Inderjit Singh
Singapore
“You do not want our monetary policy easing to offset some of these as it will result in an inefficient allocation of resources. I think our SMEs will also be similarly affected by higher import costs.”
“Thus, SPRING can become something like a Municipal Service Office (MSO) for SMEs. SPRING has already set up an outreach mechanism through the SME Centres. This structure should stay to be the outreach arm.”
“I want to thank the Minister of State for agreeing to the suggestion of the first- and one-stop agency. We have higher expectations, so, I hope we can make it work. But my question on REITs was not answered.”
“She worried about the eroded sense of belonging that she and her friends felt and their view that Page: 24 the Government was more interested in luring foreigners than bringing Singaporeans home. She said that friends and relatives asked if she planned to stay in Australia after her graduation. In 2013, she was unsure of her answer.”
“I recently read that, in Malaysia, the EPF holders are paid 6% for their savings for a number of years, and this is much higher than the return we are paying to our CPF holders.”
“I believe Minister of State Mr Teo Ser Luck mentioned just now the company formation rate of about 14,000. I would like to ask are we monitoring the rate of companies folding up. I have heard recently that the rate has also increased, especially in some sectors that are very dependent on rental.”
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“Singapore's Total Fertility Rate (TFR) is at a 26-year low of 1.38. Soon, a small base of young Singaporeans will be supporting a very large group of retirees. This "inverse pyramid" will be very unstable unless we require that every Singaporean put aside sufficient funds for his own healthcare and retirement needs. Otherwise, the burden on our future generations will be untenable. And at that time, taxes will have to increase. Singapore can no longer be an attractive place to work or live in. Many of our more capable youths will be drawn to countries offering lower taxes. The changes to withdrawal rules and Minimum Sums will underpin Singapore's competitiveness for the long haul and it is more significant than many have thought. Let me move on to discuss what else may be needed for Singapore to enhance its competitiveness. Lowering wage cost with a new CPF rate is a necessary but insufficient condition to regain our overall competitiveness. From the perspective of labour cost competitiveness alone, the odds are stacked against Singapore. The Prime Minister and Minister Lim Boon Heng have cited the wages of a manufacturing worker in Singapore compared to other emerging and competing economies. To top it all, the number of registered unemployed in China's cities alone is 8 million people. The US State Department estimates that the total number of unemployed and under-employed in China is a mind-boggling 350 million people! These unemployed will act as a buffer against any future wage increases in China. So China will remain wage competitive for a long, long time. There is no way we can match our wage cost "dollar for dollar" and "cent for cent" against these developing countries. And as DPM Lee has said, neither do we want to regress to such wage levels.”
“It is not just about waiting and seeing the outcome a few years from now, but to give confidence to everyone that we can do it. I am convinced that if we take all the necessary radical steps, we can do it. But I have not seen all the necessary steps personally. We need the Government to be bold and more entrepreneurial than what they have done before. I hope that we will not be disappointed and that the economy recovers fast enough so that jobs remain in Singapore and the unemployment situation gets resolved quickly. The Minister of State for Defence (Mr Cedric Foo Chee Keng) : Mr Speaker, Sir, thank you for this opportunity to join in the debate. I would like to share my views, especially from my perspective as Chairman, SPRING Singapore. Many Members of this House have pointed out that the broader challenge confronting Singapore is not just about the retuning of the Central Provident Fund but how Singapore can continue to be competitive in the global marketplace. It is about our ability to create good jobs so that Singaporeans can chase their Singapore dreams. Let me briefly discuss the CPF changes. The 3% CPF cut and the lowering of the CPF contribution ceiling are significant to tackle our wage rigidity to respond to our immediate challenges but of greater significance are the changes that we are making to the withdrawal rules and Minimum Sums. The benefits of these CPF changes we are making now will largely be felt 10 years from now. For the first time, the CPF and Medisave Minimum Sums will be adjusted for inflation. They will provide a basic level of financial security for retired Singaporeans. Mr Inderjit Singh suggested that perhaps a part of the CPF contribution should be made voluntary. However, in reality, it is not so simple.”
“Time will tell if I am wrong about my assessment, and I hope I am wrong in this case. I urge the Government to reassess the situation with a much open mind. Please start believing the people and the private sector more, and I hope that we will find all the answers when they give their feedback. People ask me: does the Government really have a plan to get Singapore out of the current set of problems? Many feel that there is no real plan because CPF changes alone will not fix our problems. This is the feedback I have been getting from the ground. In this respect, can I ask the Prime Minister to share with the House the reasons why companies are packing up and leaving Singapore? Surely, it is not because the CPF is just 3% too high. I am sure that there are many more factors which are forcing companies to pack up and leave. What are these factors and what are we doing about them? I know of a few multi-national companies which are still planning to exit Singapore today. They are still here, but they are planning their exit. The momentum of companies leaving Singapore has not slowed down and unless and until we address the cost factors adequately, we will continue to shed jobs and lose companies. If the Government can share with all of us what these exiting companies are saying, perhaps we can be convinced that there is a good plan in place and that we can solve all of our problems. Currently, there are many sceptics - they are not yet convinced that we have a plan that will work. Sir, in conclusion, I would like to urge the leaders to come up with a convincing plan which can assure and also inspire the people of Singapore to rally around the Government to solve all our economic woes.”
“We have to change and follow what other developed countries do, and that is, to get away from this high forced saving rate and, therefore, reduce the Government's dominant role in determining the wage levels here. The market should be driving the decisions. Let us really cut the apron strings. Let us do away with the Government determining wages. Let us do away with the National Wages Council, which is another way of Government playing a dominant role in determining wages. Let it be market driven. It worked in the past, but it is not going to work in the future, in my opinion, for the changes that we are trying to make. The sooner we learn this new paradigm, the more successful we will be. Sir, the next issue is whether there is a plan for us to solve all our economic problems. Why is the Government pulling its punches? Half-hearted and piecemeal changes will prove counter-productive. We need the right mixture of ingredients to produce the right medicine which can be administered in the right dosages to cure our unemployment and economic problems. In my opinion, the CPF changes are but just one of the component ingredients and are not the final medicine which is so greatly needed right now. And if we think that CPF changes are going to solve all our problems, we are going to be mistaken. Sir, I fear one thing - two years down the road, after we have implemented the CPF changes, we will still be in the same position as today, because we did not make the other necessary changes. If we do not progress by then, Singaporeans will feel betrayed that the Government gave away their wages with no significant gain in return. Can we risk this happening in Singapore? The answer must surely be no. I hope that the Government is right.”
“If we look at countries which have gone through the same situation as Singapore before, particularly the developed countries that made their transition from not developed to being developed, I am sure we can get some good ideas, and one of them is a real radical move to make CPF less compulsory. Perhaps we can take the first step of breaking the CPF into two components - the first, compulsory; and the second, voluntary - supported by Government incentives to encourage employers and employees to voluntarily save for their retirement. At a 40% compulsory saving rate, employers have the flexibility to adjust only 80% of wages, which is what the employees take home. Also, about one-third of an employee's wage is compulsorily saved, thus reducing the amount available to drive the consumption part of our economy. I therefore suggest that we should move away from forcing Singaporeans and their employers with the statutory and compulsory saving regime. By all means, we should encourage savings for the future and for retirement, but let us make this a market-driven practice and the Government can play its part, not by forcing, but by incentivising. The truth of the matter is that while the 3% CPF cut is welcomed by companies, but when the companies faced the crunch over the last few years, they had already taken more aggressive moves like reducing wages by 10%, 20% or some, even 30%, depending on what it took them to survive in Singapore. This is the flexible part of the wages, while the CPF is the most inflexible part of the wage system because it is dictated by the Government. My opinion is that this issue of high forced saving rate is what is deterring companies from investing in Singapore.”
“It is a manufacturing plant that employs about 1,000 people in Singapore right now. When I started it in 1998, I believed that Singapore could still be competitive in that industry. That company which I left, because it was already successful in its own right, is still around with about 1,000 employees but it is struggling to be competitive right now. In the year 2001, I started another semiconductor company. It now employs 1,500 employees but of these, only 11 are in Singapore right now; 350 in the USA, and more than 1,000 in the Philippines where we run our production, and about 60 in India where we do our design work. I tried my best to justify the setting up of a production facility in Singapore, but the other alternatives like Thailand, the Philippines and Malaysia were more compelling. I still hope to create another 1,000 jobs in Singapore, but it must make sense and it is not about National Service for us, because we have to be alive for a long time and the competition is fierce and the cost can be a killer in Singapore. Had my management team made the wrong decision of forcing ourselves to set up a site in Singapore, we may not have been around today. So, if the Government can address all the cost and regulatory issues, I am confident that operating a large manufacturing site in Singapore for quite some time to come is possible. I know we can do it, if the Government gets the right formula implemented for cost reduction. Sir, the second issue is one of CPF, whether it should be compulsory or voluntary.”
“And this is relevant because before companies come down here, they want to look at the whole life cycle and the day that they have to leave if they have to put up 24 months of retrenchments, it could discourage them from coming into Singapore; (3) rentals, utility charges, and many hidden taxes that I have talked about many times; and (4) the cost of regulatory compliance. Sir, on the way back from USA yesterday, I read about DPM's comments that the Government has already adequately addressed these cost issues. While I agree that something has been done, the changes are however not radical enough. What signals are we giving to employers and potential investors about the Government's resolve to address the total cost issues in Singapore when we do not go far enough in reducing the costs related to the factors that I mentioned earlier. Let me just take the cost of government as an example. The cost of government directly affects the Government charges and fees and also sets the stage for cost of doing business in Singapore. The Government is only now realising that there needs to be a cut waste system to cut waste in Government. In my opinion, cutting waste is not good enough. Waste, of course, should have been cut long time ago. We also need real cost reductions across the Government and its agencies, and not just in the area of waste. Even if it is just waste reduction, it shows that cost can be brought down some more. I am confident that if we look at the other factors, we probably can find opportunities for more cost reductions. I would like to relate my personal experience so that everyone would know that I am not just talking theory down here. I have started a number of companies. The first major one was a semiconductor company which I started in 1998.”
“Thank you, Mr Speaker, Sir, for allowing me to join in the debate. Today, I would like to address the issue of whether we have a real plan to address our economic woes and also how radical have we been in trying to address our economic problems that we are seeing right now. The Prime Minister mentioned that the CPF changes are the most radical ever made for a long time, but, with all due respect, Sir, I do not see the radical part of the changes. The lowering of the CPF rate by 3 percentage points is but a minor adjustment, in my opinion. Sir, the real issue is one of total cost. I would like to take up the analogy used by the Deputy Prime Minister, and that is, of the frog in the boiling water. What we have done with the CPF reduction by 3% is just like reducing the heating device a little, but it is hardly the cutting of all energy sources which are boiling the water. What we need are bold moves which will allow the frog to be energised to jump out of the pot of water. Or what we need is to cut off all the energy sources that are boiling the water so that the water never gets hot, and the frog will never die. The changes announced will just prolong our problems, in my opinion, because along with the CPF changes we need to do many other things. The much needed radical changes are nothing new and have been brought up by many Members before and also in the House over the last few days. These are: (1) the various Government charges and fees; (2) the cost of restructuring and retrenchments, which can discourage companies from wanting to set up base down here.”
“Sir, on the issue of the controversy, I would like to ask the Acting Minister, based on the data that is publicly available, would any researcher have made the same conclusion as the researchers from NTU made? Because I think the impact has been quite tremendous. People are now doubting both sets of numbers - the one that the researchers have given and the one that the Minister is giving us right now. My point is, based on the limited data that any researcher would have, would the conclusion had been the same?”
“Sir, can the Minister confirm this? The issue is that in the short term it is not viable, but in the long term it is. I can see that in any investment, it takes time to pay back. With that in mind, should we not try to compel SBS to look at the longer term gain that they are going to get and, therefore, subsidise all the bus routes, the Buangkok Station and so on? In fact, the Government has already written off billions of dollars on this line. Why can we not write off a few hundred million dollars and subsidise SBS, since we have already subsidised them on this operation, and solve the problem that the residents are facing?”
“I would like to seek a clarification. The Minister talked about CPF for retirement, housing and medical needs. But today, we are also using it for purchasing of shares, unit trusts and bonds. But because of the lack of adequacy that the Minister talked about, is the Minister signalling a shift in the Government's policy on the use of CPF because - it is a very important principle along the lines of discussion that is going on - to me, education is as much less a risky investment compared to shares, bonds and unit trusts.”
“Sir, I have a few questions. The first one relates to the impact that our actions have had on investors and on the business people who intend to travel to Singapore to meet up with Singapore businessmen. While we have been very effective in all the measures - and I think we have done all the right things - the signal that this is sending to the international community is that we have a very, very serious problem, compared to many others who may not be doing as much as us. So, we really need to do a PR exercise to rebuild the confidence once again for people to have confidence to do business in Singapore. My second question, Sir, is one concerning people from SARS-affected areas. Many residents have brought up the issue as to why we have not been so decisive in restricting the entry of people from countries that are severely affected, particularly from the various regions in China where we do not even know the severity of the problem. The third question, specifically for the Minister for Health, is: in case children are affected, the question that has been raised to some of us is whether parents will be allowed to visit their children, particularly the very small ones. I think this is one of the reasons why they fear going to Tan Tock Seng Hospital.”
“My clarification is that I do not want Members to feel that I have a narrow definition. I have a much wider definition than what the Minister thinks.”
“Madam, I want to make a clarification on the issue of definition of "success". In fact, I think the Minister may have misled Members to think about my narrow definition of "success". I may have a wider definition than him, in fact. The issue that I was trying to pursue was not so much of how we define success by way of how our students progress from one stream to another, but one of leakage of having a system of early streaming. That was the reason why I asked many questions. It is not because I have a narrow definition of "success". I, in fact, have a lot of respect for ITE graduates. I have come across many of them. Many of them are also successful.”
“Sir, I would like to speak in support of teachers. Recently, I read with concern a newspaper report about teachers reporting sick for stress related illnesses. Over the years, we have added many responsibilities for teachers without taking away some of the old duties and, therefore, teachers have to do more and more given the limited time that they have. What can we do to make teaching more effective through more motivated teachers? If stress is, in fact, affecting the teachers, it will affect the ability to teach effectively. One suggestion I can make is to separate the two responsibilities of teaching and that of administration. If the teachers can get more support in the area of administration, then I believe they will do much better and will be more effective in their role as a teacher, and not spending too much time in administrative duties.”
“Sir, I have decided not to speak on this topic.”
“Given the restrictions that we have placed in the new system, it is unlikely that we will see new private schools being set up. We should have the confidence that our children will still be able to imbibe local values despite going to such schools. Sir, on private universities, we already have many local institutions that offer distance learning or open learning programmes, and we should give them recognition to recognise them as full universities, not just for the benefit of Singaporeans, but also students from around the region. Finally, on the issue of twinning of SAP schools and neighbourhood schools - it is an issue that I should have brought up earlier - can I ask the Minister what is the progress on this suggestion to address the issues that Mr Chandra Mohan has just brought up?”
“Sir, the topic is on the new JC and upper secondary school curriculum, and the issue is on uniformity and education, and the inculcation of creativity. Sir, I did not have the chance to speak during the debate on the White Paper on the new JC and upper secondary curriculum. I fully support the intended outcome of the new system. I believe we have always had this tension between producing responsible, obedient and disciplined citizens on one side, and on developing a thinking and reflexive workforce on the other. We should, therefore, at all levels of the education system, differentiate between education practices, such as uniforms, discipline, rituals, ECA and others, and education content, such as curriculum, project work and subjects. To avoid mass production at content-related education, it is an excellent idea to create some unstructuredness within the structure of the curriculum and the syllabus. The flexible nature of selecting subjects at the Pre-U level, which has been suggested, is an excellent way to develop the entrepreneurship drive in Singapore. What are the Minister's thoughts about moving all of this unstructuredness to the secondary school level as well as to the primary school level, as some Members have suggested? Can the Minister elaborate on how bright students from neighbourhood schools will be able to take advantage of the through-train system of skipping the O-level examinations? Will they be easily allowed to transfer into schools with the new system? The next issue is on the setting up of private schools in Singapore. Can we be flexible in allowing Singaporean children to go into international schools already in Singapore?”
“I therefore would like to ask the Minister to share with the House the results of the system and, in particular, the following statistics. How many EM3 students are transferred to EM2 at the Primary 6 level? How many EM3 students finally get a tertiary qualification? How many EM3 students make it to the 'O' levels? How many Normal (Technical) students make it back to the Express Stream? And how many Normal (Technical) students make it to tertiary education? Fourthly, I also support the drive for entrepreneurship and the suggestions made by some of the Members. In addition to what has been suggested, I would like to suggest that we have entrepreneurship as a CCA activity in secondary schools. Can we set up entrepreneurship clubs, like we have debating clubs, gardening clubs, and so on? The NYAA is willing to spearhead this project but we need MOE to agree that this will be a recognised CCA activity.”
“Sir, I would like to touch on a few topics today. First of all, is on class sizes which two Members have brought up. While the availability of teachers may be a short-term issue, can we at least try to experiment with small class sizes by applying a hybrid system? We can have average class sizes for some subjects, and then break up some for bigger classes and some for smaller classes. We can do all of this within the same curriculum time. With this approach, we will not need many more teachers because these things will average out. I advocate small class sizes for slower children so that they will have a better chance of catching up with their peers as they get closer attention. And we can have bigger class sizes than normal for faster children. It will not be much loss for them because they do not need much attention anyway. Second, I support the issue of single session primary schools. I suggest that we start with a few pilot schools and, if it is successful, we can implement a roadmap for expansion to all schools. With single session schools, we will have the opportunity to have a much more flexible curriculum and to spend extra time with students who need more attention. Sir, the third issue is on streaming. While I do not fully agree with the streaming system, especially the way it is being implemented, I will not challenge the system this year because I know that I will get the same answer. I would like to, instead, focus on what success we have had with the system. If we really mean and do what we advocate in the system of streaming children according to their learning abilities, then we should see results of the focused effort to let slower children catch up with their peers.”
“I therefore suggest that we set up a Matching Agency that can facilitate this role, just as a facilitation agency. Once we can get this whole process going and the environment gets more mature and companies know where to find the money, I think the Government can back off as the momentum picks up. I think there is also room for agencies like SPRING Singapore to play a developmental role of providing smaller companies with the right training, mentorship and access to the right advice on what is the right type of financing available for them. I think whilst many companies can do it on their own, there are still some who still need some help. I have also given a suggestion of creating a special fund called a buy-out or restructuring fund. It will be especially useful in an environment like this where we want to encourage mergers, acquisitions and management buy-outs of GLCs. If there are more funds like this established in Singapore, I think we can spur the activities and create a lot more opportunities like this. Finally, the issue of credit rating and credit insurance schemes. If these can become permanent features in Singapore, they will surely help lending institutions to gain more confidence when they lend money particularly to smaller companies. And I think this is something that we have started but it is not well developed, and this could be another area which SPRING Singapore and the Government could develop further. And if these schemes are developed, traders who have been complaining about their access to financing will find the problem being resolved.”
“Sir, many Members have spoken about the need for financing of SMEs. I think the issue really is that, today, we have two ends of the spectrum in terms of financing. One end of the spectrum is VC financing through equity, which I would say is the aggressive end. And the other end is debt financing through collaterals, which is the conservative end. If we can develop a more vibrant financing environment, we will surely attract more entrepreneurs from Singapore and from outside Singapore to locate down here, as sugar attracts ants. And I think we have many gaps to plug today. It will take us some time for us to develop this vibrant environment, and I have given a number of suggestions to the Minister. I will just highlight a few, in addition to the small business bank which some Members have raised, and the OTC board. We have been very successful with the Local Enterprise Financing Scheme (LEFS), and I would like to suggest that we build on this scheme to enhance it further and to give it a bit more flexibility, so that this can be applied in many other areas, including non-equipment financing, participation by non-banks and venture capitalists, and also to give more flexibility to financing institutions so that they will be more encouraged to use the LEFS to lend. There is also a whole slew of financing modes depending on the life cycle of the company. The financing mode that a company needs may change as the company changes in its structure. As ours is still an immature market, compared to the more entrepreneurial economies like the US, Israel and Taiwan, we will therefore need some help, and this is where the Government can play an important role in trying to help find the match of a financing type for a company.”
“Sir, I have already raised the points earlier. So, I am going to skip this cut.”
“Sir, moving on to the issue of world class companies or globalising Singapore companies, I agree wholeheartedly with Mrs Lim Hwee Hua that it is important that we globalise our Singapore companies. We also have heard from many local companies that when we started talking about the second wing for our economy, many of them did regionalise. But when the Asian crisis came, they got hurt, and therefore they have backed off and pulled back on their efforts. So we really need to think of new initiatives that can help us to more aggressively globalise our companies. We all talk about the clustering of companies, big and small, going to the region. Can I ask the Minister whether there is any progress in this area?”
“Sir, my topic is on China and India. We all have heard many times in the House and also elsewhere the Minister sharing with all of us a defined strategy for China. Some examples are - investing aggressively in China, moving low cost manufacturing or the low value-added activities from Singapore to China, providing our services and expertise to China, because that is what is probably lacking there, training of our scholars in China to ensure that we develop a good network for the future, and also working on an ASEAN-China FTA. The question I have is: how confident is the Minister that we will be successful in our China strategy? The second question is on how China will respond to us. Are we a preferred partner or just another business contact for China? If we go with a mindset that we think that China is going to respond to us favourably, compared to everyone else, and if China does not feel the same way, then we may have difficulty in pushing the strategies that we want to push. The second issue is on India. Do we have a defined strategy, just like what we have for China, to tap the opportunities that are available there? And, if so, what is that strategy? One question that many have asked me is whether the Government is serious or half-hearted about going into India. Another question I have is: are we too late entering into India? Finally, how are the Indians rating Singapore as a partner? And are they willing for us to be a preferred partner to tap the opportunities? I know these questions are wide and varied, but, I think, if we understand how China and India feel about us, it is going to be easier for us to execute our strategies.”
“Can I ask the Minister what are the JTC initiatives and plans to assure the affordability of factory space over the long term? Also, whether JTC and its 100% owned subsidiary, Ascendas, have indeed passed on all of the savings from property tax rebates to their tenants. I have often heard feedback that Ascendas did not quite do so. Second, what initiatives does the Minister have to address the high cost image and to eliminate the unhealthy perception problem that we are facing? Finally, I also brought up the issue of many hidden taxes, Government charges and fees, and if they are all added up will make our overall effective tax rate looks worse than many countries - taxes like property tax, petrol tax, COE, road tax and so on, which have been brought up by many Members. Is the Minister still convinced that we are indeed cost competitive if we add up all these factors of cost?”
“Sir, I raised the issue of cost competitiveness many times before, and also during the Budget debate a few days ago. I feel that the response so far does not give a comfort feeling that we have identified the solutions of all the factors of costs. During the Budget debate, of course, I got a straight "No" answer from the Minister for Finance with respect to my suggestion on differential pricing for industrial land. The Minister felt that we already have sufficient initiatives in place to address the issue of high cost of land. The Minister also said that the Government will ensure sufficient and affordable land for industrial use, and will always be available to keep Singapore competitive in the long term. During the debate, I also highlighted the issue of the image that we have created outside Singapore, and I brought up the example of a project which would have been competitive in Singapore, but the customers that I spoke to preferred to do it in China or in countries like Philippines, simply because they felt that Singapore could not do it. And I felt that it is competitive because it was mainly capital cost that was involved, and the labour content was really very small. But the issue of land could then become a significant factor. Sir, the issue of image and perception that we have given to others regarding our cost being high could be a big issue for us. And one lesson that I have learnt throughout my working life is that the perception can be as bad, if not worse, than reality. With this as the backdrop, I would like to ask the Minister a few questions: First, on industrial land, I believe that the Minister for Finance really meant that the Government will continue to provide affordable industrial land to JTC.”
“In the light of the anticipated increased difficulty that SMEs will encounter with the risk-based framework for banks, how will the Government help mitigate this challenge? Will the Government assume a bigger share of the exposure from loans to SMEs and start-ups, in addition to the various suggestions made by my colleague, Mr Inderjit Singh? 2.00 pm”
“I have raised this issue for quite some time and the Minister had in the past indicated his willingness to look at this, and I think this is the best time to press on with the implementation. Mrs Lim Hwee Hua: Sir, many of my colleagues, including Mr Inderjit Singh who just spoke, have recounted the woes of SMEs when trying to secure financing for their businesses. In a nutshell, the factors against SMEs are largely those of size and a lack of track record. Any banker will tell you that he would love to help, but risk ranks paramount in his consideration of extension of credit. But, as we all know, all the successful businesses today must have been small and without a track record once when they started. Some banker or governmental help must have been instrumental in nurturing these entrepreneurial efforts. Sir, I am raising this challenge again as I envisage even greater obstacles to financing for SMEs with the banks moving towards a risk based capital adequacy regime. From what I understand, risk weights are attached to the customers according to some assessment of credit worthiness of either the customer himself or the business. In other words, a clear distinction will be made between customer type, perhaps with greater emphasis than is done currently. So, the more banks lend to riskier customers, the more capital backing they would need, and this goes against the grain of pressurising banks to optimise their capital efficiency. For the larger companies who have established track records and cash-flows to support the ability to service the loans, their risk weights will be pegged accordingly. For the smaller companies or start-ups, greater risk weights are likely to be attached, thus placing them at a disadvantage.”
“To create the likes of SME Loan or small entities, we will need some legislation changes to perhaps allow some of our existing finance companies which are already here in Singapore to play the role or to extend the moneylender licence to allow entities like SME Loan to be set up, which was set up on that basis also in Hong Kong. Legislation has to allow flexibility to banks or the finance companies to charge higher interest by virtue of the higher risks of such loans, and to allow them to have some facilities which are now only restricted to banks but not to the finance companies. This will allow them to help SMEs by providing more comprehensive services which do not exist today. The second one is of an emerging market board or OTC where easy listings and easy trading of shares can take place. In Taiwan, there is what we call a "grey market" or a pre-listing market, and I had the opportunity to do a study trip to Taiwan to understand how this works. It works so well that the Security Exchange of Taiwan has set up a parallel one that runs in the private sector. What this does is that it allows liquidity and cash to flow into further investments, and it also gives confidence to investors that they can exit sooner if there is a need. Companies can basically trade their shares the day the company is formed. To do this successfully, we need a couple of elements. First of all, it needs to be a very simple set-up, not like another Sesdaq. It needs to be regulated with a light touch. It must cost very little for companies to use this avenue to raise funds and, of course, we must have a good disclosure system.”
“Sir, my topic is on the financing of SMEs. I have a keen interest and have been involved in the study of financing environment for start-ups and for SMEs in Singapore. The main conclusion is that we have gaps in the type of financing available in Singapore, compared to the other entrepreneurial economies around the world. I will raise most of these issues and gaps during the Committee of Supply debate on the Ministry of Trade and Industry. There are, however, two issues which I think the Ministry of Finance should address. First of all, it is want of a small business bank. I am not suggesting that we set up another DBS or a new small bank in Singapore. But what we need is a bank or banks able to support and finance small and medium companies. After so many rounds of dialogue sessions and discussions with the business community, I am convinced that we have a structural gap in this area, and it needs to be plugged fast. Examples of successful models are the Wells Fargo Bank in the USA, which is a very big bank but it supports small companies, or SME Loan which is a very small entity and has also successfully supported small companies. What do they have in common? First of all, they have a scheme which assesses companies differently compared to assessing bigger companies. They have a good method of monitoring performance of these companies. So, this gives them comfort to loan money to the smaller companies. And they have a much more hands-on approach in understanding SMEs' needs. While we can transform one of our banks, whether local or foreign, to do all of these, we could also attract the likes of Wells Fargo to come to Singapore.”
“I also note that in the discussion of the FTA with the USA, this issue was also raised. I also recently had some feedback from an American-run SME in Singapore about the unfair competition faced from a GLC (in this case, not a TLC, but a smaller GLC which is not listed). His concern was that the GLC was competing successfully, particularly in Government tenders, because it has less than commercial funding.”
“Sir, the ERC Report spelt out its stand on GLCs, and I am happy to note that the Government is planning to divest a few of its smaller GLCs, which the Deputy Prime Minister mentioned during the Budget speech. Unfortunately, in my opinion, Temasek has not demonstrated an urgency to do the same for its group of companies. And I would like to suggest a few things on GLCs. I am sad to note that very few Members are talking about GLCs. They seem to have abandoned this cause. Sir, on the issue of divestment of TLCs, the Minister should set a target and that the Ministry of Finance should monitor the progress against the timetable. It is up to the Minister whether he wants to share this with the public, in terms of the timetable and the ability to meet this timetable. But someone should be driving this. The second issue is on Temasek Holdings: whether it is too much of a risk for all of us to put all our eggs in one basket. Is it a risk to have all of the Government companies being held under Temasek Holdings? I would like to suggest that we consider the option of splitting Temasek into a few vehicles. The added advantage is that we can create competition and the pressure for all the Government holding companies to perform better because there is competition. What is the Government, as a shareholder, doing about loss making GLCs? Some of them are among the worst performing in their industry for the last few years. How long can such losses be tolerated? Can the Minister share with us its process of handling such companies? Sir, finally, on the issue of cheap loans and grants given to GLCs before going public. Recently, I came across a couple of Annual Reports and IPO prospectus which revealed that there were some loans to GLCs which were under favourable terms.”
“Sir, the points I wanted to raise have already been raised. Sir, I wish to withdraw my cut.”
“I think the Ministry of Education is practising this for some of its teachers. Fourthly, a reward system which recognises people who are willing to think out of the box, rather than rewarding people for conformity. And finally, the secondment of civil servants to private companies with some performance measures which should add to the assessment of the long-term career potential of the person seconded. If their performance in the private sector becomes an important measure of their ability, I am sure they will seriously learn about what it takes to make the private sector tick, and skills which will be useful for them when they return back as civil servants. While I am convinced that the political leadership and top civil servants are enlightened on the need to support and encourage private enterprise down the line and down the ranks - you have heard from many Members - the motivation is not the same, and we say this from personal experience. I hope that the suggestions I have will help to change the mindset of civil servants.”
“Many a time when I visit Government offices I see the luxury of these offices - the big spaces, the nice furniture and fittings. I think we need to scale back and go back to the basics of what are the functional uses of these things. Thirdly, reorganisation of the civil service and the Government - to regroup, to outsource, to reduce sizes of the various agencies. 11.15 am Finally, on the issue of an entrepreneurial civil service, while I agree with the move, I think it is very important that, if you want to support a pro-enterprise environment, I have some ideas for the Minister to consider. First of all, we need to give greater discretion to the officers at all levels. The complaints that we see from the private sector all the time is that officers dare not make decisions because they are afraid of making mistakes. And they would rather err on the conservative side because of how the reward and recognition system works in the civil service. We should allow them to have more flexibility. Second, build in some grey areas in legislation so that there is sufficient flexibility when it comes to implementing rules and regulations. The current mentality of trying to plug all possible loopholes does not help when we try to encourage people to think out of the box. The fear of going against regulation discourages the spirit of enterprise. Sir, the third issue is to give some time off for civil servants to participate in outside activities, including being involved in consultancies and business activities, as long as they make proper declarations of what they are up to. One way to encourage this is to pay civil servants only nine months of the salary and let them earn the rest of it through consultancy.”
“Sir, in a downturn, every company takes the opportunity to restructure, reorganise and re-strategise. So, for many, restructuring exercise is not an option, but a matter of survival. The Deputy Prime Minister talked about creating an entrepreneurial civil service. While I applaud this initiative, I however do not see any recommendations in the ERC or the Budget on how he plans to achieve this. Sir, I would like to talk about three areas on this amendment. First, cost-cutting; second, improvement in the efficiency and productivity of Ministries and Government agencies; and, third, how the civil service can become more entrepreneurial. In the area of cost-cutting, I feel that it is appropriate for the Government to review the salaries and compensation of Ministers and top civil servants, not just the 30% cut that Mr Steve Chia talked about. I think this is no simple thing. When we structured the salary system, it was in times when economic growth was very high. And we realise now that it is not going to come anymore. What has happened now is that we have got a system where, instead of following the private sector benchmark, it is setting a benchmark for the private sector, so much so that it leads to higher cost of hiring talents in the private sector. I think it is about time that we took the opportunity to review the system so that it does not create the kind of pressure that the current salary system is creating. While the Government has been successful in attracting talent, having high salaries, I think the net impact on the private sector is quite detrimental. The second area of cost-cutting is on how operating costs like rentals, utilities and services bought by the Government could be brought down.”
“I will elaborate on these during the Committee of Supply debate. Sir, in conclusion, the budget is just one of the many levers to address the current situation that we are in. The current crisis is different from the previous predicaments, although we may use the same terminology to describe them. We have been using the same old formula to address these new predicaments. The context of the problem has changed. And it will continue to change, because we live in a world where change is a constant. As a result, each crisis will become more complex than the previous one. We have to adopt newer measures, and the speed of implementation is essential for their success. This year's budget is being hailed as a budget in transition. My opinion is that we need to get out of this transition quickly. We have been in the transition mode for quite some time. We need to arrive at an economic model that we want very quickly. We have been planning for quite some time. The planning phase is over. It is now time to execute and implement bold measures. We cannot be half-hearted in our endeavours. We need to be clear in thought and be decisive in action. Sir, on the belief that the Minister will implement swiftly these new measures, I support this motion. 11.52 am”
“An officer was allocated on a full-time basis to become the project manager for setting up of the factory. The American manager who was responsible for setting up the Apple factory in Singapore did not have to be personally here in Singapore while the facilities were being set up. That is what I call service. Can anyone in this House give me an example of a similar service for our local companies? I do not know of any. The reality is that most local companies are left on their own to fight their own battles and to clear the many obstacles themselves. At times, I dare say that the bureaucracy works against them. The lesson here is that had we not had EDB to champion the cause of MNCs, we may not have developed such a vibrant economy. Champion agencies can do wonders because of the influence they have in clearing these obstacles. So, how can we apply these lessons? Firstly, let us create a conducive environment by making a review of rules - which is happening, and I think the rules should not just be reviewed but also revamped - this time round, by putting smaller companies and start-ups centre-stage when we develop these rules. Secondly, of course, is to revisit all the incentive schemes and tailor them to suit start-ups and SMEs. Thirdly, we really need an EDB-style organisation, a one-stop agency for SMEs and start-ups. Today, we see too many agencies claiming to champion the SMEs and entrepreneurs, but my experience with them is such that none is able to provide the comprehensive service that EDB does for MNCs. Many things, in fact, fall into the crack for entrepreneurs and smaller companies. We need a champion. Finally, to build a vibrant financing environment, such as the ones that exist in entrepreneurial economies in the USA, Taiwan and Israel.”
“The lesson here is that while it is easy for big companies to apply and utilise the incentive schemes, the smaller companies find it terribly difficult to do the same. Thirdly, hand-holding of MNCs from cradle to grave. This, in my opinion, is the most significant initiative implemented here that made MNCs most comfortable in setting up bases in Singapore. Kudos to the EDB for this. We created a one-stop agency which hand-held MNCs coming into Singapore, right from the time that we were courting, through the time that they started operations in Singapore, up to the time that we encouraged them to leave for places like Batam and Suzhou. Having dealt with EDB on many occasions - while working in a multi-national company as well as when I went to start up my own local companies - I thought I had a good feel of how they operate. I must confess that I really understood EDB only after reading its book published recently called Heartwork. It is an excellent book. After reading it, I understood why EDB did what it did, and became even more convinced that EDB will never be able to handle and help local start-ups. I would like to say that the EDB has done an excellent job all these years but, having understood the charter and the mode of operation, especially after reading the book, I realised that it is unfair and impossible for them to effectively support local companies. Let me share one example from the book to illustrate the mindset with which it operated in helping bigger companies coming into Singapore. Sir, in the book, what I read was, when Apple computers wanted to set up a factory in Singapore many years ago, EDB went the full mile, did all the work for Apple in fitting up the whole factory. In fact, it went even further than that.”
“We can learn from our successes in the economic development of Singapore in the first 30 years, which have been in attracting foreign direct investments, multinational companies, and in establishing bigger companies, ie, the Government-linked companies here. We can then apply them as we focus on building an entrepreneurial economy. There are three main lessons to be learned from building a corporate economy. They are, first, creating a conducive environment; second, putting in place incentive schemes; and last, but not least, a hand-holding of multinational companies from cradle to grave. What I am about to say may seem obvious, but I feel that we have not fully understood the root causes and have not addressed and learnt from these lessons, and to address the issues on how we can successfully create our entrepreneurial economy. Sir, firstly, on creating a conducive environment for MNCs to set up base, why were we successful? Because the Government had developed an appropriate infrastructure, offered cheap land, removed other obstacles that may have existed and made it easy for MNCs to decide to start up operations here. Rules and regulations were tailor-made for MNCs and for bigger companies. Many of the MNCs and GLCs had direct access to top civil servants and Ministers, and this allowed them to resolve issues faster. The lesson here is that the rules made for bigger companies will not work for start-ups and for smaller companies. Secondly, on incentives and financing schemes made for bigger companies. To complement the setting up of a conducive environment, the economic development agencies developed a slew of incentive schemes, Government grants and tax breaks, again tailor-made for MNCs and for bigger companies.”
“The challenge, therefore, for the Government and the Minister for Entrepreneurship is to make a sincere pledge to lead this transformation of our economy and, then, to understand what is needed to make this transformation. The first challenge, therefore, is that of a mindset change. Yes, it is difficult to attract foreign companies to invest and set up shop in Singapore, but it is even more difficult for our economic agencies to visualise how a start-up or a non-entity - someone who is trying to do a start-up - can one day evolve into a world-class company based in Singapore. So, it is therefore compelling to still take the relatively easy way out of continuing to deal with a corporate-based economy - the tried and tested model. The unfortunate fact is that I feel the Government is still unsure or half-hearted about putting in place an entrepreneurial economy. Why is this so? If we ask anyone of the Government economic agencies or the civil servants who are driving this initiative, we cannot help but conclude that they are still programmed to bring in foreign MNCs. The sad thing is that many are sceptical about the ability of our local entrepreneurs to make it big. I say this from my own personal experience and from direct feedback from would-be entrepreneurs. Sir, the second issue on entrepreneurship is lessons learnt from our successes with MNCs. If the mindset change can be achieved, then I feel that the next few steps needed to succeed in transforming our economy and of encouraging more entrepreneurs to set up their bases in Singapore would be much easier.”
“It is clear that Temasek failed to realise this to be a short term loss but a long term gain. Because it has to answer to the people of Singapore, it therefore has to err on the safe side by taking a kiasu approach in ensuring the best possible value because they have to answer to all of us. Therefore, this is the cause of Government getting involved in business in the first place. In the process, we lost a greater opportunity of setting an excellent example of a GLC divestment done successfully for the long-term good of the country. I would therefore like to see an implementation roadmap and an implementation committee, like what Mr Leong suggested, with the responsibility of ensuring that recommendations are implemented the way we intended them to be, and with the speed necessary to achieve the intended impact. It will be good for this implementation committee to share its results regularly by publishing a scorecard for all of us to see. Sir, the final topic I would like to touch upon is entrepreneurship. Having been so used to developing a corporate-based economy in the last 30 years, the real question we have to ask is: are we willing and are we ready to make the transformation to an entrepreneurial economy? And I think this is the most difficult question for us to answer. There are two key elements for us to succeed. Firstly, understanding what it takes to create an entrepreneurial economy and, secondly, the lessons learnt from our successes with the multi-national companies. First of all, understanding what it takes to create an entrepreneurial economy. This is the biggest challenge and the most difficult one to overcome. Unless and until we resolve this issue, we will never be able to transform our economy.”
“For some of these exercises, we were big on plans, but short on actions. We risk losing the confidence of the key stakeholders of Singapore, should we fail in the implementation. The number of recommendations is overwhelming and, if not handled well and not implemented systematically, we could lose the intended impact. So when I read in the papers recently about Singapore climbing up one notch among the most expensive cities in the world compared to the year before, we actually became more expensive and not less expensive by one notch. My heart sank simply because it goes to show that we have not moved fast enough in our restructuring exercise. The second concern I have is that, in our attempt to restructure, are we doing this in isolation? We should, in fact, be aware of the fact that there is a rapidly changing environment around us. Our neighbours are also contemplating the same thing as us. We are working with a moving target. We want to lower the cost of doing business, so do our neighbours. We want to be the Life Sciences Hub in Singapore, so do cities like Xian, Hyderabad, Bangkok and Kuala Lumpur. I cannot over-emphasise the need for speed. I believe it is not only the ideas which will define our success, but more importantly, our ability to implement these ideas and our ability to implement them swiftly which will determine how successful we will be in transforming our economy. So let us not get too complacent but get moving faster than what we are doing right now. An example of a non-starter and a failed attempt which comes to mind is the NatSteel divestment saga, which dragged on for so long. The inability to make a judgement to take a certain amount of loss, has resulted in the sloppy execution, in my opinion, of the NatSteel divestment.”
“And I have personally visited a customer about three weeks ago in the US, trying to bring in what I thought was a high-tech activity into Singapore, and the answer I got from them was "We will probably not be coming into Singapore. But if you can promise to do it in China or some other low-cost countries for me, I will move my high-tech activity there." The problem we suffer is that the image that we have created for ourselves is one of a high-cost country. So we really need to fix this problem once and for all. The second issue is on the implementation of the ERC Report's recommendations and roadmap. All of us agreed that the ERC exercise was a key and necessary initiative. But, in my opinion, we reacted a bit too late. There were already a few signals that we could have picked up had we been more attentive. We could have reacted much earlier. The few signals were the bursting of the property bubble in 1996, the Asian financial crisis, the emergence of China and India and the flow of FDIs into China. These are all new things. We could have reacted earlier. But anyway, now that we have identified so many initiatives, including some considered taboo in the past, we should now roll up our sleeves and start implementing them quickly, a point that Mr Leong made earlier. The ERC should not end up as an academic exercise. Too many important people have set aside their valuable time to be involved and we cannot risk disappointing them and again failing to implement the recommendations decisively. More importantly, we cannot risk failing the Singapore economy. The reason I am bringing this up is because, in the past, we have undergone similar exercises with the likes of the S21, SME21, Retail 21 and the many '21' initiatives.”
“The ERC recommendations merely reaffirmed the 1994 changes. So the ERC's recommendation of a reduction of personal and corporate tax rate was long overdue anyway. It should have come down drastically the day we implemented the GST changes. The tax changes, in my opinion, were not radical enough. The second example is that of the CPF. It is becoming a habit now to tweak the CPF rate in times of crisis. While I am not against this to help us in the short term, this does not give us comfort that we have gotten to the root cause of the problem and that we are just addressing the symptoms. Is it not sufficiently clear that we have a structural problem with the CPF system? We should have worked on a more permanent solution, perhaps a lower contribution from employers and compensated by alternated retirement and medical schemes. Had we made bolder changes, we may never have to fiddle with the CPF contributions now and then. Sir, the final example is one of land prices, and in this topic, I tend to defer from Mr Leong. I believe that the high cost of property, particularly industrial land, is a big issue. To me, this is one of the most serious structural problems, other than the wage which directly affects Singapore's competitiveness, particularly in areas of manufacturing. So while we may talk about moving low value-added activities outside Singapore and trying to bring in more high-tech and high value-added activities in Singapore, the problem is the image that we have created for ourselves is that we are a place where business activity is going to cost companies a lot of money. It is a high-cost country.”
“" Sir, this is a true quote coming from a few prominent Singaporeans. To convince them, the argument that all of us who were involved in this process was that, this time round, the Government has realised that there is a need to change for the survival of Singapore and everyone's input was needed. The outcome has been a lot of hard work by many, and the many recommendations to remake the Singapore economy. While on the whole, the recommendations have been bold and will make a big difference, there are certain areas which could have been better dealt with. First, the impression that we have is: are we really re-tuning or refining the economy? We were promised that there were no sacred cows and that no stones will be left unturned in this whole exercise. The outcome in a number of areas, which I felt could have made an even bigger difference, was not changed. The ERC could have exercised greater will power to make bolder changes in certain areas. Unfortunately, the impression many people have is that all we have done is once again to just make tweaks in certain areas when we should have made fundamental changes to turn things around. When the whole exercise started, we talked about the remaking and restructuring of our economy. It now appears more like a refining and re-tuning exercise in certain areas. Yes, we did pick the stones and place them back in the same place or in some other place. We missed the golden opportunity to make much needed changes to the economy. Let me back up my argument with a few examples. First of all, the tax system. We have been touting the tax changes as a major structural change, but as far as I can see, there was no real change in the system. The real big change happened when the Government implemented the GST system, I believe, in 1994.”
“The measures like temporary rental rebates, temporary property tax rebates and temporary CPF cuts do nothing in instilling confidence among longer term investors that, indeed, Singapore will still remain competitive not only two years from now, but also 10 years or 20 years from now. In fact, the current approach just drives investors harder to move out faster while they can, while the rebates are still in place. As a serious investor, I know that I have to worry that in six months, rentals and property tax will go up again and that the CPF will again go up in two years. The thought process will surely be to encourage companies to prepare to move out before costs once again increase when the regime of temporary rebates and temporary increases run out and go back to a steady state of higher costs. I hope that all the efforts of all the committees I mentioned will not go in vain and I hope that the Government will overcome this inertia and get down to addressing the cost issue seriously. The ideas are all there - differential land pricing, structural changes in the wage system, levies, fees, charges from the Government and utilities, logistics and telecommunication charges. We have enough data to show that Singapore is not competitive in all these areas. Second, the issue of implementation of the ERC. We all know that many Singaporeans were involved in the above process of deriving the ERC recommendations. I must admit that there was some skepticism among some people involved in the process and a comment which summed up the feeling went like this: "I have been asked to give my feedback many, many times before for so many years. What is the point? The Government does not listen and does not believe in us anyway.”
“The Minister should have put in place a temporary scheme to make cash accessible to such Singaporeans, for example, a 1% tax reduction could have helped these people in tough times and these are the people who are paying tax and who may have lost their jobs. Sir, the second issue is the budget deficit, in my opinion, is hardly a deficit. It seems to me that the Minister tried very hard to end up with a deficit budget by making huge special transfers in the three areas of ERS, Lifelong Learning Fund and Medical Endowment Fund. Similarly, I do not see how the year 2003 Budget will end up in a deficit. Again, we are making special transfers, and we are forecasting a lower NII and we did not seem to have fully accounted for the 1% GST increase and the special income coming by way of more COEs expected. So if we had spent a bit more in trying to help companies and individuals in difficulties, perhaps that deficit would have been a welcomed deficit. So what about the long term cost competitiveness of Singapore? Has the Minister missed out looking at this serious recommendation, made not only by the ERC, but also by the many, many committees before the ERC, like the SME21, the T21 and the Cost Competitiveness Committee? I feel that the Minister again lost the golden opportunity to address once and for all this critical issue that is sinking the Singapore economy. I am really disappointed at the seemingly short-term thinking of the Government, especially on this important area of cost competitiveness. And why do I say short term?”
“Mr Speaker, Sir, thank you for allowing me to join in the debate. Sir, today, I would like to talk on three points. First of all, my assessment of the Budget - what it achieved and what it failed to achieve and what more could have been done. Second, I would like to comment on the implementation of the ERC recommendations and, finally, I will touch on the issue of entrepreneurship and what I feel will be the strategies needed to be successful in this area. My assessment of the Budget, as I listened to the Finance Minister delivering it, was that it seemed to be a balanced budget, addressing both the short term and immediate issues as well as the longer term issues needed to address the restructuring of the Singapore economy. As I analysed the Budget further, I actually saw very few new initiatives to make this Budget exciting enough to catch the attention of long-term investors. But before I touch on this point, I would like to square off some very obvious things that, in my opinion, were the disappointments of this Budget. First of all, this Budget did not address the concerns of the middle group of Singaporeans. While we did take care of the lower income Singaporeans through the various rebates, it did nothing to assure the biggest group of Singaporeans who may have more assets than the lower income Singaporeans, but who, in the short term, have the same concerns which worry them and, that is, the loss of jobs and the short-term financial help that they can get from the Government. I feel that the Minister should have done much more to assure Singaporeans that their problems will be addressed in times of difficulties.”