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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“This is presently retarding the consolidation of group accounts and resulting in income being managed out of Singapore but not consolidated here. There is a lot of benefit for us to streamline this process. With regard to mitigating inflation, I hope that we can review our tax brackets and, if needed, adjust them, since people's nominal income may have been growing but their real income may not have been keeping pace with inflation, so they may end up in a higher tax bracket with a higher tax liability while at the same time earning a smaller real income due to higher costs. An alternative to this is what I suggested during the Budget debate, ie, to have higher reliefs for self, children or elderly parents to keep up with the costs that have gone up. Finally, I want to repeat the point made by Mr Banerjee regarding the implementation of the R&D incentives which could pose some problems. I also agree with him that the definition of R&D is quite narrow and supports high-technology product companies. I ask the Minister to review the definition to allow more companies, especially service companies, to benefit from innovation-driven activities.”
“Madam, I have some tax-related suggestions for individuals and companies. First of all, the NOR scheme for Singaporeans. The Not-Ordinarily-Resident scheme has been successful in attracting talented high-earners to base themselves here, in particular, if they travel frequently. This is applicable only to foreigners. There has been feedback by Singaporeans who travel frequently that they should not be treated differently from foreigners. Specifically, some of them are asking to be included under the NOR tax incentive scheme, by apportioning their tax liability for the time that they spend in Singapore. This will encourage more of them to take up opportunities in the region and will catalyse them to internationalise. Sir, I would also like to suggest that, to assist businesses with the cost crunch, we levy a concessionary rate of property tax for commercial or industrial properties that are owner-occupied, quite like the owner occupancy concessions for property tax we have on residential properties. Presently, the foreign-sourced income received by a resident company that satisfies the qualifying conditions is not taxable. This is narrower than the exemption given to individuals for foreign-sourced income, which is not taxable outside some specific exceptions. I would suggest that we equalise the two rules for companies and individuals. According to industry feedback that my GPC got, the present system for companies does not allow them an easy way to decide whether their foreign-sourced income is indeed exempt. They have to go through a very onerous application process, following which a decision will be made on the subject income by IRAS.”
“00 pm The European Commission plans to discuss the SWFs at their coming Spring meeting and the topics will include increasing transparency, predictability and accountability of SWFs. The aim is to establish a code of conduct, including standards in areas of transparency and governance. And this is happening in many other places. We know that GIC and Temasek operate for profit, as they have done for decades now. But I do not think they have completely convinced everyone of their objectives. I believe that unless our SWFs show greater transparency and adopt certain accepted standards of governance, they might find themselves targeting investments which could be derailed. I am not calling for them to disclose all that they do. This is impractical and unnecessary and does not serve any interest. We can, however, take a leadership role in the present debate by coming up voluntarily with perhaps the following: (1) The major objectives of the funds; (2) A transparent set of guidelines on their investment principles; and (3) The decision-making process, to show that they are independent from the Government. I think the MOF can play a very big role in: (1) Trying to manage how both the portfolios of GIC and Temasek are coordinated; and (2) Setting up these new standards so that we can take a leadership role in this changing environment. GIC and Temasek Holdings”
“My point is that some rationalisation needs to be made for both GIC and Temasek to have some coordinated pattern of investment and MOF is best positioned to do this. One way, for example, could be, if MOF makes an assessment that a portfolio of, say, X%, $20 billion is appropriate for total investment into banks by both entities, then MOF could monitor the investments made by each of GIC and Temasek at their own pace, based on their own investment rules. And when the total investments of the two reach close to a limit of $20 billion set, MOF could alert and pay closer scrutiny on further investments, and perhaps even require both GIC and Temasek to operate on different rules when this happens and get MOF's approval for these investments. Sir, recently, we have also seen a changing environment for SWFs and there is a need for greater scrutiny and the operating environment is rapidly changing. In fact, we are seeing discussion of this every day in the press. There are calls for greater transparency of all SWFs. The fears around the world are of SWFs investing to serve the national interest, instead of just on commercial principles on the basis that governments might also reject major investments based on this fear. Earlier, we saw fierce resistance of DP World's bid to acquire port interests in the US and the mistrust sweeping the world with regard to investments by Chinese funds to secure energy resources, and generally by Arab-based funds. We have also seen similar nationalistic efforts in Indonesia to sabotage investments made by Temasek in Indosat, and also in Thailand for the investments in Shin Corp. 6.”
“Madam, I would like to make two points that relate to Sovereign Wealth Funds (SWFs). The first concerns risk management and MOF's oversight over GIC and Temasek, while the second concerns how both of them can take a leadership role in the changed environment that SWFs operate in. Sir, the Minister responded to my earlier questions in Parliament some months ago that MOF does not want to micro-manage GIC and Temasek. I understand his reason. Lately, however, we have seen both GIC and Temasek adopting different investment models when investing in banks and other companies with different results and I feel that MOF needs to establish certain minimum standards for investments. The current hands-off approach has resulted in both GIC and Temasek investing heavily in banks – a total of more than $30 billion, with a further investment of $14 billion being injected to GIC which was announced on 28th February. While for each of the GIC and Temasek funds their portfolio may make sense individually, does the Minister not think that if we look at Singapore as a whole, the Singapore portfolio may be too over-invested in financial institutions? These massive investments are over and above Temasek's substantial stakes in DBS and Standard Chartered Bank. I feel that MOF needs to better manage the two SWFs to protect our reserves. Instead of investing all in banks given the circumstances, would it not have been beneficial from both a balanced portfolio consideration and also the fact that commodities and food prices will continue to rise for GIC and Temasek to perhaps invest part of the money into agricultural type of companies?”
“Sir, recently, the position of a Chief Innovation Officer (CIO) was announced, in fact, in the Budget. The type of person engaged in this role is very important. The Civil Service's reward structure may not incentivise long-term efforts such as R&D and capability development. The reward structure therefore needs to be reviewed if we want success. The CIO has to be someone, I believe, with substantial private sector experience if we want this to succeed. Also, key performance indicators should not just be pegged to the number of projects implemented but the number of projects undertaken, even those that failed. Otherwise, we will likely just see betting on winners and just big companies and Government officers shying away from risky but worthwhile projects. Could the Minister please elaborate on the intended role of the CIO? Manpower Planning”
“Sir, I also have specific questions with regard to a few increases which I noticed in the Budget Book. The Elections Department has increased its budget, by almost 100% from $14 million to about $28 million; MEWR, 107% to $13 million; and MOH's bill went up by 443% to $402 million plus. Could the Minister please explain these increases? Sir, the Government is now correctly focusing on R&D, especially for SMEs for our long-term competitiveness. We need a coordinated push in Government for this to succeed. So we can learn from the US. In 1944, the then President Franklin D. Roosevelt started the process by getting his wartime Office of Scientific Research and Development to find ways to mobilise science in times of peace, among other things, for the creation of new enterprises and bringing in new jobs. The resulting report was one called " Science: The Endless Frontier". It led to a tremendous focus in the US for more active government role in funding research in the private sector as well as to engage the private sector in Government research work. In the US, therefore, many government agencies have budgets to fund research by or together with the private sector with a particular focus on smaller companies. An example is the programme called Small Business Innovation Research, or SBIR, where government agencies are required to reserve parts of their funds for small businesses, typically funding the critical startup and development stages and also in innovating new products, whether outside or within government. In the US, government as well as private sector big companies do not shy away from partnering startups for high-risk development work. We need to develop such a culture here and the Government can start this process for us.”
“Madam, I beg to move, That the total sum to be allocated for Head M of the Estimates be reduced by $100. Looking, first, at efficiency. The goal must be the optimal use of public money in running of the Government. I understand that the Manpower Management Framework was implemented in 2004 in line with the Government's policy of keeping the public sector "lean and trim". Along with manpower reduction, the Government wanted to encourage the outsourcing of non-core operations to the private sector with the following objectives. First, to allow the private sector to perform jobs that it could perform better than the public sector. Second, to allow the Government to trim the wage bill for Ministries and Government departments, while helping them to focus on their core areas. And I understand that the goal of 3% annual manpower reduction from 2004 to 2006 was implemented for all Ministries. In many areas, reduction goals were achieved through corporatising departments and subcontracting work out. In my view, this encouraged reductions in the official staff strength, without necessarily too much emphasis on the productivity of Ministries. I would like to ask the Minister whether, in terms of dollar amount spent on payments to cover the costs of these outsourced functions, did we enjoy productivity gains? In other words, have we trimmed staff on the one hand only to bear increased services costs on the other? Reducing headcount with resulting higher costs might not make sense. I also would like to highlight a common problem that accompanies outsourcing. And this is the temptation to go for the cheapest tenderer versus fierce competition among private sector companies that may unwittingly drive salaries of Singaporeans lower, especially of the corporatised organisation.”
“Sir, I would like to thank the Minister and the two Ministers of State for their comprehensive replies. I also would like to take the opportunity to congratulate MTI for doing a good job in many areas, including SME promotion and the promotion of entrepreneurship. I think they have done a great job, so they deserve a "Thank you" from us. I therefore beg leave to withdraw my amendment. Amendment, by leave, withdrawn. The sum of $620,201,900 for Head V ordered to stand part of the Main Estimate. The sum of 4,959,967,800 for Head V ordered to stand part of the Development Estimate. Head O – Ministry of Health”
“Sir, the Minister of State spoke about our attempt to reduce energy cost by diversifying sources of energy. We did discuss in this House last year about introducing competition in the power generation sector. Specifically, we discussed about Island Power. Can I ask the Minister on the status of this and why is it taking so long for that to happen? 2.15 pm”
“Sir, I have a question on the manpower crunch. I had raised that and I would like the Minister to elaborate. We had a dialogue session with our resource panel and industry experts who had raised this as a very major issue. Although the quotas have been released, they cannot get it from the traditional sources, and had asked for diversification of their sources of labour. The second problem that they highlighted was the IR. To staff the IRs, companies have been poaching from our local hotels, which is creating a vacuum. So we are going to create a vacuum somewhere, if we do not suddenly bring in a whole source of workers from outside and, specifically, the issue of the Philippines not being a qualified source for workers working in the IR. Could the Minister elaborate on this?”
“IE Singapore, however, has traditionally focused on larger and more established companies. We should make IE Singapore more accessible to our SMEs and start-ups. Otherwise, SPRING may have to add an additional role to support the internationalisation efforts of our smaller companies. Sir, on commercialisation of R&D, we heard Minister of State Iswaran speak about the initiatives, including the initiatives by Exploit. We have many research outputs available done by our universities and our research institutes that are still sitting on the shelf for want of a proper commercialisation plan, or finding a suitable partner. I think we have attempted to license and sell these outputs many times, but I believe that the approach taken is wrong. The approach taken is one of trying to derive maximum value at the time of divesting some of this research. I would suggest that we do not focus on economic gains, but on trying to get as much research outputs as possible out to industry. And I think the end result will be beneficial and the gains will come in the long term. I also like to suggest that we allow researchers to work directly with industry than to go through an organisation like Exploit and become a bottleneck, and this will, in fact, be a bigger problem in trying to commercialise the research. Sir, the other solution that we can look at is the example in the US of the Small Business Technology Transfer Programme. It has been very effective. I think we can implement such a scheme. Sir, on the whole, I think we have done a good job in supporting SMEs and entrepreneurship promotion, and I would like to congratulate MTI for that. SPRING Singapore Business Leaders Initiative”
“Sir, the tax incentives under the Enterprise Investment Incentive Scheme, while well intended, the scheme, I believe, has not been effective in achieving the objectives in encouraging angel investors to invest in start-up for two reasons. First, it is quite onerous to qualify for this incentive and, second, this is applicable to investments into qualifying companies that failed, with losses recognisable in the 2nd to the 6th year after investment is made. I believe it would be better for the Government to allow tax deductibility for investments into start-ups when the investments are made and not when the companies fail. I feel that the scheme should be changed from the current negative approach focusing on failures as a pre-requisite for tax write-offs to one of giving the write-offs at the time of investments being made. I think the intention of the Government to promote innovation and R&D in local enterprises, especially among SMEs, is a right one and will benefit the economy in the long term. I, however, have a concern with respect to the execution of disbursing the incentives announced. Many past Government schemes benefited the larger companies since the officers implementing these schemes found it easier to work with bigger companies to achieve their objectives in disbursing the incentives. For example, with the SDF, I know that in the past, larger companies, including MNCs and GLCs, benefited more than SMEs. MTI therefore needs to ensure that the KPIs of the Government agencies administering the SDF and R&D schemes should be pegged to number of companies reached, including as many SMEs as possible. Sir, in the area of internationalisation, increasingly many companies are looking to internationalise at a very early stage of their development.”
“Sir, in the last two years, we did well in focusing our efforts to build a strong and sustainable SME sector. SPRING has realigned its focus to become the agency championing SMEs. It gave up quite a bit of its old functions, including the divestment of PSB to focus on SMEs. The CEO and his management team have done well in helping to strengthen and grow the SME sector. The new Chairman of SPRING, Mr Philip Yeo, is now finally passionately focusing on SME development. The Government has finally listened to years of calls from Members and the private sector to set up an SME champion agency, and that is SPRING. And also due to the work done by the Action Committee for Entrepreneurship (ACE) together with the various MTI agencies, like SPRING and IE, financing is no longer the number one concern among SMEs. We have made very good progress but a few areas of financing gaps still exist. After the dotcom bust of 2000, many of the private equity players decided to focus largely on the late-stage companies, leaving very little money available to fund innovative companies at the very early stages. On the other hand, many growth companies have stretched their balance sheets and cannot borrow any money, and they are too small for any public listing. So we have viable companies that have problems in terms of short-term financing. There is therefore a clear market failure in these two areas. I feel that the Government can provide equity funding for growth companies with good potential for Government making modest returns, and not losses in these investments. I hope that the Government can also help develop the early stage VC industry focused on investing in Singapore's start-ups capable of growing rapidly.”
“Sir, in conclusion, I worry about the erosion of our cost competitiveness due to the reasons that I stated above. While I think we could have avoided some of these issues, that is not important right now. What we really need is for someone in Government to look at what can be done to keep Singapore's costs manageable for all businesses. And I think the Minister for Trade and Industry is the best champion for this. Top Quality Economy and Local Research Talent”
“In the past, in addressing cost competitiveness, we gave rental and property tax rebates to reduce costs for companies. These rebates benefited SMEs the most. We should consider doing the same this year, and I would like to urge the Minister to help companies by persuading the Minister for Finance to work out some off-Budget measures for this purpose. Finally, on rentals and land pricing. I like to question the role of JTC. Lately, we have seen JTC moving more towards ploughing its properties into REITs. Ascendas was formed and, as a result, we have seen cost of rentals going up for properties that are managed by Ascendas. Recently, JTC is also trying to plough some of its properties to Mapletree to form REITs. And I question whether the Government has shifted from the policy of providing affordable industrial and commercial space for our companies. The second policy level issue concerns how industrial land is priced. It appears that the Government has also shifted its policy on industrial land pricing from the earlier policy to match prices in competing economies. If we allow market forces to determine our industrial land prices, then businesses engaged in certain strategic sectors may no longer be able to compete with companies in competing economies, which may not necessarily be at our stage of development and may offer companies more attractive land costs. For example, the semi-conductor industry. China is already competing with Singapore in this area, and they offer, of course, much cheaper land than Singapore can. And unless we have a differential strategy for pricing of industrial land, we may end up not being able to compete with many of these economies.”
“Can I ask the Minister what has all these cost increases done to Singapore's cost competitiveness, and whether any multi-national companies have raised concerns with the Ministry on the issue, and whether he has seen any companies wanting to relocate outside Singapore as a result? Unfortunately, business costs have been going up in all areas and quite steeply too. The policy of strengthening the Singapore dollar has helped us, but we know that there is only so much that we can do. But the Government can do quite a lot for our businesses in two other important areas. First of all, in the area of manpower. In respect to manpower, the problem is severe and affects businesses across all sectors. The overheated economy left us unprepared for the tight market that came about. While the Government has helped in relaxing quotas for some industries, we cannot bring in foreign skilled and semi-skilled workers fast enough to ease this crunch. The Government needs to quickly review its policies to allow labour from non-traditional sources to be brought in. For example, for the Integrated Resorts (IRs), we have huge staffing needs. Our current regulations, for example, do not classify workers from the Philippines as ordinarily eligible for such jobs. There is also a similar problem in many other sectors. MTI needs to address this issue with MOM. Surely the fact that a suitable worker can be deployed is more important than where he comes from, and therefore greater flexibility is needed. Sir, to alleviate the problem of rising rentals, I think we have done rightly to release transitionary space. I hope MTI could coordinate with the various Ministries to remove any impediments which may exist in companies trying to retrofit such spaces to allow them to move in quickly.”
“Sir, I beg to move, That the total sum to be allocated for Head V of the Estimates be reduced by $100. The Economy and Cost Competitiveness Sir, while 2007 was a good year for the economy but towards the end of the year, the global economy began to be uncertain due to the global sub-prime crisis. In making a forecast for 2008, what assumptions did the Ministry of Trade and Industry make with respect to the sub-prime crisis on the state of the US economy? Can we expect another strong growth year in Singapore if the US goes into a recession? In other words, is our economy already decoupled from the US economy? We are a world leader in pushing the free trade agenda and negotiating FTAs. In promoting FTAs, MTI has raisedexpectations among our local companies that FTAs would provide increased opportunities in markets overseas. But in reality, our companies have not seen this increase. Can the Minister explain the reason for this slow penetration, and what initiatives have been put in place to facilitate our companies taking advantage of the FTAs that we have signed? I think that opportunities are tremendous, and we should help our companies to benefit from them after having done all the hard work in securing the FTAs. Another major issue that the Minister must address this year is the one on cost competitiveness of businesses. As I mentioned in the debate on the Budget speech, costs are rising rapidly, and this is an urgent problem but the Minister for Finance failed to address this in this year's Budget. We need to help these companies to tide over this cost crunch over the short term.”
“So, by managing the interest rate, perhaps, we can also help manage this problem that many Singaporeans are facing. Appreciation of Singapore Dollar”
“Sir, the Government has done a good job in trying to manage imported inflation by gradually strengthening the Singapore dollar. In doing so, we of course increase the purchasing power of Singaporeans when spending overseas and paying for imports, and I guess we all feel a bit richer because of the stronger dollar. However, we also realise that we can only use the exchange rate as a monetary policy up to a certain extent as too strong a Singapore dollar might make our exports and hence our economy uncompetitive. And MAS has acknowledged this reality in reply to a parliamentary Question some years ago. Can the Minister please share with the House whether this monetary policy can continue to work to combat rising imported inflation given the need to keep our exports competitive? Specifically, is MAS thinking of using other tools such as managing the interest rate in addition to the exchange rate as a more effective monetary policy? For example, in US, the monetary policy of the Federal Reserve, or the Fed, which is effectively the Central Bank, equivalent to MAS here, has used the interest rate tool actively to manage the US economy to fight inflation and also to help with credit and liquidity issues. Is this the right time to consider such an addition to Singapore's monetary policy? This could give us an additional tool to manage inflation and overheating or stimulate the economy when necessary. Sir, at the micro level, with the interest rates that have been so low for the past years, the Singapore dollar looks like the Yen today where for many Singaporeans, savings are actually diminishing. At the end of every year, the savings are shrinking, not growing, as a result of this low interest rate regime.”
“Another problem with such influx is that with many foreigners here, we are creating the issue of integration. I spoke about this last year. Society needs time to adjust and to absorb the newcomers, and the newcomers need time to make themselves feel at home. If we do not keep this trend in check, we may be closer to the New York or the London model, with many groups coming with all sorts of values, with everyone covering their own space. This may likely compromise our social cohesion that we cannot compromise on. Exciting City of Opportunities”
“Sir, the Government wants to achieve a future population of 6.5 million for Singapore. I can understand the rationale for having a higher population than the current, but is 6.5 million the optimum number for the future? The question is: when is this future date? I feel that in planning such a population growth, the Government may have adopted an "instant tree" mentality where after setting a goal, we want to achieve it tomorrow. We have been ramping up the population relentlessly in the last couple of years. It is like we want a tree, but we are not willing for it to grow, for the roots to go down, the tree to go up, and for the ground to adjust. Our "instant tree" mentality is pushing the pace of population growth at unrealistic rates. It has created a massive strain on available infrastructure, be it trains, property, food centres or our common spaces. Foreigners have also contributed to the fuelling of our property prices, as I mentioned in my Budget speech. Infrastructure will take time to build. I do not disagree with our policy to bring in talented foreigners here, but I cannot agree with opening up the floodgates and letting in so many, so quickly. We should have planned on a much more gradual increase of population in line with our ability to absorb and sustain it. And what if we got the 6.5 million number wrong and perhaps that it should be 5.5 million? We might then have overdone things and making it difficult for us to reverse if we try to bring in so many so quickly. I suggest that we slow down the intake, be patient about when we want to achieve the desired optimum population level. This way, we could also have managed our infrastructure growth better, adjusting the supply to match demand for homes, cars and our common spaces better.”
“I have, therefore, suggested how we can assist companies and people in this short term with some measures that the Government could put in place. I have also made some suggestions of taking some heat out of the economy and the property sector. I think the grow-as-fast-as-you-can policy needs to be reviewed. If we can slow down a bit, perhaps we can manage things better. These measures should augment the Budget measures and tailor them to our present as well as future needs. Sir, I support the Budget. 12.50 pm”
“Sell your cars, downgrade your living. And I think this is a signal that we are giving our Singaporeans by the kind of solutions that we have been dishing out to help the rest of Singaporeans. We need to address this issue, together with the income divide issue, in a more systematic way to give Singaporeans hope that there is hope for them in a high cost-increasing environment here in Singapore. I am sure that the question that I will be asked is that we are asking for many things in our wish list and how will the Government fund all of these things with lower taxes. I was quite pleased, therefore, that the Minister has again mentioned this year that he will be willing to review the Net Investment Income formula to help the Government increase its spending to derive more income for the current Government. And I suggested last year, and I think we will have a debate again on this when the Constitution is amended. I would urge the Minster that before the Bill comes up, to look at the formulas that are being used by the endowment funds in the universities, particularly in the US, on how they have a very robust and realistic formula that balances present consumption with preserving the value for the future. Sir, in conclusion, this year's Budget continues with the key and bold changes that Singapore needs for the long term. As we have seen in the last few Budgets, there are many measures put in place to address the long-term competitiveness of Singapore. In the short term, however, the rate of cost increases has impacted individuals and companies greatly. Many of the incentives this year will strengthen our economy in the long term. But we also need to ensure that our company and people have the stamina to survive and benefit from future growth.”
“I know that we already have a scheme to allow people to switch, but I think we need to make this more attractive so that more people will switch and they do not add to the congestion during peak hours. Sir, finally, we should rethink about the role of taxis in our transport master plan. Currently, we are viewing taxis as a luxury item and not as basic public transport. We need to rethink this to encourage people to switch from cars, hopefully to buses, but, in the intermediate step, to taxis. One of the things that we have done is that we are going to increase ERP charges and the taxis are also going to pay higher ERP charges. I would like to suggest that the Government relook at how taxis are treated, charge them a nominal ERP rate, perhaps half of what we charge cars, because they are different from cars. While a car belongs to one person, many people ride in a taxi per day. Sir, in summary, I feel that the ERP alone is not enough to unclog our roads. People who have cars may still pay higher ERP charges and stay on the road. The real solution is to take cars off the road and I think the three suggestions may help. Sir, I have a concern for middle-income Singaporeans, which many Members have, for whom the current problems mean that they have to adjust their lifestyles. They are constantly preoccupied with worries, like increased ERPs, means testing, higher petrol prices, higher property taxes and higher university fees without the possibility of their children getting bursaries. I read somewhere that the fact is that the wages of the bottom 50% of Singaporeans have stagnated over the years, and yet cost increases continue to stretch every dollar that the Singaporean earns. The solution for middle-income Singaporeans, therefore, is: adjust your lifestyles.”
“I would like to request the Minister to keep a moratorium on this for a longer period than to July this year so that we do not add more cost increases to what we have already seen in the past two years. Sir, I next move my wish list to the transport sector and I will not add to the great transport debate that has been going on, and I am sure it would be debated during the COS for MOT. But related to the Minister for Finance, because of the past policies of releasing too many cars and not expanding the road network, we are now in this situation of very congested traffic. If we want to see fast results, I do not think that reducing COEs and increasing ERPs alone are going to help solve our problem so quickly. We need to convince people to switch from cars to public transport, and I have some suggestions to help some of these people, mostly middle-income Singaporeans, who are feeling the cost crunch to make this decision. Firstly, the Government should offer an attractive car buy-back scheme. Government-sponsored buy-back schemes have been applied in many other countries. Some of these are, for example, buy-back of guns in Australia, fishing boats in Norway and the EU. While we do have a scheme to compensate people for scrapping their cars, the pay-out should not be in a voucher form which will then compel them to just buy another car. If we really want to achieve the objective of taking cars off the road, I think the benefit should be in cash. If the Government can offer attractive incentives, people may sell their cars and cars may be taken off the road, reducing congestion. Secondly, what we could do is to encourage people to switch their current cars to weekend cars.”
“We already had the 2% gap against the corporate rate and many of us had wished that we could have seen at least a 1% tax rate reduction this year with the roadmap to reducing it further to match the corporate tax rate. And this would have helped, I believe, many of our middle income or the sandwich group of Singaporeans that we all have been worried about. A more sustainable way of addressing inflation concerns of the middle-income earners is not by giving an unpredictable rebate like what we did this year, a one-time 20% or $2,000 ceiling, but to increase the reliefs like personal and child reliefs. And this is a realistic request simply because the cost of living has gone up, ie, the costs to upkeep yourself and your children have gone up. So the personal relief level in fact should increase, and this will help many of the middle- income Singaporeans in a very significant way. And I would like to make this call again, which I did last year, for us to bite the bullet and zero-rate GST on essential items. Since lower-income Singaporeans are seeing higher inflation than higher-income Singaporeans, I feel that they would benefit most from such a move. The argument has been that the higher income will benefit more from such a move. But benefit itself is relative. The higher income may get more in terms of larger savings. But in terms of percentage of income savings, I think the lower income would see higher savings. Sir, last year, the Government indicated that, in view of cost increases expected, the charges imposed by Government bodies would be frozen for a year - I believe until July this year.”
“(b) The levy on foreign workers, which increased from $10 to $150 last year should be reduced temporarily back to $100. And this could be a temporary measure until everyone can get a control of the inflation problem that they are facing. (c) Another way that we could help, which we did in the past when we faced such a scenario, was to give property tax rebate to companies as well as for JTC and HDB properties to offer rental rebates to companies who are facing the pressures of high rentals at this point of time. For individuals at the lower income levels, I think the Government did a very good move last year by implementing the Workfare Income Supplement (WIS). I would suggest that we finetune this scheme because the problem has shifted now, cost has gone up tremendously and the ceiling that we have put in place of $1,500 may no longer be realistic. I therefore suggest that this ceiling be reviewed as quickly as possible to $1,800 or more. And the bonus from 10% to 20%, and this be given out every three months rather than every six months because cashflow problems are hurting Singaporeans quite significantly. I am also very happy to hear that the Minister has announced the increase of Public Assistance (PA) allowance from $290 to $330 per month. Can I suggest that we allow PA recipients to also benefit from the WIS scheme? PA recipients basically are unable to work. So whatever allowance that we give them is equivalent to their income, and if we can apply the WIS scheme to the PA recipients, treating that as an income, I think we can help them further. Sir, the one thing that disappointed many of us was the personal income tax rates which did not come down this year.”
“I know that this is a new territory for the Government and we need to get used to this because I think the current method has created the problems that we are facing today. Sir, now, I turn to the wish list for things that I hope that the Budget could have presented this year. My suggestions for solving the property sector have already been stated and I would like to go through a few things. First of all, the overheating of the economy. I think one way that we can avoid the overheating situation, particularly in the construction industry is to plan projects with multi-year visibility to allow the construction sector to plan ahead. This will require some inter-Ministry coordination. This should also even out the spikes and depressions of the market and prevent too much of overheat or downturn. I am encouraged that the Government is finally looking at freeing up some portion of the reserves to spend to benefit Singaporeans and companies here. If we can have a more predictable way of generating some of these additional incomes for Government, this could perhaps help us in our planned expenditure in the longer term for any of the infrastructure projects that we undertake. Whereas we are now depending on surpluses and surpluses come in good years, and in good years, spending leads to more overheating. Second, is the issue of cost competitiveness for companies. And I have the following suggestions for the companies that the Minister could perhaps have addressed. (a) To help fight inflation as we have helped middle income Singaporeans, in fact all Singaporeans, with 20% tax rebate. I thought that the Minister could have given a similar tax rebate to companies, as they too are facing the cost pressures that individuals are facing.”
“Slowly, but surely, a buzz among the expatriates and foreigners working here is that Singapore is becoming too expensive to live in, and they do not mind leaving it if they can find opportunities in other more affordable cities. Sir, this is going to hurt our long-term plans of bringing in more foreigners into Singapore. Effect on Singaporeans Singaporeans living in HDB flats are also not spared. Some who have had to sell their HDB flats because they could not service their mortgage loans are stuck because HDB will not sell or rent them another flat for at least 30 months. Telling them to buy or rent from the open market is now looking impractical. Realistically, how can we expect someone who is, in the first place, in such a predicament because of financial difficulties and asking them to rent from the open market which is actually now beyond their reach? I think the Government needs to get a better handle on the property sector. The two areas mentioned, which are the land sales policy as well as anti-speculation measures, need to be reviewed urgently. In fact, I think for land sales, the Government should have a long-term constant land release plan. Without a reserve price, there may be times when the land is sold cheaper than we would ideally like, but over the long term, the land sold for higher prices in good years could have allowed us to reach an acceptable level of amount of income that we wanted from the land. We can put in place disincentives for hoarding land which developers buy from the Government for the purpose of developing. Very importantly, when the property market is weak, the Government should not panic and should instead go ahead and release the land anyway.”
“The reason is that businesses have been unable to predict the rapid rise in property costs that they have faced in the last two years. Therefore, because they could not plan these costs they will not be able to manage if, let us say, property prices continue to be like this. This is compounded by the extra wages which they will have to pay to their employees who may be renting, and these are the foreign employers who are here and paying very high rents for their property. My fear is that local as well as multinational companies might accelerate moving their operations to lower cost destinations, if we do not have these in control. My GPC had a dialogue with industry partners and we had heard this from some of the multinationals too, not just the local companies. Sir, in a recent report, Singapore was ranked as the 7th most expensive city in the world. While London and Hong Kong are still more expensive than Singapore, the problem this time is the rate at which our property prices and rentals escalated in the past two years. So while Singapore is only at the 7th most expensive position in the world, we rose a whopping 10 slots from 17th position to 7th position in just one year - possibly even the fastest rise among developed countries. I think this is a record that we do not want to be proud of. And this rate of rise is what has caused us a lot of problems. Effect on foreigners in Singapore Rentals, not just offices but also houses, have gone up, as I mentioned earlier. So while we attract foreigners to come and work here in Singapore, the high cost of renting a house is putting them off. In the rising market, landlords frequently increase rents in negotiations, and this is causing frustration among the expatriates who are here and the foreigners who are working here.”
“We should have been confident of our ability to drive the economy using fundamentals. So why did we have to be nervous and remove the anti-speculation measures? And this has been very detrimental for Singapore and Singaporeans. Sir, the current Government policy for land sales has also seen the Government trying to time the market in releasing land and also it has a reserve price list method. This has not worked to the optimal satisfaction and caused larger fluctuations than what we would have liked. The policy has had a significant impact in fuelling rapid property price increases as well as creating a shortage in office space which, in fact, again, failed to time the market correctly by the land release policy. Just to illustrate this, the Marine Bay BFC, for example, could have been released for development two years earlier. This would have minimised the overheat caused by the shortage of office space and the boom in the construction sector coinciding with the general pickup of the sector due to other reasons and also the time that we are trying to build the two IRs. Through 2007, we also saw many properties, both retail and residential properties being taken off the market due to redevelopment, which again reduced the supply and pushed up prices at a time when we had done more to stimulate demand. The easing of rules allowing properties to go en bloc was an aggravating factor here. Effect on business Sir, therefore, the effect on the businesses has been quite significant. Rentals have skyrocketed because of the severe shortage of space. Businesses have been forced to move from one office space to another, adding to a lot of costs in moving their businesses.”
“(p) Mandatory hospitalisation insurance for foreign workers on employment pass and S-Passes from January 2008. (q) New requirements for security guards to go for training and to be certified. (r) BCA introduced new rules in the wake of Nicoll Highway accident adding to compliance costs. Sir, the last three, I am sure, are well intended, but the timing, I think, could have been better. Were all of these price hikes necessary? Some, of course, the Government could not do anything about, but many they could. Did they have to be effected at the time they were? Given the rising costs last year due to imported inflation, I think the Government could have insisted that these bodies take a more judicious approach in raising costs and the Government could have controlled some of these. Sir, the "grow-at-all-costs" policy, with cost increases triggered or allowed by the Government, have worsened the income divide. Property Another area that contributed significantly to the overheating economy is the bubble that is being created in the property sector. Many Members may recall that in May 1996, anti-speculation measures were put in place to curb the upward spiral of property prices because property prices were going up at an uncontrollable rate. These were gradually relaxed over the last few years. I believe that the lifting of these anti-speculation measures, combined with a genuine improvement in the property sector, had caused a huge speculation-driven influx of foreigners buying properties in Singapore. The Government therefore, I think, made a mistake in lifting these measures. Unfortunately, we forgot the property balloon of 1990s. Speculation is speculation, whether we are in good times or bad times.”
“Other cost increases The cost increases in the last couple of years have not helped this situation at all, and these are what I have mentioned just now as controllable costs, which the Government could have directly or indirectly minimised. I have got a long list and I am going to go through very quickly. (a) The levy for foreign workers increased by $50 last year, in January 2007. (b) Over 2006 and 2007, hospital, consultation and specialist charges increased in most public hospitals and polyclinics. Means testing is going to add this to the problem of middle income Singaporeans. (c) Bus and train fares went up in 2006 and bus fares again in 2007. (d) ElderShield premiums were expected to go up by end of 2007. (e) SingPost raised its postal rate in November 2006. This is not Government's problems but something that perhaps they could have managed. (f) URA increased its fees for Housing Developers' Licence in April 2007. (g) POSB raised its coin deposit charges in 2007, effectively tripling them. (h) HDB raised its valuation and administrative charges for valuation reports in December 2007. (i) Between 2006 and 2007, universities, polytechnics and ITEs increased their fees. (j) ERP charges and the number of gantries went up, and they are going up again. ,. (k) Electricity tariffs went up in 2006, twice in 2007 and, again, in 2008. (l) NETS fees went up in 2007. (m) And now we have the increased SDF levy for companies. They have to pay for all workers rather than just the lower income workers. (n) There was a significant increase in civil servants' salaries which triggered inflation of private sector salaries. (o) Increase in the land rent of properties owned by Government.”
“More importantly, the real income, which is the income they get minus the inflation, for the lower-income Singaporeans has shrunk for the period from 1998 to 2006, falling behind the inflation. So, in reality, lower income Singaporeans have already been in a recession for many years! In comparison, for a period from 2001 to 2003, inflation was actually negative for the top 20% of Singaporeans, in other words, things were cheaper for them during these few years. For 2007, I was informed that the data that I have seen indicates that the top 20% income rose by 8.6% while those of the lower income rose by 3.4%. And taking into account the effect on inflation, I think our lower income are going to continue to be worse off. Sir, a very significant cost increase and also one that caused a trigger of many other cost increases was the implementation of the GST rate increase by 2% in July last year. This year, we have a surplus of $6.4 billion, the highest surplus since 1999, where a deficit of $0.7 billion was projected. This is a $7.0 billion swing. It is a pleasantly embarrassing outcome, I am sure, for the Finance Minister who had defended very strongly the 2% GST increase last year, citing reduction of Government income from other sources and the need to tap on GST to generate more money to fund Singapore's growth. I therefore feel that the Government had been too quick to increase the GST last year. It may not have been predictable when we were having the debate in the House. But in light of the booming economy which had been visible by mid-2007, the Government could perhaps make a late decision to hold on the GST increase by a year or two.”
“Further rapid growth will create a further tightening of the job market, pushing wages higher and creating more spending, spiralling upwards as cost increases are then passed on to the consumers. Other policy decisions also contributed to the overheat. For example, the huge stimulus to the economy provided by the decision to build two Integrated Resorts together and, at the same time, having a huge infrastructure projects on transport ongoing at the same time. We could have, perhaps, chosen to do one Integrated Resort at a time, to try to minimise this impact. These programmes, which were in hiatus during the lean years, caused further overheat; when we had money to spend, we spent a lot. This, coupled with the lifting of anti-speculation measures, also opened up the floodgates to foreigners taking interest in the property sector here in Singapore. We saw a huge influx of foreign wealth, buying properties here and waiting to make a profit as a result. As I mentioned, this growth driven overheating was compounded by both direct and indirect costs added or allowed by the Government. These cost increases impacted the lower-income Singaporeans more than it did the higher-income Singaporeans. Effect of grow-at-all-costs policy on the bottom 20% If you look at the statistics released by the Department of Statistics, or DOS, from 1998 to 2006, the annual inflation for the lower 20% of Singaporeans was higher than the inflation rate faced by the top 20% of Singaporeans. In 2006, for example, the lower 20% saw an inflation of close to 2% while the upper 20% of Singaporeans saw an inflation rate of only 0.5%. At the same time, the income growth for lower income Singaporeans has lagged behind the income growth of the top 20%.”
“The end result is an era of very high cost increases and high inflation not supported by enough wage increases, especially for the lower and lower middle income Singaporeans and also the smaller companies. In my comments today, I will talk about our overheating economy and the resulting impact on some of these areas. And, finally, I will present a wish list which I thought the Budget should have addressed this year. Boom and bust growth policy First, on the boom and bust growth policy. What happened to cause such a rapid rise in costs in Singapore? We seem to have adopted a growth strategy of growing as rapidly as possible in good years to compensate for periods of slower growth or recession, even if it meant a certain quarter of Singaporeans would not be able to keep up. The result of this policy is the widening income gap among Singaporeans, despite all the help that we have been given. At that time, I thought that it was a reasonable policy - the boom and bust policy. But after what we have seen in the last few years, I think we need to adjust our growth policy. The economy grew by about 7% to 8% per annum in the last four years, quicker than in the six years before that, which, I think, was around 3% to 4%. The result is an overheating economy and the symptoms and pains that accompany it, which are: runaway property prices; shortage of workers, leading to wage inflation; significant increases in the cost of transport, healthcare and other services; and inflation of food prices. The Minister did mention that the best way to mitigate inflation is sustained rapid growth. But I am not sure if or how this will help. A "grow as fast as you can policy" is inflationary in nature.”
“This is the biggest problem for our businesses today, beyond anything that they could have planned for. It is not just the actual cost numbers but the rate at which the costs increase is an issue. Unless they survive the current cost increases, they might not have the stamina to benefit from the longer-term incentives for innovation announced by the Minister. The central issue for Singaporeans this year, and for companies too, is the "I" word - Inflation. And I am sure that many Members of this House will focus on this in their speeches in the next couple of days. We have heard from the Minister that inflation and higher cost of living are inevitable in a rapidly growing economy and that we should accept that they both come together. But, I think, we could have minimised this problem, though not completely eliminate it. Singapore in the past saw many periods of rapid growth, at faster rates than the rates that we are seeing today, and yet inflation remained under control during those rapid growth years. Some part of our inflation is imported, as the Minister pointed out, because we import everything, and things cost more around the world today as consumption has gone up and production is not catching up. But I feel that a significant part of the inflation has been caused by factors - what I call the "controllable factors" - which the Government could have managed and could have done something about. In the last two years, the Government had contributed to inflation by allowing multiple cost increases, both directly or through policy changes that resulted in cost increases.”
“Sir, thank you for allowing me to kick off the debate on the Budget. I rise in support of the Budget 2008/2009. I agree with the Minister that this year's Budget is a far-sighted one and focuses on strengthening local enterprises and investing in the people. Together with the measures announced in last year's Budget, I think we have got a good formula for future growth and sustainability. The Budget also addressed some short-term and long-term issues for lower-income Singaporeans and also the elderly. Sir, having said that, I think the Minister missed addressing a very significant issue of rapidly rising costs, which is threatening many of our companies, as it does, for individuals. When the Finance Minister delivered his speech on 15th February, I was waiting expectantly for him to announce some long-term and short-term measures to address inflation issues, particularly for companies. I thought that the Minister was just part-way through his speech when he ended, quite abruptly, I thought. Just as the Government helped the lower and middle-income Singaporeans through surplus-sharing package to mitigate the impact of inflation, there are also companies that are struggling to cope with the rapid increase of cost of business in Singapore. I did a quick sum of the amount of help that SMEs got this year in the Budget, and it worked out to the grand sum of $50 million, which is a far cry from the $6.4 billion surplus that the Government announced. I do not disagree with the Minister's focus on the longer-term issues which involve the competitiveness of our economy. I feel, however, that the Government should not ignore the immediate threats to our economy and those that our companies are facing as a result of the rapid increase in cost.”
“Sir, I understand that we need to let both institutions manage their investments but since both of these institutions report to the Ministry of Finance, should not the Ministry of Finance lay down some broad guidelines without micro-managing both of them? For example, in the case of the Barclays Bank, it was an equity investment and we lost a lot of money. In the case of the investment that GIC made, it was a convertible bond and it looks like a relatively safe investment. While we do not want to micro-manage, the Ministry could perhaps lay down broad guidelines within which they can operate.”
“Sir, in July last year, Temasek invested a few billion dollars into Barclays Bank. I think it was around $3 billion minimum and up to $7 billion, if I remember correctly. From what I understand, these values have now come down to about half of the value of investment. Is the Minister not worried that if GIC and Temasek continue with this kind of multi-billion dollar investment all in one sector - in the banks - this could quickly wipe out a significant portion of our reserves?”
“In such a scenario where costs are going up almost uncontrollably, I ask the Minister of State to be prepared to come in soon with new off-Budget measures to help companies cope with the sudden cost increases. And these cost increases were something that many of the businesses have not forecasted or could not forecast. We cannot wait for the next Budget cycle to help these businesses. There is an urgent need for a review by the Government, especially by the Ministry of Finance and the Ministry of Trade and Industry, on the issue of rising cost of doing business in Singapore, and I am sure we will have a very interesting debate on this during the Budget debate next year. Madam, on the whole, this Bill is implementing changes that we have already approved in the Budget this year. It takes us in the right direction, including in the area of building a business-friendly climate. But, as I mentioned, the environ- ment is quickly changing and I hope that the Minister and the Minister of State are watching these developments closely with a view to intervening fast, if we need to. I support the changes proposed in the Bill. Madam, I support the Bill. 5.24 pm”
“Certainly, if we look at the raw numbers of Hong Kong's personal income tax, they are lower than Singapore's. Just focusing on income tax rates might not be the way to go in the future. We need to ensure that the total package we present is nonetheless still attractive for companies to want to come down here. Madam, one question I have not been able to answer is why, in Singapore, we have chosen to make the personal tax rate higher than the corporate tax rate, while in Hong Kong it is the reverse. Could the Minister of State care to comment on what might be the rationale for this difference between Singapore and Hong Kong? For example, is it simply because Hong Kong has a broader base of taxable citizens and residents or very rich citizens and residents so that even collecting income tax at a lower rate would be sufficient but it is not the same for us? Finally, Madam, I would like to talk about one thing which may not be directly related to the Bill but which is in line with the spirit of corporate tax restructuring that is being implemented with this Bill. This is an issue that I hope the Minister of State would urgently look into. In the last nine months, and especially since the Budget announcement early this year, the cost of doing business in Singapore has significantly increased. In many cases, especially for our small and medium companies, their cost increases have rendered their businesses uncompetitive. Not only are we impacted by ridiculous increases in property prices and rentals, costs of raw materials and commodities have also been spiralling upwards.”
“Can I therefore ask the Minister of State how can we avoid this situation from arising where they just locate themselves here to take advantage of the exemptions but do not really manage the actual funds here in Singapore? Madam, turning now to amendments to clause 11, this provides for the insertion of a new section 13V into the Act, which grants partial exemption to law firms involved in international arbitration work of their income derived from such work. The issue which I hope that the Minister of State can clarify is whether the law firms would get undue advantage over other companies which also derive their incomes from overseas operations. I do not think it is healthy to overly help the law firms while companies are treated differently. So I hope the Minister of State can clarify how is this going to be treated. On corporate tax restructuring, we have debated this extensively in this House, especially during the Budget debate. But the lowering of income tax rates alone is no longer an innovative move, as we have seen other countries doing the same. The latest move was made by Hong Kong in October to lower its own tax rates yet again to 15% for personal income tax and 16 1/2% for corporate tax. In the light of Hong Kong throwing the gauntlet down with its rate cuts, I wonder how far we can go, and should go, and also how we hope to remain competitive in the long run when this happens around us. Would the Minister of State also care to comment on how Singapore will be affected by Hong Kong's recent rate cuts, given that we are essentially in direct competition with Hong Kong in attracting foreign companies, particularly in the service industry? I worry that this may be a race to the bottom between Hong Kong and Singapore.”
“We have seen that a few charities were recently audited thoroughly, pursuant to the direction of the NCSS, and the reaction to this has been positive, including from the charities involved. So, overall, this latest move to allow charities greater flexibility in their spending decision is a positive move which will add efficiencies to all charities, in my opinion. When viewed against the strengthening of the regulatory framework covering charities, we see that this loosening up does not however signal a lowering of scrutiny, which is overall good for us. Second, on the exemptions relating to the funds managed in Singapore, clause 10, which repeals and re-enacts section 13R, provides exemption for income of companies incorporated and resident in Singapore arising from funds managed by fund managers here in Singapore. Clause 7 of the Bill amending section 13C and 13C(a) of the Bill there are a couple of important things that we should note. First, I agree with this initiative, and it gives a strong signal that the Government is serious about positioning Singapore as a global wealth management hub. We must however not be too surprised if this leads to the trend of fund managers locating here while managing the funds that are essentially parked elsewhere. In terms of the direct value-add, aside from the actual expenditure in Singapore, their role would be to act, perhaps with the critical mass of the banking and financial expertise here, and improve Singapore's position as an investment destination. We would, however, want to watch closely to see that we do not become a convenient shield for persons to avoid tax liabilities to their states.”
“Mdm Deputy Speaker, I support the Bill. Madam, while I understand that the Bill is a technical follow-up of the far-reaching changes which were announced during the Budget this year, I want to however raise a few points, especially since the environment has significantly changed since the beginning of this year. Madam, first, with respect to clause 6 of the Bill which amends section 13 of the Income Tax Act, that many exemptions are part of the overall bid to make Singapore more attractive as a destination for capital and business activity, and these changes are welcomed. The addition of the new subsection (1)(zm) by clause 6 of the Bill, read together with the amendments proposed in clause 8 of the Bill, which actually repeals section 13M of the Act, exempts the income of charities and abolishes the requirement of charities to spend 80% of their income and the receipts accrued in the past year on charitable projects within Singapore. This is positive in that charities will then avoid the dilemma on spending on objects for the sake of fulfilling this requirement of spending 80% and will also allow them to accumulate capital for major expenditure projects in the future. However, given the possibility now that more charities will accumulate more of their income than previously, we should also ensure that there is proper scrutiny of the affairs of the charities. To this end, we have seen some good measures put in place recently that improve the framework of regulation for charities. For example, we had the appointment in August last year of a full-time Commissioner of Charities and the setting up of the Charity Council, and the National Council of Social Services itself is taking a more active approach in overseeing and investigating the affairs of charities.”
“Sir, I have two supplementary questions and I have vested interests in these because, in the last few years, we have had four market fires in Ang Mo Kio. Each time, we have tried our best to encourage the hawkers to insure. They started off insuring and, then, over the years, they stopped doing it. In this case, about 20% insured. So the question I would like to ask is that, first of all, while they are insured for rebuilding of the new market, they are not insured for building of the temporary market, so the hawkers are going to have to pay for that market. Can the Minister consider insuring at least that portion where we have enough money paid out to build up the temporary market? If the Minister is not willing to consider compulsory insurance, can he maybe consider a scheme where we only renew hawker or market licences if the market stallholders have some basic minimum insurance, just as we do for some other licences that we renew? Perhaps, that may force the hawkers to take up at least basic insurance and then the hardship may be reduced in this manner. Assoc. Prof. Dr Yaacob Ibrahim: Sir, I think the Member would know that the answer to the second question is no, because we do not renew on the basis of whether or not he has bought insurance. We renew on the basis of whether he wants to renew his licence and whether he is a first or second generation hawker. As to the temporary market, the policy has always been for a temporary market to be provided by the hawkers themselves, not by the Government. Even under HUP, we do not provide for the temporary market. But in this particular instance, I think NEA has been working very closely with the HDB and the Town Councils to see where we can provide and assist the hawkers in providing the temporary market.”
“Sir, I have two questions for the Minister. First of all, does the Minister see any impact on our competitiveness as far as businesses are concerned? Is inflation on the general cost increases affecting our ability to attract investors in the long run? Second, what is it that is going to happen that is going to make the second half inflation come down, according to the Minister's forecast?”
“The changes we are making to address retirement savings are critical. The Government cannot afford to lose any goodwill unnecessarily by creating doubts about the future returns on CPF savings. I just cannot see the need to introduce the variable interest rate system at this point of time. This will only undermine the credibility of the other restructuring measures that we are putting in place. Sir, delaying retirement is a reality that we have to face, so it is good that we have chosen to bite the bullet early. The Government should lead the way by hiring older workers, as many Members have said. But for this to really work, we will need an effective legislation which will require employers to keep employing older workers. We will definitely need to find a way to support the employers. They may want to keep their older staff, but it may not be viable for them to operate on thin margins. The Workfare Income Supple- ment changes announced today will therefore go a long way to help companies on the margin so that even if they need to rationalise their staff costs with their productivity by paying older workers a lower wage, it is still a viable option for them to keep these older workers. Sir, in conclusion, I applaud the frank admission that we need to fix the issue of retirement savings. While there are concerns over some of the proposals, I think it is possible to fine-tune them. If done correctly, this Government and this House would have made a significant contribution towards the future of Singapore. All the announcements made by the Minister today and by the Prime Minister, the holistic approach that I have talked about will, I think, solve our problems once and for all, and we should all support these moves. 6.50 pm”
“After all, if we palm off the responsibility for old age to individuals, and leave it to the market, then the Government is saying that it has no role in this except to set up the system for them. I am, therefore, quite happy to note that the Minister is willing to make this scheme flexible, and we eagerly await the details once they are announced and, hopefully, some of these issues will be addressed. Sir, I now turn to the proposal to alter the interest rates payable on the CPF savings. I think the move to offer a higher interest rate on part of the savings is a good one that members will appreciate. I am, however, not convinced of the need to allow the interest rate on the remaining sums to float. This change will likely result in people actually earning less overall in interest than they do at present. Therefore, there is no good reason to inflict this on them at this stage. This is particularly for those who have much higher savings in their CPF. The Government's argument is that in the long term, a time may come when the floating interest rates members earn on the remaining sums may be higher than what is currently being given by the CPF Board. However, I think that members may well be willing to trade off that possible future upside in returns for a guaranteed fixed rate that allows their savings to increase. That certainty would, I think, be more in line with the objective of a retirement fund than to think of getting much higher returns. I feel that the Government can afford to pay higher interest on all the CPF savings, in light of the recent data released by Temasek Holdings showing them earning an annualised return of 18% since inception. I believe that is about the range of data that they released.”