Lee Hsien Loong
Singapore
“Yes, of course, every time I sell the land, I put money into the Reserves, but I am not putting the money into the Reserves all today. I am putting it in a stream of payments, 30 years apart.”
“Speaker, Sir, I do not think it was a very difficult question to figure out, that when I spoke to MTI, I spoke to the Minister, because Mr Gan Kim Yong is the Minister for Trade and Industry.”
“" I think that would have been unjust because he has not been charged. If there is a case, the case has not been heard, he has not been found guilty or acquitted or whatever. I cannot prejudge a case based on an incomplete investigation – started recently, or a partial investigation, just entered into the formal phase.”
“Mr Speaker, Sir, first, Mr Leong is quibbling over words. In February, Mr Tan Chuan-Jin told me, "I offer to resign". I said, "Yes, sort out your constituency first". In other words, decision taken. The moment to execute it, I will decide. So, it is quite clear. Legally, he has not resigned.”
“Sorry, Mr Speaker, to respond to Ms Poa on why not no pay leave. It is my judgement to make. The Civil Service works in one way; their basis is if you have been convicted, then you are on zero pay and other consequences will follow.”
“I am very happy to note that Assoc Prof Jamus Lim appreciates the second key and is seeking a third. And I hope that it portends a change in your attitude towards the Elected President and his custodial powers. But I think the Brazil example is a very interesting one.”
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“On the other hand, we will come under persistent pressure to spend more, especially in healthcare and social services, as the population ages. Government expenditure has already gone up over the years. A decade ago, it was only 15% of GDP. This year, it will be 19% of GDP. This is still low compared to the 40% or 50% share of GDP that the Government takes up in most developed countries. This is the result of our deliberate policy to focus spending on critical areas that yield lasting returns, but it also reflects our relatively young population. In healthcare, for example, our national expenditure currently stands at 3.5% of GDP. 3.5% is much lower than any developed country, but this is not solely because of our efficient healthcare system. It is also because our population is much younger. If our population had the same age profile as, for example, the UK, then based on our present spending patterns alone, our national expenditure on healthcare would be 7.2% of GDP, higher than the UK's figure of 6.8%. Similarly, if we were to match the age profile of Japan, our healthcare expenditure would be close to Japan's (6.6% versus 7.4%). As our population is ageing rapidly, we must expect our national health expenditure, including Government's share, to go up too. Higher Government spending will mean higher taxes. To keep taxes as low as possible, we must target Government social spending to reach those who need it most. One effective way to do so is through means-testing. The Ministry of Health (MOH) already uses means-testing to decide on subsidies for step-down healthcare. As revenue pressures intensify in future, we will need to extend means-testing to other medical and social services.”
“Taking into account the $600 million provision for ERS, the Government is, therefore, projecting a deficit of $900 million, before taking into account the fiscal changes in this Budget Speech. The Government turned in a budget deficit in FY 2001, and is likely to be in deficit again in FY 2002 and FY 2003. This will be the third consecutive year that the Government is running a budget deficit. But this is the appropriate fiscal stance to adopt in an economic downturn. During recessions, revenues will fall, but expenditures need to be maintained to fund essential projects and services, thereby resulting in a budget deficit. This deficit serves as a stabiliser to steer the economy towards the path of recovery. The Government has done this previously, although not in recent years. After the deep recession in 1985, we ran a budget deficit for two consecutive years, in FY 1986 and FY 1987. I assure the House that this Government has not changed its longstanding prudent fiscal policy. The Ministry of Finance continues to plan for a modest budget surplus over the business cycle. In difficult years, we can accept a deficit. But we intend to accumulate surpluses in good years, to cover these deficits and build up the reserves for rainy days. This prudent and disciplined approach has kept the Singapore dollar strong and inflation low. If we spend beyond our means, inflation would go up, the value of Singaporeans' savings would be eroded, especially our CPF savings, and confidence in our currency and economy would fall. However, we must recognise that it will be more difficult to balance the budget in future, even after the economy has recovered. Revenues will be less buoyant, as we lower income tax rates further, and as our GDP grows less rapidly.”
“2 billion special transfer for the ERS, I have decided to make additional special transfers to the Lifelong Learning Fund (LLF) and the Medical Endowment Fund (Medifund). The Lifelong Learning Fund is an important part of our continual education and training (CET) framework. Established three years ago, the Fund will be built up to a target size of $5.0 billion to ensure a secure and continuing stream of income to support lifelong learning in Singapore. As highlighted by the ERC, we spend less on CET at the national level than on pre-employment, formal education and training. I have therefore decided to transfer $500 million into the Lifelong Learning Fund, to bring the Fund to $1.5 billion. This will generate $60 million of interest income a year to fund skills upgrading and retraining programmes. The Medifund has helped many needy Singaporeans to pay for their medical bills during this economic downturn. To enable the Medifund to help more Singaporeans, I have decided to increase it to $900 million through a $100 million special transfer. Taking the revised revenue, expenditure and special transfers into consideration, an overall budget deficit of $90 million is now expected for FY 2002. Projected FY 2003 Fiscal Position Let me move on to the FY 2003 Budget, which is summarised in the last column of the table. The operating revenue for FY 2003 is estimated at $29.6 billion. This includes $3.0 billion in NII contribution, and is $500 million more than the operating revenue for the previous year. Total expenditure is budgeted at $30.0 billion, comprising $20.4 billion in operating expenditure, and $9.6 billion in development expenditure.”
“Despite the uncertain outlook, we are well placed to seize the opportunities that only present themselves in uncertain times. If we stay the course, when the storm clouds clear, all Singaporeans will share in the fruits of success. PART II: THE FY 2003 BUDGET Mr Speaker, Sir, I will now turn to the Budget for the Fiscal Year 2003. Revised FY 2002 Budget Estimates First, let me recap the FY 2002 Budget. I refer Members to the first column of the budget statistics table on the screens and in your Handout. Table 6: Budget Statistics for FY 2002 and FY 2003 (figures rounded off in $ billions) FY 2002 FY 2002 FY 2003 Budget Revised Budget Estimates Taxes & Fees 26.8 25.3 26.6 NII Contribution 2.4 3.8 3.0 Operating Revenue 29.2 29.1 29.6 Total Expenditure 28.3 27.4 30.0 Special Transfers - ERS - 1.2 0.60 - Lifelong - 0.5 - Learning Endowment - 0.1 - Fund - Medical Endowment Fund (Medifund) Surplus/(Deficit) 0.9 (0.1) (0.9) When I presented the Budget last year, I estimated operating revenue at $29.2 billion and total expenditure at $28.3 billion, leaving a modest surplus of $900 million. I also estimated then that the surplus would turn into a small deficit of $190 million after accounting for the package of offsets, rebates and Economic Restructuring Shares. As the second column of the table shows, the revised operating revenue is almost the same as the budgeted amount. Tax revenues were lower because of the cut in corporate income tax to 22% in YA 2003 and slower economic growth, but Net Investment Income (NII) contribution was higher than expected. The revised total expenditure is about $1.0 billion less. Therefore, in addition to the $1.”
“However, the major global cities in those countries, such as London or New York, which draw on wider hinterlands, have been able to grow faster and sustain higher per capita incomes than their national averages. Singapore too should be able to achieve 3% to 5% growth, provided we too adopt the approach of these global cities. This is why we must stay flexible, adapt quickly to changing markets and technologies, continue to welcome global talent and keep on upgrading our capabilities. Then we can take advantage of the new opportunities, provide good jobs for our people, and raise our income and standard of living. Not every Singaporean will find the going easy. The powerful forces of globalisation will widen our income gaps. A small number of citizens will need help to keep up. But every Singaporean can benefit from our country's progress, provided he puts in the effort and is willing to adapt himself to the opportunities and jobs available. The Government will concentrate its social safety nets on the minority of Singaporeans who need them the most. This will ensure that the help reaches the neediest Singaporeans without undermining our work ethic and culture of self-reliance. However, the task of caring for less successful Singaporeans cannot fall entirely on the Government. Singaporeans have a responsibility to look after others doing less well than themselves. The generous response of Singaporeans to charity drives is thus both heart-warming and reassuring. Concern for our fellow citizens and Government assistance will help keep our society cohesive as we navigate an uncertain world. No amount of aid to lower-income Singaporeans can substitute for job-creation through strong economic growth.”
“To help families in this economic climate, I have decided to enhance this by granting one extra month of rebate on S&C charges for all 1- to 5-room HDB flats. Table 5: Rebates for Service & Conservancy Charges HDB Flat Type Original Number Revised Number of of Months of Months of Rebate Rebate 1-room 5 6 2-room 4 5 3-room 4 5 4-room 3 4 5-room 2 3 This will increase the total number of months of S&C charges waived to six months for 1-room flats, five months for 2- and 3-room flats, four months for 4-room flats, and three months for 5-room flats. This extra month of rebate will be granted in April, and will cost the Government an extra $31 million. The new schedule of rebates for S&C charges for 2003 is at Annex C (Cols. 119-200). ANNEX C - REVISED SERVICE & CONSERVANCY CHARGES REBATES (FROM JANUARY 2003 TO DECEMBER 2003) (Cols. 119-120) Pulling Together The measures I have outlined will address the immediate economic difficulties and lay the foundation for the strategies to restructure our economy. Looking ahead, we expect the Singapore economy to grow more slowly, even after the present slowdown, because we are now at a higher level of development, and external conditions are more difficult. We grew by an average of 7.3% per year over the last 15 years. For the next phase, the ERC estimates our medium-term growth potential will be 3% to 5%, comprising labour force growth of 1% to 2% and productivity growth of 2% to 3%. Growth of 3% to 5% is lower than what we have become used to, but it is still an ambitious target. Few developed countries with per capita GDPs similar to ours have maintained such a high rate of growth.”
“2 billion for the first tranche of ERS. Most Singaporeans would by now have received their basic allocation of ERS worth $400. To date, almost two-thirds of the ERS have been cashed out. Some lower income Singaporeans in 1- and 2-room HDB flats and welfare homes failed to get their ERS because they did not top up their CPF accounts. We are giving them additional time to get their ERS. The grassroots organisations are contacting them individually, to extend financial assistance, if necessary. Those who apply by the deadline of 31st March will get their ERS on 1st May 2003. Utilities Save Scheme I have decided to extend the Utilities Save scheme by one year to help households, especially lower-income ones, cope with their utilities charges. Households in 1- and 2-room HDB flats will enjoy rebates for six months over the one year period from July 2003 to June 2004; those living in 3-room HDB flats will get four months; those living in 4-room HDB flats will get two months; and those living in 5-room HDB flats will get one month. The rebate will be worth $35 per month. This will cost $71 million. Table 4: Utilities Save Rebates HDB Flat Type Number of Months Total Rebate (at $35 per month) 1-room 6 $210 2-room 6 $210 3-room 4 $140 4-room 2 $70 5-room 1 $35 The schedule of rebates is in Annex B (Cols. 117-118). ANNEX B - UTILITIES SAVE REBATES (FROM JULY 2003 TO JUNE 2004) (Cols. 117-118) Service & Conservancy Charges Last year I announced that the Government would be giving rebates for two to five months of S&C charges in 2003 for Singaporeans living in all 1- to 5-room HDB flats. In addition, the 1-room, 2-room and 3-room flats would also be getting partial rebates on the remaining months of the year. This was part of the package of measures to offset the GST increase.”
“However, we need to strike an appropriate balance between meeting industry's needs for affordable, skilled manpower and keeping Singaporean workers from being displaced. The best instrument for controlling the number of foreign workers is the foreign worker levy. This is a price mechanism which leaves maximum flexibility for the market to allocate the foreign workers to where they are most needed and most productive. In 1999, when our economy was hit by the Asian Crisis, the Government sharply lowered the foreign worker levy to reduce business costs. Since then the levy rates have stayed at the same low level. Last December, we extended the levy reduction until June 2003. The Government will extend the levy reduction for another six months, until the end of 2003. As foreign worker numbers have remained stable, there is no urgency to raise the levy back again. The only exception is the levy on skilled workers, which is now just $30. MOM will review the skilled worker levy this year to decide whether it is necessary to peg it at a more realistic level next year. Help for Singaporeans Finally, the ERC recommended that the Government help Singaporeans to cope with the current economic difficulties. These include employment-oriented measures, such as encouraging part-time work, augmenting MOM's job bank, improving job-matching efforts, and counselling and retraining retrenched workers. They also include financial assistance for lower income households. The Government agrees with these proposals. Economic Restructuring Shares Apart from helping Singaporeans find jobs, the Government is also providing them with substantial support by offsetting the GST increase through the Economic Restructuring Shares (ERS). In FY 2002, the Government set aside $1.”
“Excise Duties on Petrol Currently, excise duties on petrol are levied either at an ad valorem rate on final pump price before GST, or at a prescribed floor rate, whichever is higher. If petrol prices rise, the duties go up correspondingly. This adds to the burden on businesses and motorists. To address this, I have decided to impose excise duties on petrol at a specific rate instead, so that the duties no longer fluctuate with oil prices. This takes effect from today. The new specific duty rates for various grades of petrol will be set at the current floor rates of the petrol excise duties, taking into account the Off-Budget reductions which are in force, so that there will be no increase in petrol duties after 30th June 2003. This will cost the Government about $60 million annually. Details of the changes are in Annex A (Cols. 117-118). ANNEX A - CHANGES TO EXCISE DUTIES FOR PETROL (Cols. 117-118) Foreign Worker Policy The ERC recommended that we keep our foreign worker policies flexible, so that companies can employ the professionals and workers they need, especially those companies which cannot find enough local workers. Our policy is to admit a controlled number of foreign workers and this will continue to be a major competitive advantage. These foreign workers help to keep our manufacturing sector viable and competitive, notably in shipbuilding and ship repair. They reduce overall business costs and do jobs which Singaporeans are unwilling or unable to take up. In a factory, without foreign workers manning the third shift, there would be no jobs in the first or second shifts for Singaporeans. In services too, foreign workers help many local companies to stay in business, especially SMEs, thereby creating more jobs for Singaporeans.”
“Several concessions which were introduced as part of the Off-Budget measures in 2001 were subsequently extended and are still in effect. They include the property tax rebate, rental rebates, and the reduction of the diesel tax on taxis and the reduction of petrol excise duties. These four measures are scheduled to expire on 30th June 2003. I have reviewed them and will extend or modify them as follows: Property Tax Rebate I have decided to give a new property tax rebate for commercial and industrial properties for the period of 1st July to 31st December 2003. The rebate will be $2,000 plus 15% of the balance property tax payable. This rebate will cut costs for businesses, both large and small, who own their own premises. It will give them greater certainty amidst the current business environment. The total property tax savings for the year will be $456 million, inclusive of the rebates given for the first half of the year. Rental Rebates Rebates on rental have been given to HDB's 18,000 tenants and lessees, JTC Corp's 7,000 tenants, and the Singapore Land Authority's (SLA) commercial tenants. Some 2,900 stallholders in ENV, HDB and JTC hawker centres are also enjoying rental rebates. As business conditions remain weak, the Government will extend the rebates by another six months, till the end of 2003. These will lower business costs for tenants by another $204 million, on top of the $200 million of rental rebates already given for the first six months of this year. Diesel Tax for Taxis The diesel tax for taxis was reduced from $5,100 to $4,700 in the 2001 Off-Budget package. I have decided to extend this reduction by another six months, till the end of 2003. This will cost the Government about $4 million.”
“Table 2: Lower CPF Contribution Rates for Workers Aged 50-55 CPF Rates Current From From 1 Jan 1 Jan 2005 2004 Employer Contribution 16% 16% 16% Rate Employee Contribution 20% 18% 16% Rate Total CPF Contribution 36% 34% 32% Contribution Rates for Special and Medisave Accounts Thirdly, we will phase in higher contributions to the Special and Medisave Accounts for all Singaporeans. This is to strengthen savings for old age and healthcare. These changes will be phased in gradually over three years, starting from January 2004. Table 3:Increased Contribution Rates to Special and Medisave Accounts CPF Rates Current From From From 1 Jan 1 Jan 1 Jan 2004 2005 2006 For workers aged 35 years and below - Special Account 4% 5% 5% 5% - Medisave Account 6% 6% 7% 7% For workers aged above 35-45 years - Special Account 6% 7% 7% 7% - Medisave Account 7% 7% 8% 8% For workers aged above 45-50 years - Special Account 6% 7% 8% 9% - Medisave Account 8% 8% 8% 9% For workers aged above 50-55 years - Special Account 6% 7% 8% 9% - Medisave Account 8% 8% 8% 9% CPF members need not worry that these changes will leave them with less savings in their CPF Ordinary Accounts to service their mortgage payments. We are implementing the changes over several years, during which we expect wages to increase. In addition, the Government will give those who purchased their properties before 1st January 2004 continued access to their Special Accounts to top up their CPF mortgage payments, to the extent that these payments are affected by the changes. Business Costs The ERC also recommended that we keep other components of business costs as low as possible. This the Government is doing, as I explained earlier. Besides wages, land, utilities and infrastructure services all should be competitively priced.”
“These are changes to restructure and improve the CPF scheme, and we should begin to implement them progressively, giving Singaporeans enough time to adjust. CPF Salary Ceilings Firstly, we will phase in the reduction in the CPF salary ceilings. The ceiling is currently $6,000 for private sector employees. This will be lowered to $5,500 in January 2004, and further to $5,000 in January 2005. The civil service will also rationalise the salary ceilings of the public sector to match that of the private sector, including the pensionable officers who have lower CPF contribution rates. Table 1: Lower CPF Salary Ceilings CPF Salary Ceiling Current From From 1 Jan 1 Jan 2005 2004 Private Sector $6,000 $5,500 $5,000 Public Sector (Non- $7,000 $6,000 $5,000 Pensionable) Public Sector $9,333 $8,000 $6,667 (Pensionable) This change will refocus the CPF scheme on the basic needs of the majority of the population, rather than the higher income earners who are better able to plan and provide for their future financial needs. It is not, however, intended as a wage cut. As recommended by the ERC, I encourage employers to pass on part of their cost savings to deserving workers through the variable component of wages, such as bonuses or other variable payments. This will depend on the circumstances of each company and the contribution of each worker. Employee Contribution Rates for Older Workers Secondly, we will phase in the lowering of the employee contribution rate for older workers aged 50-55. The rate is currently 20%. It will be lowered to 18% in January 2004, and further to 16% in January 2005. These changes will enable older workers to take home more of their pay, and will help them when their companies phase out seniority based wage structures.”
“However, before I discuss them, let me address the ERC recommendations dealing with the immediate economic situation. CPF Changes CPF Restoration The ERC recommended that the Government defer for two years any further restoration of the current CPF contribution rate of 36%. The rate would thereafter be restored progressively to the full 40%, although the pace and timing will depend on prevailing economic conditions. The ERC also proposed to proceed with the other changes to the CPF scheme, which had been linked to the full restoration. The Government accepts these recommendations. The Singapore economy has not yet fully recovered from the 2001 recession. Moreover, the current slowdown is not just a cyclical downturn, but a reflection of a fundamentally changed environment. Even as we pursue longer term strategies to adapt to this new landscape, we must maintain Singapore's competitive position and make sure the recovery is firmly on track. Deferring any further CPF restoration for two years will ensure that we do not increase the burden on employers before the economy has fully recovered. It will send a strong signal to investors that Singaporeans understand what is at stake, and are determined to face up to the new challenges. Some Singaporeans have expressed concern that delaying the CPF restoration will hurt workers' savings. But the more urgent priority now is to help them keep their jobs. When companies are assured that their business costs are not going up, they are less likely to retrench workers or move out of Singapore. They may even be encouraged to hire more workers as soon as business picks up. At the same time, we will proceed to phase in other changes to the CPF system that we had intended to do when we restored the CPF contribution rate.”
“We must continue to develop our talent to their maximum potential. Continuing education and training will help our workers update their skills and keep their jobs. The recent changes to our upper secondary education system and the planned expansion of tertiary education will have a far-reaching impact on the abilities and outlook of the next generation of Singaporeans. The new, broader-based educational system complements our traditional focus on numeracy and technical knowledge with a new emphasis on independent project work and creative thinking. It will enable Singaporeans to thrive in a knowledge-driven economy. Around the world, dynamic cities like New York, London and Shanghai are competing for global talent. This is on top of the considerable talent inflow from their national hinterlands. Since Singapore lacks a domestic hinterland, it is even more vital for us to reinforce our own talent pool with global talent to sustain a sophisticated and globalised knowledge economy. Singapore welcomes anyone, whether entrepreneur, scientist, engineer, manager or artist, who can contribute to our growth and prosperity. We should also strengthen our links with the community of overseas Singaporeans, numbering some 150,000-strong. Many of them have a deep sense of attachment to Singapore and want to offer their experience, expertise and network of contacts. As our economy globalises further, the number of overseas Singaporeans will grow. Our international network will help us to sense what is happening in all the major cities, and equip Singaporeans with the exposure and flexible attitudes to operate in a diverse world. Tackling Immediate Issues Most of the measures in this year's budget are directed at these five strategies.”
“We must help Singaporeans to continually improve their skills and acquire new ones in order to push our manufacturing sector further up the value chain. To diversify our economy, we must complement manufacturing with a robust services sector. Services already make up about two-thirds of our GDP and overall employment. However we must promote our services sector more actively. Exportable services offer good growth potential, because the growing middle classes in China and India will demand many services which we can provide. We are already a key hub for seaport and airport services, logistics, trading, info-communications technology, financial services and tourism. We will continue to invest in these areas and use our strong position to meet the competition from other countries. At the same time, we will grow new services industries like healthcare, education and the creative industries. Even in the services sector, the trend worldwide is to outsource semi-skilled jobs to countries with cheap and abundant labour. Many US multinationals have outsourced their back-end call centre operations to the Philippines and India, lured by low wages and an ample supply of English-speakers. Part of the training for call operators is to watch American TV serials, so that they can discuss the latest episodes in the proper American accents, and make the callers think they are talking to people in the US. So in services, as in manufacturing, we need to upgrade our workers' skills for higher-value jobs, and train enough workers in the skills that these new services industries need. Ultimately, our human capital drives our competitiveness. Human Capital Our fifth strategy is therefore to invest in our people. This is a key prerequisite for the success of all our other strategies.”
“To do so, we must offer an environment in which good ideas stand the best chance to be nurtured and take off. Producing entrepreneurs will also depend on our social values. A society that prizes self-reliance is more likely to produce winners. So is one in which winners are celebrated, while the unsuccessful are encouraged to learn from their mistakes and try again. We must become such a society. Then we can produce a constant stream of dynamic start-up companies, some of which will grow into major players. Our established companies can also develop into internationally competitive firms. This will enable us to continually renew our economy, staying ahead of others through innovation and enterprise. Manufacturing and Services Fourthly, we must promote manufacturing and services as twin engines of growth. Manufacturing will remain a mainstay of our economy. Our strong manufacturing base generates 80% of our exports, sustains many domestic support industries and provides good jobs for Singaporeans. We must continue to strengthen and upgrade this key economic sector. Other countries too are relying on manufacturing to spur their economic development. Competition is fierce, especially from emerging players like China. They do not just rely on their low costs. They are also upgrading their technical know-how, and moving into higher value-added activities. We have no choice but to upgrade our own manufacturing technology, or else see our manufacturing sector hollowed out. To strengthen the manufacturing sector, we must acquire new technologies and capabilities. Research and development (R&D), coupled with enhanced protection for intellectual property, are critical elements.”
“This is why PSA is retrenching its staff and rationalising its operations. These steps are painful, but unavoidable if PSA is to grow its market share, and remain the world's port of call. Entrepreneurship and Singapore Companies Our third strategy is to encourage the spirit of entrepreneurship among Singaporeans. To thrive in a volatile and unpredictable environment, and to ride on the growth of emerging regional markets, Singaporeans must take risks, seize opportunities and create new possibilities for themselves. Every Singaporean must rely on his own wits and initiative, in order to respond quickly and supplely when conditions change. It is heartening that despite the slow economic growth, about 600 more new businesses were registered last year compared to the previous year. Entrepreneurship is not just for the minority of Singaporeans who take the plunge and start up new businesses. It is a mindset that all of us should share. It must pervade all businesses, large and small, as well as the public sector. In Singapore, an entrepreneurial and innovative civil service bureaucracy must not be a contradiction in terms. Government policies will help to foster entrepreneurship. Low direct taxes will allow successful entrepreneurs to keep more of the fruits of their labour. Improvements to the education system will expose Singaporeans to business concepts from an early age. The public sector will continue to simplify its rules and procedures and cut red tape. Ministries and statutory boards will avoid crowding out the private sector by spawning companies to do things that the private sector can do. Entrepreneurship requires talent. While we develop our own talent, we must also attract entrepreneurs from all over the world to launch ventures and develop ideas here.”
“Work arrangements such as overtime practices must become more flexible to accommodate the ups and downs in business conditions. Our wages need to reflect the worth of the job and the contribution of the employee, instead of depending rigidly on the seniority of the person. Finally, competitively priced infrastructure will help keep business costs low. We should not subsidise services below their true cost, but nor should we allow monopoly or cost-plus pricing to inflate costs for other businesses. Land is one of the most important factors of production. To make optimum use of this resource, the land market must be efficient and flexible. This is especially so for industrial land, because MNC projects can go to any number of countries. Hence we must ensure an adequate supply of industrial land at a competitive price. We can do so, because we have reserved enough industrial land to meet the needs of a large manufacturing sector. We must improve the quality and efficiency of infrastructure services like utilities and port services. NEWater is an economical, assured and high quality source of water which complements our other water sources. It will adequately meet the needs of both industries and households. In the electricity market, competition in a properly structured industry will ensure that electricity is produced and supplied as efficiently as possible. Since we started restructuring the electricity industry in 1995, productivity per worker has increased by 60%, and tariffs have come down. In port services, PSA Corporation has cut tariffs and given $300 million worth of rebates to shippers, in order to provide better value to its customers. To meet growing competition, PSA must cut its costs and be as lean as possible.”
“These bilateral arrangements will save our exporters hundreds of millions of dollars in tariffs a year, create opportunities for our companies to expand overseas, and attract more investments here to take advantage of the FTAs. This will result in more jobs for Singaporeans. Competitiveness and Flexibility Our second strategy is to strengthen our competitiveness, and enhance the flexibility of the economy. Given our small land area and our dependence on imported energy, we cannot compete based on costs alone, against larger countries better endowed with natural resources. Instead, we must redouble our efforts to improve our microeconomic competitiveness and efficiency. We must offer a superior business environment and an internationally competitive cost structure. The Government is committed to keeping taxes low, especially direct taxes on companies and individuals, in order to keep the burden of government light, encourage investments and reward enterprise. We believe that a 20% tax rate will be highly competitive, but we will continue to track international trends. The CPF must stay focused on its core purposes of providing basic financial security in retirement, housing and healthcare for the majority of Singaporeans. To be sustainable over the long term, the CPF must not become a heavy imposition on employers that deters them from employing workers or growing their businesses. Our labour market must be flexible, so that workers can move freely from one job to another, and companies can hire or shed workers when they need to. The more difficult and expensive it is for companies to downsize, the more reluctant they will be to employ people in the first place. This will raise unemployment, to the detriment of workers, as has happened in Germany.”
“But we must also seize opportunities in new markets, particularly China and India, by deepening our knowledge of their business conditions and expanding trade and investment ties with them. Singapore must make itself a hub for strategic and high value-added activities of companies that operate in our broader hinterland of greater China, India and Australia, which are within a seven-hour flight radius from us. We must continue to deepen our economic integration with our ASEAN neighbours, and make ASEAN more attractive to foreign investors. By combining our complementary strengths, ASEAN countries can compete more effectively, and hold our own in manufacturing activities, even against China. This is what Singapore is doing together with Batam and Bintan. As a small, open economy dependent on world trade, Singapore supports multilateral trade liberalisation within the World Trade Organisation (WTO) framework. However, we must complement this with bilateral FTAs with key trading partners to expand our economic ties and assure our access to their markets. We have already signed FTAs with Australia, New Zealand, Japan and the European Free Trade Association (EFTA). The negotiations for the US-Singapore FTA were concluded in January. We look forward to signing and ratifying the agreement this year. We are currently negotiating FTAs with Canada and Mexico. We will also launch a trilateral FTA with New Zealand and Chile. We are likely to launch FTA talks with India and also South Korea this year. As part of ASEAN, we are negotiating an FTA with China and doing a study to launch an FTA with India.”
“Foreign investors and analysts have noted our decisive actions to restructure the economy and tackle the downturn, as well as our support for difficult but essential policies. This is a key reason why we have continued to attract investments, even as investment flows into other Southeast Asian countries have declined. Moving Ahead We have made a good start in restructuring the economy to secure our future. But this is a long process, and much more work lies ahead. Earlier this month, the ERC completed its work and published a comprehensive report. It recommended immediate measures to help our economy recover fully from the recession, as well as longer term strategies to make Singapore a leading global city. These five strategies addressed our: Our External Ties Our Competitiveness and Flexibility Our Entrepreneurship and Singapore Companies Our Manufacturing and Services; and Our Human Capital The Government accepts the recommendations in the ERC report. These recommendations reflect the inputs of over a thousand participants from the private sector, the labour movement, as well as the public sector. The Government thanks all of them for their efforts and contributions. Their proposals provided a sound basis for revitalising our economy, and for sustaining growth in the next phase of our economic development. Let me first explain these five strategies before I give the Government's response to the immediate steps recommended by the ERC. Later, in Part III of the speech, I will announce specific measures to implement the ERC recommendations. External Ties Our first strategy is to expand our ties with economic partners globally and in Asia, especially Southeast Asia. The US, the EU and Japan will continue to be our main markets and sources of investments.”
“Last year, the Government accepted and implemented two major recommendations of the ERC. Firstly, we decided to restructure our tax system. We are lowering corporate and top personal income tax rates substantially. This will help to retain and attract businesses and talent, and thus create good jobs for Singaporeans. At the same time we are raising the GST rate. The Government provided a generous $4.1 billion offset package to help Singaporeans adjust to the GST increase, and ensure that no household will be worse off for at least five years. In addition, the Government is phasing in the GST increase over two years, instead of raising it to 5% in one step, as originally planned. This puts an additional $650 million into the pockets of Singaporeans. Secondly, we restructured the CPF to focus on the basic retirement needs of Singaporeans and trim over-investment in housing. This will keep the burden of CPF contributions as low as possible, while meeting the essential needs of the majority of the population. To help older workers aged 50-55 stay employable, we also capped employers' contributions to their CPF at 16%. Besides these ERC recommendations, we responded to the recession by moderating wage increases to maintain our competitiveness and retain jobs. Singaporeans have been guided by the National Wages Council's recommendation of wage restraint, which extends until June this year. Their willingness to accept these sacrifices reflects their pragmatism, as well as the close tripartite relationship between the unions, employers and the Government. This clear response has distinguished us from other countries.”
“A broader-based recovery is not expected until 2004. Starting Well Mr Speaker, Sir, we now live in a fundamentally changed world. Singapore is at a turning point. We face not just greater economic volatility, but also new political and security uncertainties. Competition is keener and changes are coming faster. To stay in the race and ahead of the pack, we must constantly adapt to the changes around us, and restructure our economy. After many years of rapid growth and development, our people now enjoy a high per capita income and a high standard of living. But as our economy matures, it will be difficult for us to maintain the same high rates of growth that we experienced in the 1980s and 1990s. Structural unemployment will become a more serious problem. Older, less educated workers who fail to update and upgrade their skills will be particularly vulnerable. The Government's fiscal position will tighten as slower growth means less buoyant revenues, while an ageing population will lead to increased social spending. We must find new sources of growth or else stagnate and decline. These challenges are formidable, but we can overcome them. Over the last 30 years we have built up our financial, physical and human resources through toil and teamwork. We have strengthened our social cohesion and institutions. We share ideals and values that help us to work harmoniously together for maximum results. These key advantages help us tackle difficult problems together, and restructure our economy for continued prosperity. We have already begun the task of restructuring. In October 2001, the Government announced the establishment of the Economic Review Committee (ERC) to develop new strategies to take us forward.”
“In the US, the consumer confidence index in January reached its lowest level since 1993. The present projection remains for a pickup in the second half of the year, bringing growth close to 3%, slightly better than 2002. Regional In East Asia, sustained domestic consumption should maintain growth at rates similar to last year, despite tensions in the Korean peninsula. Exports from the Southeast Asian region should stay robust, as stronger demand from China should partially compensate for the weaker demand from the developed economies. China is a large and rapidly growing market that offers many opportunities to nimble entrepreneurs and companies. India's economy too has much potential. It is showing a new dynamism and a more outward orientation, especially in the southern states. Economic cooperation among the ASEAN countries is gradually deepening, for example, through the ASEAN Free Trade Area (AFTA). ASEAN is also launching Free Trade Agreement (FTA) negotiations with China and Japan, and preparing to benefit from an FTA with India and the Enterprise ASEAN Initiative with the US. Terrorism is still a problem in Southeast Asia, but after the Bali bombing, ASEAN countries are cooperating more closely to combat this threat. Singapore Given the external conditions, I expect Singapore's economy to continue to grow slowly in the first half of the year. In the second half, if the US economy and the global electronics industry strengthen as we hope, Singapore should also recover more strongly, and our unemployment should start to decline. For 2003 as a whole, MTI expects GDP growth to be between 2% and 5%, although it is less likely to be at the high end of the range. Like in 2002, growth is likely to be narrow and uneven across the different sectors.”
“Despite some public concern about the cost of living, the Consumer Price Index (CPI) last year fell by 0.4%. Healthcare and education costs rose, but housing and car prices fell. Lower electricity tariffs, cheaper accommodation and household durables combined to reduce housing costs by 2.2%. Cheaper petrol and a lower road tax reduced transport and communication costs by 1%. Basic food items like rice, cooking oil, meat, seafood and vegetables all cost less. The Government implemented a slate of measures to help Singaporeans cope with the downturn and adapt to the economic restructuring. Last year, our training and upgrading programmes helped 36,000 workers learn new skills to match the jobs that are available or being created. The Off-Budget package helped all Singaporeans, especially the lower-income and unemployed. 800,000 HDB households received 10 months of utilities rebates worth a total of $226 million. A further $110 million went towards helping Singaporeans through rebates on rental and service and conservancy (S&C) charges. Immediate Outlook Global At present, the major uncertainty hanging over the world economy is the prospect of war in Iraq. Consumers are holding back their spending, and companies are delaying investment plans. Within a few weeks we will know whether war is going to break out. Within a few months we will know how things have turned out. One significant worry is oil prices. After a war, they could fall back to normal and give a boost to growth, or they may stay high and slow down the recovery process. The crisis in Venezuela, which has significantly reduced world supplies of oil, makes it more likely that oil prices will stay high. Growth in Europe and Japan this year is expected to remain sluggish.”
“Mr Speaker, Sir, I beg to move, That this Parliament approves the financial policy of the Government for the financial year 1st April 2003 to 31st March 2004. SEIZING OPPORTUNITY IN UNCERTAINTY PART I: OUTLOOK AND RESPONSE In 2001, our GDP shrank by 2.4% in our worst-ever recession since Independence. Last year began promisingly. Despite the uncertainties of the war against terrorism and the conflicts in the Middle East, initially the recovery of the United States economy boosted our growth prospects. But as the year progressed, a wave of corporate scandals and the WorldCom and Enron collapses shook the confidence of investors and consumers. This slowed down the US economy. The European Union (EU) and Japanese economies also lost steam. However, the East Asian economies did well. Our exports to China grew strongly, but this was not enough to make up for the fall in external demand elsewhere. Despite the unfavourable conditions, our economy grew by 2.2% in 2002. Unemployment peaked at 4.6%, but improved slightly to 4.2% by the end of the year. Manufacturing grew by 8.3% driven largely by the small, but fast-expanding, biomedical science cluster. Exports remained resilient, growing by 1.9%. Singapore continued to attract investments. We garnered over $9 billion of fixed-asset investments in manufacturing. Foreign manufacturing fixed-asset investments rose from $6.6 billion in 2001 to $7 billion last year, while committed foreign business spending grew by 35% to $1.5 billion. The electronics cluster continued to attract the largest share of investments followed by the chemicals cluster. Investments in biomedical projects generated the second highest value-added for the economy. All these investments are expected to create 21,000 jobs.”
“Mr Speaker, Sir, I beg to move, "That Parliament doth agree with the Committee on the said resolutions." Question put, and agreed to. Resolutions accordingly agreed to. Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 2.30 pm. Sitting accordingly suspended at 2.06 pm until 2.30 pm. Sitting resumed at 2.30 pm [Mr Speaker in the Chair] ANNUAL BUDGET STATEMENT”
“Mr Speaker, Sir, I beg to report that the Committee of Supply have come to certain resolutions. First resolution reported - "That the sum of $693,901,090 shall be supplied to the Government under the Heads of Expenditure for the Public Services shown in the Second Supplementary Main Estimates of Expenditure for the financial year 1st April, 2002 to 31st March, 2003, contained in Paper Cmd. 3 of 2003". Second resolution reported - "That the sum of $106,000,000 shall be supplied to the Government under the Head of Expenditure for the Public Services shown in the Second Supplementary Development Estimates of Expenditure for the financial year 1st April, 2002 to 31st March, 2003, contained in Paper Cmd. 3 of 2003".”
“Of these, 29 were found not to be due to profiteering on account of GST increases. Replies have been given to these respondents. Nine have been forwarded to the respective Constituency Committee Against Profiteering for further investigation, and the investigation is still in progress. Four have been forwarded to the Consumers Association of Singapore (CASE) for review. The Committee Against Profiteering is currently looking into the remaining five unresolved reports. If consumers come across any instances of businesses trying to profiteer from the GST increase, they should provide feedback to the Committee by filling in the forms which are available in all community centres, community clubs as well as our website. FINANCIAL ASSISTANCE BY STUDENTS 7. Mr Gan Kim Yong asked the Minister for Education (a) how many students have approached his Ministry for financial assistance for the year 2003; (b) how many have been granted such assistance; and (c) whether there has been a significant increase in the number of students seeking the assistance compared to previous years.”
“Mr Speaker, Sir, we will consider all possibilities. I think for the older folks, we can be much more flexible. Because as Mr Heng Chee How has pointed out, once you pay the money in, you are entitled to draw it out the next day. But for the younger people, they are not entitled to draw it out the next day. When they reach the age of 55, then they can take it out together with the rest of their CPF money. So I think there is a point. And to put in $50 in order to collect $400 or more from the Government is not an unreasonable request. PROFITEERING 6. Mr Gan Kim Yong asked the Deputy Prime Minister and Minister for Finance whether there have been significant incidents of profiteering arising from the revision of the Goods and Services Tax (GST) to 4% from 1st January 2003 and if so, what actions have been taken so far in dealing with these incidents. The Minister of State, Prime Minister's Office (Mr Chan Soo Sen) (for the Deputy Prime Minister and Minister for Finance): Sir, there appears to have been no significant incidents of profiteering so far. Anyway, conditions for profiteering are not present. There is no shortage of goods in the market. Retailers are trying their best to retain customers through competitive pricing. Consumers have many choices and can turn from one retailer to another. We have investigated a few items which have increased in price and we found that the increases cannot be attributed solely to the increase in GST. The Committee Against Profiteering, which I am chairing, was set up to deal with profiteering and unjustified price increases. From 1st December 2002 to 20th January 2003, the Committee received a total of 47 reports. The majority related to price increases of food items as well as cooked food items.”
“Mr Speaker, Sir, I do not have the exact number of how many were given $50 by the grassroots organisations, because these were arrangements made by the individual Advisors. But I am assured that the Advisors have gone through it and wherever people needed assistance and could not afford the $50, it has been forthcoming. I do not think the number is very large. I believe they would number in a few hundreds. As for what exactly the arrangements will be for the 10,000 which we are talking about now, I leave that to the Advisors. I have discussed it with them, particularly the Advisors from the constituencies which have larger concentrations of the poor and older folks, like Dr Lily Neo in Kreta Ayer and a few others who have smaller flats and older residents. And they assured me that the financing is not a problem. The question is: does the person want to participate and is it really a problem that he is unable to find the $50? If it is, we can make the arrangements for him. Because if you just look at it, 10,000 people times $50, it is $500,000; divided by 80 Advisors, it is about $6,000 per Advisor. It is not an enormous amount of money. It can be arranged.”
“Mr Speaker, Sir, first, on the 3-roomers. I think we have to draw the line somewhere. If I had drawn the line at the 3-roomers, I think Dr Neo would have asked me for the 4-roomers. But, nevertheless, there will be cases where 3-roomers will have financial problems. And if MPs come across any such cases and write in to the CPF Board, the Board will consider them sympathetically. As for using the CDC's money to match, perhaps we should remember that the CDC's money actually came from the Government in the first place. But I am sure the Member will have sources of funds and that the CDC has arranged for donations and wants to use those donations for this purpose, that would be very helpful.”
“The grassroots organisations will get in touch with them and make arrangements for them to participate in the ERS scheme, extending financial help where necessary. As the numbers are not too many, it should be feasible for us to take this more personalised approach. The special facility will be provided up to 31st March 2003, to give the grassroots organisations sufficient time to identify and reach out to those in need. Mr Steve Chia asked whether the unallocated money from the ERS will be channelled to provide more aid to the poor and needy. The special arrangement I have just mentioned will help some more needy Singaporeans get their ERS. The rest of the ERS money will remain in the ERS Fund, and become available for future ERS distributions. The ERS Fund is set up as a private trust fund specifically to distribute ERS shares. The Government has many other schemes to help the poor and needy who require assistance. For future lots of ERS, we are considering possible ways to be more flexible with the CPF contribution requirement, especially for the lower-income, the elderly, and Singaporeans staying in welfare homes. My Ministry is studying the options. We have time as the next contribution is not due until 31st December 2003.”
“It is not desirable for the Government simply to give the shares to all Singaporeans, without even knowing where he is or whether he wants the shares. For example, the person may have emigrated, and may not have maintained his links with Singapore. Why should we give it to him? Dr Lily Neo, Mr Loh Meng See and Dr Amy Khor have asked if the Government will give those who missed out another chance to benefit from the scheme. For those who are not poor, and these form the majority of those who did not top up, I think we should respect their decision not to participate in the scheme. The Government made them an offer, they decided not to take it up, and we should leave the matter there. We have to be fair to the 95% of Singaporeans who took the trouble to top up by the deadline, some of them queuing up to do so on the last day. If each time the Government sets a deadline, it gets extended because people did not make the effort to meet it, soon the Government's terms and statements will not be taken seriously. However, for the lower income groups, ie, the 9,791 cases of 1-roomers, 2-roomers and people in welfare homes, I agree fully with the MPs that we should be flexible and make a further effort to reach them. They are the ones most likely to have had genuine financial difficulties and to have been unable to make alternative arrangements. They are the most in need of the ERS shares. The Government will therefore make a special arrangement to help them. We will give all the Advisors to the grassroots organisations the list of residents staying in 1- and 2-room HDB flats, and welfare homes, who have not topped up their CPF.”
“The grassroots organisations not only put up reminder posters at HDB void decks, but made house visits to those staying in 1- to 3-room HDB flats. If the occupants were not in, they made repeat visits; sometimes three or four times. If the residents could not afford the $50, the grassroots organisations helped them financially on a case-by-case basis. There could be many reasons why people did not top up their CPF accounts in time. Some may have forgotten, others may have been overseas. There may even have been some who were not interested in the shares. The grassroots leaders who made the house visits have reported that a significant proportion of those who had not topped-up their CPF accounts could not be found at the addresses given. Conceivably, they had not updated their addresses on their NRICs with the National Registration Office and hence, would not have received information about the ERS scheme posted to them. Among the lower income households, especially the older folks, many of those who did not top up probably did not have active CPF accounts. They may have found it difficult to top up their accounts, even though help from the GROs was available. Some may not have understood how the scheme would help them. Mr Gan Kim Yong and Dr Lily Neo have asked to waive the $50 CPF top-up requirement for those with financial difficulties. Let me explain the purpose of the $50 contribution. Besides encouraging Singaporeans to maintain an active CPF account that helps provide for their retirement, the top-up is a way for Singaporeans to show that they are doing something to receive their ERS. It is really to put up your hand and say, "I'm here. I would like to participate in the scheme".”
“The ERS is part of the offset package to help Singaporeans adjust to the increase in the GST rate. It covers the net increase in tax for nearly every Singaporean for at least 5 years. There is no question of the offset not being adequate for this purpose. Based on the latest data from CPF Board, about 100,336 Singaporeans, or about 5% of the total of 2.18 million eligible Singaporeans, did not contribute $50 into their CPF accounts by 31st December 2002. This is lower than the earlier reported figure of 128,000, which was not the final count, as last minute contributions were still being processed by CPF Board. The detailed breakdown is in the table (Cols. 2273 - 2274) that I have circulated to Members, and you should find it on your seats. The highest rates of non-participation came from those staying in welfare homes and 1-room HDB flats. The rate for those in 2-room HDB flats was also rather high. There were 9,791 of such cases in all (in other words, welfare homes, 1-rooms and 2-rooms). They account for about 13% of the total number of eligible Singaporeans in these categories, but only 0.5% of the total number of eligible Singaporeans. This is the relatively small group that we should focus on. Annex - Singaporeans who did not qualify for ERS (Cols. 2273 - 2274) The Government has put in considerable effort to remind Singaporeans to top up their CPF accounts by 31st December 2002 to qualify for the ERS. In August 2002, CPF Board sent letters to all Singaporeans to inform them of the ERS Scheme and to remind those who had not yet topped up to do so as soon as possible. In November and December 2002, MOF and CPF Board issued press releases, and ran radio trailers and newspaper advertisements. We mobilised the grassroots organisations (GROs).”
“Mr Speaker, Sir, with your permission, I will answer Questions 1-5 together.”
“Sir, I beg to move, In page 2, line 12, to delete "5%" and insert "4% for the year 2003 and 5% for the year 2004 and subsequent years." I have earlier explained to the House the reasons for the change and I am relieved that the Members have given me their general assent. Amendment agreed to. Clause 3, as amended, ordered to stand part of the Bill. Clauses 4 to 7 inclusive ordered to stand part of the Bill. Bill reported with an amendment; read a Third time and passed. REGISTRATION OF CRIMINALS (AMENDMENT) BILL Order for Second Reading read. 2.30 pm”
“We have made a significant move to phase out the GST - 4% this year, 5% on 1st January 2004. I would not hold out hopes to Members that come 1st January 2004 we are going to have a rethink and reconsider again. I am sure the subject will be discussed, but I should put down my cards clearly to Members so that there is no misunderstanding. This is an adjustment which we are making this time so that we will take it in small steps. 1% is a small step next year. 1% in 2004 is another small step. We have to do it. We will have to adjust other things if there are difficulties in the economy next year, but this is a structural change which will help us to get out of this problem, which will help us to create more jobs, and which will help us to recover and to grow in the long term. That is why I ask Members to support this policy and to support the amendment I am going to propose. Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. The House immediately resolved itself into a Committee on the Bill. - [Mr Lee Hsien Loong]. Bill considered in Committee. Clauses 1 and 2 ordered to stand part of the Bill. Clause 3 -”
“Some businessmen prefer that! Well, if she thinks that is a better solution, when we move the amendment in the Committee stage I think we can look into the matter. She might want to express her views again. We could even take a vote. But I think 1% is better than 2%. There is some inconvenience. The businessmen have also expressed it, that they have to adjust their settings, their pricings, twice, but it cannot be helped. These are trade-offs they have to accept. Finally, Mr Chiam talked about showing care and compassion and how the poor in Singapore are not living in the first world. I think Mr Chiam will know that while we need to improve the conditions for all Singaporeans, and especially for poor Singaporeans, somebody living in Singapore, however poor, is in a much, much better position than somebody living in China poor, or in Indonesia poor, or in India poor, or poor in nearly any better part of the world, including in America. We have gone into this before. You may not have your running water every day if you do not pay, but you do have your running water available. You do have a house over your head. Your children have schools. You have medical care provided for you. You have a Medifund if you cannot afford hospital charges. Your MP looks after you and come New Year, the MPs and the residents arrange, and you have hong baos and hampers, and I am sure Mr Chiam also arranges those. We have a community in which the poor are part of our community and we look after them and we carry them along with us and help them to upgrade as the rest of Singapore upgrades. So when we say that this system has failed, I think we should look at the reality and do a reality check rather than just read off some speech which does not correspond to what is happening on the ground.”
“Does that mean she prefer to have a 2% increase and that would solve the retailers' problem? I do not think so.”
“But some residents still want it, and if you will remember earlier this afternoon, we were talking about lift upgrading and some MPs were pressing us to proceed even though the residents did not vote for it. So I think there are contradictory pushes in different directions, but overall we will have to see how many of the upgrading programmes we can afford because it is not just money from the people, it is money from the Government, and in tough times we have to consider how many we can afford. Ms Braema, Steve Chia and other MPs talked about the small retailers and their problems. I think Dr Amy Khor also made the same point. As I had explained earlier, they do have a structural problem which will take some time to be worked out. The Members are concerned that the extra one percentage point on the GST will affect them. I think it may, to some extent, but on the other hand, they are not totally negatively affected. Let me explain why. The 1% applies to all businesses - big and small. The big ones have to pay, the small ones have to pay, most of it, but not all of it. And the reason is because the small ones whose turnover is less than $1 million do not pay GST on their own part of their business. They are GST exempt. So in fact when you raise the GST by one percentage point the big shops are affected more severely than the small shops. So, relatively speaking, it is better off for the small shops than before. Of course, everybody would feel happier if we did not have to do this at all. But if we do have to do it, in fact, the burden on the small shop is less. I was not quite sure how Dr Amy Khor intended me to respond when she said that 1% they cannot pass on, 2% they can pass on.”
“We still have foreign workers here because employers are unable to find Singaporeans to go and do the jobs. And particularly the smaller and medium enterprises who would like to do business on a small scale, they find it very hard to get Singaporeans to go and work for them. Maybe the hours are a bit irregular, maybe the wages are a bit low, but if you are unemployed, and a job is available, then better to have the job rather than not to do it at all. And I think our solution for the unemployment problem, while we have to help those who are in a desperate state, at the same time, we have to encourage all of the people who are out of work to look for work and to take up the jobs which are available and some of them which they can do, even if it is not ideal. So although Mr Tan talked about reinstating the EDRS, as I had explained earlier, I think that we do not need to do it for now because we have enough means to help the unemployed and the people who need help. But if there is another crisis we will examine the situation and, if it is necessary, we will re-introduce the EDRS. Ms Braema talked about reviewing the HDB upgrading programme because that would be additional expenditure by people at this time. I think it is something which the Minister for National Development will be considering and which many MPs will be considering when the propositions are put to them because finally to do the upgrading, main upgrading or lift upgrading, the residents have to vote for it and have to agree to want it. And if they do not want it, it does not proceed. If the MP says it is not necessary even to put it to the residents, you do not proceed.”
“We also ran a deficit last year. But next year, I think, at best, we can do a balanced budget, if you have heard what I said. I said I do not think we are going to get a surplus, at best, we aim for a balanced budget. We try, but we will have to see the circumstances in order to do it. If we go on the basis that we can spend because we have reserves, I think the reserves will soon be gone, and Singaporeans will be much the sadder for it. So we do have to be sympathetic and we have to feel with our hearts as well as think with our minds, but it is necessary to be logical and pragmatic and I am sure Mr Chandra Mohan, as a lawyer, will agree that logic is not irrelevant, and that is why we have to work out a package which makes sense, which is what we have proposed - to phase in the increase but not to postpone it altogether. Mr Tan Soo Khoon was generally supportive of the change we made and I am grateful to him for skipping many pages of his speech. We too know how to be grateful for small mercies. I should like to correct one point which Mr Tan made which was that unemployment is up 4.8%, it is a record, and it is 100,000 people. First of all, it is not a record because we have been more than 4.8% before, for example, in the 1985/86 recession, we went all the way up to 6%. Secondly, it is not 100,000 unemployed. It is 72,000 people unemployed. 4.8% is a seasonally adjusted percentage, but the actual number of people is 72,000 unemployed. Mr Chiam also quoted 100,000. 72,000 is more than we would like to have, but we should not exaggerate the extent of our problem and talk ourselves into a gloom and a funk. The saving grace for us is that even though people are unemployed, the work is still available, jobs are still available.”
“Mr Speaker, Sir, I thank the Members for their contributions. May I now pick out some of the points which they raised. Dr Amy Khor talked about small businesses and the need to give them rental rebates. I agree. These are things which are being done by JTC and HDB. It is separate from the GST package. Mr Chandra Mohan talked about why balance the budget. I think this is quite a fundamental point. Why do we need to live within our means to balance the budget? The Government's fiscal stance is one which we have to fit to the state of the economy and to our circumstances. We can live beyond our means for a time or in an emergency, but eventually the chickens come home to roost and we have to pay for what we have spent. When the economy is in a recession, and there is a major downturn, then it is right for us to run a budget deficit because you cannot raise the same amount of taxes, you are going to squeeze businesses, you need to stimulate the economy, get it going again. When the economy is at an even keel, it is not in a recession, if you routinely run a budget deficit, you will have a very serious problem because soon you will be borrowing money, your credit will not be worth what it says it is, and as I have explained just now, your Singapore dollar will go down, inflation will go up, your savings, the value will go too, because your CPF is in Singapore dollars, and if the dollars are worth less, your savings will be worth less. So when we live within our means, and try and maintain a balanced budget, say, next year, it is because we think that is about the right level to manage the economy and to provide the stimulation which is needed, not more, not less. This year we are not running a surplus, contrary to what Mr Chiam said. We are running a deficit this year.”
“Zero-rating of Co-location Web-hosting Services and Managed Services In a co-location arrangement, a service provider will generally require the customers to bring in their own server platforms and place them at his facilities. Where a local service provider provides web-hosting and managed services to an overseas customer in such a co-location arrangement, the services are standard-rated if the server belonging to the overseas customer is located in Singapore, and zero-rated if located outside Singapore. Zero-rating the entire web-hosting services and managed services provided to an overseas person, regardless of where the server is located, will promote Singapore as an e-commerce hub. Hence, clause 4 amends section 21 of the Act to provide for zero-rating of the supply of services to an overseas person in relation to computer server equipment belonging to that person which is co-located in Singapore. Clarification of Comptrollers' Powers Increasingly, business transaction information and data are stored in computers, electronic media and other alternative media. However, the Comptroller of Goods and Services Tax's powers to access and to seize such electronic records may be limited based on the interpretation of the current legislation. Therefore, clause 7 amends section 84 of the Act to clarify the powers vested in the Comptroller to access and seize such records kept in electronic and other alternative media. Sir, I beg to move. Question proposed.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." This Bill will amend the Goods and Services Tax Act to give legislative effect to the following measures: a) To change the GST rate; b) To provide for the transition from the existing GST rate to the new rate on 1st January 2003; c) To zero-rate co-location web-hosting services and managed services; and d) To make explicit the Comptroller's powers to obtain information and records kept in electronic format or alternative media. Sir, I shall now explain the main amendments in the Bill. Increase in GST Rate I have earlier stated the Government's intent to amend clause 3 of the Bill to effect the amendment to section 16 of the Act to increase the GST rate from 3% to 4% for the year 2003, and from 4% to 5% for the year 2004 and subsequent years. I shall now explain the more technical points in the Bill. Transition to Higher GST Rate In view of the increase in GST rate, there is a need to provide transitional rules to prevent businesses from circumventing the time of supply rules. Under the time of supply rules, businesses may account for GST at the lower GST rate of 3% by issuing tax invoices to customers before the GST rate increase, even though the goods are delivered or the services are performed or the payment is made only after the GST rate has been increased. Hence, clause 5 amends section 39 of the Act to provide for the circumstances in which a tax invoice, issued before the date a change in rate comes into operation, ceases to have effect. Businesses will be required to issue a new tax invoice in these circumstances.”
“Sir, I beg to move, "That the Bill be now read a Third time." Question put, and agreed to. Bill accordingly read a Third time and passed. GOODS AND SERVICES TAX (AMENDMENT) BILL Order for Second Reading read. 1.30 pm”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The purpose of this Bill is to make provision for additional expenditure of $1.2 billion to fund the first allocation of the Economic Restructuring Shares. As announced in my Budget Speech in May this year, the Government is giving out Economic Restructuring Shares to help Singaporeans adapt to the structural changes in the economy, especially the increase in the GST rate. Depending on the annual value of a person's home, each eligible Singaporean will receive $400 or $200 worth of the Shares in 2003. Additional shares on a one-off basis will also be given to those serving or who have served National Service. The Shares will earn tax-free dividends each year in the form of bonus shares, payable every year on 1st March from 2004 to 2008, when the Shares will mature. The dividends will be at a rate of 3% plus the real GDP growth rate for the previous year. There will be three annual allocations of the Shares. The first will be on 1st January 2003. This Bill is required to provide the funds for this allocation. Sir, I beg to move. Question put, and agreed to. Bill accordingly read a Second time. Third Reading”
“Mr Speaker, Sir, I beg to move, "That Parliament doth agree with the Committee on the said resolution." Question put, and agreed to. Resolution accordingly agreed to. SUPPLEMENTARY SUPPLY (FY 2002) BILL Order for Second and Third Readings read.”