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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“Yes, Mr Speaker, Sir, the purpose of the credit bureau is not to sell information so that people can build your profile. It is to establish your borrowing track record, whether you are paying back on time, whether you have defaulted, or whether you are bankrupt. You have to provide the name because if you do not provide the name, you cannot start to retrieve data. But what is associated with that name is not your deposit information, it is not how much money you have, it is what accounts you have. It is only things like the number and type of credit facilities granted, the repayment trends, whether you are repaying, bankruptcy records, and whether you have ever gone bankrupt or not. Assoc. Prof. Chin Tet Yung: But what about transaction records?”
“Should a credit bureau fail to maintain the high standards expected of it, MAS will not hesitate to cancel its recognition of the bureau. Once this happens, it becomes illegal for banks to provide customer information to the credit bureau. MAS recognises that the Consumer Credit Bureau has an important role to play in the financial industry. With the establishment of a credit bureau, members will have more information to anticipate potential bad debt situations before they occur. They will be able to better manage their overall level of bad debts. Studies have also shown that credit bureaus in other countries have enabled credit providers to differentiate between customers, and manage and price them accordingly. Assoc. Prof. Chin Tet Yung (Sembawang): Sir, can the DPM assure all credit card members that the information that they have supplied to these agencies will not be disclosed without proper safeguards, such as their identity would not be disclosed? And if their credit worthiness is disclosed, their transaction record should not be disclosed, but rather whether they were in good credit or bad credit. In other words, whether or not they can afford to pay for their charges, but not the specifics of what and how they are spending, because many credit agencies have been selling such information, so that people can build shopping profiles and so on of credit card users.”
“Mr Speaker, Sir, there has been an active public debate on the establishment of the credit bureau and, particularly, on confidentiality. Many Singaporeans are concerned that the credit bureau will lead to a dilution in confidentiality of banking information. They fear that commercial banks, with the help of the bureau, will have access to client's information about the state of his or her finances that they were not privy to before. These are reasonable concerns and deserve to be addressed squarely. The Banking Act provides the legal framework on the use of customer information. This provision is found in paragraph 7 of Part II of the Sixth Schedule. Banks are only permitted to disclose credit-related information to the recognised credit bureau such as personal details, the type and number of credit facilities granted, repayment trends and bankruptcy records. Banks are not allowed to disclose deposit information. This includes any funds, safe deposit boxes or safe custody arrangements of a customer under management by a bank. This is an important distinction between credit-related information and deposit information. The credit bureau and other MAS approved institutions participating in the bureau will only have access to a customer's credit history. The purpose for such access is restricted to the assessment of credit-worthiness of customers, and further disclosure to any other person is prohibited. Furthermore, a credit bureau that the banks want to use must demonstrate its ability to address financial privacy concerns competently, and to discharge its role effectively in providing accurate reports. MAS will only recognise and gazette the credit bureau when the concerns are adequately addressed, possibly in the form of a written code of conduct for the bureau.”
“According to DBS, which has been conducting its own internal investigation, its findings were that the bank's own Internet system had not been hacked, but it was the customers' PCs which had been hacked. By accessing the customers' PCs, the hacker(s) had been able to capture the PINs and IDs of these customers. The hacker(s) then used the captured customer information to access their accounts to make fraudulent withdrawal transfers. The Police and DBS have advised the public on certain precautionary measures to take and good security practices to adopt when conducting on-line banking. Penalties for hacking into bank systems are already prescribed in the Computer Misuse Act. These penalties have been designed to take account of the severity of the offence and the actual or potential damage caused. For example, if it can be proved that a hacker broke into a "protected computer system" relating to banking and financial services, the Act provides for an enhanced maximum penalty of a $100,000 fine, or 20 years' imprisonment or both. In addition to the criminal penalties, the court may order a convicted offender to pay monetary compensation for any damage caused by the offence to the computer system or data. CONSUMER CREDIT BUREAU (Use of customers' personal financial data) 8. Assoc. Prof. Chin Tet Yung asked the Deputy Prime Minister and Minister for Finance what are the conditions imposed by the Monetary Authority of Singapore for the use of personal financial data of customers in the setting up and operation of the Consumer Credit Bureau by the Association of Banks in Singapore.”
“Mr Speaker, Sir, MAS has promulgated security guidelines on electronic and internet banking for the banking industry. The security standards which banks have to comply will include: i) maintaining robust risk management controls and security practices; ii) deploying strong cryptography to protect customer data; and iii) enhancing surveillance, incident response and systems recovery capabilities. As part of the audit and internal monitoring process, auditors have a duty to evaluate bank compliance with these security guidelines. MAS also maintains its own programme of on-site inspections and off-site reviews. Banks are required to assess the risks relating to their on-line banking products and adopt appropriate security control measures to address and mitigate the risks involved. They are directly responsible for the safety and soundness of the services and systems they provide to their customers. Internet banking, as with other forms of on-line banking, is not without risks. These risks generally relate to impersonation, stealing ID or PIN information, computer hacking, forging access to accounts and fraudulent transactions. The safety of on-line banking is dependent on the security systems of the bank and the precautions that customers take to safeguard their User ID and PIN, as well as protecting the PCs they use. For example, customers should install firewall and anti-virus software on their PCs to block out hackers, and log off their computers when not in use. Regarding the recent hacking incident, which affected a number of DBS customers, the Police are still carrying out their investigation.”
“(2) Clause 3: Redemption of Government Securities Clause 3 amends section 24 of the GSA to provide for the redemption of the new class of Government securities. The amendment provides that these Government securities are redeemable at par on their maturity date or the redemption date specified by the holder in the notice of intention to redeem, whichever is earlier. Sir, I beg to move. 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 Lim Hng Kiang]. Bill considered in Committee; reported without amendment; read a Third time and passed. POLICE FORCE (AMENDMENT) BILL Order for Second Reading read.”
“- [Mr Lee Hsien Loong]. Bill considered in Committee; reported without amendment; read a Third time and passed. GOVERNMENT SECURITIES (AMENDMENT) BILL Order for Second Reading read. The Second Minister for Finance (Mr Lim Hng Kiang): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Bill before the House seeks to amend the Government Securities Act (GSA) to allow the Government to issue Government securities with early redemption features. In October 2001, the Government set up the New Singapore Shares (NSS) Fund to issue NSS to Singapore citizens. The intention was for the NSS Fund to invest in Special Singapore Government Securities. As NSS holders can withdraw the shares any time they wish before they mature in 2007, an early redemption feature is required for the Special Singapore Government Securities issued to the NSS Fund, so that they can match the early encashment of NSS. The GSA currently does not allow for the issuance of securities with early redemption features. All issues of Singapore Government Securities today carry a pre-specified interest rate and a pre-specified maturity period. Trying to match the early redemption cash requirements of the NSS with fixed maturity Singapore Government Securities introduces unnecessary complications and uncertainties. Mr Speaker, Sir, I shall now proceed to explain the key provisions of the Bill, which are: (1) Clause 2: Payment of Interest Clause 2 amends section 23 of the GSA to allow the payment of a portion of the half-yearly interest on Government securities when any Government security that is redeemable at any time and at the election of the holder is redeemed before its maturity. The interest will be calculated on a pro-rata basis.”
“The capital injection would be funded out of the Developmental Investment Fund and would be subject to the provisions of the DIF Act which requires "the Minister or a responsible Minister to establish and adhere to investment policies and adopt standards and procedures that a reasonable, prudent person would apply to a portfolio of investments to avoid undue risk of loss and to obtain a reasonable return." The Civil Service College, after receiving the equity injection, would be required to issue share certificates to the Government in return for this injection. Mr Inderjit Singh also asked the question as to whether statutory boards will now have to go to commercial banks and will there be a special channel for them. The answer is that the statutory boards that want to raise funds through debt financing can do so by taking up commercial bank loans or by issuing bonds, just like any corporate entity, or they can approach the Ministry of Finance for loans, but such loans will be charged interest rates comparable to commercial rates. Raising debt financing from the market or borrowing from banks is not a new option for statutory boards. JTC, HDB and LTA have been raising bonds regularly to finance their operations. In fact, we encourage the statutory boards, where possible, to raise financing commercially rather than falling back on the Government, because then we can be quite sure that when they say it is a commercial rate, that is the rate which is offered by some lender, whereas, if they come back to the Government, we will have to estimate the rate and we may get it wrong. 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.”
“I am speaking hypothetically. I do not have any specific examples, but these are issues which we will have to address explicitly, and the more transparent we can be, the better it is. Over time, as Mr Inderjit Singh has pointed out, with an equity framework, it is more likely that all the costs will be laid bare, it is more likely that the statutory boards will have an incentive to operate efficiently like a commercial company and, therefore, provide services at minimum cost and maximum value to Singaporeans. Mr Inderjit Singh asked also for some examples of how the equity structure would work. I can give him one example, which is the Civil Service College which was set up as a self-financing statutory board last year, because it is not just running courses in-house, but it is also providing courses externally. Even when it runs courses in-house, it is charging Ministries and statutory boards for the courses which it provides. So it is a self-financing statutory board. Under the new funding framework, the Civil Service College can either use equity or debt to raise funds for its development projects. For example, if it needs a new set of college buildings, the college buildings will be held on its books as its assets and against liabilities, and the liabilities will be equity which has been injected into the statutory board. It will no longer receive capital grants from the Government because, previously, if we gave it a capital grant, it bought the building, the building did not appear in anybody's balance sheet, and we are not accounting according to proper commercial principles. If the Civil Service College chooses to raise funds through equity, then it would have to apply to the Ministry of Finance for capital injection.”
“Mr Speaker, Sir, may I address the concern expressed by Mr Inderjit Singh as well as Dr Wang Kai Yuen whether, as a result of this change, fees will increase. I think these are two separate questions: the degree to which we want to subsidise an activity and how we want to fund the activity. We can fund the statutory board by a grant but, if we do not subsidise the activity, the statutory board still has to recover the cost of providing the service in order to repay the Government, or we can fund it by equity, which is an option we will now have. But if we decide to subsidise the activity, we can subsidise it as the activity is provided. The universities, the polytechnics and the People's Association (PA), which are mentioned by Dr Wang Kai Yuen, are a good example where, if we decide to give them equity that has nothing to do with how much we decide we want to recover from tertiary education or whether the PA is meant to break even, because these are institutions with educational and social missions, and the subsidy policy there is something which is separate and which is not going to change as a result of this funding arrangement. It does not mean we have decided that we are going to put equity into the universities or the polytechnics, but it gives us the flexibility to do so should we need to do so. So there may be occasions in some cases where, as a result of going to an equity framework, we may discover in fact that the statutory board has been receiving an indirect subsidy or an implicit subsidy because it had not been costing its services properly. In which case, we will have to ask ourselves do we now want to make it explicit and we subsidise it, or do we think it is not justified and, therefore, we will stop subsidising it over a period of time.”
“I hope the Minister can assure the House that this change will not result in a round of increases, resulting in higher Government fees and charges. The questions I have are: first of all, can the Minister elaborate on how the equity structure will work, perhaps by way of some examples? Will the statutory boards now look like GLCs? Secondly, for the debt financing option, will each statutory board be required to go to commercial banks or will there be a special channel for them? In other words, will they be treated like any commercial entity? Sir, the Bill is a good start to how the Government should be repositioning itself, as we try to create a level playing field and a more entrepreneurial Singapore. Sir, I support the Bill.”
“Sir, in the last two weeks of debates, I gave my views about the Government's involvement in business; particularly when statutory boards get into businesses which in turn compete with the private sector, it creates a very unfair situation simply because, as a regulator and a facilitator, the statutory boards will no doubt favour its own companies or companies owned by other statutory boards. This situation of an unlevel playing field is further worsened by the easy access to cheap funds by statutory boards, especially when the funds come from the Government's budget. Because of an easier than market-practice advantage, it is easily understandable why such statutory-board-operated businesses or GLCs can easily defeat companies from the private sector when they compete with them. With the proposed changes, statutory boards will be compelled to make decisions along market-accepted practices and will force them to make assessments of projects along commercial terms. I believe, in the long term, it will make the statutory boards much stronger and much more efficient, because they will no longer have a well-cushioned environment and will no longer have access to easy money and, therefore, will have to sharpen their competencies. I have one concern and two questions for the Minister. The first concern is that, as the statutory boards will now be required to raise funds commercially in some cases, I am concerned that some statutory boards may take the opportunity to increase Government charges and fees, which are already a cause for concern. I would expect that, in the long term, with commercial financing, the statutory boards will become much more efficient, and this should result in lower and not higher costs and, therefore, lower charges.”
“With the new funding framework, payment for capital assets would be spread out as annual operating subventions over the useful life of the assets. This is no different from the Government renting or leasing the asset. It gives a proper matching between the use of the assets and the costing of services. Some statutory corporations have developmental objectives. Capital injections into such statutory corporations would be funded out of the Developmental Investment Fund as some returns would be expected from them. However, there are other statutory corporations which are purely regulatory in nature. For these, the capital injections would be funded out of the annual budget voted by Parliament. I shall now proceed to explain the specific provisions of the Bill which are: Firstly, the amendment of the Financial Procedure Act. The Financial Procedure Act is amended by inserting, immediately after section 7, a new section 7A. The new section will empower the Minister for Finance to invest by way of capital injection in any statutory corporation out of a capital contribution appropriated by Parliament from the Consolidated Fund. The Minister for Finance, after consultation with the Minister charged with the responsibility for the statutory corporation concerned, will determine the terms and conditions under which the capital injection under the section shall be made. Consequential amendments to other written laws Forty-seven Acts would be amended to allow the statutory corporations constituted under the relevant Acts to receive capital injections from the Government, in return for shares or other securities issued to the Minister for Finance. Sir, I beg to move. Question proposed. Mr Inderjit Singh: Sir, I rise in support of the Bill.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Bill before the House seeks to amend the Financial Procedure Act and various other written laws to enable the Government to fund statutory boards through the injection of capital, instead of being restricted to funding them only through grants. The injection will be made out of capital contributions appropriated by Parliament. Rationale Currently, statutory corporations are given direct capital grants, funded out of Government revenue to finance their development projects. They are not charged for the capital provided to them. As a result of this "free" endowment of capital, some agencies might not fully economise on the use of capital or make effective choices between capital and other financial resources. The best way to bring about proper accountability for the use of capital is to introduce a debt-equity financing structure in statutory corporations as in the case of companies. This Bill will help to bring about such a market-based financing structure by making it possible for all statutory corporations to receive "equity" or capital injection from the Government. Besides capital injection, statutory corporations should also be allowed to more freely take up debt financing options, such as loans and bonds. This funding approach is also in line with the recommendation by the ERP Sub-committee on Policies Related to Taxation, CPF System, Wages and Land, for the Government to use the capital markets more extensively to finance bankable projects. Capital grants to statutory corporations are currently given in the form of a single upfront cash outlay. This results in lumpy Government spending.”
“Currently, the odd lot market lacks liquidity because it is difficult to find an exact match between buyers and sellers of odd numbers of shares. This is unlike the odd lot markets on New York Stock Exhange and NASDAQ where there are market makers and specialists who stand ready to buy up odd lots to form round lots for subsequent sale. Further, the introduction of a minimum commission of $30 has made trading of odd lots of small numbers of shares uneconomical. SGX is currently holding discussions with industry practitioners with a view to overcoming these difficulties. FINANCIAL ASSISTANCE SCHEME (Review of income criterion) 6. Mr Yeo Guat Kwang asked the Minister for Education (a) whether his Ministry will review the income criterion for application of the Ministry's Financial Assistance Scheme (FAS) including the FAS for Independent Schools; and (b) how many schools have their own FAS with different eligibility criteria.”
“Mr Speaker, Sir, SGX does not currently have any plans to merge the odd lot trading market with the main market. Currently, SGX sets a minimum board lot size for every company listed on the Exchange. The usual board lot size is 1,000 shares, although smaller board lot sizes are normally allowed for counters with a share price of more than $10. In the case of SingTel, board lots of 10 shares and 100 shares have been provided so that Singaporeans who received shares during SingTel's initial public offer in 1993 can trade those shares and the resulting bonus shares easily. Standardised board lots facilitate trading among investors. Otherwise, it would be difficult to match buyers and sellers of odd numbers of shares. SGX has received feedback that abolishing minimum board lots could increase the cost of trading as investors may then have to enter into multiple transactions to effect a single sale or purchase. Further, abolishing minimum board lots could result in listed companies having large numbers of shareholders each holding a small number of shares. This could increase the cost of shareholder communication (eg, printing and sending annual reports and shareholder circulars) for our listed companies significantly. Other major exchanges, such as the New York Stock Exchange and NASDAQ, also prescribe minimum board lots. Given that a large number of our listed companies trade at less than $1.00 per share, the usual board lot size of 1,000 shares is not likely to prevent the investing public from participating in the stock market. Nevertheless, SGX recognises that investors may sometimes receive odd lots, for example, as a result of a bonus issue, or rights issue, by the listed company. To enable investors to trade their odd lots, SGX provides an odd lot market.”
“That is a different issue which the Member is raising. His first question was why not allow people who have stock to settle in stock, and I have explained that. Now he is asking whether we can go on four days, instead of three. These are technical issues which I will leave to the Stock Exchange to settle. ODD LOT TRADING MARKET AND MAIN MARKET (Merger) 5. Mr Steve Chia Kiah Hong asked the Deputy Prime Minister and Minister for Finance (a) if there are plans to merge the odd lot trading market with the main board in the Singapore Exchange; (b) if there are, when; and (c) if there are none, will the Minister enlighten the House and the investing public the rationale for continuing to keep the odd lot market separate.”
“Mr Speaker, Sir, I am not sure whether the question is why are we averaging over three days, or why are we nullifying the trades over three days. If you ask why we are nullifying over three days, the answer is because those were the trades which were not closed, they had not settled, because we are on a T-plus-3 settlement. So any time, when you intervene, you have three days' worth of transaction which you have to clean up. As for the price, what is a fair price? It is for the committee to decide. They deliberated and they decided that they would average over three days.”
“Mr Speaker, Sir, we are on a T-plus-3 settlement. So those are trades which have not been closed, which are still open. At the point of suspension, these are trades which are left hanging and you have to find some ways to settle it. As I explained, you cannot settle in stock. Therefore, some price has to be established and, in this case, the committee established a fair market price.”
“It was something which was unavoidable given the complexities of the investigation into the case because, in this case, many shareholders were involved and the Stock Exchange and CAD had to investigate the relationship between them to establish whether or not they were acting in concert, and whether or not a corner situation existed. So they took one whole year to establish this. And finally, they declared that the corner situation existed, not because they were sitting around, but because investigations were complicated. The risk of this happening is always there. When you enter into a contra trade, you hope that you would not have to pay in full for the shares which you have already bought, and that you can sell them off and contra it. But between the buying and the contra, several days pass and things can happen in between which can frustrate that matching. And in this case, something did happen. The Stock Exchange acted according to its rules which are published. So before you enter into a contra trade, everybody must know that there is a risk of the stock being suspended, and especially in the case of Links Island, where the prices had been going up, all the more, anybody who goes in knows that this is a speculative punt, and you are taking a risk. So I think that the Stock Exchange did the right thing.”
“Mr Speaker, Sir, there are ways to deal with a corner situation. This is a problem which can arise in any stock market, and there are established ways to deal with it. There is no totally satisfactory way because, by definition, in a corner situation, there are not enough shares to go around. People have committed to deliver more shares than are available because people have shorted, and now they cannot get hold of shares for delivery. It is like playing musical chairs - ten people running around, nine chairs to sit upon, and the music has stopped. Now, you say, "I am going to sit in this chair", or "I have already "choped" this chair. Therefore, let me do that, and let everybody else settle on their own." But you cannot do that because you may have "choped" this, somebody else may say, "Well, I am waiting for you to do this to settle, and there is a chance I can settle in scrip too." So finally, the most equitable arrangement which is fair both to the people who are long in the shares and who are short in the shares is to say, "There are not enough to go around, we will establish a fair price that the committee sets. They decide what the amount is and, at that price, we settle in cash." And later on, if the shares trade again, at that point, you buy and sell the shares for whatever they are worth. Now, the music has stopped, we settle in cash at a price which is fair to both who are long and who are short. The duration of the suspension was not something which the Stock Exchange wanted to do.”
“The company's free float had fallen to less than 8% (below the minimum 10% required by SGX Rules) at the time of Links' trading suspension in August 2000. If the company can meet SGX's requirements and trading in Links shares resumes, contra traders with Links shares will have the opportunity to sell their Links shares. But there is no guarantee that they will be able to sell their Links shares at the prices prevailing before the trading suspension. A contra trader should always be prepared to fork out the full amount for his share purchases and not rely on the proceeds from subsequent sale to pay for them. Apart from a corner situation where the SGX Rules provide for cash settlement of outstanding market trades at fair settlement price, there are other risks that contra investors should take into account before engaging in contra transactions. For instance, if trading in the counter should be suspended for a few days (either by the listed company or SGX as provided for under the SGX Rules), before the investor could contra his outstanding purchases, he would have to pay for the shares in full. Or if the share price fell sharply after the investor had bought his shares, he would have to sell off the shares at a loss if he could not pay for them. Therefore, it is not prudent for an investor to over-stretch himself by relying on contra trades to pay for his share purchases.”
“Mr Speaker, Sir, in July last year, SGX announced that its investigations had revealed that a corner situation had arisen in Links shares. In accordance with the SGX Rules, the SGX Settlement Committee decided that all outstanding market trades in Links shares done during 14-16th August 2000 be settled by way of cash instead of delivery, at the fair settlement price of $1.21. This ruling also applied to sale transactions by contra traders who had bought Links shares before 14th August 2000 and sold those shares during 14-16th August 2000. As a result, such contra traders had to pick up and pay for the shares they bought because their sale transactions, like all other market trades during the period, had been settled in cash instead of by delivery. Some brokers have indicated to SGX that they are prepared to extend credit to help ease any cashflow difficulties faced by such investors. Others have allowed their clients to pay for the shares by instalments. MAS encourages such flexibility on the part of the brokers, so long as they comply with regulatory requirements. MAS cannot, however, require or compel all brokers to do so. Another proposal was for SGX to use its fidelity fund to help the affected investors. This is not legally possible as the Securities Industry Act stipulates that the fund may be used only to compensate investors in the event of defalcation by a broker or to pay creditors when a broker winds up. SGX has informed the company that it is prepared to allow Links shares to resume trading provided the company puts in place safeguards to prevent the counter from being cornered again. One of the safeguards that the parties are discussing is for the company to restore its free float to an appropriate level.”
“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. ADJOURNMENT MOTION”
“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 in accordance with Articles 148(2) and 148C(2) of the Constitution for additional expenditure in excess of the provisions authorised by the Supply Act, 2001 and the Supplementary Supply (No. 2) Act, 2001. The additional sum has been presented as Final Supplementary Estimates which have been considered and approved by the House as Command Paper No. 2 of 2002. Sir, I beg to move. Question put, and agreed to. Bill accordingly read a Second time. Third Reading”
“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. FINAL SUPPLY (FY 2001) BILL Order for Second and Third Readings read.”
“Sir, I beg to move, "That the Bill be now read a Second time." In accordance with Article 148(1) of the Constitution, heads of expenditure to be met from the Consolidated Fund and Development Fund, other than statutory expenditure, have to be included in a Bill to be known as the Supply Bill. The purpose of the Supply Bill before Members is therefore to give legislative approval for the appropriations from the Consolidated Fund and Development Fund to meet expenditures in the financial year 1st April, 2002 to 31st March, 2003. The heads of expenditure and the sums that may be incurred in respect of each head are shown in the schedule to the Bill. These have been approved by the House in the Main and Development Estimates of Expenditure for the financial year 1st April, 2002 to 31st March, 2003, and appear on pages 24 and 25 of Command Paper No. 3 of 2002. The Supply Bill, when approved, will empower me to issue warrants, authorising expenditure up to the amount for each head as shown in the Bill to be paid out from the Consolidated Fund and the Development Fund. 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 resolutions." Question put, and agreed to. Resolutions accordingly agreed to. SUPPLY BILL Order for Second and Third Readings read.”
“Mr Speaker, Sir, I beg to report that the Committee of Supply have come to certain resolutions. First Resolution reported - Question, "That the sum of $36,685,882,080 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the Main Estimates for the financial year 1st April, 2002 to 31st March 2003, contained in Paper Cmd. 3 of 2002," put and agreed to. Second Resolution reported - Question, "That the sum of $19,641,738,900 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the Development Estimates for the financial year 1st April, 2002 to 31st March 2003, contained in Paper Cmd. 3 of 2002," put and agreed to.”
“Only about 5 tonnes of these vegetables did not comply with our pesticide standards and were destroyed. Besides Malaysia, Singapore also imports vegetables from 31 other countries, including China, Indonesia and Australia.”
“Mr Speaker, Sir, I think it will be difficult to decide on the appropriate amount of toilet paper rolls to bring back from Johor Baru - three-quarter roll. The problem is not so much the $50 limit as the difficulty of enforcing the requirement. Because, sometimes, you may come back with somewhat more than $50, and you may not have declared it and the Customs does not check every single vehicle going through. So we will monitor the situation. I understand Mr Ong Ah Heng's problem because the shops and the shopping centres in the northern part of Singapore, in Yishun, also in Woodlands, are affected when the residents go overseas to shop. And if this becomes a problem, we will see what we need to do to tighten up, either reduce the limits or to tighten up on enforcement. VEGETABLES IMPORTED FROM MALAYSIA 3. Mr Ong Ah Heng asked the Minister for National Development (a) whether the vegetables imported from Malaysia are safe for consumption; (b) how many cases of vegetables imported from Malaysia have been detected by the Agri-Food and Veterinary Authority (AVA) to contain pesticide levels which are below international standards since January this year; and (c) whether there are other sources of supplies of vegetables. The Minister of State for National Development (Dr Vivian Balakrishnan) (for the Minister for National Development): Mr Speaker, Sir, the Agri-food and Veterinary Authority (AVA) inspects and tests all imported vegetables for pesticide residues and other harmful chemicals to ensure that they are safe to eat. Imported vegetables that failed these tests would be destroyed under the AVA's supervision. As such, vegetables imported from Malaysia are safe for consumption. A total of 59,000 tonnes of vegetables was imported from Malaysia from January to April 2002.”
“The Government does not expect a sharp rise in people going overseas to shop because of the GST increase. The Government is giving a generous offset package to restore each household's buying power. There is no need for Singaporeans to resort to travelling overseas just to shop for daily necessities. When GST was introduced in 1994, inflation was hardly noticeable. And the 2% increase in GST this time is less than the 3% in 1994. GST is chargeable on imports. The GST exemption limit per person re-entering Singapore is only $50 if he is away less than 24 hours. This means that he only saves $1 for the 2% increase in GST. These small little savings should generate little incentive for Singaporeans to shop overseas, simply to avoid the increase in GST. Nevertheless, if against our expectations leakage does become a problem, the Government will consider lowering the exemption limits. GST is an important source of revenue. We should not allow it to be undermined by large-scale overseas shopping.”
“Mr Speaker, Sir, with your permission, I would answer Question Nos. 1 and 2 together.”
“Sir, as Mr Zainul Abidin has pointed out, the AGO's efficiency is measured by two performance indicators which are based on a proxy for its audit workload, known as auditable dollar, which is a total of the audited revenue expenditure, assets and liabilities of the auditees. In other words, it looks at the accounts of the organisation being audited, and it adds together its revenue, expenditure, assets, liabilities, its profit and loss, as well as its balance sheet. All added together, it is just a number, to give some indication of the size of the organisation. The two performance indicators are the cost per auditable dollar as well as the amount of auditable dollar per unit staff. The cost per auditable dollar measures how efficiently AGO operates, and AGO tries to keep these indicators as low as possible. On the other hand, AGO strives to maximise the amount of auditable dollars per unit staff, as it is a measure of labour productivity. It is a rough-and-ready measure. As to whether AGO audits for opulence, the answer is no. It is not his job to be a censor. It is his job to make sure that if you have built the building, the money has been properly accounted for. But as to whether the building is too lavish, too opulent or wasteful, that is management accounting, and that is a management responsibility. The Ministries involved, the Permanent Secretaries, and ultimately the Ministers, are answerable for that.”
“MAS requires credit card issuers to clearly disclose in their monthly statements all the late charges and relevant interest rates, and the Association of Banks has also acted to improve transparency of fees and charges and terms and conditions, and they are putting out leaflets to explain in simple terms what it involves, what are the terms and conditions, so that you do not have to plough fine print and legalese and, at the end, to be none the wiser. 4.30 pm But more can still be done and I urge the Association of Banks to look into developing a set of best practice standards on credit cards to take into account the needs of the public. Then consumers can make an informed decision, whether they have the means to pay the principal, to pay the interest. But finally individuals have to exercise personal responsibility to ensure he does not over extend himself and does not live beyond his means.”
“When it comes into operation, the card issuers will be able to monitor the number of credit cards which each of its customers holds, his total credit exposure and his credit history. The card issuers can then manage the risk exposure and use this information when deciding whether to grant him another credit card. MAS will also encourage the card issuers to be prudent and to make full use of this information. Mr Yeo asked why interest rates on credit cards are 24%, uniform across all issuers. MAS' understanding is that it is not actually uniform. Not all cards charge 24%. Some are lower, but these are interest rates which are determined by the market. I think it is a competitive market. There are many players, certainly more players than there are petrol station companies. It is really not for the Government to say whether this is or is not at the right level because credit cards are not a basic necessity and there is no reason for the Government to intervene to ensure that it remains affordable. One reason that the lending rate is high, 24% or thereabouts is because the default rate is significant. When you borrow from a credit card company, if you are paying regularly and paying interest, you are really cross-subsidising the other credit card customers who have defaulted on their borrowing. And because the default is significant, 5% or 6%, so the interest has to be high. The advice to you is, if you do not have to borrow, especially from a credit card company, better don't. What is more important than trying to push the rate down or control the interest rate is for consumers to know what interest rate they are actually being charged and to understand what other charges are being levied on them.”
“Such an expiry date will provide us the means to target new activities for promotion as the industry changes. Mr Yeo Guat Kwang asked about credit cards and young people's easy access to credit cards and unsecured personal credit lines. I agree completely with his concerns because an individual with many unsecured credit card lines is going to be tempted to spend beyond his means. Borrowing on credit cards and unsecured credit is very expensive and if an individual does not have enough means to repay his loans, he would soon see his debts piling up and they would come and look for us, as MPs, to help them sort out their problem. As Dr Amy Khor told us recently, a young lady came to see her and she had built up $20,000-$30,000 of credit card debts, six cards. She asked this constituent, "Why did you do it?" The constituent said, "hua de shi hou heng shuang!" - when she spent it, it felt good. Now, she has to look for her MP. Therefore, MAS only allows credit cards and unsecured credit facilities to individuals with a minimum of $30,000 in annual income and even then, we have limited the maximum credit that can be extended on a credit card on unsecured personal lines to two months of income. Unfortunately, it is not watertight because consumers can still apply for multiple credit lines and add up to far more than two months of income. We need some system to prevent individuals from having too large a credit exposure through credit cards, multiple cards. We are going to launch a Singapore Consumer Credit Bureau in September this year to pool borrowing and repayment history of customers and give lenders the list of profiles of borrowers.”
“We recently announced the merger of the approved fund manager and the approved boutique fund manager schemes in this year's Budget and I am optimistic these new incentives will help to attract some of these boutique hedge funds and specialist hedge fund managers, which Mrs Lim speaks about, to set up in Singapore. Mdm Ho Geok Choo asked about our new tax incentives, whether they would be attractive, what they cover and how their compliance cost would be. The approach in our review for the financial sector and tax incentives is firstly to enhance the incentives so that we are still competitive in the new landscape and, secondly, to rationalise the current range of incentives so that it is easier to administer and comply with, precisely the point that Mdm Ho raised. We will be placing greater emphasis on high growth and high value-added activities and for these activities, we will apply a consistent concessionary rate of 5%, which is lower than the existing 10% rate enjoyed by most of the financial activities currently incentivised. This lower 5% rate will directly benefit many of the high value-added activities that Singapore is aiming for. The harmonised incentives will ensure that, where there are existing schemes which overlap, they will be simplified for ease of administration and lead to lower compliance cost. How we will harmonise, how we will work it out will take some time. We will announce the details, we hope, in about six months' time. We are not going to have a sunset clause on the overall scheme, but we will have incentives awarded to individual institutions which will have specific expiry dates attached and the length of the incentive will be based on criteria such as the kind of activities or the skill sets which they bring to Singapore.”
“We have to understand what the risks are, understand them well and manage them well too. As for promoting equity markets and hedge funds and creating local demand, I agree with Mrs Lim that for promoting the equity and debt markets, there is a role for the public sector to start the ball rolling and to generate a certain base load. We have done this for the debt market because quite a number of the statutory boards have been making significant bond issues in recent years and the market has grown substantially. In fact, we have been successful, not only in promoting the bond market, but also in the whole fund management industry in Singapore. In 10 years, the fund management industry has grown 15-fold, from $18 billion in 1990 to $276 billion last year. Our debt market has grown substantially too. Our survey shows that the bulk of the discretionary assets that are managed in Singapore are invested in Asia, and 30% of them are invested here. The amount of investments traded in Singapore by fund managers is not insignificant. As for hedge funds, we promote them, but we do not have very good statistics on them because it is hard to tell exactly what is a hedge fund and what is just an ordinary fund manager. But we have seen more hedge fund managers setting up or expanding here and now Singapore is one of the significant hedge fund markets in the region. There are four - Japan, Hong Kong, Australia and Singapore - and we are definitely one of them. If we took five or ten years ago, we were not at all on the map.”
“They will not upstage and leave, or say, "I just cut losses, fighting another day somewhere else." I do not think the problem of range of services has to do with whether the foreign banks can or cannot buy into the local banks because they are present here. They have 40% of the market, and through their own branches and their own ATM networks now, they are able to provide quite a wide range of services. In fact, they have been quite innovative, maybe not the same services that you can find in their home countries, but that could be as much due to cultural reasons and mindset and infrastructure, as it is due to lack of market opportunity. In fact, some of the foreign banks are extremely aggressive. I have heard that they even set up stalls on five-foot ways on Saturday afternoons and press people with application forms. I have heard this, not as information, but as complaints. But that is the way it is. If it gets out of hand, the people in charge of touting will look into the matter. As for the low ROEs of our local banks, I think it is early days yet. It has only been three years. As we have opened up the market, there has been increased competition and the opportunities for lending have not been that great because of the economic downturn and the local banks are grappling with the change and upgrading and diversifying themselves into fee-based income sources. Furthermore, they have just made their mergers and there are some costs involved with the mergers and rationalisation. I think that given time, they should be able to improve their returns and their standards. Our objective in banking liberalisation is to encourage more innovation by progressively introducing competition, but we cannot just pursue innovation and risk-taking on their own.”
“I urge the industry to take the feedback seriously and the more effort you put in and the more candid you are in your views, the more we will be able to come up with standards which will be effective and worthwhile. As for form versus substance, in our capital market standards, our current standards follow generally the international financial reporting standards (IFRS), rather than the US generally accepted accounting principle or the US GAAP. Our desired outcome is for companies to comply in substance, and not just in form. We also require effective enforcement actions on the one hand and active involvement of the private sector on the other, so that we can improve our corporate governance and disclosure practices over time. This is something which has to happen over time and cannot be done overnight just by fiat. It is not just the rules but also the norms and practices, the seriousness in which people take these rules and the depth of understanding when they implement, and their sense of responsibility - when something goes wrong, to put the flag up so that it can be put right. On foreign banks and whether we are hindering innovation by restricting the foreign banks from investing in Singapore banks, our philosophy is not to prevent foreign banks from participating in the industry altogether, but to maintain local control of the main local banks. There are now only three main local banks. There can be foreign participation in them, but not a controlling stake, and the reason is not that we want local banks to do national service, but that we want to align the interest of the local banks substantially with the long-term interest of the Singapore economy so that in a crisis, they will calculate their interest and will thereby further the interest of Singapore.”
“Sir, on Enron, I fully agree with Mrs Lim Hwee Hua that the problem really is one of confidence or loss of confidence and trust, rather than inadequate standards, and however you tighten the standards, if the people operating them are not honest and lack integrity, we are going to have a problem. 4.15 pm At the same time, we also have to recognise that we have to keep our standards up to date and review them from time and time and when there are obvious loopholes and when there are problems, then we have to tighten them up. The difficulty is to strike a balance between having a set of standards which are comparable to best practices elsewhere and having a set which is not so onerous that, in our circumstances, we are not able to get them to work and we are just going through the form and the motion, rather than actually to maintain high standards of corporate governance. There is no magic answer to this. Our approach is to involve the private sector when we review our standards so as to help ensure that the recommendations are in line with market practices and are practical and worth doing. Before submitting reports, review committees would normally conduct extensive public consultation, solicit feedback from stakeholders so that we could get the widest range of views. I ought to say, however, that there have been occasions when we have not got as much and as timely feedback as we had hoped to get. After we have settled the recommendations, then people say, "I am sorry. I should have told you this earlier but there is this problem". Where there has been a serious problem, we had to go back and undo and redo.”
“Mr Chairman, Sir, how much time do I have?”
“So what we are doing is, we are assuming that when you draw on your annuity, 3% of what you draw is interest and the balance is capital. So the interest is taxable, because interest is taxable in Singapore. The capital is not taxable. Until you have finished drawing out as capital, the entire amount which you put into the annuity over the years, and then beyond that we say, "Well, all the rest we will treat as interest". So beyond that point, the entire annuity sum will be taxable every month. It is to be consistent with our approach that capital sums are not taxable, but the interest is. If you say that an annuity may have some capital gains element in it, so it is not purely interest, that is something which we will have to consider. It is something which we will have to study. I think it is not something to be likely changed.”
“As I have explained, the GST covers everybody, and the senior citizens, if they are in the lower income group, they will be covered by our schemes which assist lower income groups. And in the case of retirees and pensioners, we are also revising the Singapore Allowance for them, and that will also help them to offset any additional GST which they will have to pay. In the long term, to put it in perspective, it is precisely because there is going to be a large number of Singaporeans who are going to be senior citizens, and a small number of Singaporeans are going to be working, that is the reason why we cannot say we are only going to tax income, and only working people will pay tax. Because in the long term, if you only tax income, the burden on the taxpayer who is working to pay for his services, as well as all the services for the retired people, will be very great. Now with ten people working to one retiree it is bearable. In the long term, three to one. Then will you be able to sustain that? It is not possible. It is necessary to widen the tax net, which is why we have to cover senior citizens. If they are not poor, there is no reason to subsidise them. If they are poor, there are ways we can help them out. Mr Low Thia Khiang asked about annuities and why they are taxable. It took me a bit of puzzling out, to figure out they are taxable, but there is a reason. First of all, Mr Low Thia Khiang is wrong to say that interest earnings are not taxed. I made no such announcement in the Budget, as far as I can remember. So interest is still taxable. Secondly, the rationale for this is that we are allowing the capital part portion of the annuity to be tax-free but the interest earnings' portion of the annuity will have to be taxed.”
“I think the best way to run a GST system is to keep it clean, low-cost, easy compliance, efficient, and most convenient and most bearable for many Singaporeans.”
“The second reason is that you have to make a distinction between what is an essential and what is not an essential. Yes, I can define arbitrarily sushi to be not essential, and rice and fish to be essentials. But at the boundaries there will be many anomalies, many ridiculous things which you cannot explain. Mr Tharman's example is what is a confectionery and what is a cake. Well, it depends on what icing and cream you put on top of it. We are just creating distinctions which are meaningless but will occupy a lot of legal time, arguing, defining, refining, disputing, which is not worth our while doing, and why do I want to encourage people to buy rice and fish separately instead of the sushi ready-made in Fairprice? It does not make sense. So, better to cover everything and again the focused subsidy will enable him to buy whatever he wants, whatever he needs. As for services provided by the Government, which was another point which Mr Chia raised yesterday, generally speaking, there are services which recover their own cost and are not funded out of taxpayers' money. For example, in a restructured hospital, if you stay in an "A" class ward, it may be a Government operation, but there is no reason why we want to favour an "A" class ward in a restructured hospital against a private ward in Gleneagles or Mount Elizabeth. So, in those circumstances, there is no reason to discriminate in favour of the Government, just because the Government happens to be providing the service. The offset package is generous. You know all lower income groups are looked after and have at least five years' worth of offsets. We have been through these arguments extensively.”
“And this is in fact a special benefit which we are uniquely operating in Singapore. Other tax jurisdictions do not have this. If I may answer Mr Steve Chia's question. He raised it yesterday and we did not get around to it, but his proposal is to exclude essential items from GST. He disagrees that we should tax essential items and he also wants to exclude services provided by the Government from GST. We have two main reasons for taxing even essential items in the GST, which I have explained on other occasions. First, most essential items are not consumed by poor people. You can say it is rice, you can say it is education services or health services, but in fact, the largest consumers of these essential items are not poor people but higher income people. For example, on average, if you compare a household with a monthly income of $10,000 against a household with a monthly income of $1,000, on food, the $10,000-household spends 3 times more than the $1,000-household. On education, the higher income household spends 7.5 times more, on health care, the higher income household spends 3.7 times more. So if we are going to exempt essentials from GST, it is going to be a very large tax loss for very little benefit to the lower income groups. Most of the money you are giving away will not be to the lower income groups. And so to make up this revenue, you will have to raise the overall GST rate, which is going to hurt the lower income groups. So it is better to have an overall coverage, cover everything, keep the rate as low as possible, whether it is 3% or 5% and then we target the lower income group through specific assistance, offset subsidies, whatever, in order to address their special needs, at much lower cost and much greater effect. That is the first reason.”
“So if you are allowed to pay the mortgage tax-free money and yet you can make the mortgage interest tax-deductible, then you are giving individuals tax benefits twice, which is not a sound principle to do. Mr Inderjit Singh also asked for stock options to be taxed upon realisation of profits and not upon exercise, ie, when the employee realises the benefits of share ownership at the point of exercise of the stock option. So therefore the tax liability arises at the point of exercise based on the benefit which is realised, in other words, the discount between the market price and the exercise price. Most jurisdictions, for example, in Britain, Hong Kong, and also in the US, for the normal stock option treatment, tax income gained at exercise. In other words, once you have exercised and you buy the shares, whether you sell it or not, you have already derived the benefits, because you bought the shares at a discount to what they were worth on the market. We will tax you at that point. And, if you incur a tax liability, you better sell a portion of these shares to meet that tax liability, unless you deliberately want to go long in the shares, but then you take a risk. In fact, during the dot.com boom some people incurred tax liabilities and did not sell shares, and by the time they sold their shares, the price had crashed and they had a big tax outstanding and some of them were bankrupted. But the system is fair. They made the wrong judgement call. In the case where the employee has to observe a moratorium before he may dispose of the shares, now we will allow him to pay the tax only at the end of the moratorium period, which means the employee has to pay the tax only at the point when he is actually able to dispose the shares and realise its value.”
“45 pm As for negative gearing on property, which means that if an individual owns a property and he has expenses on the property and interest to be paid, and it exceeds what he earns on that property, then we allow him to offset all those expenses, not just on what he earned in rentals, but on his other incomes, in other words, operate like a business which owns a property - the question is whether the person is carrying on a trade in properties, in which case, we will allow the offset, but when he sells the property, the gain will be subject to tax. Or, if he is just owning the property as an investment, in which case he is not subject to capital gains tax, but neither can he offset the expenses beyond the earnings from that property from rentals. We do not allow interest expense deductions on other transactions. For example, if you buy a car on hire purchase, there is interest to be paid, that is not tax deductible. The fact that we allow deduction of mortgage interest against property rental is already in a sense a concession and if we go further and allow interest expense to be deductible against other income, apart from the rental income, I think it will encourage even more over-investment in property. In order that the losses can be offset against other income, I think we should not introduce any further distortions which incline people even more towards property purchase. Furthermore, if I may point out, many property owners are paying their mortgage interest using their CPF savings. In fact, paying their mortgage loans using their CPF savings and the CPF monies are not taxable.”