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 Speaker, Sir, does the Senior Hon. Parliamentary Secretary not agree with me that the principle of the matter is clear enough for anybody to see and that he can commit himself if he wants to?”
“Mr Speaker, Sir, my question is: what does the Hon. Parliamentary Secretary think of my idea? I am not interested in what his officials think. Mr Eugene Yap Giau Cheng: Mr Speaker, Sir, when I get the details of the report from my officers, I will give him my opinion.”
“I do have in mind one hawker centre at Jalan Tenteram in my constituency. But this question is of interest to more than just Jalan Tenteram Hawker Centre.”
“Mr Speaker, Sir, would the Hon. Senior Parliamentary Secretary consider upgrading existing hawker centres so that business can be improved, for example, the addition of suitable car parking facilities? Secondly, Sir, in the event that any hawker centre is to be demolished, an alternative of a more suitable site should be provided, such as a site close by or nearby in order to safeguard the livelihood of the stallholders?”
“Mr Speaker, Sir, of the 922 cases, most of whom rejected the stalls offered to them, to what extent was location a factor? We know very well that certain hawker centres are popular. The applicants too know this very well. And very often the vacant stalls that are offered are those in locations which are very unfavourable for business.”
“And that is another feature in the purchase of Housing Board flats which is absent in private transactions. Many of us would wish in a purchase of private apartments and houses that we could get a loan from any bank for 20-25 years' duration at a fixed rate of interest over that period of time. Can we find such an arrangement privately in the commercial world? The answer clearly must be no. Sir, my third table shows the effect of extending loan repayments from 20 to 25 years. These figures are based upon the press release of the Housing Board last week. Suppose we have a loan amount of $22,400. That is the first line. The second line shows the monthly payment over 20 years before the 15th March announcement. That works out to be $160 per month. The third line shows the monthly payment over 25 years at the reduced interest rate; it should be 5.88%, and that works out to $144 per month. That means, on a monthly basis, there is a saving of $16 per month or $192 per year. Sir, if we assume that this amount of $192 per year is invested at 6% per annum regularly each year over 20 years, the total amount at the end of that time would be $7,063. The extra five years' payment that has to be made by the purchaser at $144 per month would be $8,640 and that liability is incurred 20 years from now, from the 21st year to the 25th year. The shortage to the purchaser at the end of 25 years is only $825. And discounted 25 years to the present, taking the present value, is a much smaller sum of money. Sir, we can see from these three tables that I have given out and my arguments that what the Housing Board has done is to make the repayments of the housing loans very easy indeed and no one should complain.”
“Thirdly, the purchaser can always sell to anybody he likes after five years of occupation. If you refer to my Table 1, Sir, you will see there Future Value of HDB Flats. I have made some hypothetical calculations, assuming different rates of increase of prices or inflation of the value of prices of flats over the years at 2%, 3% and 4%. So under one column you have five years hence and another set 25 years hence. And I have hypothetical calculations for 3-room improved flats, 4-room 'A' model and 5-room 'A' model flats. The compound factor is taken from a book called "A Dictionary for Accountants" by Mr Koler, Third Edition. Let us look at some hypothetical calculations. Suppose somebody bought a 3-room improved flat today at $22,700. In five years' time, even at 2% per annum, that flat will be worth $25,061. In 25 years hence, even at 2%, that flat will be worth $37,241. And the value goes up as the rate of increase goes up, and I have used very conservative rates of increase, no more than 4% per annum. And we are now in an age of inflation and we have seen certainly property prices appreciating by much more than these values. In Table 2, I have calculated the future wages of a worker 25 years hence. You can easily do the calculations five years hence and 10 years hence because the compound factor is also given there. A worker earning $500 today, 25 years hence, at 2% increase per annum, would get $820; at 3% per annum, would get $1,047; at 4% per annum, would get $1,339 per annum. What I am trying to say, Sir? I am trying to say that the capacity of anyone who purchases a Housing Board flat today will be increasing over the years while his liability to repay the Housing Board stays at a fixed quantum.”
“Anybody from any country visiting Singapore would be able to see this fact. In fact, our visitors from Japan look with tremendous envy upon the living accommodation which the people of Singapore have. Anybody who has travelled to Tokyo would know that executives, people in managerial capacities, live in 1-room apartments with no toilet facilities, with the size of the apartment smaller than even our 1- or 2-room flats here in Singapore. So we have much to be thankful for. At the same time, Sir, the hon. Member for Anson stated that having to purchase a flat over 20 or 25 years is a commitment over a long period of time. Well, one is understandably concerned about this. But I would like to point out to a few facts, some of which I have laid out in the Tables that I have passed around. First of all, the HDB has a policy that says that anybody can sell back the flat to the HDB at the original price plus the cost of renovations with suitable depreciation. Sir, that at once put a downside risk to any acquisition of HDB flats. I wish, and Members in this House wish, those of us who have bought private apartments and private houses, that we could sell back our houses and flats to whoever we bought them from at the original acquisition price. Those who bought flats and houses, say, in the 1981-1982 period would be very thankful if they could do such a thing. So let us be mindful of this, that there is a guarantee by the HDB to buy back at original cost. Furthermore, Sir, even if the purchaser cannot pay at some future date, he can always rent out one or two rooms, provided he stays in one room himself. And currently the rental goes from $100 to $200 per room per month or more, depending on location.”
“So I hope I am not pre-empting anything that the Minister might say but I would like to put my tuppence worth. 3.30 pm Sir, I think the fact that 84% of Singaporeans live in Housing Board flats, both purchase and rental, should be ample testimony to the affordability of HDB flats.”
“Perhaps I can have my tables distributed. [Copies of tables distributed.] Sir, I have got two amendments under my name. May I first make reference to a concern of my residents in Whampoa about the future redevelopment of Whampoa Constituency which comprises the old St. Michael's Estate and part of Balestier Estate. The residents have gotten to know that some of the blocks are going to be demolished and redeveloped. But for the moment, the greatest concern has been expressed by the hawkers at the Jalan Tenteram Hawker Centre. Sir, this hawker centre was built some 15 years ago and from its inception had its difficulties because of poor location. There are no car parking facilities and no direct access from main roads. However, in spite of the difficulties, some 93 or so hawkers have through perseverance, hard work, and the production of good quality food, been able not only to survive but to do fairly well. Recently, they received a notice informing them that they have to quit their present stalls and that they have to be relocated elsewhere. Sir, I would like to appeal to the Minister to redevelop that hawker centre, if not on the present site, on a better site within the constituency, because these hawkers live in the area and many of them have lived in the constituency for 10 to 20 years, and so understandably they would like to be in the same place of business. So I would appeal to the Minister to look into this request. Earlier this morning, Sir, I was challenged by the the Member for Potong Pasir. I suppose he was really hoping to go after the Prime Minister. But in the absence of the Prime Minister, he began to hit this way and that and one of the blows came my way.”
“In that case, Sir, would the Hon. Minister agree with me that it is the public sector that sets the pace in determining the so-called market rentals?”
“Would the Minister specify the proportion island-wide?”
“Would the Hon. Minister inform this House what is the proportion of car parks controlled by the public sector as opposed to the private sector?”
“Would the Acting Minister inform this House whether there have been any cases of abuse or neglect, by way of nutrition or some other way, of children who are put in foster homes?”
“Would the Minister inform this House whether there are investments in stocks and in properties as well?”
“We can safely increase the preferential margin for local contractors beyond 5%, to something closer to 14%. In the past the major share of contracts above $20 million have gone to foreign contractors. And many of them do not pay any taxes. The Government ought to look at this very carefully. So we make sure that we create more business for one another and make a bigger domestic economy. Sir, I support the motion.”
“But they must work. Their families can and should help them. Their churches can and should help them. Community organizations should help them. The Skills Development Fund and the NTUC can help with retraining. The Government can help to find jobs and Government can help to reclassify job requirements. If we want to move to a developed stage, we must have more graduates working in jobs currently held by people who are non-graduates. Sir, Government can help to restructure our industries, particularly construction and the retail sector. I want to say something about the retail sector because many people, many shopkeepers, have been staunch community leaders who have been pillars of stability for Singapore over the last 25 years. I think we should give them the information about the excess capacity in the entire retail sector. We should help them to restructure, to get into new businesses. Perhaps the HDB can help to mothball some of the shophouses, and maybe shopowners can be persuaded to mothball some of the shophouses as well. We may even need to demolish some HDB shophouses. More importantly, we need to increase tourism. So let us give them a helping hand. Finally, Sir, we can improve the input/output linkages of our economy if the Clerk could pass that Table to Members. [Copies of table circulated to Members.]We can do this in the following ways. We can urge people to buy Singapore goods and services. We can urge the Government to give preferential purchases from local industries. We can urge Government to use local expertise. We can urge foreign contractors to buy local goods and services, to buy through local dealers. We can give more contracts to local contractors.”
“How should we help the unemployed? The first priority must be to safeguard jobs, to prevent firms from going down under. And our workers have got to realize this, that the Government is not taking sides, that by cutting 15% CPF, it is not wanting to hurt workers. It is wanting to help the workers. I know my colleagues on the opposite side went through much soul searching before they changed what they had accepted as policy for a long time. Yes, it was not a decision lightly taken. Secondly, we need to create new jobs and that means overseas promotions, whether to bring in the tourists or to bring in new investments. And our Ministers are going out to other countries to do so very shortly. Then we need to create new markets. Our managers must prove their worth. I was talking with a Japanese diplomatic official recently. He said that in Japan, if a firm is in trouble, the manager goes out and shows the example by working harder than everybody else. He takes responsibility for the success or failure of the firm. So too must our managers. I think our managers have had it too easy for too long. With high economic growth, anybody could succeed. In times of recession, it is those managers who have got it in them, they are the ones who are going to pull through. And I am sure there are many Singaporeans who have it in them. Our manufacturers' attitude must change. We must think of the long term. We must think of quality. We must think of searching for new markets. We must think of new products and new processes. We must be innovative. We must be creative. As for the unemployed, the first lesson they must keep in view is this. Every able-bodied person must work, even if it means accepting work inferior to what they desire, even if it means accepting lower wages temporarily.”
“In due course. See how people make money out of other people's misery?”
“It is one of those two sitting over there.”
“The best way to look at Singapore is to think of Singapore Airlines, flying high above those chickens. Singapore Airlines has to buy Boeing 747 aircraft. It is the same aircraft that other airlines fly. It is the same technology. We provide the pilots, the engineers, the mechanics, the stewards and the stewardesses. The same aircraft can get you from point A to point B, as other airlines do. What makes the difference? Better service at less cost. Otherwise we end up with a bankrupt airline. And many airlines in the Western countries have gone bankrupt. That is the principle enunciated in the Economic Committee's Report, that if we want to be a developed country, we have got to provide better service at less cost. Be more competitive and yet expect less wages than workers in the Western countries. That is the simple fact of life. We cannot run away from that. And don't you listen to those lawyers? They make money out of your misery. In a boom time, their income goes up, conveyancing charges go up. In a recession, they take litigation cases. There was a case too in my meet-the-people session, Sir. I helped a taxi driver. He came to me. He had his licence cancelled. And I appealed to the Minister for Communications. It was turned down for good reason because the man had so many violations. This man was not satisfied. He went to see one MP who operates a law practice. This MP wrote for him a letter and got the same kind of reply and charged him $200. An hon. Member: Who?”
“We do not have natural resources. We have some liabilities from that corner! Being without natural resources means, Sir, that we have to take other people's natural resources, add value to those resources and earn our wages and salaries and profits from that value added. It is a simple fact of economic life. We have no oil to give away. We have no lands to farm with. If we wanted to grow more chickens, we cannot do it.”
“And the workers. And it is the workers' concern we ought to be worried about. It is the workers whose welfare we ought to be worried about. So if we tax the rich so heavily that they leave the country, the talented, the managers, the entrepreneurs, they leave the country, who is going to produce the jobs for our workers? Who is going to provide the wages, the income, for our workers? We can tax the firms. Oh, yes, the multinationals, any firm in Singapore. Why 40%? Why reduce to 33%? Why not tax them 90% or 100% of their profits? We could do that. But, you know, what is going to happen. They are going to go to some other countries that offer them lower taxes. So are we fooling ourselves? People grumble about the tax rebates. Tables are produced. Figures are computed. What do they all add up to? It is very simple. Those who pay more, get more back as a proportion, and it is the same proportional rebate, 25%. That could not be fairer. How can you say to a man, who pays $40,000 in taxes and now gets a quarter of it back, that it is unfair for him to get back $10,000 in tax rebates? Or if somebody else who pays $1,000 tax gets $250 back in rebates, you say that is unfair, that you should be given more than the rich man. Let us be fair. Let us not play games with the lives of Singaporeans. Let us not play games with the finances of this nation. Let us look at what makes this economy tick.”
“Yes, the bad lawyers, the worthless professionals.”
“First of all, let us recognize the minimum that any government has to do. It has to maintain law and order, that means paying for policemen, for judges and such like. It has to defend the country against aggression, that means paying for defence. It has to maintain minimum health standards. It has to maintain minimum educational standards. So these are basic services that it has to provide. But the principle must be that all who benefit from these services should at least pay something. The Opposition Members and others would say, "Why don't we tax the rich and the talented?" Yes, we can do that very easily. We can vote in a socialistic government, a workers' government or whatever government that will say, "Yes, we will tax the rich 80 cents to the dollar, 90 cents to the dollar, and the talented as well." Do you know what is going to happen? All the rich people, all the talented, are going to migrate from Singapore. All your professionals, like lawyers who are any good, will migrate from Singapore. And who are going to be left in Singapore? An hon. Member: Bad lawyers!”
“Why can we not have a body to control buses and their operations, to oversee their operations, again widely represented? And the same for taxi fares. I feel sorry for the Minister for Communications. He means so well. But he gets cursed by taxi drivers. He gets cursed by the public. And he has done his homework so very carefully. Why do we not set up a public board, widely representative, to look after taxi fares? That would take away all blame from the Government in future. I would suggest the same thing for MRT. That is another thing that is going to land the Government in trouble in future. Every time fares have to be adjusted, it is going to be a painful political decision. But it is so unnecessary. The public must realize that if they want good services, they have to pay for those services. Having said this, we must bear in mind a number of principles for these bodies, whether it be buses, taxis, CPF or whatever. Firstly, that it is not right for the Government, the public sector, to subsidize these services. Secondly, they should be efficient, providing good services. Thirdly, they need to provide a fair return to shareholders. And I think the boards have to keep these objectives in mind. Related to this is a personal question of mine. Why do we need to provide such comfortable services to the public, such as airconditioned taxis? If they want to pay less, why can they not ride a rickety old taxi without airconditioning? Why do we need to buy new buses with all kinds of safety features that were reported today in the Straits Times? Why give them such safe buses if they are willing to pay for unsafe buses, if they want cheaper bus fares? Next, Sir, we come to a very important question. Who should pay taxes?”
“If these two services could be reduced in this fashion without cost in terms of quality to the country, then all of us can pay lower taxes and lower rates. But, Sir, the trouble is that the Government took on too much responsibility in the past. It has been accused of being paternalistic. But you cannot be a father unless there are willing children. If we do not want the Government to be a father to this nation, to be paternalistic, then we should stop behaving like children to this father, and asking father all the time for this goody and that goody, and blaming father for this and blaming father for that. Let us have a healthier relationship than that of parent and children. Why should the Government be responsible for the CPF? It is the people's money. If they want housing, why can they not pay for it? If they want to provide for old age, why can they not be responsible for it? If they want to pay for health, why can they not be responsible for it? One way out for the Government is to appoint a board for the CPF that is widely representative of functional groups of responsible citizens, who will then decide for themselves what they want to do with these funds. And these citizens can then report to the public that these funds are extremely well managed and that whatever they decide is whatever they will get and benefit in the end. Why should the Government be responsible for setting bus fares? I know some years ago it was necessary to intervene, to send a team of officials to help the bus company revamp its operations because it was very inefficienct. But now it is on its feet. Why should the Minister answer for the bus companies in Singapore in this Chamber and take the rap? Why is it necessary?”
“I would like to propose, Sir, that in Health that the suggestion that was being mooted by the Minister of State for Health, that eventually most of the Government hospitals should be privatized and that Government should merely concern itself with providing very basic health services, to prevent epidemic, to give enough services to the poor. At the same time, we shall be able to export these services by building up excellent hospitals in Singapore. We could do the same with Education. And I believe we have a comparative advantage in education. Why can we not allow private primary schools, private secondary schools, private colleges, and even a university, provided quality control is there? That would first take some burden away from the public sector and at the same time give quality to parents who want to pay for quality and give us export earnings.”
“This does not include the CPF. The question is: is this size of the public sector unhealthy? On the other hand, there are many people demanding more Government services. The two Members of the Opposition have been full of suggestions about what else Government ought to do. We are to bear in mind that the more services we want from Government, the more taxes will be required. There is no other way except to borrow money from abroad, or to print money, which is what typically other governments do. And we have the sad tale recently of the President of the Philippines running away with bags of money. How wonderful to be in that position that you can print money and take as much of it as you want, and pay for 3,000 pairs of shoes, etc, etc. What a sad thing for a poor economy when the Head of that government could run away with billions of dollars. I calculated that almost half our reserves were taken away by him and his cronies over a 20-year period. And here in Singapore we grumble about the salaries that we pay our Ministers. I think when the full figures are out, this will look like peanuts, a mere pittance, compared to the money of corruption which has been taken away by many government ministers in neighbouring countries. And there are new scandals which are boiling at the moment. Hon. Members and the public can read for themselves. If we want less taxes, if we want lower rates from PUB, from the statutory boards, from Government, then we have got to reduce government services.”
“This can be an endless process, whether it be subsidy to PUB, or Telecoms, or any of the other bodies. We should take care that in comments made in this House we do not discourage the very excellent civil servants and those who work in the statutory boards. They have been very efficient, very productive, and who have enabled the public sector as a whole to produce surpluses from year to year. And, Sir, we do not need to be ashamed of past surpluses because in years of rapid economic growth, these surpluses help to dampen down inflation, prevent the economy from overheating. But now, of course, in a recession, these surpluses ought to be reduced so that we can get out of the recession more quickly. As to the corporate and income tax reductions, we are grateful for what has been done. The Finance Minister and his officials understandably are very conservative, very watchful over our revenue position. I think they are afraid that there may not be enough money in the till to pay for all the expenditure. I wish they have been a bit bolder and to reduce the corporate tax rate to 30%, and better still to 25%. I would appeal to the Minister to monitor the situation, and that if in six months' time there is no appreciable progress, maybe he should do so. As to the consumption tax, I have argued that this is not something we should worry about at the moment because we do not need the revenue for the next two or three years. And that even for the longer term, I would like to propose another strategy, instead of raising consumption tax. The question I would like to pose to this House, Sir, is this. Is our public sector, as a whole, too large? In 1985, both the Government plus the seven statutory boards constituted nearly 53% of our GDP, if you took their total expenditure.”
“You will find all kinds of funds in there - Revolving Fund, Contingencies Fund, Development Contingencies Fund, Development Fund, Singapore Municipal Provident Fund, Sinking Fund, Skills Development Fund. I want to draw particular attention to the Sinking Fund which has nearly $15.6 billion worth inside. Now if you study this asset position very carefully, you can see that Government has been extremely prudent in its financing. And because we have had surpluses from year to year in the past, we are now able to drawdown some of these surpluses to help overcome the recession, unlike other countries where government perennially goes into deficit and has to borrow money or else to print money resulting in inflation or a huge foreign debt. Another indicator that our finances are in good order is the fact that our foreign debt is negligible. We borrow only to establish credit rating. Not many countries in the world can boast of such a comfortable position. Then, Sir, many comments have been made about the surpluses of our statutory boards. First of all, they are less than what people imagine. The table I drew attention to, Table 5.1 on page 34 of the Economic Survey, shows that for 1984 the surpluses of statutory boards were only $354 million and, for last year, about $900 million. How did these surpluses come about? I think, in the main, it is due to the efficiency of our statutory boards. Some have complained that it is due to high rates; to the extent that the surpluses allow, Government has been lowering the rates that statutory boards have been charging. But there is a limit beyond which we cannot go. And it will not do if governments have to subsidize statutory boards, as in other countries.”
“Mr Speaker, Sir, as we debate this Budget, I think we should keep in mind two major objectives, firstly, to overcome the recession, and secondly, to set the direction for long term economic growth. The Minister for Finance has drawn attention to the fact that this year's Budget will have a deficit of at least $3.2 billion. Sir, if you compare it with past years' Budgets and look at the budgets of statutory bodies as well, you will see that this will most likely reduce the overall surpluses to zero or even an overall deficit. Hon. Members might want to take a look at Table 5.1 on page 34 of the Economic Survey, which gives a good overview of the consolidated budgets of seven major statutory boards and the Government proper. You will see that this presentation and this table nets out the intra-board loans and that the CPF loans are out of the picture altogether. And you can see from this Table, as compared with the thick Budget book,that the CPF money has never been needed by Government or statutory boards. And the latest Monthly Digest of Statistics, which is February 1986, Table 11.20, shows us the fund position of the CPF. There was a net $2.6 billion retention by the Fund. Amount owing to members was $26.8 billion. But the Fund is operated in such a way that its monies are held in terms of Government bonds and Government in turn reinvests these bonds mostly abroad. And if we compare official reserves of $27 billion at the end of last year, you will see that we are in a very comfortable position; this figure excludes other Government assets. There is another Table in the Budget book which shows the assets and liabilities of the Government itself. On page 59, you will see that both assets and liabilities constitute $43 billion.”
“Does the Hon. Minister have any figures on cars which are 10 years and over which are exported to other countries? Because if they are actually exported, we are gaining some foreign exchange.”
“Mr Speaker, Sir, does the Minister have any figures on the age of cars which do break down on the roads?”
“There will be dangers ahead but there will also be opportunities provided we have faith in God, set the right course for our country and make the most of any chances that come our way. Thank you. 3.36 pm”
“8 billion - I hope the computations are done properly and,as I said, this has to be compared with the overall public sector budget before we conclude whether it is stimulating enough. The 1984 figures, for example, showed that for Government and the seven major statutory boards put together, their surpluses were about 11% of their combined budget. Add to that $3.2 billion retained by CPF net, and you have a big surplus on your hands. So I say to the Government right now: Prudence is good, but prudence taken to extremes is no virtue. Finally, Sir, we need to ask ourselves some hard questions. Have we been too greedy a people, too covetous as stockbrokers, as developers, as contractors, as hoteliers and as retailers? We hear many complaints from foreigners, from tourists of overcharging. Why should a tourist pay $7.50 for a glass of fresh orange juice, $15 for a glass of beer? If we want to attract tourists to Singapore, if we want expatriates to come, if we want people to come and do business with us, be reasonable. Have we become a nation of gamblers, too interested in a quick buck, giving shoddy work, too little interested in acquiring better skills, better management, and investing too little in productive activities? I do not think it is an accident that investment in machinery and equipment was down. The reason is simple. Why bother with productive investments when there are capital gains, speculative gains to be made, tax free, in the stock exchange, in the property market, in the futures market? I think there is something wrong here in terms of relative incentives for investment. Have we become too proud as a nation, taking progress for granted? Sir, allow me to end by paraphrasing the President.”
“I do not know whether they have made another calculation, and that is, how many new enterprises are we going to attract to Singapore,and therefore how much additional revenue are we going to gain? More fundamentally, because of our relatively high corporate tax, many firms have established holding companies in Hong Kong and elsewhere with low taxes, and they have shifted their profit centres there. My hope, my belief, is that, with a lower corporate and income tax here, we will attract these profits back to Singapore, so that the tax base will be larger. Furthermore, between 30% and 33%, lies some $180 million in forgone revenue. So I do not know why 33% instead of 30%. The CPF cut, 15%, is a bold move. But I would prefer a 10% cut plus a 2% Skills Development Fund cut. The Fund now has something like $500 million. And I believe it is enough to tide it over four or five years. So we do not have to worry about that Fund for the time being. The Medisave ceiling, $15,000, I consider too high. For the moment we are tying up funds, freezing funds unnecessarily. I have more to say on Medisave later on. I think we have been too liberal in allowing private hospitals to use these funds. You are going to end up with the American system where hospitals over-charge because there is a sum of money available. The property tax rebate of 50% - welcome. A good move. But why not extend to residential buildings which are rented out as well? Because these are also in trouble. More importantly, it is the basis for valuation that many people have complained about. But hopefully something is forthcoming. The total release of $2.”
“So I urge the Government to look at this question of exchange rates very carefully. Related to it is the money supply. I am alarmed that in 1984, M1 grew at only 3%. 1985, up to November, 1.9%, negative for some months last year. We are asking for trouble. Interest rates, also related to exchange rates and money supply, are too high in Singapore. Given the virtually zero inflation rate, the real interest rates are too high. So I would urge the Government to look at this problem seriously. Otherwise, all the incentives we are giving to industry right now, the cost-cutting measures, the CPF reduction which on some measurement account for some 7%-8% of total costs can be wiped out overnight by one move of the exchange rate. So I say, watch it, in this area. May I comment on the measures that the First Deputy Prime Minister introduced yesterday. Firstly, let me make the general point that until the actual budget is announced and until the details of the budgets of statutory boards are in, we do not know whether these measures are giving sufficient stimulus to the economy. There is one principle which the Economic Committee has enunciated, and I hope the Government will take seriously. We should consider the public sector as a whole for the purposes of fiscal policy. The company tax - I would prefer 30% or better, 25%, and I would prefer implementation this year rather than next year because we want to put money in the hands of entrepreneurs. I am afraid, Sir, that Ministers for Finance are typically very niggardly. They watch over revenues and if one were to look at historical performance, then naturally you make your computation. If company income taxes were reduced by X%, how much revenue will we lose?”
“Sir, many people do not realize that construction and real estate, together with ancillary services, account for something like 25%-30% of the GDP, employing 120,000 to 150,000 workers and providing some 20% of Government revenue. There are links to the Stock Exchange as well. Property stocks are depressed. Companies which own a lot of property, their shares too are depressed. The amount of loans given for property, is about $9.5 billion outstanding, not to mention other loans that use property as collateral. So we have a very substantial stake in this sector. Something must be done and I would urge the Government to study this problem very carefully and if at all possible withdraw public sector buildings from the market, particularly offices, warehouses, factories and shops. Many people do not realize that the public sector owns 40% of the factories, 44% of the shops, 33% of the offices, 28% of the warehouses. In housing, you know the situation. Next, Sir, may I deal with a problem on exchange rates. There has been much talk about exchange rates. The best way to understand the situation is this. We are living in an age where because of huge capital flows exchange rates are primarily determined in the capital market, not in the goods market. This means that the exchange rate that the market establishes is often inappropriate and does not reflect the economic fundamentals or the comparative advantage of your goods and services. In America, this problem has manifested itself in the last few years, in terms of American industries having to close down because the American dollar has been too strong and belatedly, last September, they recognized this problem. Now the tables are turned and Japan is having a problem with a strong Yen.”
“Already, $500 million worth of equipment is rusting in the rain. The property sector - I will come back to this later - there is tremendous excess capacity. That could have a dampening effect on this economy. The commerce sector employs 300,000 workers, many of them in retailing and wholesaling, it is due for a big shake-down. Shipyards and oil refining, with excess capacity that must be adjusted. Let us not fool ourselves. We have problems at hand, problems that can only be resolved if Government and people work together. The current excess capacity in the property market is as follows - latest figures, September 1985: Occupancy rate -------------- Shops 84% Offices 83% Residences 80% Hotels 65% Factories 75% Warehouses 71% The question is: will the situation get worse or will it improve? It depends on two factors. First, whether the projects which have been approved but not commenced will be aborted and, secondly, what is the rate of growth of demand for each of these sectors. If we are optimistic and assume that developers make their corrections and we have the same rate of growth of demand for 1981 to 1985, then by the year 1990 only factories and warehouses and hotels will be in trouble. The other sectors will be all right. If we assume half the growth rate of demand, then homes, offices, shops, factories, warehouses, hotels will all be in trouble. If we assume developers continue developing projects which they have not commenced, there will be even bigger trouble. So the question is whether we can turn this economy around as quickly as possible. That is the surest way to help the property sector.”
“It is excess capacity in electronics and computer peripherals. Yes, there is some excess capacity in whole- saling and retailing. But giving workers more money will not buy up all this or any of this excess capacity. So let us not fool ourselves. Next, Sir, the unemployment situation. I had considered whether I should be realistic or I should mask the problem but because the reaction to the package of measures announced by the First Deputy Prime Minister has been so cynical, so demanding in terms of even more measures, even more tax rebates, let me put the situation clearly and starkly to our people in Singapore. Right now we have 5% unemployment. If we assume zero growth for this year and for next year, we are going to add another 4% to the unemployment rolls, making a total of 9%. If we should get negative growth - and I am going to show that we are going to get negative growth - we are going to add another 5-6% to the unemployment rolls. The situation is serious and it calls for measures that will work. It calls for measures that will produce jobs. So let us not bicker. Let us not look at the measures in terms of how much each of us personally benefit. Let us look at what is good for the economy and I shall return to those measures shortly, using that criteria. We have a number of weak spots in the economy right now. Firstly, the Stock Exchange. A number of brokers might well become bankrupt. The bankers are already nervous over their $1 billion loans to the Stock Exchange. This will shake confidence. This may bring stock prices down. This will affect the wealth of people who own stocks and shares. Secondly, the construction sector is in the agonies of being reduced substantially in size, from 11% of GDP back to 6% or so.”
“But if you look more closely, you will find that it is private investment and construction activities that have been reduced. In other words, total private investment activities have gone down. If you look at private consumption expenditure, there has been no change, $9.3 billion for 1984 and 1985. What is the reason for this? Yes, there were the 90,000 workers who lost their jobs but, do not forget, wages went up by 3% in nominal terms or 2(r)% in real terms. So overall, private consumption stayed the same. So, I submit, there is no case for pumping more money to enable people to spend more on consumption. That is a wrong move to make. Many people think in terms of a Keynesian situation. I know this is economics and some people do not look favourably on economics in this House. But whatever the state of the soup, let me add to it. The typical approach is this. When you have a recession, the way to do things is to get Government to spend more, put more money in workers' pockets and they can spend their way to prosperity. I submit that even in the best of times and situations it is at best a short-term solution. More importantly, it is only applicable to big countries, like the US, where much of the demand is internally generated. But for us here in Singapore, that is a wrong thing to do because two-thirds of our demand come from abroad. Furthermore, you must look at the nature of the excess capacity. It is not excess capacity of consumption goods that can be easily bought up by the people. It is excess capacity in construction, equipment, cranes and tractors. It is excess capacity in hotels, offices, shops, residences. It is excess capacity in shipyards and ship-repairs. It is excess capacity in oil refining.”
“Secondly, the proposal by the Economic Committee to remove whatever remaining tariffs that we have. Sir, I believe some firms depend upon these tariffs. If we remove the tariffs, those firms might fail. This is not the time to remove the tariffs. When the recession is over, let us think about it. Thirdly, privatization of government-owned companies. Sir, while I support this as a long-term measure, it is inappropriate now to even consider it and the reasons are as follows: (a) When you sell these companies to the private sector, money is going to be absorbed from the private sector, and will be withdrawn from the economy. (b) The change of ownership and control might destroy some of these companies at this time. Already I have heard some civil servants being very upset over the whole matter. They say, "We spent years building up these companies and now you want to take our babies away." I say, just go slow, not yet. Next, Sir, may I deal with a problem which has been voiced in this House and outside the House - the question of whether there is deficiency in domestic demand and whether we should release some CPF to the workers in order to enable them to spend more. There are a number of aspects that we need to consider. First of all, there is a deficiency in demand created by public sector surpluses, inclusive of CPF, and these surpluses must be reduced, preferably eliminated, for the next two years if we do not want to drag the economy down further. But then, beyond that, if you will turn to my Table 2, you will see the nature of the problem. Table 2 shows the composition of domestic demand for 1984 and 1985. You will see that the total domestic demand did go down by $0.7 billion from 1984 to 1985.”
“The third part of the strategy is to take the opportunity now to create a more flexible market-oriented economy without adversely affecting the economy now. It is in the light of this three-fold strategy that we must evaluate whatever measures are being put forward, but first let me dismiss those measures which I think are inappropriate, even dangerous, at this moment. Firstly, indirect taxes. My advice is, do not confuse the people. Do not upset people unnecessarily. Government does not need the revenue right now from consumption taxes. Let us not even think about it right now. Let us get the recession over and done first. Some hon. Members: Hear! hear!”
“There will be keener competition, the play will be rougher; there is the prospect of our being booted out of the GSP programme. It will be harder to increase our share of the world's economic pie. To prosper, we must monitor world trends of production and trade. We must catch the winds of change of technology and we must learn to ride the storms of world inflation and recession. What we need to have is the cohesion of the people, the adaptability of our enterprises, the flexibility of our policies and institutions, the productivity of our workers, the quality of our goods and services, dependability as suppliers, integrity of entrepreneurs and financial institutions, high savings and investments. And last, but not least, vision from our leaders. Look at our Prime Minister. He has always projected an international image bigger than a Prime Minister of 2.5 million people should. He talks like a Prime Minister of 50 or a 100 million people. Sir, I say this not to praise Caesar but to counsel would-be Caesars that for the sake of Singapore our leaders should have a vision considerably larger than a niche. Now, if I may discuss about our current recession. We need a three-fold strategy. Firstly, we need to prevent further erosion of the economic situation. Secondly, we need to find and to stimulate new growth points in our economy. This, I submit, Sir, is of some urgency. Because I am afraid of what might happen in two years' time. Just as we are about to emerge from the recession in 18 to 24 months' time, we might run into a US recession. So unless we can pick up as soon as possible or at least identify and get certain industries going in the meantime, we are going to be in deep trouble in two years' time.”
“On the other, it is bad because the European countries are going to be more protectionistic. What is the outcome? Your guess is as good as mine. So with these difficulties as a backdrop, what can we look forward to. What do we need from the international environment so that we can not only sustain our standard of living but hopefully improve upon it? The Economic Report and other Ministers have used the word "niche" to describe what we need of the international economy, if we can get a new niche. But, Sir, I looked up the definition of the word in the dictionary, and this is what it means: 'A niche is a shallow recess in a wall to contain a statue or a vase, sometimes associated with columbariums.' May I suggest we change our terminology? In terms of population, yes, Sir, we are small. 112 out of 189 countries in the world. I have a couple of Tables. Perhaps they could be distributed now. [Copies of document distributed to Members.] But in terms of GNP per capita, we are number 22 in the world. In terms of size of GNP, that means size of market, size of purchasing power, we are number 50 in the world. In terms of exports, if Members could look at the Table 1, Major World Exporters 1983, you will find that Singapore ranks number 19 in the world, with $21.8 billion worth of exports. It is a little more than 10% of US total exports and the US is an economic superpower. From this Table alone and the other figures which I have mentioned, quite clearly we occupy more than a niche and we need more than a niche if we are going to improve our standard of living. What we want, Sir, is a place in the sun. What we want, Sir, is to qualify in the rich nations' club in the world to one day belong to the OECD.”
“That trade deficit arises because the US has a shortage of savings. The US has a huge Federal Government deficit and that has induced a lot of capital in flow. In other words, the US has become a net borrower from the world market. But there must be a real counterpart to that borrowing and that is the import deficit of goods and services. So if they try to cut down on their imports, how could they then borrow what they need? So they are going to have to deflate their economy or else print more money, both of which spell trouble for us. At the same time, Sir, the advanced countries are getting more into services in terms of their economy. We also have the international debt problem that could explode at any time. Members may not realize how fragile the international monetary system is at the moment. Falling oil prices is good for us and good for many other countries. It makes things cheaper. But for those countries dependent upon oil revenues, they may not be able to pay their debts and that may trigger a financial crisis leading to a world depression. In the region there are a lot of uncertainties. Falling commodity prices, falling oil prices, have affected our neighbours. So we no longer have the regional economic growth to give us some stimulus. Then trade itself has been reorganized internationally. Counter-trade is the order of the day. That means I trade my rice for your rubber. There is no need to go through the middlemen, no need to go through the banks, no need to use foreign exchange. Eight to 10% of world trade is now counter-trade. We have to rise to these challenges. Then we find the centre of economic gravity shifting from the Atlantic to the Pacific. On the one hand it is good for us because we are situated on the rim of Asia Pacific.”
“There is not much more that we can go. We are going to have a lower rate of growth of labour force in the coming two decades. Therefore, there is the need to find new internal sources of growth. At the same time, the Report highlighted a very significant point, ie, although we have achieved a standard of living which some developed countries have achieved, yet in terms of educational levels and skills we are lagging far behind. I believe the biggest challenge to us in the coming decade is this catching-up process, making sure that our education and our skills are appropriate enough to enable us to qualify as a developed country. Otherwise, I believe we shall go backwards. Then, Sir, the international economic environment has changed rather dramatically. We had a good run over the post-war period. We have seen tariffs on goods being reduced, exchange controls being reduced. We have reached a stage now where capital flows easily from country to country, virtually at the touch of a button. What do these trends portend for us? I believe, immense difficulties. Because of the ease with which capital flows from country to country, exchange rates are very volatile. And countries faced with deficits in the balance of payments begin to move to protect their trade in goods and services. The choice is either restrict the capital flows or restrict the flow of goods and services. Since nobody wants to restrict the capital flows, protectionism is the order of the day. At the moment we have a problem that exists between the US and Japan that may spill over to our disadvantage and to the disadvantage of many developing countries. The US has a big trade deficit. Japan has a big trade surplus. And the US is trying to cut down their trade deficit.”
“Mr Speaker, Sir, I rise to join my colleagues in thanking the President for his Address to this House. I think we should also thank the Acting Minister for Trade and Industry for his Economic Committee's Report. Sir, I think it was in 1961 when the United Nations sent a team to Singapore and presented a report on future industrialization in Singapore. That report constituted the blueprint for our development over the last 25 years. Now we have another Report before us and this time a home-grown Report, of a quality, I think, better than the UN report in terms of its economic analyses and sophistication. I believe that this Report that we have before this House will serve as our blueprint for development in the next 25 years. The Report has two parts to it. Firstly, the future growth strategy of Singapore and, secondly, overcoming the current recession. Unfortunately, Sir, not many Members have focussed upon the future growth strategy for Singapore outlined in the Report, perhaps because our recession takes too much of our attention at the moment. But let me go over some of the important points for us to note because, even as we overcome our present difficulties, we ought to bear in mind the longer-term context within which we must operate. And the policies which we are going to adopt to overcome the recession must, at the same time, not be in conflict with what is compatible with our long-term development. The first thing that we need to note about our long-term prospects is that the easy phase of economic development is over. We have gotten over the stage of low technology, labour-intensive industrialization. We have built most of our infrastructure that we need for further development. We already housed 81% or 82% of the people in HDB homes.”
“Mr Speaker, Sir, I think the Member for Potong Pasir keeps misquoting my figures. We cannot be arguing like that. Here I am flying very high and he is down there. I cannot argue with a man like that. $25 billion only, in reserves. Then, work permit holders. I think there are between 150,000 and 180,000 still around in Singapore. Even if you reduce the figure somewhat, you still can more than cover the 60,000 unemployed in Singapore. I do not mean to make fun of the hon. Member. But if you want to debate things seriously in this House, you have got to get your facts straight first.”