TIME LIMIT FOR SPEECHES (Suspension of Standing Orders)

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TIME LIMIT FOR SPEECHES:

(Suspension of Standing Orders): With the consent of Mr Speaker and the general assent of Members present, Question put and agreed to.

Resolved,

That the proceedings on the item under discussion be exempted from the provisions of Standing Order No. 48(8) in respect of the reply to be made by the Prime Minister and Minister for Finance. - [Mr Mah Bow Tan].

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Column No : 503

ANNUAL BUDGET STATEMENT: Debate resumed.

1.15 pm

The Prime Minister and Minister for Finance (Mr Lee Hsien Loong): Mr Speaker, Sir, I thank all the Members for their views and suggestions, especially all those who have spoken in support of the Budget. I have heard all of them, including Mdm Cynthia Phua, and we will take up their views and act on them wherever it makes sense to do so. The specific issues which they have raised will be dealt with by respective Ministers during the Committee of Supply. In this response, I will just focus on the broad thrusts of the Budget.

Let me start by addressing a question which many have asked - some rhetorically, others seriously. "Is this an Election Budget, given its generous package of incentives?"

I am glad that many Singaporeans and MPs are happy with this Budget. The provisions and measures, which we have taken, have received wide support. But this is not a Budget merely for the purpose of distributing hongbaos to get votes.

It is a Budget with its feet on the ground and with its eye on the future. It is the result of consulting broadly and taking views from many people. We have had many committees - the Low Wage Workers committee, RECORD; Mdm Halimah Yacob and other Members of Parliament have participated in many of these sessions and worked hard to come up with initiatives which will achieve our social objectives, address problems and stand us in good stead for the long term.

This is a Budget:

(a) to support our ongoing efforts to restructure the economy;

(b) to ensure that all Singaporeans can benefit from growth and can manage the impact of globalisation; and

(c) that will maintain fiscal prudence and long term sustainability.

These schemes and initiatives have to be sound and sustainable. To make promises and to give money away - that is easy. But, to improve lives, to give hope, to provide opportunities, to have schemes which will lead to the objectives which we have set out, and not to the opposite of what we intend, to be affordable over the long term - that is much more difficult. This Budget makes the right long-term commitments so that the Government wins not just the next election, but also the mandate to govern over successive terms.

We are not issuing cheques thinking that maybe we will not be here after the elections. This is a Budget which we are taking responsibility for, because we have to answer for the outcomes.

** Growing the economy **

The Budget supports our efforts to restructure and upgrade the economy, and sustain economic growth over the long term.

The restructuring over the last few years has not been easy. It has been painful. In 1999 and 2000 before the recession, we had about 13,000 retrenchments a year; more or less steady. But over the past few years, the retrenchment numbers went up sharply to as high as 26,000 in one year - 2001. This is real pain because every person in these numbers is a worker with family, with responsibilities, with a future, with worries. The retrenchments are now back down to 10,000.

It has been a painful experience but we have become stronger. Overall, we have become much more competitive. We have to press on with our restructuring and not to fear change. If you look at our companies, you can see that. PSA, which restructured and retrenched 600 workers, is now competitive again; able to hold its own, not just against Tanjung Pelepas, but Dubai Port, and many other competitors in the world. SIA, working with unions, has made major changes to cut costs and to operate more flexibly.

But, we must never think that we have arrived. Mr Tan Soo Khoon made a very good speech yesterday pointing out that we live in a world where trade and political tensions still exist and will continue to simmer. He listed out the places where there is no level playing field. SIA - you want to open - there is obstruction. Each time you want to move, a new challenge comes up and we have to deal with it. That is the reality of the world. We accept it as it is. But, having come here and having strengthened ourselves, we have now to gird ourselves to tackle all those problems: to deal with a world which is changing at an ever increasing pace, to watch the trends, and to move quickly and decisively to respond to them.

The competition in the future is not just going to be about lower cost, but increasingly about higher value. I think we are well-placed for this competition. We have explained this in many ways. We now have one fresh way to present this, that is to look at four core strengths, CORE -

(a)

C: onnected. Plugged into the global market, moving around goods, people, and information; through our seaports, through our airports, telecommunications, and our FTAs.

(b) We are

O: pen. Open to ideas, capital and talent. Open to enterprise. Set up as a knowledge hub and a land of opportunity.

(c) We are

R: eliable. We enjoy a great reputation for trust, quality and consistency, and generally a very high reputation in Asia and around the world.

(d) We are

E: nterprising. With a flexible mindset and the ability to anticipate, to learn, to adapt, and to move quickly.

So CORE competencies. We must build on these strengths to stay ahead of the competition and keep the economy growing,

(a) to differentiate ourselves as a trusted centre for quality and service;

(b) to invest more in innovation and R&D, and become a key node in the global network of people, ideas and businesses;

(c) to support entrepreneurship and enterprise; and

(d) to maintain a tax system that is best for business, and will enable us to grow.

Let me deal with these one by one.

Going the extra mile for service

First of all, setting ourselves apart from our competitors through good service. Service excellence is a critical competitive advantage and it is as much about attitudes as it is about skills. If you are sitting on a production line and you scowl at the computer chip, it will not scowl back at you and it will not run away from you nor tell its friends about you. But if you are a shop attendant, an airline attendant, a waitress in a restaurant or a banker, and you scowl at your client or customer, you do not just do yourself harm, but also do the whole business and Singapore's reputation harm.

If we think about the IRs (Integrated Resorts), service quality is critical. One of the foreign bidders for the IR at Marina had HR executives who visited WDA (Workforce Development Agency) to find out what schemes we had to train workers and help them to find jobs. WDA asked the executives: "What can we do to help to prepare the workers, help to prepare Singaporeans to support the IR, to take up the jobs there?"

These HR executives replied that they will have in-house training to impart specific skills to the workers - how to turn the roulette wheel, how to dish out the cards, how to rake in the chips; these, they will train. There is no need for WDA to do that. But the most valuable training which the WDA can provide is to prepare Singaporean workers for service jobs in general - to know how to serve, to want to serve and to go the extra mile for good service.

This is not just about the IRs, it is about all our service industries: tourism, retail, food and beverage, finance, and healthcare. Service quality matters. Even in community centres (CCs), service quality matters - the PA (People's Association) staff running our CCs must provide five-star quality service. It is an outfit which is for the mass market, but the quality of service must be first class.

That is critical to Singapore's future, to our ability to earn a living in a competitive world, and it is a national challenge. That is why I got Minister Raymond Lim to spearhead the GEMS Movement, Go-the-Extra-Mile-for-Service.

GEMS has created a buzz. A lot of people have written to Mr Raymond Lim to ask to join the movement and we have involved many private sector executives, businessmen, and entrepreneurs in this effort. They have started initiatives, TV and publicity ads to promote great service, training programmes and leadership seminars. They have got service indicators to benchmark our service level with other countries, "Thank You" cards which customers are supposed to give to the service provider to show appreciation - to show that the good service has been noticed and has been recognised with appreciation.

I think we are beginning to see a difference. The employers are showing more commitment to service excellence. Metro has reported a doubling of compliments for the staff and a 20% reduction in complaints since it participated in the Customer Centric Initiative. The senior counter manager for Estee Lauder at Metro, Ms Joanne Liu, was interviewed by CNA and she explained why. She said: "For example, when customers came back for goods exchange before, we were unwilling to do it. But now, we accept the changes and we do it on the spot willingly". It is a mindset change. The Government is fully behind this movement. We are allocating $63 million to support this movement.

Fundamentally, what we are trying to do is to achieve a change in behaviour, in social norms, and make Singaporeans focus on courtesy and graciousness. We want to transform our society into one where people who serve do so willingly and with passion, and people who are served show respect and appreciation for those who serve them.

It is not going to happen overnight. It will take time. We have to start in the schools, practise in the community and transform the workplace. But we can do it. Over the years, we have changed many aspects of Singaporeans' behaviour - no spitting, no littering, no messing up public toilets, speak English more properly, (that, we are still trying), accept other races and religions, keep fit and so on. So, many efforts, but cumulatively they have made a difference. Singaporeans today - I do not say we are beautiful Singaporeans, but less ugly than we used to be. We must continue to make an effort to be less ugly, not just in Singapore, but when we go overseas. I think the changes with GEMS are within our reach, because deep within each one of us is a desire to be appreciated and to be respected. What we need to do is to develop the habit of putting ourselves in the other person's shoes and 'do unto others as we would like others to do unto us'.

_Investing in R &D, becoming a knowledge hub _

Second, investing in R&D and becoming a knowledge hub. This Budget underscores the Government's commitment to invest in R&D and to become a knowledge hub. We will inject $5 billion into an R&D Trust Fund over the next five years.

R&D is about experimentation, taking risks, venturing into uncharted territories - some failures, others successes. It means that we must be ready to support good people, to support good projects, to be hard-headed about what we do with our money, where we spend it, and in assessing whether projects are getting somewhere or whether we are getting nowhere.

We have to be patient. We cannot expect results overnight. We have to spend some time. So, I am heartened that MPs like Dr Teo Ho Pin, Dr Ong Chit Chung, and Dr Loo Choon Yong support this effort to secure our long term economic future and have offered many good suggestions which we will follow up on.

Prof. Ivan Png has cautioned against being overly driven by a target like raising national expenditure on R&D to 3% of the GDP, which he points out is an input target rather than an output target. His point is well-taken. I fully agree with him that what counts is output, not input, and we must get the appropriate performance measures, because how you measure influences what people will do. But, we do need inputs to get the desired outputs. If you look at countries like Sweden, Finland, US, Japan and Korea, they have shown that high levels of R&D investments are strongly correlated with the level of innovation there - in terms of the high-tech start-ups, new products and processes, patents and finally, dynamism and prosperity.

So we do need the money. We will not spend it blindly. We must make sure it is well spent. This means we must have robust processes to review and evaluate R&D proposals, using local and foreign experts to help us. We must focus on building up core R&D capabilities and talent, and not just on funding projects.

The National Research Foundation (NRF) and the Research, Innovation and Enterprise Council (RIEC), which I chair, have been formed to drive this overall effort. I am glad to tell Members that eminent academics and leading corporate figures have agreed to serve on the RIEC and on the Scientific Advisory Board of the NRF. These include Dr Susan Hockfield, who is President of MIT, Professor Clayton Christensen from the Harvard Business School, Dr Thomas Connelly, Chief Science and Technology Officer at Dupont, and Kenji Fujiyoshi, President of Mitsui Chemicals. They are experienced, very capable people. They know we are taking it seriously, and their participation shows that they have confidence in what we are doing. They will advise us on key areas of development and on how to assess and direct funding for R&D.

Prof. Low Seow Chay has recommended a higher private share in total R&D spending. I agree with him that greater private sector participation in R&D is our long-term goal. But to get there, the Government's approach is to use public sector investments to drive, and to seed, private sector investment. We will not just fund projects but we will also encourage collaboration between the wider research community, including the research institutes, universities and the private sector. We are one small country. We cannot have factions and different warring territories in Singapore. We have to bring everybody together and make the most of a national effort.

Dr John Chen and Mr Ahmad Magad have suggested that funds should focus on supporting commercialisation of R&D. Indeed, economic payoff is the ultimate objective. By commercialising technologies and ideas developed in the universities, research institutes and firms, we will be able to achieve this.

But we have to be prepared to invest in the whole continuum of R&D in a balanced sort of way, from upstream research to commercial application. We used to focus just on the very downstream development part. If we want to make further progress, we have to move upstream. But we have to do it in a focused sort of way, in fields where we believe there is a reasonable chance of a good outcome over the medium term.

We used to focus on capability building in our first efforts in developing R&D. Now, we are moving into creating new knowledge and commercialising the applications. EDB is already getting companies to set up the R&D centres here, with A*STAR focusing on applied research. EDB and SPRING have a programme called SEEDS, Start-up Enterprise Development Scheme, which also helps to provide equity financing for creative individuals who want to commercialise their business models or products. So far, eleven of them have achieved the million dollar mark and six have won international awards for their products. So, not too bad.

We have plans to help existing SMEs develop and commercialise creative ideas too, through the Enterprise Technology Fund. The details of how we will help SMEs to participate will be in the Committee of Supply for MTI.

Prof. Low Seow Chay expressed concern that R&D could be dominated by foreigners and that Singaporeans will not benefit from it. I think we should look at it positively. We want to develop Singaporeans to go into R&D - to become researchers and scientists - but we must get as many foreigners as we can to come here, do good work here, and help us to get the activities moving - better for them to be working with us rather than against us elsewhere. Only by attracting the best talent, foreign or local, can the quality of our R&D be truly world-class. There is no centre in the world which only works with local talent and is world-class. You can go to the Whitehead Institute in MIT, you can go to Weizmann in Israel, you can go to Cambridge, Cavendish Labs - all the world-class institutions gather talent from around the world. No single country, not even the US, not even China, has enough talent and scientists to say: "This is my own national effort - foreigners stay away."

The way to do it is to bring everybody in, the talent from wherever you can get them, to cross fertilise, spark off and germinate new ideas. At the same time, we will encourage locals to pursue a career in R&D - get bright people into R&D. We are always enhancing our programmes to grow our local scientists, but we need to find the talent with the potential and interests to do R&D. Not everybody can do it, not even every bright person can do it. You have to have the right mindset to focus, to understand the subject in detail, and to spend a large part of your life researching in-depth in something which may lead to nothing, but which you hope will lead to something big. There are only a finite number of such people in Singapore. So where we can find them, we will deploy them to R&D, remembering that you also need SAF officers, civil servants, MPs, businessmen, entrepreneurs and many other things.

Supporting entrepreneurship and enterprise

Third, this Budget builds on initiatives taken over the last several years to support entrepreneurship, enterprise and businesses. Of course, in every Budget Debate, there are speeches that not enough has been done for SMEs. But, as with every Budget Debate Round-up Speech, let me try to put this issue in perspective.

Help for SMEs

Dr Ong Seh Hong, Mr Lawrence Leow and Dr Wang Kai Yuen spoke about the lack of assistance for local enterprises and SMEs. We have to see this Budget not in isolation, but as one of a series. Supporting entrepreneurship and enterprise has always been a key pillar in our efforts to reinvent ourselves. In recent years, we have taken several major initiatives, many of which confer significant benefits to SMEs.

We have reduced taxes. We have introduced numerous tax measures that will help SMEs. Our tax burden is already low for start-ups and small companies. In fact, for the first three years, you do not pay tax at all. The tax system provides for cyclical swings in business and in earnings, because you have one year loss carry-back which I introduced last year. If you make a profit this year and next year you make a loss, you can actually go to IRAS and claim back some of the tax you paid the previous year and even out your tax burden - in fact, lighten your tax burden.

We have also reduced our regulatory burden. There is an online business-licensing scheme to streamline licensing processes and cut business costs. This year, we are reducing record-keeping requirements for 17 statutes, which I believe has been welcomed by members, and which will be particularly helpful to small companies with not a lot of space, not a lot of staff, and not a lot of money.

We have also introduced many schemes to help local companies upgrade and expand overseas. In fact over the last five years, 9,000 SMEs have benefited from the Local Enterprises Technical Assistance Scheme, LETAS, to help them upgrade their capabilities, and 12,500 SMEs have obtained $3 billion of Government-facilitated loans. $3 billion - it is bigger than the Progress Package. It is quite a substantial amount. It has gone to a lot of SMEs.

There are many, many schemes - too many for me to list here. But I went to the EnterpriseOne Portal yesterday, and I looked at the web pages on Government schemes for SMEs. If you print them out, it will be 10 pages, over 60 schemes - from tax incentives to grants and non-financial assistance measures. We do not lack schemes. Members have the handout.

What we need to do is help the SMEs take full advantage of schemes already there, so that they can be guided through this forest of assistance in order to get what they need and what will make a difference for them.

But nevertheless, I invite the members to look at these 10 pages. Let me know if you have other ideas, or if you think these ideas can be simplified or improved. We will keep on improving our package and, if need be, add to these web pages, so long as it makes our assistance more effective and does not increase confusion.

But I know that SPRING feels a mission to help SMEs. This is not just a business, and those are not just clients. They feel that this is something which is worth doing, which they believe in, and that there is promise and hope - something worth promoting. They are going at it 'heart and soul' and the Government is behind them. We are happy to consider new ideas to help SMEs succeed.

Our philosophy is that if SMEs have good potential for growth and for success, we should encourage and help them in all the ways which are possible. But if SMEs are non-viable, then we should not artificially prop them up because that will just extend their pain and misery. It would not do a real favour to their owners and to the employees.

Mr Inderjit Singh and Mr Chay Wai Chuen raised the question of incentives like the Global Trader Programme and the Warehouse Retail Scheme, which they felt were biased towards foreign companies and multi-nationals. This is not true. As a principle, our incentives are focused on promoting desired activities and influencing where companies decide to locate, be they Singaporean companies or foreign companies. The incentives are not biased or structured in terms of ownership.

In the case of the Global Trader Programme, it is aimed at making Singapore a global trading hub. It targets all companies that commit to conducting substantial offshore trading activities, and to carry out business activities which will result in spin offs to our local economy. It really does not matter whether these are local or foreign companies. As a matter of fact, there are some local traders which are enjoying this incentive, such as Petra Foods and Agritrade; maybe not as many as we would like, but it is open to them.

In the case of the Warehouse Retail Scheme, this is designed to encourage companies, whether local or foreign, to establish their regional activities in Singapore. The requirement for this scheme is that 60% of the gross floor area must remain industrial but the balance can be used for retail. But when it is designated for retail, the user is charged full retail rates, comparable to retail rates in the vicinity. It should not put retail businesses nearby at an unfair disadvantage or at risk from large firms which are enjoying concessionary rents. It will increase the supply of retail shop space - that is true - but that is supply and demand, and I think, overall, that is good for the customers.

Pro-enterprise Government

Mr Wee Siew Kim and Mr Zainul Abidin Rasheed have suggested that public agencies need to be more pro-enterprise. For example, they suggested that some small businesses should be allowed to operate at void decks.

We have relaxed rules for small businesses. We used to be very stringent and some of the regulations were overly restrictive. We review and update them on an ongoing basis. For example, we now allow small businesses like car cleaning and mobile ice cream kiosks in HDB car parks, provided they do not affect the parking needs of residents, they do not create nuisance to the residents, or compromise the safety of car park users. We have also liberalised street hawking so vendors can sell food like ice cream, which does not perish so easily, in housing estates and car parks. Last year, we included newspapers and costume jewellery because, in the downturn, we felt this is one way people would be able to make a little bit of money for themselves and tide over their family.

But many of the conditions and rules are there for some reason, and we cannot remove rules which are necessary for public safety or for the living environment. HDB has drawn the line on using void decks for commercial activities. I think we have to be fair to the people who live upstairs, especially on the second floor, and we have to preserve the residential character of the housing blocks. I would be careful about having char kway teow or something like that; the more fragrant it is, the bigger the problem upstairs.

But it does not mean that rules will never be changed. The position is continually open and we will review our rules as business needs change, and as views evolve on what the public considers acceptable, in terms of level of safety, convenience and public order.

So, I encourage Members to keep on raising the subject and pushing the boundaries. With this dynamic tension, from what you think will be good and what we feel we can do, we will be able to become more pro-enterprise. I hope that in the process, Members will be able to understand what are the constraints and real problems.

Mr Inderjit Singh has asked us to be patient before asking about results from the entrepreneurship promotion efforts. I also ask that he and other Members be equally patient because it will take time for the pro-enterprise mindset to become entrenched. But, we have success stories and we have outcomes which we can be proud of. For example, there is a home-grown sheet metal fabricator and machining company called Eng Tic Lee Achieve, which acquired new capabilities and became the first company in Southeast Asia to manufacture pharmaceutical packaging machines in partnership with a leading German equipment manufacturer. Many others have also made their mark in the region in China, in India, and also now in new markets in the Middle East. As we continue with efforts to improve entrepreneurship, I am confident we will have many more success stories to celebrate.

GLCs

Still on local enterprises, Mr Inderjit Singh has asked about efforts by Temasek companies to become globalised Singapore enterprises, as recommended by the ERC. Our companies have expanded overseas over the years, but these are decisions which the companies have to make - with their boards and their managements. The Government cannot dictate the pace of expansion for individual companies. In fact, Inderjit also reminded us that we should not get involved in dictating things for these companies. In the long term, Temasek's aim is to reduce exposure in Singapore from half, which it presently is, to about one-third. The companies are moving. Sometimes, we give them an encouraging nudge.

The Minister Mentor (MM) once in a while gives a very encouraging nudge. Members will have read that he has been talking to SIA and its management and unions. Mr Inderjit Singh raised an eyebrow and suggested that we have failed to observe the ERC's recommendation to ensure that GLCs are commercially-run without interference by the Government. I think without interference does not mean without encouragement.

MM's involvement has been chiefly in resolving the labour relations situation in SIA. It reflects his long association with the tripartite process and his standing as a trusted and well-intentioned neutral party by all the players. It is also driven by the Government's larger strategic interest to safeguard our status as an air hub and to help SIA restructure to face a new landscape while it is still doing well.

So MM's comments to SIA that it needs to consider trimming its businesses was not a directive. The specific restructuring and adjustment to deal with the future will have to be decided by SIA management and its board, based on what makes commercial sense. But sometimes it is helpful to paint a broader picture of the industry trends and state clearly where the Government sees a strategic national advantage - in this case, in being an air hub rather than keeping out competition in order to protect Singapore Airlines; so that managements and unions recognise that tough changes are necessary. As Mr Inderjit Singh pointed out, the comments may have preceded an upward tick in the SIA stock price. So maybe the market took it positively.

Maintaining a competitive tax environment

Finally, on maintaining a competitive tax environment, Prof. Ivan Png has suggested minimising tax incentives and moving towards a simple tax system with a low headline tax rate.

This is an ideal which I sympathise with, but unfortunately, reality is not so simple. The basic problem is this. We want the best companies in the world to come and locate here - offer the best technology, best jobs, best markets - but these best companies are in demand everywhere. Other governments are courting them. Even the developed countries are courting them. America, Japan, Europe - they offer lucrative incentives to selectively anchor key businesses and investments. Sometimes, they give outright cash grants per job created - one hundred thousand or two hundred thousand Euros because every job created is one fewer job on the unemployment rolls.

So, if we want them to come here and we say you pay the same here as everybody else in Singapore - 20% corporate tax - we cannot get them. We are out of the running. They come to see us and they show us; they say this is best of breed. Best of breed - they 'shop' for the best incentives from different governments - investment allowances, tax holidays, grants, training assistance schemes and so on. Assemble one page 'best of breed' and they tell us: please match this and then we will think about whether to put you into the running.

And if we need them, we have to make an offer which they will consider, but one which leaves us above zero. Not ending with a net negative but above zero. If they come, we get the economic spin-offs.

On the other hand, if we say we give the same favourable tax rates, flat tax rate, to other companies that we give to the best, most desirable project which we want to anchor here, the Government will get very little revenue.

So we have to retain tax incentives to attract and retain strategic businesses and activities. At the same time, we have to ensure that our incentives are granted fairly and objectively - that the companies must meet our criteria and deliver specific net benefits to our economy.

Overall, our formula has served us well. Quite a low headline rate to support enterprise, plus targeted incentives, usually with clear sunset clauses, to promote strategic investments. But we try to keep our tax code clean - we do not encumber it with many special perks and loopholes as happens in other countries, because we would like to keep the playing field as level as possible, subject to this constraint - that there are companies, which we need, whom we cannot charge the full rate.

** Maintaining fiscal prudence **

Even as this Budget invests in key areas of growth and shares the fruit we have reaped with Singaporeans, it maintains our core principles of fiscal prudence and sustainability over the long term.

Keeping Government lean and trim

As I said in the Budget Statement, our major taxes are at about the right levels. On the other hand, there will be new spending needs in healthcare, education, training and R&D which will put pressure on our finances.

So, we have to keep the Government lean and trim to manage these new spending priorities. Over the years, we have introduced various initiatives to help do this. To drive discipline, we have the Manpower Management Framework (MMF), the headcount freeze and other schemes. To get value for money, we have best sourcing, demand aggregation, the Centre for Shared Services and so on.

Dr Ong Seh Hong has raised concerns that cost-cutting efforts such as the Manpower Management Framework should not come at the cost of poorer service levels, or worse still, drive agencies to outsource services at an increased cost to the public.

We are mindful of these concerns. The MMF aims to achieve headcount reductions through productivity improvements, job redesign or by re-prioritising functions. Where there is additional manpower required, the framework is responsive to the circumstances of the Ministries. For example, for the Budget Terminal at Changi - it is a new service. We are providing additional manpower headcount. Or, because the IR is coming, MHA needs to set up a Casino Regulatory Authority of Singapore - we are studying how we can increase MHA's baseline in order to account for this new function so that there will be appropriate manpower recruited for this.

Best sourcing results in outsourcing only if the private sector can do the task more cost-effectively and, therefore, cannot be the cause of increased fees. Since we launched Best Sourcing in February 2003, we have market-tested 218 functions. We have outsourced 59% of them. The annual operational cost savings is S$25 million or 25% of in-house costs. Still quite small, but I think there is further potential. Outsourcing has resulted in direct savings for the public. For example, the Ministry of Finance itself has reduced the fees charged to suppliers for registering as Government suppliers by at least 10% as a result of outsourcing this service.

Mdm Halimah has raised concerns that MMF should not inhibit public sector agencies from employing older workers and she has warned that best sourcing should not simply become "cheap-sourcing", because private companies may cut back on staff welfare and benefits to win jobs.

The public sector's approach is that we employ the candidate who best fits the job requirements regardless of age, sex or race. But when we outsource, we outsource to reliable vendors - we should not assume that outsourcing achieves lower costs simply by having the vendors cut the workers' salaries. There will be, in some cases, specialised private sector providers which offer lower costs simply because the business which is best sourced to them is their primary business. So, they can achieve greater economies of scale and innovation. Also, I would say that we want to outsource to a reliable company, not one which submits a ridiculously low bid and then is unable to meet its obligations or pay its workers and then runs into trouble halfway, leaving the Government to pick up the pieces.

Mdm Halimah has suggested that the Government considers stipulating in outsourcing contracts that providers must comply with labour laws and pay the employees decent wages on time. I recognise this concern and there have been some cases which have run into problems. But, the solution lies in enforcing the labour laws. I do not think a contract obligation stipulated by the Government as the buyer of the contract will solve this problem, because really it is a legal obligation that the vendor pays its workers, pays the CPF, meets all the legal rules which he has to meet. Anybody who does business with the Government, or with anybody else, is expected to do that. If they do not, there will be penalties. From time to time, employees complained that they have not been given their pay. In such cases, if they have missed out on the rightful employment benefits, they should seek the union's advice or they should approach MOM for help.

Specifically on the change on headcount arising from the MMF, Mr Chay Wai Chuen has questioned the apparent increase in the public service headcount despite the MMF. May I clarify that the increase which he saw in manpower in the FY2006 Budget - 1.6% increase in the headcount - is actually an increase in the establishment posts and not the actual headcount, because often the establishment posts are left unchanged for some time while agencies work out how to cope with fewer personnel by, for example, streamlining or modifying processes when they have natural attrition, resignations and retirements. On the other hand, when agencies undertake new functions, they introduce additional posts. So, overall headcount numbers have come down although the establishments have not yet.

Funding this Budget

Now, let me talk about one very important issue which MPs have raised, and that is, funding this budget. Several MPs, including Mr Yeo Guat Kwang, Mr Chew Heng Ching, have asked if this Budget's stance diverges from our principle of fiscal prudence and our longer-term sustainability. And Mr Ong Kian Min had asked if we should have been more tight-fisted and withheld some of the generous cash give-aways.

It is good that Members are looking beyond this Budget to these issues of long-term growth and fiscal sustainability. But let me assure Members that this Budget will not strain our long-term fiscal position.

First, the size of the Progress Package, $2.6 billion, is not large compared to that of the New Singapore Shares which was $2.5 billion and Economic Restructuring Shares which was $2.7 billion. So it does not imply unprecedented generosity as mentioned by Dr Amy Khor. However, because we have become more targeted in our approach, older, lower-income households can expect to receive more this time and the impact on them will be more significant.

Second, our Progress Package is not a permanent programme. It is once-off. We are not promising this every year or every five years or every so many years. It is once-off, needed this time because we are restructuring, because the economy has turned good, and yet we know that there are some segments of the population needing help. So, a Progress Package is justified.

Also, our transfers to the Endowment Funds, which Prof. Ivan Png mentioned, are accounted for conservatively. Prof. Png suggested that the Overall Budget Position should be calculated based on actual expenditures rather than the total transfers to these funds. This is a plausible accounting treatment, but we have chosen a more conservative approach in line with our principle of fiscal prudence.

Going forward, our fiscal position is sustainable. In this term, it has been tighter than we expected and tighter than before. Several reasons - because there was a slow economy in 2002 and 2003 and we have had two major packages. First, we provided the ERS (to offset the GST increase) which was $2.7 billion. Later on, we deferred part of the GST increase, staggering it, first 3% to 4%, then 4% to 5% - the deferral cost $600 million-$700 million. It is big money. And now, we are having this Progress Package.

Going forward, we are not likely to have the same combination of events. Nevertheless, the position will be fairly tight and we must continue to be vigilant and focused.

There seems to be some confusion about how we will fund the Special Transfers of $3.59 billion for FY2006, judging from the media and analysts' reports on the Budget, and also from what has been said in this House.

As I stated in the Budget Statement, we have some funds which accrued to the current Government when it took office in 2001, as well as some capital receipts from our statutory boards during the term of this Government. We do not reflect these capital receipts in the overall budget position because despite what Mr Steve Chia said, they are irregular, lumpy and uncertain sources of funds. Over the last 10 years, these capital receipts have fluctuated between $30 million at the lowest to a few billion dollars at the highest. If we had included them, it would have overstated the amount of regular revenue we have on a year-to-year basis with which to fund our regular expenditures. But these capital receipts remain available to the Government to spend within its term, without drawing on past reserves. Taking them together with the funds from the changeover of year 2001, we have enough to pay for the Special Transfers without drawing on past reserves.

Let me just go through some of the numbers.

We started off the current term in 2001 with $2.51 billion of funds accruing to the incoming government. The amount was computed because it was a changeover year, and it was computed in accordance with the Apportionment Rules between the outgoing and the incoming government as laid out in the White Paper on the protection of reserves.

The Government also received $2.45 billion over FY2002 till FY2005 in capital receipts from statutory boards which were returning capital in excess of their needs.

On the other hand, if you total up the budget surpluses and deficits between FY2002 and FY2006, including $3.59 billion of Special Transfers in 2006, the net cumulative Overall Budget Deficit is $4.23 billion.

So, just taking the $2.51 billion that the current government got in FY2001 plus the $2.45 billion in capital receipts from statutory boards - that adds up to $4.96 billion - we can comfortably fund the $4.23 billion net cumulative Overall Budget Deficit from FY2002 to FY2006.

So, we have enough funds with some left over. But let us not exaggerate. Today reported on 24th February that the Government is able to draw on capital receipts from statutory boards in the current term and such receipts raked in $13.42 billion between the fiscal years 2002 and 2005. Mr Steve Chia yesterday further inflated this figure to $19 billion.

Mr Steve Chia says that he is misled and that the people are misled by the Government. But actually it is Mr Steve Chia who is misleading all of us because these numbers are all incorrect. We do not have $13.42 billion of capital receipts to draw on as reported by Today , let alone $19 billion as claimed by Mr Steve Chia.

Let me explain. Today 's main error is to treat capital receipts from the sale of Government land as money we can spend. These land sales add up to more $10 billion, but they are locked up, as past reserves, and cannot be touched because this is not new money. It is not earned, it is not capital gains, it is just transformation of a piece of land into cash, transformation of one asset into the other. The land has been locked up, so the cash proceeds are also locked up. This was Today 's mistake. Mr Steve Chia also made this mistake but I believe he must have made some other mistakes in order to reach such a huge number.

Fiscal sustainability

Mr Low Thia Khiang asked why it is okay for the Government to incur a deficit of $2.9 billion and yet when the opposition suggests increasing expenditure on education and healthcare, we say it is fiscally irresponsible - which it is.

The reason is that the Workers' Party proposes to spend regardless of whether we can afford it on a sustained basis. To quote the Workers' Party Manifesto, it talks about "an unconditional needs-based welfare safety net". In contrast, this Government lives within its means without neglecting its obligations to lower-income Singaporeans. Regular expenditures are funded by regular revenues and not irregular capital receipts. I had explained earlier that the Progress Package does not draw on past reserves and will not impose an ongoing fiscal burden on taxpayers.

Mr Steve Chia's speech yesterday shows vividly where the Opposition's approach will lead. He wants to raid the bank. He proposed cutting all sorts of taxes and fees; just declare that Christmas has arrived. Or as Zaobao says " zuo chi shan kong " (sit and eat until the mountain is empty); it is precisely this kind of free spending which the Constitution and the Elected President have been designed to prevent. The safeguard ensures that our past reserves are protected and politicians will not make free with them in order to win popularity.

But the Workers' Party advocates that we abolish the Elected Presidency and remove the Second Key. That is why I believe that the Opposition's approach and the Workers' Party's approach is fiscally irresponsible.

Mr Low Thia Khiang's memory also seems to have been selective. He claims we are not spending enough for Singaporeans who need help. But, he has forgotten. During downturns, we have provided assistance to Singaporeans who have difficulties coping. Mr Low said that after giving out the New Singapore Shares and holding elections in 2001, we pushed up the GST rate. Yes, we did. But what we also did, which he forgot to mention is that before we raised the GST, we provided $2.7 billion worth of Economic Restructuring Shares to help Singaporeans cope. So the GST was completely buffered by the Economic Restructuring Shares, and the New Singapore Shares is a completely different package, a clean benefit which all Singaporeans enjoy. So to say that the New Singapore Shares resulted in the GST after the elections is as they say in Latin " suppressio veri suggestio falsi " (by suppressing the truth you suggest a falsehood).

Mr Low also said we have not done enough to help the poor on a consistent basis, and our help is only once in five years. Since 2001, this Government has spent about $7.8 billion in total for a variety of assistance measures not counting this Progress Package. This includes the New Singapore Shares in 2001, the ERS from 2002 to 2004, the CPF Top-Ups from 2004 to 2006, U-Save, Service and Conservancy Charges and Rental Rebates, and so on. A typical low-income household would have received more than $11,000 in total from all these schemes. This, not counting the Progress Package.

Furthermore, Mr Low has had nothing to say about the substance of the Progress Package, unlike, for example, Mr Chiam See Tong, who has gone through and has pointed out some issues with implementation, particularly with the Workfare Bonus. Indeed, Mr Low had nothing to say about his alternative propositions as to how the Workers' Party proposes to take Singapore forward and to help low-income Singaporeans - nothing. It only shows that he is really not interested in whether Singaporeans are getting the help they need. He is only interested in scoring political points.

The underlying principle that must continue to guide this Government is fiscal prudence. Every term of the Government must live within its means and the Budget must be in overall balance over the economic cycle, and that is what guides this Government.

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Moving forward together: _

Economic growth is a basic pre-condition to raise living standards across the board. But incomes will get stretched out as we restructure the economy and as globalisation hits us. Older workers and lower-income groups will face particular difficulties. So we have to augment our broad-based approach with more targeted help. Deliver the fruits of growth to every citizen, especially the older workers and lower-income groups who need the most help. Ensure that nobody is left behind and left out.

At the same time, we have to provide the help in a way that encourages recipients to make the effort to work, not to free-ride on state support, to target the areas where the needs are greatest, to involve the community and the grassroots network and leaders, and to maintain fiscal discipline and responsibility.

Workfare, not welfare

The key principle was set out by Ng Eng Hen's Committee on Low Wage Workers - Workfare, not welfare. Because, the best way to help people is to help them re-train and find work, so that they can take care of themselves and their families. This is something which many MPs have said in different ways over the last few days.

Long-term measures to help workers

Dr Amy Khor asked whether we can find sufficient jobs for all those willing and able to work. There are many jobs. Last year alone, we created 111,000 jobs. Job vacancies in the private sector, just in establishments with at least 25 employees, rose to a four-and-a-half year high of 20,000 in September 2005. But, many of the jobs created are at the higher end. Nearly half the job vacancies require at least an upper-secondary qualification, which is not surprising because this reflects our economic restructuring. So, while there are jobs available, the workers who are unemployed will need the skills and qualifications in order to take up these jobs. That is why we have many initiatives like the Workforce Skills Qualifications System to help them to do so. At the same time, NTUC is working with WDA to step up the Job Re-creation Programme and to re-create 10,000 jobs a year.

Dr John Chen and Mr Zainudin Nordin talked about the need for systematic and sustained measures and also asked whether we could make the Workfare Bonus permanent to help the lower-income and unemployed in the longer term. I agree that sustained measures are needed. Indeed, most of the key Workfare measures are permanent and address structural issues. We are providing more social support for low-income families so that parents can go out to work. We are expanding job opportunities through job redesign and equipping individuals with higher skills for better jobs. WDA is expecting to spend a lot of money - $140 million per year over the next three years on training and re-creating jobs, and we are investing heavily in education. I agree completely with MPs - Dr Lily Neo, Mr Arthur Fong, Mr Ong Ah Heng, Ms Eunice Olsen - who said that it is important to concentrate on children of lower-income families so that they can, in turn, help to lift their families out of poverty. We have a comprehensive approach that includes early intervention, making sure that education is affordable to all, reducing school dropout rates and strengthening vocational training pathways. The Opportunity Funds support our commitment to help these children.

Financial support for workers

There are two key financial measures to encourage work. One is the additional CPF Housing Grant, and the other is the Workfare Bonus. The additional CPF Housing Grant is a permanent scheme, consistent with our policy of helping Singaporeans to be homeowners. It will help provide lower-income HDB first-timers with a significant sum for buyers to own their homes - a significant sum over and above the subsidy which all HDB buyers already enjoy. $20,000 is equivalent to 20% of the selling price of a three-room flat, and an even bigger proportion of the selling price of the two-room flats which HDB will be building. So, we have made one very big move on the additional CPF housing grant, which is permanent, and which is targeted at the lower-income groups.

The Workfare Bonus marks a significant step because it provides low-wage workers with a cash bonus. If you work, you get the cash bonus at the end of the year, twice - this year based on 2005 work, next year based on 2006 work. It is a once-off scheme because this is the first time we are doing it. Payments will be for two years. We should experiment and gain experience with the scheme first, before considering whether we need a more permanent work-based assistance scheme like this, and if so, what form it should take.

With once-off schemes, we can afford to make mistakes. But with a permanent scheme, mistakes will be much harder to reverse and we have to be mindful of unintended consequences. Will a scheme like this cause employers to push wages down permanently? Will it reduce the incentive to upgrade to a higher paying job? How do we deal with a problem, which Mr Chiam talked about, where somebody works hard, goes from $1,200 to $2,500 doing overtime and then, as a result, falls out of the net and does not qualify? To some extent, that is unavoidable but how steeply do you want the bonus to tail off with income so that for each extra dollar of work, it is still worth your while to go for that extra dollar? This is the sort of problem we have to watch out for and study. How complex will the Workfare scheme be to administer? How do we prevent people from over-claiming? Nobody over-declares when you pay income tax but when you claim negative income tax, over-declaration can be a significant problem.

But, however this Workfare idea evolves, we must never allow it to expand into a permanent needs-based welfare scheme that is not conditional on work. Because that is the way to financial ruin and worse still, as many MPs have pointed out - Dr Amy Khor, Dr Chong Weng Chiew, Dr Wang Kai Yuen and Dr Tan Boon Wan - it will breed a crutch mentality.

Alternative suggestions for helping vulnerable workers

Some have suggested a few other ways to help vulnerable workers. One is to have tax incentives for companies to hire older workers. It is possible but I am not in favour. I will tell you why. A tax incentive is, in principle, no different from a Workfare Bonus which is paid directly to the workers, except for this - it goes through the company and the company has to make a profit before it can take advantage of the tax incentive. I would rather pay this directly to the worker. Also, if I make a tax incentive which extends to all older workers and not just the older lower-income workers, then there will be a lot of deadweight loss because I will be granting tax exemption on many people who really do not need the tax incentive. It is more straightforward to give a direct grant to workers, like through this bonus. In fact, that is how other countries which have earned income incentives do it - direct payments.

Mr Inderjit Singh suggested providing more retrenchment protection through increasing compulsory CPF savings or having a national unemployment insurance scheme. It is also one of the items in the Workers' Party manifesto. The same question applies to both - which is, who is to pay for this protection? Who is to pay for this unemployment insurance? If you raise employee contributions to CPF, then you reduce workers' take home pay. Are you prepared to do that?

If you raise employer contributions, then you are going to increase business costs and lower competitiveness. In fact, since the ERC recommendations, we have been working hard to adjust the CPF contribution rate to be at a sustainable level to lower cost and yet have enough for retirement requirements, for housing requirements, and for medical requirements. Quite a number of MPs, including Ms Penny Low and others, have pointed out that we must make sure that we have enough money for retirement. Every additional item you take out of the CPF means $1 less from somewhere, from retirement needs or from housing needs. You might say: Decide the principle, then we can figure out how to do it later on. But I think we have to look at the practicality and the practicality is: who is to pay for this?

Also in Singapore, most workers already have some form of retrenchment protection. MOM did a survey two years ago in 2004 - 96% of private sector establishments with at least 25 employees paid retrenchment benefits to their local employees who had at least three years of service. So there is already some kind of unemployment protection which is in the retrenchment benefits scheme. If you are going to introduce a new layer of unemployment insurance, is it going to be on top of retrenchment benefits or in lieu of retrenchment benefits? I think you have to consider carefully because if it is in lieu of retrenchment benefits, you have to take away a well-established scheme which is more or less working. We can improve it but it is a scheme which has worked out and people have accrued retrenchment benefit rights which are very important - as I am sure Mdm Halimah will confirm. If it is going to be on top of the present system, is it wise to have double provision for unemployment protection at additional cost and with additional negative side-effects?

What are these side-effects? Straits Times today had a timely article: "How the next welfare state must work?" It is an article from the Ifo Institute for Economic Research in Munich and it is by the Director, Prof. Hans-Werner Sinn, who is an eminent economist. The research institute is a well-respected European, German, think-tank. They produce Ifo Business Surveys which track how the European economy is going. Their article today says how the next welfare state must work and what is wrong with the present welfare state. I read from the article: "In Western Europe, the welfare state helps these people by paying replacement incomes in the form of social aid, unemployment benefits or early retirement benefits". Unemployment benefits - so it gives you replacement income. In other words, if the market does not provide you with a sufficient income from your labour, the state will provide an income without requiring you to work - which is what unemployment insurance is about. He goes on to say: "As humane as this policy is meant to be, it is largely responsible for the mass unemployment from which Europe suffers. The reason is simple - replacement incomes are wages for doing nothing."

Then he goes on to explain this is an old problem but it is worse now because of China and India, and now wages have to adjust. So, another way European companies have tried to fix this is with a legal minimum wage, to prevent wages from falling. He explains why a legal minimum wage is also not a sensible approach. He says Europe's welfare system based on replacement incomes and minimum wages will not survive globalisation. Because, if you go for minimum wages, you are actually pricing yourself out of the market. You are encouraging other people to come in to work - to take the work away. You will not survive globalisation and there is no way to turn back the tide of history.

So what does he propose? He proposes wage supplements, which means paying people to work - the way we are doing Workfare. He says even wage supplements is expensive, because you have to pay everybody - you have to pay all those who are working and not just those who are not working. But he thinks if you do the sums, it probably will be less expensive than going for unemployment benefits and minimum wages.

I think the most important thing is, whether we call it wage supplements or Workfare, we are encouraging people to work, we are encouraging people to take care of themselves, and we are ensuring that they have a reasonable standard of living. At the same time, we let the market do its work so the economy can restructure, can grow, and in time they will upgrade, retrain and be able to do better for themselves.

The Progress Package

Targeted approach

Now, let me talk about the Progress Package. When there are budget surpluses, we have periodically shared the fruits of growth with Singaporeans and that is what the Progress Package does. But there is a key difference. With the Progress Package, we are taking a more targeted approach. There is more for the older workers and for the lower-income group most affected by economic restructuring. More for the elderly most worried about medical and retirement needs.

Some MPs like Ms Irene Ng, Prof. Ivan Png and Dr Ong Seh Hong have suggested we could have taken a more broad-based approach and provided more to the 'asset-rich, cash-poor' group, younger lower-wage workers in their 30s, housewives and so on. I recognise that these are all groups which have some claim. The Progress Package recognises the contributions of all Singaporeans. Every adult Singaporean will receive at least $200 of Growth Dividends and many Singaporeans will receive more. But, we have to set priorities to make the most of the package and to send a clear message on what our focus is. This Progress Package is weighted towards poorer Singaporeans and lower-income workers. For the Workfare Bonus, we have focused on the older lower-wage workers because they are more vulnerable in terms of employment, security of jobs, and their income. Our aim is to make sure that nobody is left behind when we restructure and upgrade the economy. I think the message has got through. The New Paper reported one housewife, Madam Kwan Yoke Kuan, who said that looking after the older lower-income group is more important. This, I think, sums up the sentiment of many Singaporeans. Over the past week, I have received many emails too from people who agree with the Budget's focus of targeting help for those who are lower-income and most in need.

I should also like to urge Members to look at this package not by itself but in the context of the many other things which the Government has done and the many other packages which we have introduced over the years. As I explained just now, we've spent more than $10 billion, including this Progress Package, since 2001 on various assistance measures. It is not possible to be absolutely fair to every group every time. I cannot do that unless I know in detail everybody's life, how the household is structured, what your finances are, and what your background circumstances are. But, we try to be roughly fair, and over time, with the range of packages, taking all our policies together, I think generally we have been fair to all.

Implementation of Progress Package - fair and simple

Now let me deal with some of the queries on the details of the Progress Package. First, do not be anxious about the need to sign up. Most Singaporeans only have to be patient and wait for the letters to come. The letters will tell you exactly how much you will be getting, then just sign up from 1st April if you want to receive it on 1st May. But even if you are a little bit late, we will keep the window open until the end of the year. Let us know whether you want us to credit your bank account or you want the cheque in the mail. There is no need to put in $50 in your CPF account this time, but in future we will think about it.

Only those who meet the age, income and housing criteria for the Workfare Bonus but do not have CPF contributions and have not received a tax return, they are the ones who should fill in a Workfare Bonus scheme income declaration form by 1st April. It is a serious declaration. It is an IRAS form. There are serious consequences if it is not properly filled. Please declare honestly what you have earned and we will work on that basis.

I also welcome Mr Chew Heng Ching's and Mdm Ho Geok Choo's suggestions that better-off Singaporeans may want to donate their Progress Package to others because they may not need the money. They can do so. We have arranged for this. When they sign up online, they can donate to a list of available charities.

So, the first thing is - do not worry, the administration is simple. Second, the conditions are simple and fair. Mr Ang Mong Seng, Dr Teo Ho Pin, Dr Warren Lee and some members of the public have asked why we have not used property ownership instead of place of residence for the Growth Dividends and CPF top ups, because you could be living in your parents' or relatives' home. I agree that the proxy of the residential address is not quite perfect, but generally speaking, those people living in higher-value homes will have more resources to call on even if they do not own the place they live in. If we tried to determine the person's exact wealth or the wealth of the household per capita, it will be complex and intrusive, and I think Singaporeans will resent that. If there is some inequity, or maybe a few people benefit more than they needed to, we have to take the rough with the smooth.

The Workfare Bonus has the condition that one must work at least six continuous months in each year to qualify for the Workfare Bonus. Many MPs, including Mdm Halimah, have asked us to clarify this because sometimes a person may be unemployed for a short time, between jobs or some other reason, in spite of him making the effort to stay continuously employed. Over the past week, we have also heard from some low-wage Singaporeans. So, we have reviewed this and decided to be flexible. We will allow exceptions for those who have worked for at least half a year to also qualify for the bonus, even if their employment period had a break in it. Let me also clarify that it does not matter if you switch from full-time to part-time or contract work. What we ask for is that you work for six months - effort from individuals to work regularly and to help yourselves.

There will be other unique circumstances which we have not anticipated, but it is not possible to have rules that cater to all of these. Otherwise, it will be a whole book. So, those with genuine cases can appeal to the grassroots advisers who will take up the matter with the CPF Board. We will continue to work through the mass media to inform all Singaporeans about the Progress Package, but we will pay special attention to those who need additional help to sign up. We will enlist the help of grassroots leaders to reach out to residents staying in one and two-room flats. We will also be working with the welfare and nursing homes, community hospitals and even prisons to help the residents get the Progress Package.

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Our approach is working: _

Mr Speaker, Sir, I believe that overall, our approach of targeting help at the most needy and those willing to help themselves is working. People who are in genuine need have benefited and have got useful help.

Under the Job Re-creation Programme, which is spearheaded by NTUC and WDA, the tripartite partners from 13 sectors have come together to re-create jobs and retrain job seekers. Last Friday, I went to DXO. It is a disco, but there was no music. This was just a Job Re-creation Programme Awards Night. Mr Lim Swee Say invited me. I gave awards, among other things, to 15 JRP participants, workers, and I spoke to them all after that. I was very impressed and moved by their commitment. One of them is Mr Arumugam s/o Ramalingam. He is 45. He had a business failure back in 1997, and he was declared bankrupt. He worked for a cleaning company for five years - he got retrenched in May 2004. But he did not lose hope. He did not give up. He took up a National Skills Recognition Scheme course in landscape maintenance. He became a landscaping technician. Starting pay, $1,150 just February last year. He did well. After four months, he got a raise to $1,300 and last December he was promoted to supervisory position. Now, he earns $1,500 a month and oversees the work of a four-man team at Marina City Park. So it is a small programme to assist the person, but it has helped him to make good in his life. The other recipients all had stories to tell and were proud of themselves, and I think that is the way we should help people. It shows us that as long as we believe in our workers, and people believe in themselves, it is possible for them to move up the job ladder, earn higher salaries, and live better lives.

With the Progress Package, we will provide much needed help for the lower-income. So after I announced the Budget, the newspapers went and looked for specific cases to see how it affected people's lives. Shin Min Daily reported one odd job worker, Huang Qichang, who lives in a three-room flat with his wife and two daughters. The family will get Growth Dividends ($800 each husband and wife), Workfare Bonus for him ($600), NSmen's bonus for him (he had two daughters, so only for him, $400), U-Save rebate because three-room flat ($100); adds up to $2,700. He told the papers that he will use the money to pay off his outstanding bills. His daughters currently have to go to their classmates' houses to use computers to do their school assignments, so with money from the Progress Package, he is going to buy a study table and a new computer for his daughters.

And there was another example in Lianhe Zaobao , a 32-year-old lady, Wang Suyan and her family. She earns $300-$400. She just works part-time as a coffee shop assistant. Husband is a factory technician, monthly income less than $1,500. So when asked how she would use her family's share of the Progress Package, she said she would save the money for the education of her two young children, aged five and six, as the road ahead is still long for them. So, not everybody is buying 4D. These are the stories which give you heart and hope, and convince me that we are doing the right thing for Singaporeans.

Ultimately, we can only help Singaporeans if we can continue to grow the economy. Therefore this Budget also focuses on attracting investments to grow the economy, and to create jobs. The incentives and the measures we have put in place in this Budget and in previous years are beginning to bear fruit. We have seen good growth in a wide range of areas and let me just cite you a few.

In transport engineering, we have become the largest and most comprehensive centre in Asia for the provision of aerospace maintenance, repair and overhaul services (MRO) - that means aeroplane engines being serviced and overhauled in Singapore. Our shipyards build 70% of the world's oil rigs and platforms and their order books are full for the next five years. We are competitive.

In retail trade, wholesale and retail trade has been growing double digits in the last three years. I know HDB shops are still having some difficulty and MND has been helping to tackle some of their problems, but overall, the retail sales have been doing well and even provision and sundry shops in 2005 did better - went up by 8.6% compared to 2004.

In financial services and wealth management, we have had double-digit growth over the past five years - assets under management reaching $570 billion by end 2004. Each time I meet them, I ask them how well are you doing? They say "Sshhh", do not tell anybody, but they are doing alright.

And so jobs have been created - 111,000 last year. If you look at university graduates, last year 92% got employed within six months of final examinations. Polytechnic students - 91% found jobs within six months of final examinations.

So overall, I am confident we are on the right path. Our strategy of competitiveness and cohesion is the right approach for taking us into the future.

Mr Speaker, Sir, recently Ministry of Finance and SMU organised a forum: "If you were the Finance "Minister", where students developed and debated their own budget statements. We should practise this with MPs as well. The budget plan that was voted the most appropriate was entitled: "Staying Ahead, Staying Together". That is exactly what this budget is about.

I did not read the plan. Perhaps my staff may have borrowed some ideas from it, but that is what this Budget is about:

(a) Staying ahead - building a vibrant economy where there is prosperity for the nation and good jobs for all.

(b) Staying together - forging an inclusive society, where every citizen benefits from the country's progress.

Prof. Koo Tsai Kee is correct when he says this is a landmark year of profound change. While sharing the fruits of growth is something which the Government has periodically done, this Budget is different because it recognises that the world has changed and growth will no longer deliver the same opportunities to every individual. So going forward, we will work systematically to ensure that no Singaporean is left behind as we forge ahead. This Budget lays a foundation for a strong and prosperous Singapore. It offers a better life for all Singaporeans and that is our shared responsibility:

(a) Courage and commitment from every citizen - adapting, upgrading, and seizing new opportunities.

(b) Strong and competent leadership from the Government - focused on the long-term, in touch with the people and their needs.

Mr Ong Kian Min said some Singaporeans think Singapore has reached its peak and it is just downhill. I believe they are completely mistaken. We have scaled the peak of one mountain, actually we are not at the peak, we are on one mountain, and we are climbing up. We see a whole mountain range opening up in front of us. There is a whole range of possibilities ahead. We can choose which one to go to. We still have to climb, it will still require great effort, but with the skills and the strengths we have acquired climbing the first mountain, we are stronger and better placed to conquer the next higher peak and then the next.

So let us work to make Singapore our best home and together build a brighter future for all. [ Applause .]

Mr Low Thia Khiang (Hougang): A clarification, Sir.

Mr Speaker: A short one. No speeches, please.

Mr Low Thia Khiang: Sir, the Prime Minister has referred to the Workers' Party's manifesto. I happen to have a copy here. On unemployment insurance, I would like to clarify the reason why we contemplated and decided to propose this unemployment insurance. It is because of the experience of the financial crisis. Yes, we have retrenchment benefits, but when the company closed down, the workers get nothing. Bearing in mind that there are a lot of workers who are not unionised, they are just retrenched and left with nothing. They can be drawing a few thousand dollars or a few hundred dollars but, suddenly, when they are retrenched, they must be left with nothing because the company just went bust. How do they cope with life with the sudden drastic change in income? The current situation that we have, in terms of securing some kind of payment, when a person is retrenched, is not satisfactory.

The Leader of the House (Mr Wong Kan Seng): That is not a point of clarification. It looks like Mr Low is making another speech.

Mr Lee Hsien Loong: He should have said this in the debate, not now.

Mr Low Thia Khiang: I am clarifying. He is saying that unemployment insurance is something ---

Mr Speaker: But you are taking the opportunity to make a long speech, Mr Low.

Mr Low Thia Khiang: Okay. I cut it short, Sir.

Mr Speaker: Just clarify. That is all.

Mr Low Thia Khiang: The concern of the Government is whether this is going to be a welfare state. So I clarify that it is not so because we are contemplating unemployment insurance ---

Mr Wong Kan Seng: I do not think Mr Low knows the meaning of clarification. After the PM has made his round-up speech, he is to seek clarification from the Prime Minister and not to say something in clarification of what he had wanted to say or had said but said wrongly or was misunderstood. That is the meaning of clarification. I think he better understand this carefully. If he wants to have a debate on the Workers' Party manifesto, that is a different matter. It is not a clarification.

Mr Low Thia Khiang: May I understand that I can only seek clarification of what the PM has said. Okay, never mind, Sir. I leave the matter. I do want to clarify some points made by the Prime Minister. First, on unconditional needs-based welfare scheme, he said it would bankrupt the Government. He criticised the Workers' Party for saying that the Government should provide unconditional needs-based help. I would like to seek clarification from the Prime Minister as to what form of help that is going to be. If it is not going to be unconditional needs-based, is it going to be adhoc or depending on budget surplus? What happens if there is no budget surplus? The people who need help will perhaps have to fend for themselves. I hope he would clarify that point.

The second point is on fiscal prudence. First of all, I wish to thank the Finance Minister for his detailed explanation as to how the Budget is funded. I noted the funding is actually quite thin in the sense that you do not have very much left. Practically, this Government is spending almost everything it has accumulated within the term of government.

Is he spending too much and having it too thin in terms of the margin that has to be contributed to the national reserves?

Sir, the fact that the Prime Minister has to explain in detail here how the budget is funded shows that we do not need an Elected President. What we need is a robust parliamentary democracy and sufficient number of Opposition Members in Parliament.

Mr Speaker: Mr Low, there you go again.

Mr Low Thia Khiang: It is purely for clarification, Sir.

Mr Speaker: Please take your seat.

Mr Steve Chia Kiah Hong: I want to thank the Prime Minister for his comprehensive reply. Can I clarify with him about his comments on the funding of the Budget. Which chapter and clause in the Singapore Constitution states that all land sale proceeds go immediately into the national reserves and should not be reflected in the operating budget? I think it is the Government's choice of accounting practice and not a constitutional requirement. Can the Prime Minister clarify on this?

Mr Lee Hsien Loong: Mr Speaker, Sir, first of all, Mr Low Thia Khiang asks: unconditional needs-based versus what? It is versus what we have been doing, where we have many helping hands. We have ComCare, S&C, U-Save and Progress Package. We have many schemes to address problems according to their needs. But unconditional needs-based, that you will all be entitled, do not be afraid to put your hand out. This is something which should have been debated during the debate, when he made his speech, instead of scoring political points. Then we can discuss whether it is wise or unwise, how he raises it. Well, there will be further opportunities for him to do so, I assure him, before the General Election.

As for funding being thin, let me tell Mr Low that every self-respecting Finance Minister has more than one bottom card and I have not shown him all of my cards yet.

On Mr Steve Chia's land sale, this is the principle in the White Paper which is settled between the Government and the President, and it has been tabled. It is not an arbitrary arrangement. Land is a form of asset. So when you transform one asset into another, you are not earning something, you are just changing from land to the equivalent amount of money. The money can come back and become land. So land is locked up, therefore, the money is locked up. This is a straightforward matter. There is no monkey business or anything strange about it.

Question put, and agreed to.

Resolved,

That Parliament approves the financial policy of the Government for the financial year 1st April, 2006 to 31st March, 2007.

Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 3.00 pm.

Sitting accordingly suspended

at 2.48 pm until 3.00 pm.

Sitting resumed at 3.00 pm

[Mr Speaker in the Chair]