Augustine H.H. Tan
Singapore
“There are instances when reserves should be used, but the govern- ment has to make a case to the President and if good arguments are used, the President is expected to concur. I therefore end by asking you, as you have done in your speeches, to support this Bill with a very loud "Aye" when it comes to the vote. [Applause].”
“We must have confidence that in the end, as Singaporeans, we know what is overall best for ourselves. We are a community of free citizens committed to making Singapore a great city to live in and for foreigners to come visit and admire.”
“There is such a thing as initiative. Who initiated the project? What was the objective of the project? And there is such a thing as economies of scale, the benefits of which are passed on to the taxi drivers. Let us not forget those elements. An hon. Member: They do not pay tax on their income.”
“They can still enjoy the seafood regardless of the indigestion. They can do the shopping and do other things in Johor Baru. I believe that what is important for us is that we do not preclude ourselves the option of setting our own national policies.”
“Mr Speaker, Sir, the Minister stated that it is undesirable to employ foreigners to run child care centres because they affect the values of our children. Is it not also true that by having foreign maids in our homes that they too directly impact upon the values of our children?”
“It was a point which I brought out much earlier when a similar matter was debated here in Parliament. Because the government could borrow on the basis of the reserves even though the President has one key to the reserves because there is such a thing as credit-worthiness of the country.”
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“Mr Deputy Speaker, Sir, I also rise to support this Bill and to add my compliments to those expressed by my fellow MPs. This Bill is a difficult one to steer through the Select Committee, as there were many representations and many provisions. I also join my colleague from Geylang Serai in welcoming the amendments introduced to clause 59 which protects workers' interest. I want to take up a number of issues concerning clause 22 which refers to section 149. In the first place I welcomethe amendment which is much needed, as it will certainly help to encourage the development of entrepreneurship in Singapore. The earlier version was very restrictive and would have scared off many people from taking responsibility for companies. But I would like to make some specific suggestions, if I may. On page 46 of the Report, sub-paragraphs (b)(i) to (iv) are conditions which, if violated by directors will lead to their removal as directors. I think we need to add two more sub-paragraphs. '(v) if a director is involved in defrauding creditors knowingly by allowing the company to trade while it is insolvent.' Sir, there are many cases where the directors of a company know the financial situation of the company but yet they carry on the business using up whatever credit is extended to them knowingly. It is a clear case of fraud and should be included in that sub-paragraph. A sixth sub-paragraph should be added there: '(iv) if a director is involved in defrauding creditors knowingly by transferring assets through inter-company transactions while the company is insolvent.' There have been many cases, again, of company directors who attempt to do this to defraud creditors. Then on page 47, subsection (11). There are two exclusions there.”
“Point of clarification. First, he did not answer one question on the issue of Government stock and bearer bonds which require scrips. Why not do without the scrips. Secondly, it is of material concern where the money is invested by the Finance Minister. If it is invested locally, the money gets channelled back into the system; if it is invested abroad, it is a leakage out of the system, and the quality of stocks obviously would be important.”
“Why do we need to continue issuing stock and bearer bonds that bear the signature of the Minister, that is, actual scrips when we are moving towards the book-entry system on government securities and earlier on in terms of Treasury Bills? Why do we not dispense with the scrips altogether and rely upon the book-entry system? My final comment has to do with page 8, sub-clause (3) of clause 17, which says: 'The Minister may at any time apply all or any part of the moneys in the sinking fund created under this section to the purchase of trustee stock or local stock or of any other stock, fund, security or investment mentioned in section 7 (3) of the Financial Procedure Act.' This seems to be a very liberal provision and I wonder whether some constraints or some safeguards should not be built into this particular clause. Trustee stocks are fine because these are deemed to be relatively safe. But it says "local stock", and presumably penny stocks or second-tier market or Sesdaq tax stock would count. "Or any other stock or fund", that means from any other stock market in the world including Timbuktu, if there is one. Whereas I recognize that usually the people who manage our funds are very responsible people, but one never knows what happens in the future. So when one enacts legislation, it will be wise to put in the appropriate safeguards. Sir, I support this Bill.”
“Mr Deputy Speaker, Sir, hon. Members should welcome this Bill as another step in the development of our capital market here in Singapore. The loans which the Government raises each year go partly to finance development expenditure and partly to augment our reserves abroad. It is the latter feature, the second feature, that causes us some problems on the liquidity front. The move towards the issue of floating rate bonds and shorter maturity bonds will help the liquidity problem but will not eliminate it altogether, unless we get to the stage where Treasury Bills of three months' duration or so are issued, because such bills are acceptable by MAS as part of the bank's liquidity ratio, the assets that count as liquidity ratio. But I do not know whether the five-year maturity bonds and the floating rate bonds of longer maturity will count in this direction. If it does not, then the liquidity problems will still persist. What happens now is that when Government raises a loan from the private sector, whether it be CPF or whatever, funds are transferred from private holders to MAS ultimately, and that causes a contraction of the local money market which, in turn, would attract funds from abroad causing our Singapore dollar to appreciate in value. It is then that the intervention by the MAS in buying up the foreign currency that comes in releases back some of the liquidity into the system. If MAS does not do the intervention correctly, then there would be a shortage of liquidity. If it overdoes it, there will be an excess of liquidity. But I believe that if the shorter term Treasury Bills are eventually issued, this would alleviate somewhat this problem. Another observation I have relates to the issue of stock, bearer bonds and book-entry Government securities.”
“Mr Deputy Speaker, Sir, the Singapore Council of Social Services will be glad to receive the remuneration that will be due to the Member and I gladly accept on behalf of the Council.”
“Mr Deputy Speaker, Sir, I did not get the response to my question. I would like an explicit commitment on the part of the Member for Potong Pasir that he will refuse any remuneration for his work before this Commission. And I would like to make an additional suggestion to him, that since he represents the Singapore Democratic Party, perhaps his Party can bear the expenses for the entire Commission.”
“Mr Deputy Speaker, Sir, if I may join in the debate here. Sir, as I understand the issue, the question of the Commission of Inquiry did not arise from any Member of the Government; but as a result of the suggestion or the proposal by the Member for Potong Pasir, we now have this Commission of Inquiry. And as I understand it, it is going to take time, it is going to involve a lot of people, so a lot of public money is going to be involved in the process. I was glad to hear that the Member for Potong Pasir is indifferent whether he is going to be paid or not. Sir, we all recognize that, as Members of Parliament elected by the people to represent the interests of the people, we ought to give of ourselves to the public. We are paid an allowance for that purpose and, therefore, if we choose to raise matters concerning public interest, there is no reason why we should expect additional payment. What I would like is an undertaking from the Member for Potong Pasir that he will gladly give his services free. In other words, even if the money is offered to him for his time and services, he will refrain from taking it.”
“We are prepared to pay $20,000 and more for a third child. Why cannot we do something to induce those women who are already pregnant and are aborting or who are planning to abort? Again, I read a while ago that the Ministry has introduced counselling, which is a good thing, counselling for women who wish to abort their babies, and a film was prepared for this. But under pressure from the doctors and nurses who are profiting from the abortions, the film was withdrawn. First of all, it is bad for Government or any Government Minister or Ministry to withdraw anything under pressure. Secondly, if the film is deemed to be educational and necessary, then you should persist in showing it, not only to those women but to the public at large and to the MPs here so that maybe they realize the horror of abortion and would be prepared to support a Bill to restrict it.”
“Sir, recently the Acting Minister for Health announced increased fees for various hospital services. I am not here to question the right of the Government or the necessity to raise various fees and charges in order to make sure that the Government budget does not get out of line. But I do have a few questions for him in regard to whether or not his Ministry has been looking at the question of productivity and costs. In the last few years, we have been upgrading standards of health facilities here in Singapore, especially rebuilding of Singapore General Hospital at tremendous cost. In the process of upgrading and modernization and the use of expensive equipment, costs tend to run up, sometimes beyond original estimates and the cost of maintaining the equipment and the facilities that we have established can be quite exorbitant. Is he taking the necessary measures in this regard? Another question is: are we not trying to raise our standard of health care too high, as a result pricing it beyond the reach of the lower-income group? I am rather concerned about this because I believe the Government should maintain certain minimum standards of health for people at affordable prices. What I am afraid is, with the availability of Medisave and now extended to one's next-of-kin or near-kin quite freely, there may be unnecessary tests, unnecessary services performed on patients, which use up the Medisave funds which ought to be saved for some other purposes. Another issue that I would like to raise with the Minister is with regard to abortion. Sir, we know that we are short of some 15,000-16,000 babies a year to replace our population but we are aborting 24,000 or more each year. These are the ones which are reported. Can we not do something to restrict the number?”
“I thank the Hon. Minister for his confidence in NUS economists. Perhaps if his predecessor or predecessors had the same confidence, we might have avoided the recession. With that, I beg leave to withdraw my amendment. Amendment, by leave, withdrawn.”
“Ironically, those companies that may have the collateral end up as colossal failures. We have no lack of examples - Pan-El and other companies that have failed. In other words, banks tend to look at balance sheets rather than to evaluate the character, the personalities of the people coming forward to apply for these loans. At the broader level, Sir, I believe we need a very careful investigation of the whole savings, investment, intermediation process. In other words, to study the flow of funds in our economy. Britain has done it. I think there have been two studies. One, the Radcliff Report, and later the Wilson Report. I believe Australia has undertaken such a study too, recently. We need such a study to see how savings get into the hands of investors ultimately. And if there are impediments in the process, then these impediments should be removed. There have been no lack of investments in the property market; no lack of investments in financial markets. But we are lacking in investments, in manufacturing, in a lot of service areas that would do Singapore a lot of good.”
“It is the fear of failure, the fear of being scolded. It is risk aversion, an attitude of risk aversion. We know the scions or the sons and daughters of many traders and entrepreneurs have now secured jobs in the professions and have become executives and managers. They prefer to do this rather than to become entrepreneurs. What can we do to overcome this? The Economic Committee Report had a good analysis of the problems and it was stated there that we should, through the educational process, inculcate a more creative spirit. I hope our independent schools that are going to be set up will be helpful in this regard. But then there may be laws and regulations that we have that may need adjustment. So that is one part of the problem of promoting local entrepreneurship. The other part has to do with access to capital. The question is whether we have enough venture capital. I believe it was in 1985 that about $100 million was set aside under the EDB for venture capital. I understand from the Annual Report of EDB that very little actually has been spent. Is EDB the appropriate vehicle, the appropriate institution, to provide this venture capital? Should we not think in terms of a wider network? The problem is this, Sir, that when one goes to a bank for a loan for business or for anything else, one has to produce collateral. If one does not have the collateral, then very small amounts of loan are available on a personal basis, on the basis of your signature, and looking into the background, what kind of job you are doing. This inhibits a lot of businesses from expanding. They may be good entrepreneurs with good ideas, good projects, but they have great difficulty in finding funds for expansion or even for launching their business.”
“How can we have greater regional cooperation if our bilateral trade relations are so poor? I come now to another issue that has to do with promoting the private sector in Singapore as an engine of growth. Sir, we all know that since 1960, our economy has been driven by two economic engines: (1) The influx of multi-national corporations coming into Singapore bringing in capital, technology, access to markets, skills and so on; and (2) The public sector itself responding to this or in anticipation of the new investments by providing the infrastructure and, of course, our huge public housing programme. Both of these have spawned a number of other activities in transport, communications, information services and so on and so forth. But we are now at the stage where both of these engines are stalling or are not working as well as they used to. We know, for example, that the net investment commitments in manufacturing have been falling. And public spending on infrastructure and housing is declining and is expected to decline in the years ahead. Our fixed capital formation figures have also been declining in the last two or three years. So we need to have an alternative engine of growth. That means the promotion of services and the stimulation of local enterpreneurship, local enterprises, upgrading them, encouraging them. Government has taken the lead in these two areas. My question to the Minister is: from his monitoring of developments in these areas, is he satisfied and what other measures are necessary? Quite recently, General Winston Choo in speaking to the SAF mentioned that a number of soldiers or many soldiers have this kia su spirit. And I believe that this spirit has also infected a lot of other Singaporeans as well, particularly businessmen.”
“Mr Chairman, Sir, I beg to move, That the sum to be allocated for Head V be reduced by $10 in respect of Subhead VA-01-1100 of the Main Estimates*. In moving this amendment, my committee Members and I are concerned with a number of issues relating to trade and industry. I will mention some of them and my Members will speak on the rest. The first issue concerns our bilateral trade relations with different countries. As we all know, we are faced with increasing protectionism today. Last year, we had the case of our exports of tropical fish to the United States banned or restricted for a while. And, from time to time, various items of trade are subjected to scrutiny of various kinds on all kinds of pretexts. This happens not merely in the advanced countries but this happens in developing countries as well. But paradoxically or ironically, within the region of ASEAN, there have been recent moves towards greater economic cooperation or economic integration and there have been no lack of suggestions in this area. At the same time, we have been subjected to harassment, subjected to a lot of non-tariff barriers from various countries in the region. Hon. Members are aware of the existence of exit taxes imposed by some countries in the region. There was a threat to end our airline agreement with Malaysia. Last year, I believe, you, Sir, raised the question of milk powder and water jugs as problems that we have with Malaysia. I believe the water jug problem is still outstanding. And there have also been a number of restrictions on electrical goods which are brought back to Malaysia from Singapore. I understand the list is going to be extended very shortly. What is our Government doing about these measures which have been instituted against us?”
“Inland Revenue Department (5) That the sum to be allocated for Head N be reduced by $10 in respect of Subhead NN-01-1210 of the Main Estimates. That the sum of $169,395,000 for Head N ordered to stand part of the Main Estimates. That the sum of $852,092,300 for Head N ordered to stand part of the Development Estimates. Head R -”
“Mr Chairman, Sir, I thank the Hon. Minister for his reply. And my Committee and I fully intend to continue to debate privately. With that, I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.”
“And how we are going to fit in to this scenario of growing protectionism is something we have to face. We might have to study the case of South Korea and Taiwan and maybe introduce some form of constraints on capital movements so as to allow us the extra degree of freedom in manipulating our exchange rate, to ensure the competitiveness of our exports. As I mentioned earlier, you cannot cut your cost by 4% and allow your exchange rate to appreciate by 4%, you are vitiating the whole process.”
“Mr Chairman, Sir, I thank the Hon. Minister for his kind answers. In one of his comments he raised something quite interesting, and that is, the problem of determination of exchange rate policy in our context. He said that essentially the exchange rate is determined by the real economy. I think there is more to it than that. There is a real part of the economy, there is a financial part. I think the problem for us, as for other countries, is that financial flows are now so overwhelming that they dominate exchange rate markets such that the exchange rates which are eventually set work to the detriment of the real economy. So it may have comparative advantage in production of certain goods where the exchange rate moves in such a way that it becomes uncompetitive. I think that is the nub of the problem. If one looks at the economic history of the world since 1948, one can see a very interesting development. Initially the world economy started off with a lot of capital constraints, exchange controls, and so on. But trade was gradually being liberalized. During that era until 1973, exchange rates were, by and large, fixed under the Bretton Woods system. The reason why they could be fixed was that the world economy was doing well. There was sufficient growth in the world economy; but more fundamentally, because there were capital controls in place. But as the capital controls were eroding, countries in the world had no choice but to float their currencies. And now there is a dilemma. As the capital markets become more liberalized and more integrated, you have a paradoxical situation of a return to trade protectionism because there is no way to control or to ensure competitiveness of exports vis-a-vis other countries. I think that is the root of the problem.”
“Why not? Dr Tan Cheng Bock: I suppose he was shy. Because being the past Minister for Trade and Industry and having presented Budgets, I think he was not too keen to tax too much on the Minister for Finance. I wonder if the Minister would also consider giving more grants to the Institute of Education because, if he remembers, the Minister for Education also indicated that in order to implement single session schools he needs more principals and he needs more teachers. So I do hope that the Minister for Finance will share his vision and make another grant to the Institute of Education so that they can train more teachers to implement the single session school project. Sir, the last amendment I moved was actually a very small one, but it got hijacked by the Member for Queenstown and it turned out to be a free-for-all discussion on Chinese education. But you were wise and I must congratulate you. You did not stop the whole discussion.”
“This is of some concern to me because the cost cutting measures which we painfully went through - the CPF cut and cuts in other areas - have succeeded in reducing the overall production cost of our manufacturers and others in the economy by something like 4%. So if our currency has appreciated vis-a-vis the US dollar by 4%, then it would appear that the effects of the cost cutting were vitiated in the process. I do realize that we export to Europe and to Japan in addition to the US. But Members would want to take note of the fact that so much of our trade as with international trade is denominated in US dollars. In other words, what we order from abroad is denominated in US dollars. What we sell abroad even though it is to Europe is also denominated in US dollars. So it does affect the profit margins of the firms concerned. Perhaps the Hon. Minister can enlighten us on his position in this regard.”
“But other nations like the Asian NICs, including Singapore, have had to adjust their exchange rates in the process. Two issues arise from this process. One is that the United States since last year have been pressing the Asian NICs to revalue their currencies. That means to up value their currencies in order to cut their trade surpluses vis-a-vis the United States. And among the countries mentioned was Singapore. What is the Singapore Government's response to this? Secondly, our problem as with other countries is how to set our exchange rate policy in order to minimize imported inflation on the one hand and to maximize our export competitiveness. This is an area which we probably need to pay closer attention. Last year, as hon. Members who read the Economic Survey will note, we had negative inflation. The cost of living index went down 1.4%. The GDP deflator was minus 1.9%. The deflator of expenditure on GDP was minus 3.7% and the domestic price index went down minus 15.1%. I understand these indices take into account the oil prices as well, which we all know went down. But was there something more than that? In other words, did our exchange rate have something to do with it? Was the Singapore dollar over valued rather than under-valued, as the Americans are trying to persuade us that it is? And if it is really over valued, then we have unnecessarily penalized our exports. As I look at the figures on exchange rates, Sir, we find that the Singapore dollar in September 1985 was worth S$2.2 to the US dollar but today it is probably S$2.14, ie, an 8-cent appreciation, roughly 4% appreciation of our currency vis-a-vis the US dollar.”
“Mr Chairman, Sir, I beg to move, That the sum to be allocated for Head N be reduced by $10 in respect of Subhead NA-01-1100 of the Main Estimates*. In moving this amendment, I have a number of issues to bring to the attention of the Minister for Finance. The first one has to do with our role as a financial centre. We know that we have done very well with the various tax incentives over the years and we have developed as a financial centre of some note and importance. But in recent years, other financial centres have emerged. Australia has developed its own offshore system. And lately Tokyo has emerged as a major financial centre because of the strength of the Japanese Yen, the sheer size of the Japanese economy and its attempt at financial deregulation. The question that surely must occur to us is: how does it affect our future as a financial centre? Are we nimble enough to do the adjustments? How are we adjusting to the new situation to ensure that there will always be some room for us in the financial area? The second issue that I want to take up with the Minister has to do with exchange rates. Sir, we are witnessing today a replay of many of the things which happened in the years immediately preceding the last Great Depression. One of the things which was happening then was protectionism through competitive devaluation, when one nation devalued its currency and other nations did so in order to protect their own trading positions. We all know that in September 1985, the United States through the G5 meeting, the group of five most industrialized nations, met together and agreed to allow the US to force the value of the US dollar down vis-a-vis the Yen and the European currencies.”
“It was not long ago that the Minister told us in this House that he was taking action to remove all the hawkers in Bugis Street because of both physical and spiritual pollution. At least he agreed with me there was spiritual pollution as well. Now we read in the newspapers, Sir, that the Tourist Promotion Board is trying to revive Bugis Street. May I ask whether he is taking care to see that both types of pollution will not recur in the new Bugis Street?”
“Mr Chairman, Sir, first of all I would like to add to the comments about hawkers and hawking raised by the Member for Changkat. First, I think most people imagine that when somebody applies for a hawker licence, the person is qualified to be a hawker in a particular trade. And very often it turns out not to be the case. The person may want to have a cooked food stall of a particular type but if the food which is served does not meet the standards of the people who come to eat, that person will lose his business in the course of time or very, very quickly. So may I ask whether the Ministry of the Environment would consider an educational programme, a trade course if you like, for would-be hawkers or even hawkers presently holding licences so that they can be upgraded or they can be taught the requisite skills in whatever trade they wish to pursue? In connection with this too, perhaps courses on hygiene could be given to the hawkers as well so as to upgrade the standards of hygiene in our hawker centres. With regard to the use of disposable utensils, I have tried it out at some of the hawker centres. I do not like it and I have seen cases where the contents are disposed of upon the lap rather than ingested the regular way. So I would urge the Minister to re-consider extending the use of disposable utensils. I have a couple of other queries. One is with regard to Sungei Whampoa. The Ministry has done a good job cleaning up Singapore River but there are other waterways that are also important, particularly Sungei Whampoa. Is he going to clean it up quickly? Then I have a question concerning Bugis Street.”
“Mr Chairman, Sir, education is a good thing and a necessary thing. But education has not prevented people from going to jail, committing suicides and a lot of things which they are not supposed to do. Control of drugs is one thing but it has never prevented people from getting hold of drugs or using them in ways which are not permitted. My question is, and it must be the concern of this House, whether his inspectors are actually examining the meat which is produced so as to make sure that whatever is residual by way of antibiotics and hormones is tolerable or safe for human ingestion. He must have read, as I have read, some years ago of a shop assistant or a son of a chicken rice seller who developed certain female tendency characteristics not desirable in males because he was ingesting hormone which had been injected into the chicken.”
“Mr Chairman, Sir, to get away from birds and back to animals and antibiotics, I am reassured by the Minister of State that his Department is monitoring the mix of antibiotics in the food which is fed to the animals. But should he not also be concerned with checking the meat which is actually produced, because antibiotics and hormones can be administered to animals in addition to what is put inside the feed mixes which are fed to the animals? One further question is: would he read the article that I alluded to earlier, because it is rather important?”
“Sir, I would like to draw the attention of the Minister to an article in the recent issue of the Economist. This article drew attention to the dangers of an excessive use of antibiotics and hormones in the rearing of animals in America and other advanced countries, as a result of which new types of bacteria and viruses which are resistant to antibiotics and other drugs have been produced, thereby posing a danger to human beings who ingested the meat. Do we face a similar problem here in Singapore (a) because of such excessive use of antibiotics and hormones by our farmers; and (b), in terms of what is actually being fed to the animals whose meat we are importing from other countries? Furthermore, since we are going to be more dependent upon imports of pork and live pigs from neighbouring countries, is the Ministry looking at the conditions under which such animals are being reared in nearby countries to ensure that the meat that we consume is actually fit for human consumption?”
“Was it because the terms of reference were rather too broad so that there were problems in interpretation of the specific details that were required by the Ministry? I raised this question because tenders can be faulted on the basis of technical specifications or mis-specifications, and if one wanted to do things out of the ordinary one could use this as an excuse for getting the tenders rejected. Mr Dhanabalan: I would suggest that the Member waits until we process the new tenders before coming to any conclusion as to whether a particular excuse was used to reject a tender.”
“Could not the designs have been submitted through separate tenders in the first place and then having chosen an appropriate design a tender exercise for the actual construction could have been done?”
“On a point of clarification, Sir. The question that some people have raised about this project is why did not the Ministry's engineers design the whole expressway and then let it out for tender instead of inviting by designs and tenders?”
“Point of clarification, Mr Speaker, Sir. Sir, I was not against our public housing programme. In fact, I commended it. It has done a lot of good for Singaporeans. It has brought social political stability and also increased economic efficiency. I merely asked the question: Have we now reached a plateau, a point beyond which to keep on investing more and more in upgrading our quality of housing would not be counter-productive and inefficient? As to the question on materialism, he took it completely out of context. I was merely saying that it was materialism that caused people to have fewer families, which is a fact of life proven over and over again in more advanced societies. I do not see anything wrong with making that point.”
“There are certain problems in life that transcend earthly solutions. At such times, repentance and prayer might be helpful. Another important ingredient that is missing is, I believe, the family ethos that we have here in Singapore, as indeed in all industrial countries and industrializing countries. I mentioned the European case and the same problems are plaguing us: city life, economic pressures, changing ways, the pill, and women's lib. There is a confusion of male and female roles in modern societies. Women do not like to be mothers and wives and home-makers. Women do not even breast feed their babies. Fear of losing their figures as a result, but they prefer disfigurement through breast cancer. There is materialism. When there is concern for a better house, a second car, holidays abroad, which women would like to stay at home and bear more babies? The incentives offered are material incentives. But let us note that it was materialism that led to a reduction in births. Can materialism now work to increase birth rates? Can you imagine five or six years hence when one of these babies procreated this year asks his mother: Did you conceive me out of love or for $20,000? You really needed help from Dr Richard Hu? You mean, Dr Richard Hu actually had to bribe you to have me? We have a problem on our hands, Sir. Unless we can reinforce the ethos about the family, about the role of woman as mother and wife, we need to bring back some of the more traditional values if we are going to succeed in reversing the decline in our population. Sir, I mean to be serious. We are faced with a serious problem because a declining population means increasing burdens on our economy in the years ahead. But how to do it is something that goes beyond material incentives. 12.39 pm”
“It nearly became "Stop at Two Wives" but for the hue and cry over polygamy. Hurray for the women who spoke up, but few were the men. But for a time anyway, the Prime Minister's popularity among the men rose. Let me, Sir, refer to the case of Europe. This is taken from the Economist, 6th September 1986. In an article entitled "Europe. Where did all the people go? Long time ahead." Let me quote: 'Europe is old, not just in its bricks and mortar but in its human joints as well. Its population is older than any other continent's. And though the world's population is growing fast, the population of many European countries is stagnating and in some cases even shrinking.' 'Declining population growth is not peculiar to Europe's western part; Eastern Europe faces a similar problem, despite the efforts of its communist governments to boost birth rates. For many reasons, Europeans are not attending to fertility rites as eagerly as they did in the past. The reasons include city life, economic pressures, changing ways, the pill and women's freedom to choose and to work. For a European country's population to be maintained in the long run, demographers now reckon that every 100 of its women have to bear 210 children: an average of 2.1 each. In none of the large countries of Western Europe except Spain is that score reached.' Sir, we now have a whole array of incentives and programmes in Singapore from procreative subsidies to Medisave to organ transplants. Truly, the Government looks after us from conjugal bed to death bed, till death do us part. But the question is, will the incentives work? There are two missing factors in the Minister's equation. First, is the Almighty willing to bless the nation with intelligent children when so many babies are aborted every year?”
“We need to have more innovative measures so that the private sector can take off. I view with some alarm that last year the investment commitments in manufacturing by local firms and entrepreneurs dropped to 17.6%, amounting to a paltry $253 million. Why is our local private sector not dynamic? Why is it not responding? Should we not have a strategy, a fundamental rethink, about tax rates, about national savings, about the composition of national savings, and have fewer regulations? I come now to the levy scheme for foreign workers. The Minister is proposing that there be a $140 levy per month on Malaysian workers other than construction workers and maids, but he is also reducing the levy from $200 per month for non-traditional workers other than construction to $140. What is the impact of this? First, I believe it will raise the cost to employers of Malaysian workers. Secondly, it will induce a shift from Malaysian workers to non-traditional sources of supply because the non-traditional sources command lower wages. My question to the Minister is, did somebody make a miscalculation? In the days when the employer's contribution to the CPF was 25%, a levy of $140 was appropriate. But we are now at a stage where the employer's contribution is only 10%. So 10% of a wage of $500 is only $50, or on $400 it is only $40. I know that there will be some adjustments in terms of the wage actually paid to such workers. But I think we need to get the employers together to find out what some of these adverse effects might be because we do not want to abort our economic recovery at this stage. I come now to the procreative parts of the Budget - our declining population. Was it due merely to our birth control efforts? We had the "Stop at Two" slogan.”
“What is wrong with it? What is wrong with it is that we are diverting precious national resources away from productive activities into housing. We need a certain minimum standard of comfort and we can thank the Government for having achieved this through the public housing programme. But are we not overdoing it? Should we not call a halt sometimes? Should we not change the incentive schemes or the schemes by which the CPF can be used so liberally? One can buy a house quite easily nowadays using CPF funds. Is this desirable? If you look at the case of Japan, Sir, you see that Japan has consistently been putting much more of their money, much more of their capital into economic activities, into productive activities. They have sacrificed on housing. In fact, the housing conditions are most appalling compared with most other countries in the world. I am not arguing that we should be like Japan. But we are certainly very luxurious and certainly have a lot of room for our people to stay in. And the perversity is, the bigger the flat, the bigger the house, the fewer the people, something which the Minister is trying to correct. At the end of 1986, the total amount of CPF belonging to members outstanding was $29 billion. But the total deposits of non-bank customers of commercial banks was $30.6 billion. In other words, the amount of savings controlled by CPF compared to that by the commercial banks was about equal. Is this desirable in the interest of economic efficiency and productivity? And if we add the outstanding deposits of the Post Office Savings Bank, in January of this year it totalled $10.6 billion, a very substantial amount indeed. Sir, if we want to have the private sector serve as the engine of growth, we need to release more savings to private users.”
“Yes, my colleague from Punggol is prodding me from behind, and saying, "What's wrong with that?" I can tell you that plenty of things are wrong with that.”
“We have been given no information thus far. We should protect the image we have as a shopping centre for tourists where goods are much cheaper than elsewhere. Sir, I come now to another question, and that is of the CPF rates and our national savings. The Minister was reassuring that the CPF rate will be kept where it is for the time being and that even if it is raised in future years that the Government would take care that our competitiveness will not be eroded. Sir, I believe that we need a very careful study of this very important subject. Last year, in spite of the heavy cut in the employer's contribution to CPF, our overall national savings still stood at 41% compared with 42% in the year before. But what is more interesting to me was that for the first time in many years our gross national savings exceeded gross national investment. In Table A 1.1, page 87, of the Survey, last year there was a net outflow of savings of minus $1 billion. In other words, we have reached a stage whereby we are not even able to absorb our own national savings domestically. Hitherto, in the earlier years, we have been relying on foreign savings in addition to our own. A more important question related to savings is this. What is the optimal mix between the public component of savings and the private component of savings? Are we not generating too much savings controlled by the public sector? As I look at the CPF accounts and as I look at the behaviour of Singaporeans in their investments, I find that we are all crazy about housing. You have a 5-room flat, you want to upgrade to an Executive or HUDC flat. You have an HUDC flat, you want to upgrade to private property, from terrace to semi-detached and to bungalows. If you have one house, you want to have another house.”
“Last year, for example, we projected an expenditure of $19.3 billion but we actually spent $16.3 billion, -16%. We projected revenues of $8.6 billion. We actually collected $10.1 billion, +17%. Why then do we need a consumption tax? I recognize we already have some forms of consumption tax. But in the light of budgetary surpluses and in the light of the fact that we are in the process of scaling down public sector construction for housing and also that the need for infrastructure construction facilities is going to be declining, relatively speaking, in the years ahead, should we not think in terms of scaling down the public sector through a tax cut on income and corporate taxes? Another question I have for the Minister, and we can explore this again in the year ahead. The question is: has the public sector in Singapore grown too large for the economy to be efficient? In 1986, using the figures from the Economic Survey, we can see that the Government itself plus the seven major statutory boards accounted for 46% of the GDP and this is not counting the Government-owned companies, related companies and so on, and some of the statutory boards which have been excluded from the figures. Have we grown too large for our own good? I recognize that in the early stage of development, it is necessary for Government to build the infrastructure for economic development to provide the services that are called for for the economy to grow, the training, the education. But once we have provided the basic needs and once we have reached a plateau in terms of housing requirements and infrastructural requirements, should we not actively think of scaling down the public sector? And if we are thinking of a consumption tax, let us be very careful what form it takes.”
“Can the public sector cope with declining construction activities? Can the public sector, not only in terms of its own expenditure but in terms of incentives for private sector expenditure, redirect much of that expenditure on construction into more productive channels? Therein lies the challenge. I come now to another very important question. The Minister in his Budget statement stated that he thought our corporate and income tax rates are competitive with the newly industrializing countries. Are they really so? Is there not room for corporate and income tax cuts? And do we really need a consumption tax? We can review the comparative tax rates of the NICs in Asia. Hong Kong, 18%. Very recently, when their budget was presented, the government there reduced the tax rate from 18 1/2 % to 18%. Why did they do this? Why did they bother even with the 1/2 %? They were trying to make a point that as far as possible, the Hong Kong government would reduce taxes in order to stimulate the private economy. Taiwan, 25%; South Korea, 30%, but we remain at 33%. It is true that Hong Kong can afford 18% because it has no defence expenditure. But why can we not be like Taiwan, 25%? And if one looks at the overall public sector surplus last year, was there not room for further tax cuts last year, not to speak of this year? The question is: will we develop a public sector surplus again? There was a forum conducted by the Straits Times, reported yesterday, and one of the participants raised the question of fiscal marksmanship or rather poor fiscal marksmanship on the part of our budget planners. If one were to examine our figures in past years, Sir, we will see that we always over-estimate expenditures and we under-estimate revenues.”
“Furthermore, does he not realize that such a surplus also tends to make the Singapore dollar too strong and thereby affects the competitiveness of our exports? I shall have more to say during the Committee of Supply. If you look at the figures, Sir, you will see that Government consumption fell by 11% in nominal terms and 5% in real terms, because of the CPF cuts and wage restraint. But public capital formation also fell by 0.6% in nominal terms, although in real terms it grew marginally by 0.8%. What I believe we are seeing, Sir, and I again will come back to this point later, is that the public sector is not able to adjust to new economic realities sufficiently fast. Let me now turn to the distortions caused by the over-building which occurred between 1979 and 1984. These distortions are still causing trouble to our economy. Last year, construction and works still accounted for 54% of total gross domestic fixed capital formation. In 1970, construction and works accounted for only 41%. Even as late as 1980, 42%, but it rose to 63% in 1984. So quite clearly we have allowed construction activities to dominate the economy, at least so far as the investment side is concerned. It should not surprise us therefore that there are traumatic effects when the private sector construction, for example, declined by 47% last year. And what about public sector construction? We are projecting a continuing drop in HDB construction. In the Budget presented to us the other day, there will be a 2% drop in development expenditure for 1987. And furthermore, if one looks at the figures more carefully, the direct development expenditures by Ministries and organs of State are ostensibly increasing but much of it is because of the proposed purchase of land from URA and JTC.”
“And we need to search for and encourage new engines of growth and I shall have more to say very shortly on this. Let me now, Sir, turn to the question of economic recovery. I shall call it the "incomplete recovery", and I have a number of questions for the Minister. We grew at 1.9% last year. My question to him is: why only 1.9%, compared to South Korea, 12.2%; Hong Kong, 10.8%; Taiwan, 6.5%; and even Thailand had 4.3%? The Minister gave two explanations: (1) the decline in construction activities in Singapore; and (2) the slowdown in regional economies caused by low commodity prices which impact upon our tourism, impact upon our financial and business services. It is true that the construction sector continues to pose a problem for us. Last year, it still accounted for 8.5% of the gross domestic product. When it accounts for such a big percentage of the gross domestic product and when expenditure on construction and works declined by 22.2%, you can see that the impact on GDP growth was appreciable. Yes, there was a slowdown in the regional economies. But we were not nimble enough to seek markets for our services and our goods elsewhere. I come now to what I think is another factor which the Minister overlooked, and that is the public sector surplus of $1.4 billion last year. In the previous year, the public sector surplus was $1.6 billion. I am talking about the consolidated accounts of the Government plus the seven major statutory boards as reported in the Economic Survey. Why did we allow such a huge surplus to develop last year? Did the Minister not realize that having a budgetary surplus in a time of recession exacerbates the recession and prevents the economy from recovering?”
“You see them being reduced to very petty reaction vis-a-vis very small countries like Singapore. We have seen the US taking action over our tropical fish. One can name many other examples where minute attention is given to small items of trade and quotas are set for these items of trade. This is certainly a far cry from the 50s, from the 60s and from the 70s. In addition, there are the growing debt problems of developing countries and these threaten to blow up the international monetary system unless preventive measures are taken in time. It is against this kind of international backdrop that we must design our economic policies if we are going to survive, even more if we are going to prosper in the years ahead. We must develop flexibility. If certain markets become closed to us, we must search for newer markets. If certain goods become uncompetitive, we must shift into other goods and services too. The Government is trying to implement wage reform. My Committee and I consider this one of the most important measures that Singapore needs to take, if we are going to make the adjustments that are necessary for our survival. The wage reform will enable companies to adjust their cost of production, without the trauma of unemployment. We give full support to the efforts but at the same time we would urge that full attention be paid to the problems that may arise on the part of workers that may be victimized by employers in the process, and I am sure my colleagues in the NTUC are looking after that. There is a need for greater productivity. You know, after a while the productivity campaign becomes just like any other campaign. But we need to re-emphasize, we need to reiterate the need for it, especially when the labour force is declining in the years ahead.”
“The attempts to finance budget deficit by governments of developed countries usually revolve around two things: (1) printing more money which leads to inflation; and (2) borrowing from other countries which leads to increasing trade deficits. If we examine what is happening to the United States in its economic relations with Japan and other countries in the world, we will see that the basic problem of the US is inadequate savings to finance a huge government deficit which is growing all the time. Under the Carter Administration, the government attempted to finance the deficit by printing money. So the American dollar dropped in value and all countries in the world experienced a bout of severe inflation. When Ronald Reagan took over as President and together with Volcker and the Federal Reserve, money supply was tightened. So America was, in effect, forced to borrow from Japan and other countries. Paradoxically, this led to the rise in the value of the US dollar and a rising trade deficit, which is causing them problems. In September 1985, the US decided to bring down the value of the US dollar in the hope of reducing its huge trade deficit. It did so primarily by printing more money. And that is why stock markets are booming all over the world and the money will spill over into real estate and very shortly into gold, and when gold prices begin to rise, inflation is around the corner. All these spell increasing trade protectionism because there is no way a country can borrow money from abroad without incurring a trade deficit. You cannot have your cake and eat it too at the same time. So we see the pathetic responses of the advanced countries, both the superpowers and the not-so-superpowers.”
“This will mean increasing burdens of old age pensions, security, hospitalization needs, homes for the aged. They also face ageing and inflexible industrial structures which are proving to be unable to cope with rapidly changing technology and with the challenges of cheaper and better imports. There is also a shift away from manufacturing towards services, with a corresponding decline in productivity and difficulty in sustaining the high wages to which they have become accustomed. Many of these countries are also plagued by inadequate savings. A typical American housewife has a dozen credit cards and a typical American family is in debt many times over. So are their corporations. So are their governments. Moreover, because of the demands for government attention and government services they have built up overly large and inefficient public sectors. As a result, their public sectors are burdened with chronic deficits. Then there are certain other shifts at work internationally. Firstly, there is the shift of economic gravity away from the Atlantic towards the Pacific. The technological lead of the US is being increasingly challenged by Japan. And more significantly, the United States has shifted from a net creditor country to a net debtor country in the last two years. All these factors and shifts are proving to be rather traumatic because the countries concerned cannot make the adjustments easily and rapidly enough. What are some of the implications that might spill over in terms of our economy? Firstly, we are in an age of greater exchange rate volatility with all the repercussions in terms of international trade and finance.”
“Mr Speaker, Sir, on behalf of the Government Parliamentary Committee on Finance, Trade and Industry, may I first of all congratulate the Minister for Finance for a Budget that is designed to enable Singapore to weather the difficult conditions ahead as well as to meet our long-term objectives. The Budget bears the traditional hallmark of prudence. In fact, one can argue, as I shall do, that it is more prudent than necessary. But we can be thankful, Sir, that the economic climate and mood in Singapore today is distinctly different from that of one year ago. For that we thank God and the Government. My Committee and I have had the benefit of briefings by the Ministers and officials of Finance, Trade and Industry. We have also met our Resource Panel comprising nine eminent businessmen and industrialists. My colleagues will be touching on other areas but I intend to focus on a few myself. And unless you hear to the contrary from my colleagues, you can take it that they are in full agreement with me. I intend, Sir, to be provocative in my comments on the Budget in the hope of stimulating deeper thought and analyses of the economic problems facing Singapore today. The Minister for Finance rightly reiterated our need to remain internationally competitive. Hon. Members can see the signs for themselves that the international economy is much less benign and will be much less benign in the coming decade. Perhaps it might be useful to look at what is ailing the industrial countries which are and have been providing the main engine of growth for the global economy. Most of the industrial countries are plagued by a number of problems. Firstly, they are suffering from populations which are ageing rapidly.”
“On a point of clarification, Mr Speaker, Sir. In regard to the treatment of capital gains arising from trading in stocks and shares by fund managers in particular, does not the Minister agree with me that if we want to develop a capital market this is a very serious constraint? In other words, if we were to allow all such transactions to be treated on capital gains basis, then our stock exchange, our securities market will be much better developed as a consequence. And I think it will be a small price to pay in that regard. One can make a distinction between financial assets and other goods which are inventories, eg, manufactured goods, and so on and so forth. At the same time, under the CPF investment rules, there is a safeguard there already: you have to register your share and when it is registered you may then sell it, which normally takes six weeks to two months, and I presume there is no tax on the capital gains that may be realized for CPF investment holders. Why could a similar rule not be applied for fund managers and others who hold stocks and shares, provided they go through the process of registering the shares or a suitable time limit of two or three months which would deter unusual turnover such as speculation and so on? This might be beneficial for our economy?”
“Perhaps a more definite ruling by the Income Tax Department may be helpful in this regard because I know of people who got caught in the income tax net as a result of such transactions in the past. As to the provision for tax deductions in respect of gifts-in-kind to the National Museum, I do not recall seeing any limitation or limit placed upon the amount. I wonder also whether any safeguards have been drawn up in respect of the valuation of such donations. In the US, as in other advanced countries where such deductions are allowed, this has proven to be an excellent tax loophole and arbitrary valuations have been made even for Presidential papers of no consequence which have been valued at such a high rate for income tax deduction purposes. Perhaps the Minister could inform this House what safeguards are envisaged, particularly when one comes to value antiques and ceramics and so on. In the first place, there are antiques which are not genuine antiques and valuation can differ from one market to another.”
“Mr Speaker, Sir, some of these tax measures, particularly the income and corporate tax reductions, were introduced in the Budget earlier this year as part of a package of incentives designed to stimulate our economy. The Hon. Minister for Finance together with his colleagues must be very pleased to note the recovery we have had in our economy as a result of these measures. But during the Budget debate, several Members in this House, including myself, questioned the reduction from 40% to 33% in corporate tax rate and marginal income tax rate as to whether this was a sufficient reduction. At that time, the Minister replied that he thought this was sufficient but that a review would be made in the event that other countries, which are competing with us for investments, reduce their tax rates further. We now know that countries like the US have reduced their tax rates or reformed their tax structures. In the light of these changes, is the Minister considering further reductions? Of course, he can only say so in principle. He cannot tell us anything in detail until the next Budget. Another question I have is in regard to the treatment of capital gains. I understand that any sale of property or shares or any assets would not normally attract any tax because we do not have a capital gains tax. But if the Income Tax Department should so rule that the gain is really an income because trading activity is involved, then that capital gain becomes subject to income tax. I think this has dissuaded a number of people and fund managers and so on from engaging in the buying and selling of certain assets, like stocks and shares, and even property.”
“Mr Speaker, Sir, do we have the capacity to ration water to households by installing meters that shut off after X number of gallons per day? BG Lee Hsien Loong: That is an innovative suggestion. I will ask the PUB to look into the matter.”
“If ever fusion becomes a reality, maybe in a generation, well, it is possible that that will give us a cheap, safe source of energy which will give us a desalination capability. As of now, nobody has done it. Hong Kong, some years ago when the People's Republic of China (PRC) threatened to cut off its water supply, built the desalination plant. They have mothballed it because it is just too expensive to operate. I do not think we need any plants to be put in mothballs.”