low Wage Workers headed by Dr Ng Eng Hen. He deserves our appreciation for his recommendations and also for winning the argument to share the fruits of progress as proposed in the $2.6 billion Progress Package. Sir, it is well known that medical doctors are people with deep compassion for the underdogs. The compassion shows through in this particular Budget.

Sir, the Singapore economy has indeed done well in 2005 and most Singaporeans are better off now than at the depth of the recession, except the poor and the old. Furthermore, there emerged a class of new poor as a result of structural unemployment. In fact, Sir, I was trying to come out with a definition of "new poor" but listening to Mr Inderjit Singh, I think he has done a very good job defining what is "new poor" - people who are affected by structural unemployment.

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In so doing, in taking care of the poor and old, this Budget has indeed covered all the bases. In giving every Singaporean an ang pow , the Prime Minister skews the benefits towards the poor and the old and I believe it established a new precedent and also several new principles.

Let me look at some of the principles. First, the Budget confirmed that in sharing surpluses, the Government has committed that the poor should get more than the rich. This is a departure from the previous approach of equal sharing regardless of needs. To many of us, we think it is an improvement.

The second principle: the Budget helps those who help themselves. Thus, it provides incentives for low-wage workers to find a job or to keep a job when otherwise he might not have taken up those jobs. For instance, there are many jobs in Tuas which could not be filled because of transportation costs. Perhaps with the incentive provided in this Budget, some workers might now find it worthwhile to travel the distance and incur the expense to take up those jobs. In this respect, I also support the CPF top-up scheme for low-income workers to own their homes, enabling them to own a stake in the nation's prosperity. Of course, on the other hand, we should be careful not to enslave those who cannot afford home-ownership in the first place by over promoting home-ownership as a Government policy.

Sir, just in case that we are overwhelmed by the generosity of this Budget, I would like to take a step backward and look at this Budget and see how it deals with the challenges faced by Singapore through its impact in the following timeframes: future, mid-term and immediate.

Looking into the future, the Budget allocates the first disbursement of $500

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million of the National Research Foundation. This is in line with the vision of Singapore, establishing Singapore as a knowledge hub. In a way, this emphasis of a knowledge industry is a return of the previous emphasis of the old Government promotion like NSTB or A*Star R&D programmes. I wonder whether the Government was satisfied with the success of those efforts in the earlier years. To an observer, by the way the various R&D institutes had been reorganised, presumably, the effort was less than stellar success.

This time round, the R&D is headed by none other than the Prime Minister himself. Sir, given the complexities of public funded R&D, I would like to wish the Prime Minister great success in this new effort. Picking out winners in the R&D race is important for Singapore's future. However, because we could only see the fruits of our efforts some time in the future, we cannot depend on this effort to have an impact on the job market in the next 5-10 years.

Sir, I like the various proposals in the Budget for the education for our young, such as the Opportunity Fund for the schools, in the sense that the schools can then be more creative in the programmes they could offer to our children. I support the allocation for kindergarten education to ensure that all young Singaporeans would start their formal education as well prepared as others. In the field of education, I agree that if we could do more, we should. However, I am surprised that the MOE is funding breakfast programmes for our children. Sir, I am not aware that there are many children in Singapore going to school hungry in the morning. In fact, if anything, our impression is that the children in Singapore are getting bigger and fatter at a younger age. The sizes of our school uniforms and children's clothings are larger than children of poorer countries.

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Moreover, the onset of diabetes in our citizens is occurring at a younger and younger age. So, I am not sure that MOE's effort is all that necessary. But even if we do, even we need to help children who go to school today hungry, I thought this would be better left to voluntary organisations rather than taken up by the MOE.

Sir, let me look at the mid-term impact. In this area,

I am also echoing the disappointment of Mr Inderjit Singh, in the sense that the attention of the Budget did not particularly address this particular area. While there are some tax measures to promote the economy, in terms of tax cuts, they are actually pale when compared to the other measures being taken, in particular, of course, the Progress Package. The plight of the SMEs, which the Prime Minister is very familiar with, has not been addressed. As tax measures will take some time to take effect, I am disappointed in the sense that we are not putting sufficient weight on the measures to help the industry that will show tangible results in the next few years. Perhaps the Prime Minister has decided to deal with this problem sometime in the next term of his government. This is worrisome, because I think we might be taking our eye off this problem on the assumption that things have returned to normal. Because, I believe, that job opportunities to be generated by the local SMEs are important. Given that direct foreign investments brought in by the EDB tend to be high-end, SMEs are the companies that we must nurture so as to provide young Singaporeans today with fruitful and rewarding careers in the near term.

Clearly, Sir, the emphasis of this Budget, in particular, the Progress Package, is to help Singaporeans in the immediate term. Every adult Singaporean, including overseas Singaporeans, will

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receive his notice of how much dividend he will get by the end of March. Money will be put into their hands by 1st May. The emphasis is here and now. Yes, we are helping those who have suffered in the long drought due to the economic downturn. However, such Government generosity breeds dependency and, in an election year, it breeds future expectations. For instance, why do we include overseas Singaporeans, in particular, those who have not been actively contributing to the Singapore nation since their departure from Singapore? Rather, by settling overseas, such Singaporeans have contributed to the development of their adopted countries. Sir, the more cynical will then jump to the possible linkage between granting them the right to vote as well as their inclusion in the Progress Package. This will be unfortunate, Sir.

In his speech, the Prime Minister anticipated some of these and mentioned that we would change our policies based on our experience of undesirable outcomes/results. Sir, this is easier said than done.

Now, let us see how we are setting the stage of great expectations for every general election sometime down the road. To me, Sir, the stance adopted by this Budget reflects two shifts in Government's management of fiscal surpluses.

First, in sharing the nation's surpluses, the Government is handing out an all-cash disbursement for the first time. In the past, the disbursement was in the form of shares, which some could and indeed keep for their future while others cashed them. In a way, this reflects the recognition that for the lower-income groups, holding on to shares is not a preferred approach. We have, in a way, given up any attempt to camouflage the Government's handout as subsidies, welfare payment or negative income tax.

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We just give them cold hard cash. The message is, "You have done well. You have been good citizens. You deserve a reward. Go and spend some." I believe the timing, being so close to the next GE, would condition Singaporeans to respond in a way similar to the Pavlovian experiment.

Second, the Government has been changing its perspective of balancing the Budget from an annual basis to a "term of government" basis. In other words, instead of balancing the budget every year, I can see the Government shifting to balancing the budget over the term of Government, which could be as long as five years, theoretically. I have observed this gradual change over the years after the amendment to the Constitution on the preservation of the reserves. But with this Budget, this shift of stance seems to be permanent. For the current Government, the term started from the date the Prime Minister was sworn in as Prime Minister. Since the Prime Minister has declared that he is not dipping into past reserves to fund this year's unprecedented deficit of $2.86 billion, I can deduce two facts.

First, it is clear that the deficit of $2.86 billion has been provided for in the management of the Government's finances since this term of government took office. Indeed, when I spoke on the Budget Statement 2005 last year, I asked why was the NII recognised in the Budget lower than the previous year, ie, Budget 2004. In fact, NII recognised in 2004 was $0.82 billion lower compared to NII recognised in Budget Statement 2005. Now, I think we know. The difference is being salted away for the Progress Package.

Second, I think we can deduce that the current term of government will end before this financial year. Otherwise, no Finance Minister could be so confident to make that statement of not dipping into

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past reserves without having to worry about balancing the next budget if the Government were to last another year. Even if he could, then the Finance Minister would have disclosed to Singaporeans that the Government has very deep pockets, which I am not sure is true. So I think it is quite clear that this term of government will end before the end of this financial year.

In this sense, Sir, I believe that from this year onwards, every future government will be tempted to reap political dividends through a people-oriented Progress Package at the end of its term; thus, starting a new cyclical trend which I will call "election year budget". I expect to see a trend where the Government will maintain a balance of revenues and expenditures for most years of its term of government, while recognising less than the statutory limit of 50% on return of investment from past reserves in that year's Budget. The rest will go into reserves. But, as we all know, only 50% of the NII would be locked into past reserves. The balance could be tapped for future Progress Packages. Then, at the end of the term of government, in delivering the Budget on the year of the election, the Minister for Finance could pull out from his hat a Progress Package with goodies for everyone. I think this will be the expectation set up in the public mind and, indeed, this is my major concern about this year's Budget. The question is whether setting up an expectation of Progress Package in future election years is good or bad.

I first described our reserves as our "oil well under the ground" in this Parliament a fair number of years ago. I described NII as our black oil oozing out from the well and that Singaporeans should be indebted to the Government for managing and protecting our reserves so successfully. When I spoke on this, I was urging the Government to make use of the

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NII to provide more affordable social and medical services to the older and poorer Singaporeans. Well, the Government has outdone this and produced this year's Progress Package. I could only add that I would urge the future Finance Minister to look into providing more affordable social and medical services for the old in the future, maybe a scheme similar to the Utilities Save, where unused allocation into this programme for medical care could be cashed. This would be much more better appreciated by Singaporeans.

Sir, I will move on to other topics which I have, in fact, asked for in previous budgets. Many people have brought up the increment for the Singapore pension in the past. I did it last year and I am doing it again this year. I will ask whether the Minister would spare a thought for the pensioners on the Singapore Government pension scheme. If he could just review it, maybe this review would be like his visit to the fruit machine room in the NTUC. The pensioners might hit jackpot as well!

Sir, in conclusion, I would say that everyone I have spoken to is happy with the Budget - some happier than others. Most are looking forward to cash in hand. A small minority is concerned about the lack of attention paid to the challenges facing Singapore, in particular, in the mid-term. Some of them have asked: within the next few years, what could they do? It seems like we are looking at the IR as a solution. But how long can we depend on the Integrated Resort for the prosperity of Singapore? How do we convey to the younger generation that they should be confident and enthusiastic about their future in Singapore? The Prime Minister did not address some of these questions except in passing. I hope he will do so in future Budget Statements.

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The Progress Package is welcomed by Singaporeans. This will render the ground sweeter for the ruling Party in the coming general election. Whether we will set up this expectation of election year budget would be left to future generations of MPs to worry about. Personally, I am concerned, as I expect that it would.

1.35 pm

Dr Amy Khor Lean Suan (Hong Kah): Sir, weeks before the Budget announcement, there were great expectations that this year's Budget will have lots of goodies to offer, especially to individual Singaporeans. Nonetheless, I was still pleasantly surprised by the Government's unprecedented generosity when the Budget was actually announced. The "special transfers" reached an astounding $2.6 billion. More significantly, the projected budget deficit of $2.86 billion for 2006 is said to be the largest budget deficit in at least 20 years.

Sir, the $500 million ComCare Endowment Fund and the over $600 million of top-ups and rebates, announced at PM Lee's first Budget Statement last year, was the first substantial and very tangible expression of the present Government's commitment to help needy Singaporeans. This year's Budget is even more heavily skewed towards social objectives and should leave no one in doubt of the Government's commitment to help vulnerable Singaporeans, especially the low skilled and low wage workers, suffering the painful effects of globalisation.

Sir, this is a Budget where the heart and the head beat with wonderful symmetry. I am so delighted that almost all the recommendations made by the various committees have been accepted and, in many instances, enhanced. It reinforces the hallmark of PM Lee's leadership, which is to be an inclusive and consultative Government that listens to and, more importantly, acts on feedback.

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But - there are always "buts" in life - there are two areas of concern that linger. Actually, this Budget is so well crafted and comprehensive that I am hard put to come up with the customary three points to highlight.

Adapting from one of Jack Neo's memorable movie titles, the two areas of concern are: (1) Jobs No Enough; and (2) Help No Enough.

(1) Jobs No Enough

Sir, as expected, the Workfare Bonus has been warmly received by low wage workers who qualify for it. The Workfare concept, which is a key feature of this year's Budget, seeks to ensure that all who can work will find meaningful jobs and earn adequate wages to support their families. The success of Workfare hinges on the success of our efforts to, firstly, create, reclaim and redesign jobs for those able and willing to work, and, secondly, to ensure that workers upgrade their skills so that they can earn more.

Sir, one key concern therefore is whether we would, in fact, be able to find sufficient jobs for all who are able and willing to work as well as better paying jobs for them to upgrade to. For instance, how do we provide for housewives who are nudged by the Workfare concept to re-enter the workforce to supplement their household income? What about the elderly who have passed their retirement age but who desire to work and/or need to work to support themselves and their families?

I envisage that there might be an increase in the number of such job applicants, but I fear that many of them might be disappointed, as finding suitable work for these job seekers and/or retraining them in order to help them find suitable jobs would take time, and lots of time.

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Workfare is not a new concept. It was started in the US and has been adopted by countries such as Canada and the UK in various forms. A major criticism of Workfare is that while it is supposed to help people under this programme get "real" jobs, jobs not financed by welfare, in reality, there are not enough of such jobs to go round.

This situation could be aggravated during an economic downswing when jobs are cut. Given the volatility of economic cycles nowadays, retrenchment is likely to be a constant refrain. So, where do we find enough of such jobs on a sustained basis especially during an economic downturn when the less educated and skilled would be the most vulnerable to retrenchment?

In Singapore, much has been done by WDA and NTUC to reclaim, redesign and/or re-create jobs by giving low end jobs a makeover under the Job Recreation Programme (JRP) launched last year. While good progress has been reported in sectors like landscaping, security, cleaning and healthcare with 7,200 jobs targeted for re-creation last year and 4,600 job seekers matched, the process is painfully slow and unemployment and skills are in a frequent state of mismatch especially for the lower skilled, less educated and older workers.

The number of jobs recreated pales in comparison with the estimated 60,700 unemployed Singaporeans and PRs as at December last year, even though not all the 60,700 unemployed are older and less skilled workers. The Government had also previously set aside $10 million to redesign jobs for about 5% of the estimated 300,000 low wage workers. But this still leaves a gaping 95% unattended to.

PM Lee has announced in his Budget statement that WDA and NTUC will be given $40 million over three years to ramp

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up the JRP, targeting to recreate 10,000 jobs per year. There is also the "Advantage" scheme with $30 million over two years to incentivise employers to adapt their employment practices and hire older workers and/or re-employ retiring workers. Even with this boost for JRP and the new Advantage scheme, it is likely that the number of jobs created or reclaimed is insufficient to meet the demand of job seekers and low wage earners due to mismatch of skills. This vulnerable group of job seekers may consider relief in the form of a job or a better paying job to be too slow in coming and hence become disgruntled, more so if that deprives them from being able to qualify for the Workfare Bonus that will be given this May and next May.

For Workfare to work - excuse the pun - we therefore need to more aggressively explore ways to create more jobs for this group of job seekers as well as ameliorate the current skills and job mismatch through skills upgrading and retraining.

Three areas which we could consider in our job recreation efforts are:

(i) Reserving some jobs

Sir, given our very small and open economy, it will be contrary to our strongly held belief in the efficiency of markets for us to distort the labour market by safeguarding jobs for locals. Notwithstanding this, we could still review our foreign worker ratio for various industries and identify certain jobs in these industries which are more amenable to locals and tweak the foreign worker ratio as well as expand the scope of these jobs to cater to at least a higher percentage of locals.

For instance, I once met a resident who was a former painter who felt

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aggrieved that his job had been taken over by foreign workers. Such measures should not significantly distort the labour market since it is only applicable to selected industries and job specifications, and productivity ought to be increased to justify the higher pay for locals. Indeed, we are already doing this to some extent in the cleaning industry, where the foreign worker ratio has been tweaked and also crane drivers in the construction industry. But more can and needs to be done.

(ii) Redefining "jobs"

We should also rethink some policies that hinder our drive to create more jobs and opportunities for the unemployed and low income. For instance, instead of tendering out the hawker and school canteen stalls or rent them to anyone that comes along, the Government could stipulate that a certain percentage of these stalls should be allocated to our unemployed or low income workers. NEA is already issuing some street hawker licence to the unemployed as well as low income households but there are few of such licences available.

WDA, the CDCs or other self-help groups could provide training to such unemployed people to create a pool of stallholders who are versed in the art of running a small food business and who can be matched with these stall openings. The CDCs and MPs at the MPS regularly receive many requests from our unemployed and needy for such stalls so that they can become financially independent again, yet there are hardly any such stalls available.

(iii) Role of the Government

The Government itself as the largest employer around should take the lead by re-designing jobs and adopting employment practices which will allow it to hire older workers, employ retirees as well as offer part-time work. I would like to ask

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the Government what percentage of the employees who have been made redundant over the last few years due to the Government's economy drive, outsourcing and best sourcing efforts were re-deployed to other departments instead of being retrenched and of these, how many were retrained.

Also, what proportion of work in the Government and statutory bodies is available on flexi-time and part-time basis so that more women can join the workforce and those who wish to supplement their family's income with part-time work can do so.

Sir, I would also like to ask MINDEF what about all those retired from the army once they reach 45 years of age, what proportion has been redeployed to other jobs. Sir, I appreciate the need for a young and fighting fit army and the need to constantly groom top talent for the all-important armed services, but 46-year old national servicemen taking early retirement can surely contribute in many ways.

(2) Help No Enough

Sir, although it has been announced that the Workfare Bonus is one-off and contingent on the economy doing well, many are already harbouring hopes that this may continue indefinitely. It takes time to redesign and upgrade skills, so in the meantime they would need assistance beyond these one-off measures. The question then arises if the Government should provide direct income support to this group of vulnerable Singaporeans in the form of a regular, sustained Workfare Bonus or even a negative income tax.

There has been some talk of a negative income tax regime such as the Earned Income Tax Credit that is now used in the US. In this case, the Government gives tax credit to people who are already working but earning

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below a certain income. The percentage given is often a percentage of their actual earnings, subject to a cap, thus rewarding those who work hard.

The worry is that they may breed an entitlement mentality with little incentive to upgrade oneself and get a better paying job. Moreover, such schemes may be viewed as a subsidy given to employers of low qualified jobs, giving them no incentive to re-design the jobs and pay their workers higher wages.

It is clear that the problems facing our low skilled and low wage workers are unlikely to go away anytime soon and a one-off Workfare Bonus and Progress Package, although much welcome, are only temporary pain relievers. There is also some justification for a "longer" multi-period Workfare Bonus, perhaps over two consecutive years instead of a one-off scheme (though paid over two years) to provide greater encouragement to low wage workers to remain gainfully employed.

But the inherent negative effects of an entrenched income subsidy scheme as experienced in other countries cannot be ignored. So how can we solve this dilemma? There is no ideal solution but, going forward, we should monitor the impact of the Workfare Bonus as well as other related initiatives and weigh the pros and cons carefully, before deciding if more Workfare Bonuses are warranted under future budgets.

However, on balance, I would favour a more comprehensive, yet targeted package of measures to help this group augmented by Workfare Bonus as and when our fiscal position permits. This would be much better than a recurrent direct income subsidy due to the latter's inherent perverse disincentive to work and moral hazard of breeding a crutch mentality.

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As aptly noted by the Straits Times' Editorial dated 21st February 2006, "The problem of passing out handouts too frequently is the entitlement belief it is bound to encourage.", no matter how much the Government preaches to the contrary. Already, we are seeing an entitlement creep in some residents who unabashedly turn up repeatedly either at the MPS or CDCs to demand for financial assistance, supermarket vouchers, etc., even when they are being helped with a package of assistance such as school fee subsidy, food rations and utilities and conservancy charges on a regular basis. So how then can we provide more comprehensive, yet targeted and customised assistance to the disadvantaged workers and the needy in general? Sir, in many ways, this is already being done, especially with the recent slew of measures that have been announced by the various Ministries. However, I would like to highlight three cardinal principles that ought to underline such a programme.

(i) "Different Strokes for Different Folks"

An oft-cited criticism of our present social assistance regime is that there are simply too many, perhaps even overlapping, help schemes available. Whilst it is useful to simplify and streamline some of the schemes, it must be remembered that there is really no one size that fits all and there is a need for a variety of schemes to help the vulnerable with different age and economic profiles.

The recent slew of MOE initiatives of extending the assistance given to students from low income families such as raising the qualifying household income ceiling for financial assistance and bursaries as well as expanding the scope of assistance to include national examination fees and miscellaneous fees and free breakfasts - whether my

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colleague, Dr Wang Kai Yuen, in the House agrees or not - are steps in the right direction. Other indirect income support we can give to this vulnerable segment until they attain financial independence include child care and kindergarten fee subsidy, partial payment of utilities and service and conservancy charges and transport subsidies.

Most of these are already provided ad hoc but could be given on a more sustained basis on "workfare" conditions, ie, that the beneficiaries put in effort to find a job and/or upgrade their skills. Transport subsidies, co-paid by the transport companies and the Government, which were previously given to needy families, have been very well received and ought to be resumed in some form, be it in the form of transport vouchers or travel fare card for the needy.

Sir, I note that nothing has been mentioned in this Budget about costs of healthcare which Singaporeans, especially the low income and the elderly are very concerned with, despite the CPF top-ups for elderly as well as 10% of the Workfare Bonus going into the Medisave account. These are great for old age requirements but are still not much help to the present drain on resources.

Sir, we need to deal with the problem of the inevitable increase in costs in the light of improving medical technology and our aging population profile. Allowing a wider use of Medisave such as for outpatient treatment for chronic illnesses would go a long way towards alleviating the plight of the needy who are afflicted with such illnesses.

( ii) Widening the reach

Another key principle would be to involve and mobilise the community's social support network to reach out to all in need of help with a holistic assistance

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package. Often times, it has been noted that ours is not so much a case of insufficient help available but of its accessibility and getting it to the right people. Since the introduction of ComCare, besides the CDCs, help is now available through each constituency via the CCs and the grassroots. On average, about 70% of the cases received by my South West CDC are walk-ins, whilst the rest are referrals from the CCs and the MPs. This trend indicates that most residents know where to get help from. This is a far cry from the days when help was centralised at the MCYS.

However, besides the CDCs, the grassroots and CCs, we need to rally every one in the community to help identify those in need and refer them to the CDCs or CCs so that all who need assistance would be catered for. Some elderly and uneducated may still be unaware of the help available and we need everyone in the community to be the eyes and ears of our help agencies in order to be able to deliver a holistic help package to our disadvantaged.

(iii) Prevention is better than cure

Sir, anecdotal evidence suggests that children from poor and/or dysfunctional families have a higher risk of leaving school prematurely or not doing well in school. Studies in the US have indicated that even with the same given ability, children from rich and poor families do not have equal chances of success.

Hence, I applaud the Government's initiative to invest more in the education of children from low income families to help them become school and work ready by expanding and enhancing the scope of financial assistance available to these children in the kindergarten and in the schools. The move to upgrade the

Vocational Training Centre (VTC) and its programmes so as to allow more youths to acquire employable skills is also

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welcome to cater to those with no aptitude or interest in academic studies and are likely to drop out of school.

Sir, while the overall dropout rate of students from our primary and secondary schools is only 2.6% of the cohort in 2005 and 3% over the previous five years, these premature school-leavers with no job ready skills are likely to add to our existing underclass earning low wages. Although it is estimated that, on average, there might only be about 1,000 students who drop out before completing secondary school every year, over time, on a cumulative basis, they could form a sizeable portion of our low-wage workers.

At the ITEs, the dropout rate is higher at about 12%. These students could also have little job ready skills. Hence, more effort must be made to further reduce the dropout rates and at the same time help these premature school-leavers to acquire useful work related skills either through the enhanced Vocational Training Centre or through the WDA's Workforce Skills Qualification System.

To further reduce the dropout rates at primary and secondary schools, we must do more to help these children cope in school. At the primary schools, more resources should be put into helping children from needy families who are unable to cope with their studies, such as extending the Learning Support Programme.

Teachers and counsellors must also work together to identify these children and help them cope. The community could also help identify and encourage low-income families to send their children to pre-school so that they will not lag behind and become demoralised and disheartened when they attend primary school.

Notwithstanding all the concerns that I have raised, this is a heartwarming

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Budget which aims to put in place sustainable solutions to ensure Singapore's continued economic viability in the face of increasing global competition. It is also a Budget designed to arrest the simmering tensions that arise from a widening income gap that could tear our social fabric apart. And I think this is really a timely comprehensive package. It is a Budget that tries to ensure that all Singaporeans march in step and progress together, with no one falling behind.

Sir, I support this generous and most enlightened Budget.

2.03 pm

Mr Low Thia Khiang (Hougang): ( In Mandarin ): Mr Speaker, Sir, this is a Budget-Extraordinary. The Government is giving away $2.6 billion worth of dividends to the people against the financial burden of $2.9 billion deficit, just to please the voters. The Finance Minister has not explained why it is so urgent for these giveaways that he had to run into such a huge deficit. The Government has always regarded budget deficits as "fierce floods and savage beasts" (or great scourges) and has consistently been accumulating surpluses year after year.

When there was a deficit of $1.2 billion in the 2003 Budget, the Finance Minister said in his Budget Statement that we could accept a budget deficit when the times were bad, and that the aim was to build up surpluses in good times so that we could have adequate reserves to meet unexpected needs. Now that the economy is recovering, the Government has also stressed that the economic growth is better than expected. One would have thought that the Government would automatically return to the path of accumulating surpluses. However, notwithstanding non-increase in taxes, the generosity in which the bonuses were

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given out and the huge deficit that has incurred in the FY2006 Budget surprises even the strongest supporters who have always regarded the PAP as being logical and rational.

The media have acted in concert. In covering this year's Budget, almost no mention is made of the deficit. In contrast, when there was a $1 billion deficit in 2003, the media played it up. For example, Lianhe Zaobao then carried a headline: "Government's $1.2 billion deficit budget." On the contrary, despite this year's budget deficit being double that of 2003, the media's focus is on the dividends for everyone. The headline on the front page of Lianhe Zaobao read, "$2.6 billion Dividends for all People". Not a word was said about the deficit. Is it the social responsibility of the media? Or have our local media become the propaganda tool of the PAP Government?

I tried to interpret the implication behind the use of a deficit for bonus-sharing and the media's reaction to this Budget. In recent years, economic downturn and restructuring have caused many people to lose their jobs or suffer pay cuts, putting their families into hardship. But according to the survey conducted by the Department of Statistics, the monthly income of families in the lowest 20 percentile dropped from $933 in 1998 to $795 in 2003, but the cost of living was $1,259 - a serious shortfall. The gini coefficient, which measures the disparity between the poor and the rich, is getting worse, year by year. It is, in fact, worse than that in the United States, Europe, Japan and Korea. This is indeed worrying!

People in the lower-income group suffer most in a downturn. Yet, in an upturn, they do not benefit. Had the Government been as generous as it is today, extending a helping hand to the people when they needed it most, much of their anxieties and worries could have

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been alleviated. Many families would have avoided problems that led to broken marriages and suffering for their children. People in the middle and lower income groups silently suffered from the economic restructuring and accepted the cut in CPF contributions. They truly deserve the goodies offered to them this time round.

The Government's impromptu gesture of dividend distribution once every five years can only provide temporary relief to the people. I would like to repeatedly remind the Government that the problem which the people are truly concerned with is the rising cost of living that they have to face every morning when they wake up.

I hope that the Government will remember that a society where the middle and lower-income people are hard pressed by the heavy burden of the cost of living cannot be a society which is vibrant and creative. This is not in keeping with our endeavour to move towards a creative and knowledge-based economy. In the 2006 Budget, revenues of statutory boards amount to $1.2 billion, and other Government fees and charges total $1.8 billion. Can the Government make a thorough review on the fees and charges affecting the people to reduce their daily living expenses?

Distributing goodies before an election and then scrapping back money from the people after the election is the usual practice of the PAP Government. The people are used to it. For example, at the last election in 2001, the Government generously gave away New Singapore Shares (NSS). After the election, GST was raised from 3% to 5%.

In 2001, when a $2.6 billion deficit arose from the giving away of New Singapore Shares, I can understand. This was because, from 1997 to 2000, despite the economy being in a bad shape and the

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people having to tighten their belts, the Government budget still enjoyed surpluses year after year, accumulating to approximately $15 billion, whereas the NSS shares cost the Government only $2.4 billion, just like the so-called "peanuts".

However, I cannot figure out how the Government could cope with the $2.9 billion deficit in this year's Budget from the surpluses accumulated from the budgets from 2002 to 2005. Yet, the Finance Minister and the Government do not seem to take the $2.9 billion deficit seriously. On the other hand, the moment the Opposition party raised the point that the Government should increase the expenditure for education and healthcare to reduce the burden on the people, the Government would issue a stern warning that this would result in deficits and even bankrupt the Government, leading to the collapse of our economy.

I believe the Government should have other sources of revenue to cope with the deficit. The Government should spell out clearly its other sources of revenue, and make them transparent and public so that the people will know how these other revenues are used to offset the deficit.

In this extraordinary Budget, if the Government, apart from the ordinary revenue and the Net Investment Income, must also use the non-direct financial revenue in order to meet the huge budget deficit, the following questions would arise: (1) Should the Government's other revenue be reflected in the budget to clearly show the Government's real income? (2) In the present format of the budget, because the Goverment's other revenue is not included even when it shows a deficit, it does not necessarily mean that the Government's expenditure exceeds its revenue. When the Government has budget surpluses, the actual surpluses can possibly be even more. Is this in keeping with the principle

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of transparency? (3) On what principle can the Government use its other revenue for its deficit, in addition to the revenue in items set out in the budget? Under what circumstances can the Government use this other revenue? Or can the Government use it at its whims and fancies, or just before the election?

2.13 pm

Mr Seng Han Thong (Ang Mo Kio): ( In Mandarin ): Mr Speaker, Sir, this year's Budget, as Mr Inderjit Singh said, is a people's Budget. Dr Wang Kai Yuen also feels this is a people's Budget, but I would say that this is a workers' Budget. Of course, the workers' Budget means everybody would have a share in the goodies. I think Mr Low Thia Khiang also agreed that everyone would have a share. But in his case, he was saying that everyone would have a share in the anger. He said that since 1999, the PAP Government had been giving dividends every time when there was an election. I believe in 1999, the year when he came into Parliament, he made an issue out of this, and because of that, he came into Parliament.

According to the media at that time, he said that the Government had money, but the people had none. But now, the Government has money, so it is sharing with the people. He is angry. He said, why should the Government distribute the money to the people? This year, the Finance Minister mentioned that in 2005, the growth was very good, better than expected. I am not an analyst, but I can understand in simple English and simple arithmetic. Last year, from our investment income, we earned $2.7 billion which was much higher than expected. There was a surplus. Yes, last year, there was a surplus. So the Government is now distributing this Progress Package. But Mr Low Thia Khiang said that this

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was no good, and he had many complaints. He said that by increasing the GST from 3% to 4% and then to 5%, the Government was taking back what it had given to the people. But we have told the people, right from the beginning, that the GST would eventually go up to 4% and then 5%. Likewise, in this years' Budget, we cannot just look at the ang pows that we are receiving, we have to look at the long-term target of this Budget.

In this Budget, in the short term, we want to help the lower-income people, particularly the older workers, and we want to redesign the jobs and create new jobs for the people. This is a Budget to create job opportunities so that everybody can live happily.

Mr Speaker, Sir, I would like to praise the Finance Minister for introducing this Workfare Bonus, a bonus that encourages the people to work. Now, everybody is talking of how much he or she is getting - a small ang pow , a big ang pow, or a medium-sized ang pow . Of course, those who get a big ang pow will have to work harder, and because they are older, they need to work harder. According to the newspaper report, this is a something that very few other countries can emulate. But there is also an article that claims that there is a problem here. It asked why the people who are working will get the money and those who are unemployed do not get the bonus. This is a misunderstanding by some people, including Mr Low Thia Khiang. If we were to encourage the unemployed Singaporeans to remain unemployed and enjoy the welfare, then Singapore will collapse. We want to encourage people to work. We are using cash bonus to help the older people and lower-income people.

In the past few years, many of our workers have gone through a lot of problems. They were unemployed, retrenched, had difficulty finding a job,

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and they could not last long because their income was low, they did not have much savings to survive on. They cannot survive for a long time. If they can find a job and carry on working, then there is hope that one day they will earn more, and life would be better. I think we should encourage them. We should give them some incentives for that. However, there are indeed some unemployed people who are still unable to find a job. We would like to thank the Prime Minister and Minister for Finance for this package to encourage the unemployed to try harder to find a job. There are some other people who feel that we should not be encouraging the older workers at the expenses of the younger workers. But, as we are advocating lifelong learning and lifelong working, we should encourage the older folks to work too, if they can handle it.

I do not know whether Mr Low Thia Khiang is aware of the changes in the whole global market. Is his mindset still the same as 10 years ago, three years ago or two years ago? If his mindset is stuck in the situation 10 years ago, then I think his conclusions will all be wrong. If his point of view is based on what he understood of the market three years ago, then he is partially wrong. But if he bases his understanding on the situation one year ago, then he would be better off, but still there could be some mistakes in it. Why? Because the whole world is changing. Now, the workers know a lot about the problems they are facing, while Mr Low Thia Khiang does not know about them. The important thing is that we must encourage our people to work. They must carry on working and not wait for the Government to feed them. We cannot keep on handing out bonuses to the people. We must encourage them to start working, even from a lower paid job. If they put in an effort to work, the Finance Minister would give them some kind of bonus to encourage them. That is why we have the Workfare Bonus. They

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can start from a lower-income job and gradually move on to a higher-income job. We would also encourage the employers to pay them appropriately. The employers should not say, "Well, since the Government is paying you so much, I do not have to pay you so much."

Mr Speaker, Sir, just now I mentioned that Mr Low Thia Khiang was probably not aware of the changes in the market today. In fact, the NTUC has already started the Job Redesign Scheme. The problem of structural unemployment is faced by all the countries, not just Singapore. In the United States, United Kingdom and France, they have the same problem. Last year, through our Job Redesign Scheme, we were able to create 7,200 jobs. In every constituency, we have people coming to see us at our meet-the-people sessions complaining of not being able to find a job. Maybe in Hougang, there are also people going to see their Member of Parliament for help in looking for jobs. There may or may not be, we do not know. People may not go to see Mr Low, because they do not believe that he would be able to find jobs for them.

But we all know that outsourcing has become a trend. During the 1970s, if you went to Disneyland and bought a Mickey Mouse to give to your children, when you looked at the tag, you would find that it was stated: "Made in Korea". At that time, we did not understand why we bought a Mickey Mouse in the United States, but it was made in Korea. In the 80s, if you had bought a Mickey Mouse, it was probably stated: "Made in Taiwan". We could understand that because we realised that production cost was cheaper in Taiwan. But now, more often than not, you will find your Disneyland toy being made in China, and we understand. We all know because we have lost a lot of jobs when manufacturing work was outsourced to China. We know that there is a lot of outsourcing which has become

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"bad-source", ie, production work is not carried out properly. We want to have the "best sourcing". As Mr Low said, we do not lose our manufacturer to outsourcing. But, with the rising production cost and highly competitive market condition, no outsourcing means we will not be able to survive.

By now, we have already created 7,200 jobs and helped 4,600 low-income workers find their jobs, and we are getting more ambitious. The Minister for Finance is giving us $46 million and we hope that every year we would be able to redesign and create 10,000 jobs. Even in the taxi industry, we have about 700 people who have found jobs there. We want to create this form of welfare for the people. It is not that the Government is avoiding giving welfare to the people. We do not believe in the welfare scheme because this will only discourage people to work and become lazy. We want our people to be hardworking.

NTUC will be celebrating its 45th Anniversary this year and our theme is "Together for a Brighter Future for All". Our emphasis is to create more jobs for our people so that more unemployed people would be able to find jobs and that the lower-income people can get better jobs and those who are 62 years old and above can carry on working so long as they can do it. So, our target is something that we can achieve, so long as we put in a concerted effort.

Just now, when Mr Low Thia Khiang spoke, he appeared to have failed to think in terms of the welfare of the workers or the perspective of the workers, despite the fact that he is from the Workers' Party. As is said in Chinese, "If the name is not correct, whatever you say cannot be justified." If you represent the Workers' Party, you must think in terms of the workers. If you do not, then you

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are not doing the right thing. We, the PAP, represent and work for the welfare of the people. Over the years, Mr Low has made a lot of speeches according to his subjective views and not from the point of view of the workers. His famous saying was, "Whereas Government has money, the people do not." He does not understand that nowadays the workers are singing a different song. The workers now say, "Wherever it is cool, I will sit there. So, when there is money, I will go there." For the manufacturers, wherever it is cheaper, they will move their factories there and, for the investors, where there is money and profit, they will invest there. This is the world today. We want to create jobs and job opportunities for our people, and we cannot just hand out money to the people. He said that, over the years, people have been suffering. Now that we see light at the end of the tunnel, we hope we would be able to lead our people to a better future. This is a Budget that looks after the welfare of the people, so that our people will be full of confidence and work harder. Just like what is stated in our NTUC theme: "Together, we can build a better future for our workers!"

Sir, I support this Budget.

Mr Low Thia Khiang: Mr Speaker, may I have your permission to clarify what the Member for Ang Mo Kio GRC has referred to my speech?

Mr Speaker: Do you want to clarify your own speech or his speech?

Mr Low Thia Khiang: To clarify what he has said about my speech and his imputing of some issues which I have not mentioned in my speech at all.

Mr Speaker: Yes.

Mr Low Thia Khiang: ( In Mandarin) : Mr Seng Han Thong mentioned that though I am from the Workers' Party, when I

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spoke, I failed to represent the welfare of the workers and that the PAP has better represented the workers. I wonder whether the PAP is going to change its name to the "Workers' Action Party" (WAP).

He also mentioned about a Teochew song which says that, "Wherever it is cooler, I will sit there, where there is money, I will go toady", and he uses this as an analogy that workers should be more flexible in jobs and should support the Government which gave them benefits. I must say his analogy is not correct. Yes, we want jobs but there are also principles in life which we cannot compromise. We cannot just say, "Well, there is money, we will just go toady." As a people, we must have backbone; we should not promote such a mentality; otherwise, we risk sending the wrong signal to the people. This type of attitude and value are also associated with the issues of whether you would be a quitter or a stayer. I hope that Mr Seng understands the implication of what he has said and explain to clarify them.

Mr Seng Han Thong: ( In Mandarin ): Mr Speaker, Sir, the Workers' Party was named as the Workers' Party many years ago. In so far as the People's Action Party is concerned, we get into action for the people. The Workers' Party is saying a lot, but there is no action. It is just mere lip-service. In the People's Action Party, the word "people", includes everybody, including the workers. So, we do not have to change our name to the Workers' People Action Party.

I mentioned just now about this Teochew song that "wherever it is cool, people will sit there". I was just explaining the global trend. Investors will look at where the cheapest place is, and go there to produce their products. In the past, it was cheap to be in Singapore. Then they moved to Taiwan, and now mainland China is cheaper. So they go there. From

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the investors' point of view, wherever it is cheaper, they will manufacture there. For the investors, if they feel that they can go there and make the most profits, they will invest there. Now, the general feeling is that China is good, so they go to China. We need to understand that. When the workers understand this, they will know that there is still opportunity in Singapore because not all outsourcing jobs go to China. We have also managed to secure a lot of jobs, like aircraft repairs and maintenance, and some high-level jobs. I think if we understand this, we will be able to help our workers. If they have the skills, they will be able to secure better jobs.

2.25 pm

Dr Teo Ho Pin (Holland-Bukit Panjang): Mr Speaker, Sir, I support the key thrust of this year's Budget, which is to build a vibrant economy where opportunities abound and an inclusive society where no one is left behind. The Budget, which provides support for strategic industries and goodies for Singaporeans, has received very positive feedback. Many Singaporeans welcome the generous handouts given to them, especially the lower-income group, elderly and NSmen. The Budget has given new hopes to many Singaporeans, both young and old.

Sir, as we progress as a nation in a competitive global environment, Singaporeans must continually gear up and adapt to changing economic conditions to survive and do well. We must be highly vigilant of changing global economic conditions and build adequate resilience in our economy and workforce to better cope with future challenges. The structural unemployment which hit Singapore several years ago has thought us to be more alert of globalisation trends and equip our workers with more employable skills.

First, expanding the economy. Sir, I support the measures to upgrade and

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expand our economy. We need both a strategic and broad-based economy. Looking ahead, we should focus on an innovation-driven, technology-driven and service-driven economy. Knowledge would be the key driver in an innovation-driven economy. As such, I fully support the setting up of the National Research Foundation and R&D Trust Fund. To be a magnet for global talent, we must invest more resources to make Singapore an R&D hub for global brands and services. I would like to propose three areas to focus on.

(1) R&D set-ups. We must provide more incentives to encourage global and local firms to have R&D set-ups in Singapore. As land cost in Singapore is relatively higher as compared to our neighbouring countries, the Government should construct more purpose-built R&D parks, such as the Biopolis or Science Park, to lease out to R&D set-ups or companies. In addition, the Government can consider granting double tax exemption for capital and operating expenditures for R&D projects incurred by companies.

(2) R&D talent. To be a knowledge and R&D hub, we must provide a conducive and intellectually stimulating environment to attract global research talent to Singapore. I propose that the Government provide more research scholarships and fellowships to nurture and attract both young and mature researchers to conduct research work in Singapore. In addition, I would urge the Government to provide more local research scholarships for Singaporeans to pursue a career in research fields. Today, many Singaporeans are not willing to take up research as their career, as they cannot see any prospect in the research industry. Furthermore, many fail to understand

the challenges and potentials of research. We need to step up our

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recruitment campaign for researchers in Singapore. It is only with the critical mass of researchers that we will be able to develop a research culture amongst our companies and research institutions.

(3) R&D infrastructure. Sir, I support the development of a new national broadband network to link up Singapore to the world. In today's advanced technology, we must make high-speed wireless broadband accessible to all at a lower cost. In today's Straits Times , page 4, it was reported that 29% of the respondents from a recent survey conducted by the Infocomm Development Authority highlighted that Internet access is too expensive in Singapore. This is one of the key impediments to having a high rate of Internet access to all households in Singapore. Sir, having a comprehensive IT infrastructure is necessary to spearhead our R&D efforts. Broadband wireless Internet will facilitate access to knowledge and exchange of ideas anywhere in Singapore. In this way, researchers will be able to conduct their research work more effectively and link up with their respective partners, such as businesses, Government agencies or community easily. I would urge the Government to invest in the IT infrastructure to support R&D.

Opportunities for all

Helping low-wage workers

Sir, I fully support the recommendations as put forward by the Committees on Low-wage Workers and Older Workers. As a fast aging society, Singapore faces the daunting task of keeping our elderly healthy, active and employable. At the same time, there will always be a pool of low-wage workers who will require help to keep pace with the progress of our nation. Many post-war baby boomers are badly affected by globalisation. They do not have the relevant qualifications and

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skills to take up jobs in the new economy. As a result, many are engaged in low-paying jobs, thus making it difficult for them and their families. We must do more to help this group of low-wage workers. Although the Job Recreation Programme (JRP) has helped 4,600 job-seekers to secure recreated jobs last year, many low-wage workers will have to wait for many years to benefit from this programme. Therefore, I would urge the Prime Minister and Finance Minister to increase the $40 million allocated to JRP to further expedite the JRP programme. The Job Recreation Programme must not only help the existing low-wage workers, but also keep pace with changes in the economy so as to create new high-value jobs.

Sir, I support the investment of $30 million over the next three years to help 45,000 low-wage workers attain skills under the Workforce Skills Qualification System. I commend WDA for identifying the employable skills of our future workers. But I would urge the Government to provide more support to encourage low-wage workers to learn new skills. I have two suggestions to make.

First, we must ensure that all generic skills training courses are easily accessible to low-wage workers. I would propose that WDA appoint Community Clubs or Residents' Committee Centres as training centres for their accredited generic skills courses. This will make it convenient and less costly for low-wage workers to attend such courses. In addition, I propose that we should incentivise low-wage workers to make efforts to upgrade their skills or learn multiple skills so that they will be more employable. We can adopt the Continuing Professional Development (CPD) points as awarded by professional bodies to ensure that their members upgrade themselves continually.

Low-wage workers can also clock in their skills upgrading hours and be

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rewarded accordingly upon completion of the generic skills courses. The completion of skills upgrading courses can also be factored into the Workfare Bonus as performance bonus. Having identified the employable skills of our future workers, WDA must adopt a multi-pronged approach to achieve maximum outreach and take-up rates by our low-wage workers in skills upgrading. This will build resilience in our workforce and reduce our vulnerability to structural unemployment.

Sir, the only way for low-wage workers to increase their income is either to upgrade their skills and go for higher-paying jobs or take up additional jobs to supplement their income. While we continue to encourage skills upgrading amongst low-wage workers, we must also provide more opportunities for them or their family members to increase their household income. More home-based work, cottage industry or part-time jobs should be created to provide opportunities for Singaporeans, especially low-wage workers, their family members or the elderly. We should be more supportive of micro-business set-up, consultancy services or lifeskill enrichment courses. Of course, we must always be mindful that businesses do not offer just part-time employment, thus reducing full-time job vacancies.

Helping older workers and retirees

As for helping older workers and retirees, the key approach is to offer them more options to either continue working or retire meaningfully. Sir, I understand that many older workers are keen to continue working but at a slower pace. Some retirees would like to take the opportunity to work in areas where they are passionate about, such as nursing homes or voluntary welfare organisations. Besides encouraging companies to continue employing their older workers through the ADVANTAGE scheme, I would urge the Government to support

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the social services sector to create more job opportunities for older workers. Many voluntary welfare organisations, self-help groups, non-governmental organisations, societies and religious organisations offer good job opportunities for older workers. However, these organisations are usually constrained by their limited financial resources.

Today, many have employed foreign workers to supplement their workforce in order to deliver their services. I hope that the National Council of Social Service can also spearhead a Job Recreation Programme (JRP) for our social services sector to create jobs for the elderly. This can be in the form of full-time, part-time or flexi-work arrangements, thus offering a wider range of job options for the elderly. We can also set up a golden opportunity fund for these social organisations to create new jobs for the elderly.

Sir, many retirees are concerned about healthcare and living costs in Singapore. While the CPF savings and medical insurance will address some of these concerns, we should explore more innovative approaches to encourage Singaporeans to save for retirement. The interest rates for personal savings have been pathetic for many years and many people are at a loss as to how to save or grow their savings. The lack of financial planning knowledge amongst many Singaporeans has led to poor investment by some Singaporeans. Sir, we need to provide more guidance to help Singaporeans to save and grow their retirement funds. The MoneySense programme by MAS should be conducted more regularly to reach out to more Singaporeans, especially the heartlanders. I would urge the CPF to also reconsider its investment portfolios so as to provide a higher return for Special Account holders. We should also provide more incentives for Singaporeans to save.

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Progress Package

Growth Dividend

Sir, the Progress Package is well-received by many Singaporeans. I commend the Government for coming up with the innovative Growth Dividend scheme to share the fruits of our success with Singaporeans. It is given out in cash and almost immediately. However, there is feedback with regard to the criteria for distributing the Growth Dividend. In general, Singaporeans agree with the principle that more help should be given to the needy, lower-income and elderly. However, a criteria-based method of distributing Growth Dividend does have some shortcomings. Let me cite a few examples to highlight the shortcomings of using annual value as a proxy of a person's wealth.

For example, a person who has just bought a five-room HDB flat and has not paid up his mortgage fully cannot regard the full value of his flat as his wealth. Two, an occupier of a private apartment could be staying with his or her relatives and thus do not own that apartment. And, three, multi-tier families tend to live in bigger flats and, thus, their family members will be placed at a disadvantage when computing the Growth Dividend.

Sir, as the Growth Dividend is to share the fruits of our success with all adult Singaporeans, we should provide a flat rate dividend to all Singaporeans without criteria. This approach is similar to the distribution of corporate dividend which applies equally to both major and minor shareholders. The manner of distribution will ensure that no one is left behind when sharing our fruits of success. The Government can declare a fixed amount of Growth Dividend to be distributed to all adult Singaporeans based on a quantum of budget surplus. In this way, all adult

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Singaporeans will get equal recognition for their contributions to the country, irrespective of their vocations or wealth status. They can be working adults, home-makers or retirees. A flat rate Growth Dividend will also ensure that all adult Singaporeans get an equal share of the fruits of success and motivate all to rally together.

In addition to the flat rate Growth Dividend, the Government can also come up with specific help packages for specific groups of Singaporeans needing help at that particular time. These could be low-income workers, physically handicapped persons, the elderly or middle-income families. At different times, different groups of Singaporeans may need the support of the Government to progress together. Thus, a fixed plus variable Growth Dividend package can motivate all Singaporeans and, at the same time, help specific groups of Singaporeans in need. The Growth Dividend is indeed a good gesture to recognise the contributions of all Singaporeans.

Opportunity Funds

Sir, I support the setting up of Opportunity Funds for schools to help needy students to participate in enrichment activities. This will level the playing field for all students to maximise their potential and learn useful lifeskills. To be an inclusive society, we should also pay attention to students with learning difficulties at school. We need to devise a more systematic approach to help schools identify children with learning difficulties, such as those suffering from attention deficiency disorder. Expertise is needed to help those students with learning and reading difficulties . I would propose that the Opportunity Funds should be extended to organisations which provide intervention and support programmes for children with learning difficulties at the community. These support programmes must be heavily subsidised so that parents

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can afford to send their children to address these learning problems. Sir, if we wish to invest in the next generation, we must nurture every child to his or her fullest potential so that they can be useful citizens in the future.

Sir, I support the motion.

2.45 pm

Mdm Halimah Yacob (Jurong): Mr Speaker, Sir, this year's Budget is indeed a very generous and pro-worker Budget. On behalf of the workers, I would like to thank the Prime Minister and the Government for the generosity in sharing prosperity with the people, especially the poor, the low-income earners and the elderly.

There were some people I talked to who were quite incredulous at the amounts that they would receive but they were grateful that the money would help to pay for their arrears with some leftover for future contingencies. When Government shares during times of prosperity, it makes it a lot easier to get Singaporeans to accept difficult policies in bad times as the trust is already established.

Sir, we all remember the difficult years of 2001-2003. Many workers lost their jobs, had to tighten their belts and took pay cuts. Even last year, a number of big manufacturing companies retrenched workers and thousands were affected. Older workers were particularly affected by the restructuring. Those among them who lost their jobs found it more difficult to get new ones as the reality of structural unemployment hits home. This Budget, Sir, is indeed a fitting recognition of all Singaporeans' sacrifices. It will go a long way towards helping them deal with the pain of adjustment in the labour market and, at the same time, incentivise them to stay employed and be motivated to upgrade their skills. At the same time,

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Sir, the job creation focus of this Budget cannot be overlooked. By ensuring that Singapore continues to remain economically sound and competitive, our workers can continue to look forward to new and better jobs being created and, therefore, assured of a secure future.

Sir, this Budget is also significant in the way it aims to help Singaporeans deal with globalisation. As we all know, this debate over globalisation and its impact on workers in society is a long-drawn one and is not over yet. My meetings at the ILO are never complete without someone, usually trade unionists, criticising globalisation and its ill effects on the workers and the poor. Needless to say, championing globalisation are usually employers, with some governments oscillating between the two views. Globalisation creates winners and losers not only between countries, but also within countries. In Singapore, we have seen how the salary of our bottom 20th percentile has stagnated. Globally, the same grim picture has emerged. According to the ILO, in 1960, the income gap between the wealthiest fifth of the world's population and the poorest fifth was 30 to 1. By 1999, it was 74 to 1. In 1995, average per capita GDP in the richest 20 countries was 37 times the average in the poorest 20 - a gap that has doubled in the past 40 years.

Often, Sir, the debate over globalisation is stuck in an ideological quagmire with neither side being able to see beyond their own limited sphere. This debate is also important in Singapore, although it has not been as intense nor are we stuck in ideological battles. But we too need to understand what are the forces that shape globalisation and plan strategies to help create more winners rather than losers. For this to happen, one thing is clear - the Government plays a crucial role in ensuring a fair and inclusive globalisation

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process. Those who argue that governments have no role to play and should leave it to the market to sort itself out are wrong. In fact, evidence shows that when governments take a strong and interventionist role in helping the most vulnerable and needy in society, the benefits of globalisation can be better harnessed for the good of everyone. So crucial is the need to ensure a more inclusive and humane globalisation process that in 2002, the ILO set up a Commission on the Social Dimensions of Globalisation which made many recommendations on how countries could ensure a fairer globalisation with benefits spread out more evenly.

With this Budget, Sir, our Government is sending out a very strong signal. Our Government will not allow the weakest and most vulnerable members of our society to bear the brunt of globalisation, a pattern that we see repeated in many countries, and which is building up a lot of resentment against globalisation.

Yes, we must continue to restructure and change in order to maximise the opportunities that come along. But we can also do much more to help all Singaporeans benefit instead of leaving this to market forces alone. Jeffrey Sachs, an economist, argued in his book The End of Poverty that, "when the pre-conditions of basic infrastructure (roads, power and ports) and human capital (health and education) are in place, markets are powerful engines of development. Without those pre-conditions markets can cruelly bypass large parts of the world, leaving them impoverished and suffering without respite. Collective action, through effective government provision of health, education, infrastructure underpins economic success." Markets alone, Sir, without strong and active labour market policies, cannot correct the imbalance in progress and income that comes about because of globalisation. In Singapore,

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we can show that it is possible to build a fair and inclusive globalisation process. As the World Commission on the Social Dimension of Globalisation argued, "seen through the eyes of the vast majority of women and men, globalisation has not met their simple and legitimate aspirations for decent jobs and a better future for their children."

Hence, Sir, this Budget is significant as it will help to create decent jobs where our low income Singaporeans can earn enough to feed their family. At the same time, there are also measures to ensure a better future for their children. A sustained effort is needed so that our lower income workers and needy and poor can continue to have hope and see a future for themselves. If we fail to address their concerns, Sir, this will result in social tension and, in the long run, everyone will lose. I am glad that our Government is putting in place systems and structures to help our unemployed, low wage workers and older Singaporeans own a stake in our society and curve a future for themselves.

Sir, while I understand that a lot of attention has been focused on the immediate benefits to be gained from this Budget, such as the Workfare Bonus and Growth Dividends, I also urge all Singaporeans to focus on the long-term benefits as well. The substantial funds allocated to the Job Redesign Programme, the ADVANTAGE scheme and the Lifelong Learning Fund will greatly help NTUC and WDA in our efforts to recreate jobs for low-skilled and older workers and to retrain them. Through the JRP, we have already helped create 7,200 jobs and place 4,600 workers in better paying jobs in 16 sectors, and we aim to create 10,000 such jobs a year. In this way, we help to create decent jobs and make it possible for everyone to level up. In the long term, this is the most tangible and sustainable assistance that we can render to low-wage workers. Now that these

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funds are available, I hope that employers will take advantage of them to train their workers, especially the SMEs, which do not train their workers as much.

I must say, Sir, that I am a bit concerned when I read in the papers about the different ways in which some Singaporeans intend to spend their Growth Dividends. There was even one person who was quoted as saying that he wanted to use it to buy 4-D. I think that it is better to save this money to be used for a rainy day. As jobs are now more volatile and uncertain, it is possible for us to lose our jobs at anytime. In such a case, this amount will come in handy to tide us over until we get a new job and will help to pay for our daily needs such as utilities, service and conservancy charges and costs for children's schooling as well as other daily needs. I hope, Sir, that Singaporeans will spend their money wisely.

Let me now come to some specific aspects of the Budget.

Sir, I have received a lot of feedback that Singaporeans are somewhat confused about the Progress Package. One university student I spoke to did not know that he would be getting $800, which is more than enough to offset three years of university fee increases. Some thought that they will not get anything since they are not working as they have mixed up the Workfare Bonus with the Growth Dividends. The elderly are worried that they may miss out as they did not know how to register to get the money on 1st May. So, I think there is a need for MOF to explain more clearly and also to reach out to Singaporeans who need help to explain and assist them. Another group that may need special help are those who are confined in institutions, such as those in our penal institutions, nursing homes or hospitals, especially IMH. The MOF should also work with GROs, as well as tap the resources of the self-help groups

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and VWOs, to help reach out to these groups. The Ministry could also rope in employers to help in explaining to their workers, just as unions will do our part in reaching out to our members.

Sir, on the Workfare Bonus, I have also received some feedback from Singaporeans who work as temporary, casual or part-time workers. They are unsure whether they can claim the Workfare Bonus because they are not clear on how to interpret the requirement that they must have worked for a period of at least six months continuously. For some of them, although they have worked for six months they may be working only sporadically when work is available. For example, if a worker works for six months but only for a few days in each month depending on the availability of work, will he qualify for the bonus? Or, for instance, he had worked continuously for the first six months of 2005, but later lost his job and is now unemployed, will he also qualify? Perhaps a clearer explanation from MOF of these issues would be helpful.

Sir, I have also received some feedback on the housing grant. Some are not clear on the requirement that they have to work continuously for two years before they qualify for the grant. A question asked was whether they would qualify for the grant if they had been working for some time but lost their jobs because of retrenchment before fulfilling the two-year requirement. In such a case, would they have to start from zero-base and count again once they start working in a new job? Would there be some flexibility, they want to know, to deal with genuine cases where the interruption in the work is due to reasons beyond their control?

Sir, in response to a question which I had raised in Parliament, which is also

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covered under the Low Wage Workers Committee's Report, the Minister for MCYS promised to look into enhancing the social assistance programme to support women to remain or re-enter the labour market. I hope that, in the course of this debate, we would get more details of the enhanced KiFAS, childcare and student care subsidies that low-income families will be able to enjoy.

Sir, in his Budget Statement, the Prime Minister had mentioned about the enhanced childcare subsidies for the first and second child. I welcome this benefit as it will certainly help low-income families to improve their finances as mothers can now go out to work. However, Sir, some mothers have lamented that restricting this benefit only to the first and second child is too rigid. They have asked that the Government consider extending the higher subsidy to the other children in the low-income family, or at least to the third child. If the rationale, Sir, is to encourage self-reliance and make it possible for mothers from low-income families to go back to work, then it really makes sense to extend this higher subsidy to more children, and not just the first two. This flexibility, Sir, is necessary, in my view, to prevent children from low-income families from becoming low-income workers of the future, costing the Government much more to retrain them and to provide social assistance. I hope that the Government will consider this request.

Sir, let me now touch on the headcount freeze for three years and the Manpower Management Framework (MMF). The Manpower Management Framework, Sir, was introduced in 2004 and was meant to apply for three years. Under the MMF, Ministries and statutory boards are required to reduce their headcount by 3% per year. The MMF had caused some concern among public sector employees. Many were worried that this policy meant that they would lose their

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jobs if normal attrition is insufficient to make up for the 3%. There was also the problem of how the MMF policy relates to the current policy of raising the effective retirement age. With the MMF in place, there is no incentive to employ anyone beyond 62 years, for if a public sector agency does so, it cannot reduce its headcount. Also, where there are new services or when existing services are expanded, it is difficult for public sector agencies to increase headcounts as they would then be contravening the MMF. Sir, I was hoping that the MMF would be discontinued, so that we will not see a conflict in the current policy to employ more older workers and extend older workers' employment and the MMF. Since this policy will continue for one more year, I would like to seek a clarification from the Prime Minister whether this would inhibit the ability of public sector agencies to recruit and extend the employment of older workers. Also, I note that from FY07 onwards, there will be a headcount freeze for three years. Although this is an improvement over the MMF, I would be grateful if the Prime Minister could also clarify on the meaning and impact of this policy. Specifically, how will this affect recruitment in the public sector and the policy to engage older workers and re-employ those who have reached 62 years of age?

Sir, in last year's Budget, Prime Minister had mentioned that about 20% of the non-core functions in the public sector will be market tested and, if found suitable, best sourced. Following this, we have seen a number of best sourcing initiatives carried out in the public sector. The argument in support of best sourcing is for the public sector to avoid doing things which are not core to their work and for which they do not have the expertise or economies of scale. In such situations, it is better for the public sector to buy such services from the private service providers. However, Sir, generally

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the use of outsourcing in Singapore has caused some concern. In some cases, or in most cases, I may add, once a decision is taken to outsource, tenders will be called

and contracts awarded according to the criteria set, one of which would be the pricing of the services offered. Because of the practice of awarding the contract to the lowest tender, contractors try to outbid each other in order to secure the contract.

The service provider is then measured strictly by the outcome or output that is defined. Usually, there will be nothing in the contract between the agency using the contractor/service providers on the workers' welfare - that they should be treated decently, the contractor should comply with labour laws, cover the employees with adequate insurance protection, pay CPF and decent wages and pay them on time. In a few cases, where this is stipulated in the contract, there is no follow-up mechanism to ensure compliance. As a result, contract workers employed under such arrangements are worse off compared to permanent workers. In such a situation, Sir, best sourcing can become cheap sourcing.

I think it is possible for us to change this situation, so that the outcome will be win-win for everyone. Employers can make more effective use of their resources, especially they can have greater flexibility in managing their manpower cost depending on their needs. At the same time, workers are paid decent wages and enjoy the minimum benefits stipulated by labour laws. People see the public sector as a model employer and expect it to uphold high HR standards, and they are not wrong, as having dealt with both the public and private sectors extensively, I can vouch for the public sector's fair and humane treatment of staff. Hence, on the issue of outsourcing or best sourcing, I would like to ask the Prime Minister and Minister for Finance what is the policy in the public

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sector when it outsources. Are there sufficient safeguards included in the contracts to the vendors or service providers to ensure that they do not exploit the workers and fully comply with labour laws and pay CPF? What follow-up action is in place to ensure such compliance?

Sir, I have spoken on previous occasions on the need to reduce the maid levy for singles taking care of sick relatives and parents. Our population is ageing very rapidly and the elderly suffer more from medical problems and other disabilities. We want to encourage families to take care of their elderly, as we feel that the elderly will fare better in a home environment than if they were to be put in institutional care. This is also one of the key thrusts of the Committee on Ageing Issues which recently made known its recommendations. Ageing issues are becoming predominantly women's issues, as women live longer, have less savings and need more medical care. Women also make up a high proportion of singles that take care of their sickly parents or other disabled relatives. So, they suffer a double whammy. With such responsibilities, women usually find it difficult to get married and have a life of their own - something which the Government is trying very hard to promote- yet, at the same time, they also find not much support from policies to help them take care of their aged parents. I hope that the Ministry of Finance can also review this policy and allow singles, who take care of their elderly sick parents or other incapacitated family members, to pay a lower maid levy.

Sir, as GPC Chair for Health, I am very pleased with the Medisave top-ups of between $100 and $800 for those above 50 years. Elderly Singaporeans, especially

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those above 65 years, have low Medisave savings but require more medical attention. I hope that such top-ups will be a regular feature in future Budget years if there is a surplus.

Let me conclude, Sir, by pointing out one aspect of the Budget that many have missed, and that is the extensive consultations that took place with many Singaporean stakeholders before these Budget measures were announced. Many of the Budget measures arose from the recommendations of three Committees, ie, the Low Wage Workers Committee, which recommended the six key measures to help low-wage workers level up, including the Workfare Bonus and the housing grants; the Employability of Older Workers Committee, which recommended setting aside $70 million for the Job Recreation Programme and the ADVANTAGE Scheme; and the Committee on Ageing issues which recommended the Medisave top-ups. Sir, these Committees were represented by a cross-section of the society, and workers had a strong voice. This is again something unique to Singapore. Globalisation may have diminished the voice of workers in many countries, leading to a sense of marginalisation and loss. But, in Singapore, workers' voice remains strong and powerful, as we were fully represented on these Committees and actively participated in contributing our ideas and in representing workers' interests.

Sir, I applaud the Government for this farsighted, socially inclusive and humane Budget. I fully support this Budget.

Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 3.30 pm.

Sitting accordingly suspended at

3.06 pm until 3.30 pm.

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Sitting resumed at 3.30 pm

[Mr Speaker in the Chair]