Chua Teck Chew Robert
Singapore
“Given time, if the economy of Singapore continues to grow rapidly and in the process bring in more and more adverse influence from the western culture, resulting in our people behaving like the westerners whereby the relationship between parents and children is built on legal responsibility and obligations rather than love and compassion,…”
“Sir, the idea of allowing owners of factories to build dormitories for foreign workers is an excellent idea. May I know from the Minister whether the rules concerning usage of factories, ie, the 60:40 ratio and so on have been changed so that factory owners can in fact build dormitories and not violate any of these standing rules?”
“This way the system will not be seen as favouring only the rich and depriving the less rich of ever owning a car. At least, if someone should lose out in the draw, he can attribute his inability to own a car to his lack of good luck and not just blame it all on the Government.”
“For example, Singapore families should be encouraged to try and spend some time in some of the rural areas of our neighbouring countries, perhaps even in the long house of Sarawak, to try and understand that people do live in a different environment.”
“Other possibilities include giving special tax allowance and depreciation benefits to financial institutions to encourage them to finance the machineries and working capital needs of these enterprises which often lack the track record overseas to obtain standard bank loans from the overseas banks.”
“So land cost in Singapore can never be the same as that of other countries which have more land. But we should not try artificially to keep the land cost down, but to ensure that our limited land resources are put to the best possible use.”
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“If people need help, they should know where to go for it. They can ask their MPs. They can go to EDB. And if they say they do not even know how to go to the MP or the EDB, then I think they are not very good businessmen. Whether the programmes are too conservative, of course, people will always like to have more than what they are given. Here again, if I can be given specific examples of good projects which were not sufficiently supported, I will be prepared to take them up. 2.00 pm Regarding the question of coordination between the Trade Development Board and the Economic Development Board, yes, perhaps there has been some confusion because both organisations are very involved, especially in this new subject of regionalisation and promoting investment overseas. I think the point was made that perhaps TDB is in a better position to help investment overseas. That really depends. We have not decided yet whether to set up a new organisation. Most probably not, because both the EDB and the TDB, as presently constituted, are more than able to support local enterprises going overseas. The EDB has also many strengths in trying to support local enterprises going overseas because they know the nature and the type of manufacturing operations in Singapore and how overseas investments can be tied up with the operation in Singapore. What we want to do, as far as possible, is that when Singapore companies invest overseas they do not entirely transfer their operations from Singapore to an overseas location but that there will still be a connection between the overseas investment and the Singapore investment, perhaps with the more labour intensive type of operations being done elsewhere and the more technical or knowledge and technology intensive operations being done here.”
“For the smaller companies, the limit is $6 million. If the average is small, it just indicates that perhaps the applications were for small amounts or that the applicant was not able to justify a high amount. Although both the loan scheme and the grant scheme are meant to assist the local enterprises, certain normal financial criteria must be applied in considering loans and they must be related to the type of project, the cash flow expected, the security available and so on. And the last thing we want is to have a scheme that just throws money away and hope that results will come out. If Dr Ow can give me further details where there were deserving cases for large loans and were not given, I will take them up. There are no limits to the resources that we are prepared to put into encouraging local companies to invest overseas. All the schemes that we have in mind, although they may have annual budgetary limits, can be increased if the demand is there. So I do not think that it is shortage of resources that is the problem, but it is a question of finding sufficient viable, bankable projects. Dr Ow made the point that the problems that he has encountered in his feedback are that the programmes available for local companies are not clear. I think they can approach the Local Enterprise Promotion Centre. They publish a book. I will give each Member a copy of this book. It lists all the types of development assistance programmes that are available in Singapore and most of them are, in fact, aimed at the smaller local enterprises. If somebody does not know the type of assistance available, it is very easy for him. He can just call the EDB or the Enterprise Promotion Centre and they will be able to assist. I think ignorance here is really not much of an excuse.”
“] This is the result of a survey of the top 10 manufacturers in 1992 and perhaps this will help the Minister in addressing the issues faced by manufacturers so that the manufacturing sector can remain viable and continue to grow, not at a slow rate or half the rate of the economy but be leading or be above the GDP of our nation. On the issue of pricing of Government industrial land and premises, I have already said something about it yesterday and we hope that the Government will consider that land used for industrial purposes generate long-term returns and should not be allowed to be determined just by market forces. Otherwise the cost of industrial land and premises will be so high that nobody could afford to invest here and use them. I would like to suggest also that the Government look into the issue of the notice to be given for leases which are due to expire. For example, we are told that JTC would not inform or discuss the new leases until it is about three years before the expiry of the lease. We are asking for a longer period, say, five years before the lease expires for negotiations to start between JTC and the lessees so that they can plan ahead and they would know what to do with the premises or leases that they have Three years is a bit too short for them. We hope that the Minister will consider this issue. The Minister for Trade and Industry (Mr S. Dhanabalan): Mr Speaker, Sir, I will try and take the items in the order in which they were raised, except where they are very closely connected I will take them together. Dr Ow made the point that the schemes to assist local enterprises appear to be insufficient and that the average amount of loans and grants is rather low. Actually the loan scheme has a fairly high limit.”
“Thank you, Sir. First, on Government and private sector cooperation in business development. Much has been said in the last few days concerning what can be done. I would like to propose that on top of what has been said, the Government could consider assisting our companies which have already invested abroad to look at the skills training of their workers in those countries or economies. I am glad to read that, for example, Johor is going to ask the Singapore Government for help to set up a skills training centre in Johor. We are probably the largest investor in that state. And one of the major problems faced by our investors is the lack of skilled workes of a higher level and I hope that the Singapore Government would cooperate with the private sector here to train workers employed by our companies in such places so that their investment will have a better chance of success. Again, I would like to stress the importance of setting up joint information centres as well as joint committees. Moving on to the future of the manufacturing sector, my speech yesterday has been publicised. I would like to ask the Minister for his response on what is being done or will be done to ensure that the manufacturing sector will not shrink and become insignificant in the growing economy of Singapore. I believe that it should continue to be a mainstay or pillar of our economy right into the next century. I would like to propose that a council on international competitiveness comprising Government and private sector participants be set up to monitor our international competitiveness so that we will remain viable as a manufacturing centre for a long time to come. I would like to give out Table 4, with your permission, Sir. [Copies of Table distributed to hon. Members.”
“Sir, may I ask that Tables 1 and 2 be distributed to Members? [Copies of Tables distributed to hon. Members]. As can be seen from the Tables, the concerns of the manufacturers in the survey are factors affecting the cost of doing business in Singapore. Manufacturers are concerned that wages will continue to rise faster than productivity. And the rising RULC is also eroding our international competitiveness. Manufacturers are also concerned that the restoration to 20% of the employers' contribution for CPF would further erode their competitiveness. The increases in industrial land rental and premises are also of major concern. Following the implementation of the second-tier foreign workers levy, manufacturers are starting to feel the pinch of it. We are hoping that with the shedding of 13,100 jobs in the manufacturing sector last year, the Government will review this second-tier levy, either by reducing it or increasing the dependency ratio so that we can be allowed to employ foreign workers without paying the second-tier too early.”
“Sir, the private sector would like to see more missions led by Ministers to the region because we have found from experience that such missions are very effective in opening doors for our investors and businessmen.”
“Sir, may I have your permission to circulate Table 3 on the main problems faced by Singapore companies venturing overseas? [Copies of Table distributed to hon. Members]. Table 3 is contained in a survey by SMA on the globalisation and regionalisation of Singapore manufacturing companies in September 1992. I would like to suggest that the Government consider setting up a market intelligence gathering mechanism together with the private sector to help the problem of lack of good market research and information. Of course, the excellent agencies, like EDB and TDB, could contribute towards such an agency or committee. I would like also to propose that more joint councils or committees be formed between the Government and the private sector here and the Government and private sector of the target host countries where we would like to encourage our investors to go to, especially in the region. We have found, from experience, that such joint councils or committees are very useful for overcoming some of these problems faced by our companies venturing overseas, especially in providing information, linkages, as well as in locating suitable partners in the host countries. I would like to propose also that the Government and private sector in Singapore consider setting up programmes to train foreign managers from our host countries where our investors are going to so that we can strengthen long-term ties with the decision-makers and bureaucrats in those countries. Such programmes will enable our managers and investors to form strong links which will facilitate their investments over there.”
“On the issue of GST, special attention should be given to the problems of small enterprises in complying with the requirements of the GST. Although the Ministry of Finance exempts all small businesses with an annual turnover below $1 million from the GST, the proportion of small businesses opting for exemption will be lower since there will be pressure from registered customers to demand that these small enterprises also register for GST so that they can claim refund for the GST paid. This can be a serious problem as the experience of New Zealand and a number of other countries showed that the GST always encouraged large companies to deal with large companies, often at the expense of smaller businesses. To help small businesses register and comply with the requirements of the GST, I would like to propose that the Government provide grants and other financial assistance to help SMEs computerise and upgrade their accounting systems to meet the requirements. The GST is also likely to confer unfavourable cash flow on export-oriented companies. For companies where the total value of direct exports exceed their value added, the input tax will always exceed the output tax. For such export-oriented companies, I would like to suggest that the Ministry of Finance grant exemption for GST on their imported raw materials if the company provides an undertaking that such raw materials are destined for export. Finally, I would like to request that the Ministry of Finance consider the refund of any tax credit within 14 days of submission of the GST return. This will ensure that export-oriented industries will not be further penalised for complying with the GST.”
“I am glad that the Minister for Finance heeded the requests of businesses to provide tax incentives to help them venture abroad. Employers also welcome the cap on deductions for medical expenses. It is a wise move to force both employers and employees to become more cost conscious in consuming medical services. However, the implementation of the capping will require the cooperation of unions, employees and employers to look for innovative ways of managing their health care needs. At the same time, to ensure that such capping does not deprive employees of their existing medical benefits, there is also a need to find ways of keeping down the cost of providing medical benefits in Singapore. In other words, we must pay special attention to both the demand and supply sides in managing the health care costs in Singapore. The reduction in corporate tax rate by 3% for Year of Assessment 1994 is a welcome move and will help to partially reverse the declining after-tax profit share of GDP. The reduction will also help to keep the corporate tax rate in Singapore internationally competitive. The business community is looking forward to further reduction in corporate tax to 25%. This should be done as quickly as possible as it is still far above the rate of 17% in Hong Kong. Finally, I would like to touch on the GST. The business community welcomes the various measures and rebates introduced by the Minister for Finance to offset the unfavourable impact of the GST on the lower income groups. This will help to dampen the pressure for wage increases arising from the higher cost of living contributed by the GST. Given the already high cost of doing business in Singapore, businesses must be spared any additional cost burden.”
“We all agree that market forces should determine prices. However, the price mechanism would not yield optimal results in situations where externalities exist. Such externalities cause a divergence between the social and private valuation of a product. Where positive externalities exist, market forces will result in under production at a higher price. For industrial land, I believe that market forces cannot be used entirely to determine its price. Compared with residential land, industrial land creates positive externalities as it helps to generate jobs and income over a long period of time. It is a factor of production which contributes positively to the wealth creation process in Singapore. Therefore, industrial land generates social benefits for Singapore. Thus, leaving the pricing of industrial land to market forces will result in less than optimal provision. It is natural that industrial land will always be valued lower than the price of residential land. Although the industrial land fetches a lower price than residential land, we must encourage more allocation of our scarce land resources for industrial purposes as it generates jobs and income. It must also be priced at an internationally competitive rate so that foreign investors will continue to consider Singapore as an attractive investment location. Let me now move to other aspects of the 1993 Budget. The need for Singapore to build an external economy is an important economic strategy for the 1990s. It is needed if we want to catch up with the leaders in the super league. The various tax incentives announced in the 1993 Budget to promote an external economy are very timely and most welcome.”
“It means that manufacturing is becoming less profitable, earning lower rates of return on investment and becoming less attractive as an investment option. We are also concerned because lower profits mean less internally generated funds for new investment in machinery, technology, skills training and research and development and also for venturing abroad with new investments and for new markets. The figures from the gross fixed capital formation showed that investment in machinery and equipment fell by 2.2% in 1992. While we appreciate the 3% reduction in corporate tax rate and the 25% property tax rebate, manufacturers would like to see more action taken to address the issue of falling profit share of GDP. In addition, bold measures are needed to address the problem of rising unit business cost. Thus, it is time for the Singapore Government to embark on a total review of business costs, such as rentals, utilities, health care, labour, transportation and various Government levies such as the foreign worker levy. For a start, I would like the Government to re-examine our land pricing policies. One of the major concerns of Singapore manufacturers in 1992, as revealed by a recent SMA survey on the "Manufacturing Operations in Singapore" was rising rentals. Rentals rose by 11% in 1992, which is much higher than increases in labour cost. While the manufacturers welcome the property tax rebate of 25% announced in the 1993 Budget it must be noted that the rebate will only partially offset the higher property tax paid by many businesses due to the upward revaluation by the Property Tax Department of industrial properties over the last few years. The rising industrial rentals appear to stem from the Government policy of applying market forces to the pricing of land.”
“The manufacturing community was very much encouraged last year when the then Minister for Trade and Industry made the firm commitment that the manufacturing sector would remain as one of the key pillars or mainstays of the economy. However, I believe that more should and can be done to help the manufacturing sector regain its competitiveness internationally and reverse the above unhealthy trends. One of the major concerns of manufacturers is rising labour cost. Unit labour cost has been rising because productivity increases continue to lag wage increases. We must find more innovative ways to increase productivity at both the company and industry level through quality and skills upgrading programmes. I would like to suggest that the Government give more tax incentives and grants for companies to set up in-house training facilities or group training centres at the industry level. This will ensure that the skills acquired by our workers are relevant to the job. More funds from the general Government budget should also be allocated for such purposes as collection from the Skills Development Fund would not be sufficient to meet all our training needs. I am personally against raising the rate of the SDF contribution as it represents a tax on the business community and an added cost. Another issue that must be addressed by the Government quickly is the falling share of profits to nominal GDP. Over the last few years, the profit share of nominal GDP has been falling from 52.2% in 1988 to 46.2% in 1992. The declining share of profit may be attributed to keener competition in the international market and the rising cost of doing business in Singapore. This is a cause for concern. Why?”
“Profit share as a percentage of nominal GDP has also fallen from 52.2% in 1988 to 46.2% in 1992. If the manufacturing sector continues to grow at a lacklustre pace compared to the overall economic growth, the sector's share of GDP will fall to about 22% by the year 2000. May I ask the Clerk of Parliament to distribute a table which I have prepared for your reference? [Copies of Table distributed to hon. Members]. I have painted three scenarios of the manufacturing sector growing at half the rate of the GDP assuming that the GDP grows by 4-6%. You will see that by the year 2000, the share of manufacturing of the GDP would have fallen to about 22%. If that continues, it would be less than 20% in the next century. In fact, I would like to draw the attention of Members to 1991 and 1992. In that period, the manufacturing share of GDP actually dropped from 27.4% to 26.5%. The above indicators suggest that the manufacturing sector is at the verge of entering into the economic danger zone. We risk the danger of losing our competitiveness and slipping into a permanent era of slower growth unless the Government takes bold policy measures to reverse the decline of the manufacturing sector. The experience of the United Kingdom is instructive. Recently, the British Prime Minister, Mr John Major, admitted that Britain had made a mistake in allowing the manufacturing sector to decline. He felt that the present British government must take a different attitude towards manufacturing. We should learn from the British experience. However, I am confident that the Singapore Government will not make the same mistake.”
“Do we have the right skills and techniques and the stamina to go on? In the long race, we usually have some reserve so that we can at least make the second half of the marathon. Do we make good use of that reserve? I believe that the Budget that the Finance Minister has presented to us marks a very important major reform in our tax system which should help us to spur ahead and catch up with the developed economies. In fact, I would describe the 1993 Budget as a watershed budget. It is best described as a pro-growth budget aimed at rewarding entrepreneurship, work effort and companies which take commercial risks abroad. The introduction of a Goods and Services Tax (GST), though painful initially, is a move in the right direction as it would result in a more balanced fiscal system in terms of our reliance on direct and indirect taxes for Government revenue and its treatment of income and consumption. I hope that the tax reform will provide the necessary stimulus to propel Singapore forward in this race of the world economies so that Singapore can catch up with the leaders in the super league. However, I move that not enough attention has been given to the problems facing the manufacturing sector. In 1992, the manufacturing sector grew by only 2.3% compared with 5.8% for the whole economy. Total employment in the sector declined by 13,100 jobs and the index for unit business cost of the manufacturing sector is at an all-time high of 119.2. This is higher than the level of 114.3 when Singapore entered into a recession in 1985. The same is true of the unit labour cost. Our relative unit labour cost has also been rising since 1989 and we are now close to the 1984 level when measured against the other newly industrializing economies.”
“Mr Speaker, Sir, thank you for giving me the opportunity to participate in this debate on the 1993 Budget. Singapore is running in a marathon of the world economies and we can imagine this marathon to have started just after the war. But if we look at the participants, they are in clusters, almost like the real marathon. Right up front, we have the developed economies of the world - United States, Japan and most of the west European countries. Just behind them are the NIEs (newly industrializing economies) such as Singapore, South Korea, Taiwan and Hong Kong. But just behind the second group, we have the developing NIEs, as they are sometimes called, such as Malaysia, Thailand, Indonesia and China. Further down the track, we have the less developed economies such as the African economy, Vietnam and so on. We are about half way through this marathon and we should take stock of what is happening. Upfront, the developed economies have been running a very fast race but they are slowing down. But they are still far ahead. The second group, the NIEs, are still running at a fairly fast pace, trying to catch up with the first group. But the third group is running very fast. Somehow they took off a bit slowly but now they are catching up. Unfortunately, far behind, is a group of slower developing or less developed economies. We are in the second group. As we try to catch up with the first group, let us take stock of where we are, and how we can get there. Our economy was growing fairly fast after the last recession. But in the last two years we have slowed down. I believe that, like in any race, we have to know how we stand and how we can forge ahead. We have to look at whether we are truly strong or we have too much fat that we should shed or trim.”
“Sir, traders and investors are more concerned about getting insurance against political risk. Has the Ministry considered these special needs? Because, currently, from what I understand, political risk insurance is very small. What is available here is very small and cannot meet the needs of bigger projects overseas. Will the Minister consider looking at re-insurance or insurance for political risk of a larger quantum?”
“Sir, let me declare that I am a non-executive director of ECICS Holdings Limited.”
“Would the Minister consider putting it the other way? Someone who knows that the offender is a repeat offender lends his vehicle knowingly, so that it amounts almost to abetting, then the vehicle is forfeited rather than to have it done the other way right now. Would the Minister consider this?”
“Mr Speaker, Sir, may I just clarify what I said. What I was suggesting was that the owner of a vehicle should not be the one to suffer for the offence committed by the offender, because the cost of his vehicle can be a lot more than the fine to be imposed on the offender himself. So the owner should be spared.”
“Mr Speaker, Sir, generally, I support the Bill that we should enhance the punishment for reckless, drunken driving and repeat offenders who have been disqualified. But I voice the same concern that the owners of vehicles who have lent their vehicles to such people, knowingly or unknowingly, should not be penalised to the same extent of having their vehicles forfeited because, to them, the vehicle may cost a couple of hundred thousand dollars compared to the fine of $10,000 which the offender is expected to pay, of course, on top of the jail term. I am concerned about the proposed section 43 (3B)(b) that owners of vehicles, who are not the offenders, should lose their vehicles just because they lend it to them, whether knowingly or unknowingly. They always say that vehicles are actually very well designed engineering machines, but we need only one loose nut behind the steering wheel to wreck it or to kill somebody. Let us put away the nut, but let us not punish the owner of the vehicle who is not the offender.”
“Mr Speaker, Sir, Question No. 12. Let me declare my interest as a director of a company which is a lessee of Government land and factories.”
“The Minister mentioned about the recession, but he is fully aware that the recent economic survey showed that the manufacturing sector did badly this year and it is hardly recovering. It is expecting a 1% growth this year. So will the Minister consider giving manufacturers a relief at this time with a lower property tax rate for industrial properties?”
“Sir, will the Minister consider a lower property tax rate for industrial properties in view of the high rental or high land cost here in Singapore which is eroding the competitiveness for manufacturers?”
“Sir, will the Minister consider revising upwards the $200 limit since it was set a long time ago?”