Liang Eng Hwa
Singapore
“Sir, in Mandarin, please. (In Mandarin): [Please refer to Vernacular Speech.] I would like to thank IMDA for its flexibility in allowing the filming of "Dear You" in the Teochew dialect, and for approving additional screenings to meet public demand.”
“Thank you, Mr Speaker. Sir, we hope that there will be peaceful resolution to the Middle East conflict soon and that the Strait of Hormuz will be fully open.”
“Sir, I believe the political office holders have not replied or responded to my cut on traffic congestion, so can I perhaps ask the Minister, whether is it because he disagrees with me that the traffic congestion has worsened or that there is no non-pricing solutions to traffic congestion, which I had asked for.”
“Sir, Minister Chee, in his speech mentioned that this year we will be launching 19,600 new BTO flats. So, I would like to ask, how he sees the trajectory in the next two, three years.”
“Also, flexible work arrangements, through inter-agency coordination, could also help flatten peak demand. Sir, road pricing remains important, of course, but it must be a multi-pronged approach to manage congestions. And all these suggestions that I have made, I hope would also help to reduce congestions.”
“Thank you, Speaker. Sir, there are Singaporeans who felt strongly that the founding Prime Minister Mr Lee Kuan Yew's original wish to have the house demolished should be respected. It is not just because this is his personal wish but also the values that he espouse, which is not to have personal monuments.”
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“Lately, we have read in our media about some Chinese nationals resorting to violent demonstrations because they were not happy with the way the Chinese officials dealt with their grievances. Such demonstrations sometimes resulted in casualties. Then I read about the Chinese leaders telling their officials to keep in constant touch with the people and that they should meet the people often as what the Singapore MPs do regularly. The Chinese classic Lunyu said we should avoid entering a chaotic country nor should we live there. Only an orderly and stable country can provide an ideal home for us. Only a strong and capable government can safeguard order and law in a country just like what we have here. We should support the Government that has an interest of the people at heart, that carries out policies which are beneficial to the people. The government we would like to have is one that looks after the interest of the people that provides peace and happiness for the people. We have gone through a rough time in our history. We hope the "disorder" mentioned by Jackie Chan will not befall Singapore. *Cols. 397-402. 2.42 pm”
“Then there were the racial riots in July 1964, resulting in scores of deaths and hundreds of people injured. The older Singaporeans still have a vivid memory of such ghastly incidents. We are lucky in having far-sighted pioneers who succeeded in steering the country through chaotic and storming water to a peaceful haven. Can we take the peaceful livelihood we are enjoying for granted? There is a saying, "It takes three years to build up but only three days to destroy." The stability which we have laboriously built up could come to naught overnight. The widespread use of advance info-technology and new media could bring about chaos and instability in a society in a twinkling of an eye. It may lead to unthinkable consequences. As the President said in his Address, our political system is not set in stone. Singapore’s politics would evolve in tandem with world situation and societal changes. But the evolution must proceed with our unique characteristics and the change must be incremental and gradual. I feel that there are two aspects on which we can continue to strengthen. Firstly, we must continue to maintain social stability while enhancing the transparency and accountability of our political system. This will foster confidence towards our political system. With credibility in our political system, Singaporeans will stay calm and be matured enough to deal with any untoward happenings in the country. Secondly, we must invest more to broaden the various feedback channels and network to enable people to voice their views on Government policies and grievances. At the same time, the Government should pay more attention to such feedbacks and give more transparency to such feedbacks.”
“His wife, a Taiwanese, was a famous film star. Taiwan is his wife's homeland. Hence, he understands both countries better than any other person. Furthermore, he has been to many parts of the world making films, including Singapore. So he has good knowledge of various countries. Perhaps when he talks about a country being in a mess, he does have some basis. According to a news article published by Taiwan Economic Daily, after 18 days of voting by the public, the "Chinese character of the year" chosen to best reflect Taiwan’s situation in 2008 was the word "disorder". Having being exposed to the chaotic incidents taking place in the countries in this region, we Singaporeans are by no means unfamiliar with the word "disorder" or "chaotic". Some of us who have been to Thailand know what it was like to be in a chaotic or even violent situation and trapped in Bangkok's International Airport. We could not even come home. The fight between the red-shirt and yellow-shirt protestors had evolved into international incidents which had caused the ASEAN Summit meeting to be scuttled. Even our Prime Minister had some unusual experience at the Summit meeting. I am appalled at the chaotic conditions in such countries. Are we going to be like that one day? When disorder is the order of the day? Will we forget the livelihood of the people because we are too much pre-occupied in politics and the country is manipulated by a few opportunistic politicians? I am not so sure that we will not have chaos in Singapore as there had been troubles in the past. In the early stage of our nation building, we witnessed troubles such as the Hock Lee bus strikes in 12th May 1955 which resulted in four deaths, 31 people injured.”
“Rather than take a backseat and be content to act as a mere source of capital, I urge the Government to take the steering wheel and, if need be, give companies the direction they need at this critical juncture. After all, history has shown that the model works in our circumstances, and there is no reason why we cannot continue to engineer successes. So let us be brave and venture out, focus on securing future opportunities and, in so doing, turn our dreams of achieving economic independence into reality. Sir, in Mandarin. (In Mandarin): [For vernacular speech, please refer to Appendix A*.] At the recent Boao Forum, the world famous Hong Kong film star Jackie Chan made a somewhat controversial statement. He asked, "Is it good to have freedom?" What he meant was political freedom. He further said, "If there is too much freedom like what we have in Hong Kong, we will have chaos. Taiwan is chaotic because there is too much freedom there. I slowly feel that we Chinese need to be controlled." This is Jackie Chan's view, and such view has evoked some robust responses from netizens and the press. I have adored Jackie Chan's movies since I was young, particularly when he acted in some thrilling movies without using a stuntman. And I admire his dedication and professionalism in his acting career. It cannot be denied that Jackie is a very successful film star and a hero in the eyes of Asians. But many would have reservations about his political views. I do not agree with his view on the need for people to be controlled. However, his description of Hong Kong and Taiwan being very chaotic has given me some food for thought. The word "chaos" needs to be clarified. Why? Jackie Chan is a Hong Konger. He was born in Hong Kong where he has developed his career.”
“While this is admittedly a change from Temasek's current stated role of an investment house with purely commercial objectives, I believe the organisation can make a great difference by producing more respected and admired companies in the region based in Singapore. The benefits of homegrown global brands are exemplified through the likes of smaller European economies, which have generally performed better and are less severely impacted by the global downturn. For example, countries with similar population like Singapore, such as Denmark, Belgium, Finland and Switzerland, have been pretty resilient. On closer examination, I noticed that these are also countries whose economies are well-anchored by large homegrown companies headquartered at their cities. They are the same companies brandishing well-established global brands – such as Finland's Nokia and Denmark's Maersk – that play a significant role in keeping their respective national economies humming along. For all our tenacity and business acumen, Singapore has yet to exhibit the same kind of resilience. Therefore, our target over the next 10 to 15 years should be to nurture and develop between three and five global brands, similar to the likes of SIA. In conclusion, Sir, let me stress that I am not calling for a 180-degree U-turn of our economic strategies. Our policies are sound and have served us well, and they will continue to do so as we emerge from this crisis. However, simply reinventing the wheel is not the ticket to survival in this harsh new era. Instead, we should expand our economic machinery by playing an active role in fostering the growth of homebred companies; companies that were firmly rooted in Singapore.”
“The missing link we have to address is how best to channel such capital into companies, so that we can anchor value in Singapore for the long term. Perhaps, this is where our history books can serve as a guide. In the early years of our industrialisation, state-managed development financing, through the then-Development Bank of Singapore, was available to help promising companies expand and grow. Many of these firms today are established and successful, contributing significantly to our GDP, and, through the total or partial ownership of Temasek Holdings, remain firmly rooted in Singapore. With such dedication to funding and developing businesses, we were able to establish regional companies, including the high-flying global brand name like Singapore Airlines (SIA). Today, the development bank model no longer exists. Agencies like EDB, SPRING, A-STAR and others have stepped up to fill the void, but their roles are less direct, and the assistance they offer limited. More importantly, while such agencies can help companies obtain financing with more favourable terms, they do not necessarily anchor companies and value in Singapore for the long term. In my view, Temasek can play this role of nurturing more regional and global champions, and, in so doing, root them in Singapore. Since its inception in 1974, Temasek's track record speaks for itself, having been an exemplary steward of the companies it owns. After 35 years, I think it is opportune time for Temasek to review its role and harness its capital to strengthen the resilience of the Singapore economy.”
“It mentioned that the Government will encourage more foreign MNCs and high-growth companies to anchor their key functions here and partner Singapore-based companies so that they, too, can be part of the Asian growth story. I fully agree with the Ministry’s strategy, and call on the Government to make this a top priority in our economic action plans in the next few years. To anchor the value of these multi-national corporations here, I suggest we adopt a "pick and choose" strategy when chasing the MNC dollar, rather than a "all are welcome" approach. We should offer maximum concessions to MNCs that invest in Singapore with a long-term view. These firms should also be prepared to sink in significant fixed capital expenditure, as well as have a higher share of their earnings retained in Singapore. To foster the internationalisation of our home-grown companies, we should also incentivise MNCs to partner or form joint ventures with them. Here, again, without the economic agencies acting as middlemen to broker such partnerships, it may be unrealistic to expect these tie-ups to take place organically. In our effort to nurture homebred industry champions, we should leverage on our strengths. Notwithstanding other constraints, Singapore does have its competitive advantage in this race. Besides the presence of talents, excellent infrastructure and a stable Government, Singapore, as a triple A-rated jurisdiction, is also well-endowed with capital. Our high savings rates, ample reserves and continued foreign capital inflows are a good source of funds for our companies to tap on for expansion and growth. Even during this financial crisis, our promising companies have little issue raising funds to strengthen their balance sheets.”
“Building new capabilities on this front could also spur demand for such services as Government, companies and homes look to improve their energy efficiency. In this aspect, the Government has made some headway through the various support programmes, such as the $20 million grant recently awarded under the Solar Capability Scheme. Pending further breakthroughs in technology, however, the cost of solar energy is still higher than that of conventional sources. Commercial companies would be hard pressed to invest in the solar sector, especially if they are unable to price solar energy competitively. Here is where I hope the Government can come in. We should take reference from the way we introduce our fourth national tap to enhance our water self sufficiency. Desalinated water on its own would not be a viable alternative as it costs more than the traditional source of water or NEWater. To overcome that, PUB entered into a long-term Water Purchase Agreement to buy a certain volume of water at an agreed price so that the company can have a viable long-term business model to base on. The Government could look to similar approach to encourage investment in alternative energy by agreeing to off-take a certain amount of electricity powered by, say, solar over a period of time. This will encourage more fixed investments with a longer term horizon, which will also enhance our energy and economic resilience. In the MTI's Addendum, the Ministry also emphasised the need for a more concerted effort to deepen the capabilities of our companies, so that they can compete on the global stage.”
“Despite our attempts to diversify the economy since 2001, we continue to rely extensively on volatile sectors such as the electronics and manufacturing industries for job and wealth creation. The pharmaceutical sector, which increasingly accounts for a bigger share of our non-oil export, is dependent on a handful of large companies based here. Our export strategy continues to be weighted heavily on developed economies such as the US and Europe, where demand has taken a nosedive since the crisis began. We have suffered as a result of our dependence on global circumstances. In the Ministry of Trade and Industry's (MTI) Addendum to the President’s Address, MTI stated that it will step up measures to help our companies expand in markets such as China, India, Southeast Asia and the Middle East. The Government will also enhance efforts to engage and understand emerging markets with potential, such as Latin America and Eastern Europe. This "cast the net wide" approach is sensible and necessary in building our economic resilience. It gives the economic agencies the opportunity to be re-oriented to these markets, while motivating our local industries to gear up for the export frontiers. Besides the new export markets, we should also build emerging industries as new growth areas. One promising emerging industry that I want to zoom into is the sustainable energy sector. With increasing volatility in the price of crude oil and the growing concern on climate change, the global search for alternative clean and efficient energy will pick up speed. Staying at the forefront of the energy technology scene would also help strengthen our energy resilience as we are almost totally dependent on piped gas to power our economy.”
“It is therefore timely again for us to do some soul-searching and take a hard look at our economic strategy, particularly with regard to building stronger economic resilience. Is our economy diversified enough to power on even with our main growth engines down? Have we done enough to nurture our home-grown companies? Are we still overly reliant on foreign multi-national companies to add value to our economy, and in the process leave ourselves vulnerable should they decide to pack up when the going gets tough? Just as the President has said in his Opening Address, our economic problems will not disappear the moment the economy recovers. Our constraints of limited land and labour could derail our progress once we start growing again. Major developing economies such as China and India, on the other hand, will emerge from the crisis as bigger and stronger competitors, and they will be in a better position than us to pick up the slack. Also, we must expect a new world order in the post-crisis economy. In the US, for example, all signs are pointing to a structural downward shift in consumers’ propensity to spend. On the other hand, we can expect an increase in households’ propensity to save as individuals rebuild their falling net worth. De-leveraging at the private sector will continue to dampen demand. So, what are our options? In his Address, the President had raised key questions necessary to take Singapore to its next phase of growth. Among them were: one, how can we capitalise on new markets and emerging industries for growth and diversification? Two, how can we build new capabilities and anchor value in Singapore for the long term?”
“Mr Speaker, Sir, I join Members in support of the Motion of Thanks to the President. In the last three years, the Singapore economy has been put to a "stress test", with both extremes tested in every sense of the word. We started the new term of Government in 2006 worried about high inflation and the severe bottlenecks caused by our then-strong GDP growth. Fast forward to 2009, and our worries have shifted dramatically to growing unemployment and excess capacity. The economy has never been this volatile. Sharp growth has given way to deep contraction. The pace of GDP contraction in the last two quarters has been unprecedented, with our national income contracting 16.4% in Q4 last year and another 14.6% for Q1 this year. Thankfully, the unemployment situation thrown up by this downturn has not been too serious. So far, the retrenchment figures have neither been as bad as past recessions nor as significant as previously feared. I must commend the Government for taking the bold decision to dip into our national reserves to fund one-off assistance measures such as the Jobs Credit Scheme. Such programmes have no doubt provided companies with some financial cheer amidst all the gloom, and obliged large companies which have received the Jobs Credit to hold on to their staff. Nevertheless, this crisis has again highlighted that we are not as economically resilient as we had hoped ourselves to be. As a small and open export-oriented economy, our fate in this economic storm depends almost entirely on the fortunes of those bigger and stronger than us. Without major world markets such as the US, Europe and China leading the way, there is very little chance we can get out of the wilderness on our own.”
“Even though the new company remains in national airport business and is in the so-called "too strategic to fail" category, the borrowing cost for these corporatised entities would, nevertheless, still be priced like any corporate with equivalent rating. It has happened to PSA and SingPower, which have seen their borrowing costs increased since corporatisation. Similarly for the upcoming Sports Hub project which enjoys the support of the Government. As soon as the project is wrapped under a corporate vehicle, the borrowing cost would be priced accordingly. My concern is whether this higher borrowing cost would lead to a re-pricing of the charges and airport taxes. Would there be a repeat of the Mapletree situation where the new company has no room to reduce charges even in a severe downturn due to the lending covenants with the banks? Finally, Mr Deputy Speaker, Sir, while there are obvious merits in the corporatisation, we should not be too "romantic" with it and see it as a natural path for all statutory boards. I hope the Government can allay the fears and concerns of ordinary Singaporeans even as we continue to take this path to restructure our public assets and services.”
“It is well recognised that statutory board like CAAS has done very well financially. Changi Airport, for example, besides widely acclaimed as the best airport in the world, continues to generate healthy operating surpluses. In fact, some would argue that a statutory board in Singapore may have better governance and financial discipline as it is not only audited by an external auditor but there is an oversight by the Ministry as well as the periodic performance audit by the Auditor-General’s Office. My third concern is also a common one. Changi Airport is the only international airport we have. There are no immediate alternatives for carriers coming here and, hence, they have to accept whatever price that is imposed on them by the airport company. Would the new company exploit this demand stickiness to earn short-term supernormal economic profits? Also, how responsive is the new company to lowering its charges in a severe downturn such as the one that we are currently experiencing? A case in point is the former JTC properties now managed by Mapletree. I read in the press reports that the company is unable to match the 15% rental rebate that the former owner JTC is offering to its tenants in the light of the downturn. According to the reports, the company’s borrowing commitments may be the reason why it has limited room to reduce its rental. The point is that once the commercial control is transferred, the Government will lose some of its direct influence on pricing and charges. Another implication of corporatisation is that the cost of borrowing for the non-government entity will increase.”
“The situation can get even trickier if the new company is eventually listed. The interest of the shareholders would need to be taken into consideration. The Minister has just said that there are currently no plans to privatise the corporatised entity. But we know that corporatisation is often the first step that will pave the way for privatisation and the eventual listing. Hence, it will be good if the Minister can give a clear indication whether listing of the new company is the long-term intent. Next, I hope that the Minister can also elaborate further as to why a two-entity structure is a more compelling one than the current structure. Currently, CAAS is the single entity entrusted with the mission to make Singapore a leading air hub in the world. There is no ambiguity at all in terms of who is in charge and accountable for this mission. However, in the new two-entity set up, we would not have the same clarity as to who owns the aspiration to make Changi the best airport in the world. It is this clarity and the strong sense of ownership to the task that produced passionate civil servants like the late Mr Sim Kee Boon who seeks success at Changi Airport as his "National Service" to Singapore. I hope we can still see the likes of the late Mr Sim Kee Boon owning and championing the various causes for Singapore. With this corporatisation, the aspiration to be the premier air hub in the world would be shared between two organisations. And that is where the problem of ownership will arise even with very well defined roles and responsibilities. Another natural question – how different is a statutory board helmed by a set of competent board members and management different from a corporatised entity with similar board members and management?”
“While I do not question the benefits of corporatisation, I would want to raise some of the potential pitfalls and concerns which I hope the Minister can address. Firstly, do we see Changi Airport our only international airport and its services as a public good as opposed to a private good? Air traffic accounts for a very significant proportion of traveller arrivals and departures in Singapore. The spending from overseas visitors adds significantly to domestic consumption and is a crucial source of revenue for the retail, hotels and hospitality industries among others. Having more aircraft coming to Changi will also enhance our ground handling businesses. Maintaining our leading edge as an international air hub is hence of strategic importance economically. We need to continually attract and retain airlines to and through Changi Airport. In some cases, this strategic and competitive positioning may not necessary make immediate commercial sense. For example, in the face of a new entrant and in a bid to maintain our leading air hub status, Changi Airport may need to temporarily price its charges very low to defend its position and fend off new competition. It may even have to be priced below the required commercial returns of a corporate entity in the short run. Would a profit-seeking company be prepared to go that extra mile for the overall economic gain of the country? Understandably, as a commercial entity, the company’s strategic horizon will be shorter than that of a national agency like CAAS. The perennial question that was asked by the Member who spoke before me is how would the new airport company align its shorter term commercial interest with that of the country's longer term strategic interest?”
“Almost overnight, we were able to create three very competitive players which brought about immediate benefits to consumers. However, not all the corporatisations that the Government has undertaken are as smooth going. Take the case of Port of Singapore Authority (PSA). Shortly after the corporatisation of PSA in 1997, PSA Corporation suffered the loss of two major accounts in August 2000 to Port of Tanjong Pelapas (PTP). The loss of Maersk Sealand and Taiwan’s Evergreen resulted in the shifting of their transshipment operations from Singapore to PTP in Johor. It reduced value to our economy while improved the economies of scale for the newly established competitor. Perhaps due to the aggressive pricing and the undercutting by the new port entrant, the loss of the two accounts may well be the commercially sensible thing for PSA Corp. to do. However, from the national standpoint, we may not only have lost valuable spin-off from the two giant shippers but also tactically handed a lifeline to the regional competitor to stay viable. Indeed, for the other corporatised statutory board, I am not convinced that it would have done any worse had it remained as a statutory board. Of course, corporatisation policy is long term and it may be too early to make that conclusion. The key motivation for corporatisation has always been that as a non-government entity, its commercially-driven model will steer the company towards improving operational efficiencies and better financial performances. There is also better leeway to manage the challenges of the market place and enabling it to be more nimble in today’s rapidly changing business landscape. The Ministry has also cited greater flexibility to attract and retain top talent as another reason for its corporatisation.”
“Mr Deputy Speaker, Sir, first and foremost, allow me to compliment the CAAS for their announcement last week to hire more than 400 positions as part of the upcoming corporatisation exercise. This is indeed a piece of good news to cheer the very difficult job market at the moment. In many countries, such corporatisation and privatisation exercise will often result in some streamlining of headcounts. Hence, I am heartened that CAAS is not only not reducing headcounts but hiring to staff the two new entities. The Government has embarked on a corporatisation drive for various statutory boards since the 1990s. By and large, these corporatised entities have continued to serve us well and are able to fulfil both the corporate and national objectives. Some of the corporatisations have had direct benefits to the public and the economy. A positive case here is, of course, the corporatisation and privatisation of Telecommunication Authority of Singapore (TAS) which leads to the opening up of the telco market and the establishment of Infocomm Development Authority of Singapore (IDA), SingTel and the other telcos like StarHub and M1. Consumers clearly benefited from the liberalisation as the telco market became competitive. It sharply reduced handphone prices, lowered service subscription rates, improved customer services and spurred on more innovative products among others. Citizens, at large, also benefited from the privatisation exercise as the Government dished out the new SingTel shares as part of the wealth sharing exercise. Overall, the economy and Singapore are better off. One key attribute to the success of TAS' corporatisation cum privatisation exercise is the non-monopolistic nature of the telco market.”
“Sir, I would like to ask the Minister whether the Government has any specific plans to help fresh graduates join the labour market. In particular, are there more schemes like what MAS, SPRING and CDAC have recently announced to subsidise fresh graduates joining the labour market?”
“Madam, the momentum for the 2010 Youth Olympic Games' (YOG) is building up slowly but surely. This inaugural event will be yet another opportunity to showcase Singapore to the world. In view of the current global economic crisis, I would imagine the increased difficulty to meet the sponsorship target. While the support for YOG is still high, companies are much more cautious as no one has any idea how long this crisis will last. I would like to ask the Ministry for an update on the status of corporate sponsorships for the YOG. Has it been impacted by the severe economic downturn? The Youth Olympics will undoubtedly contribute to the economy by creating jobs and new business opportunities. Would the Minister share his projection as to how the hosting of YOG here will be of help to our local SMEs, especially in this downturn? Also, what plans do we have to get our local companies more involved in YOG? Youth Sports”
“There is also the Direct School Admission (DSA) scheme where MOE gives schools greater flexibility to admit students with a diverse range of achievements and talents. This is a more balanced approach and helps lessen the over-emphasis on academic performance. So just like primary school affiliation and DSA, proximity to the school and siblings should also feature in the selection criteria. Perhaps, MOE can devise some credit points system to incorporate this feature – pupils staying near to the schools – into the selection criteria. Non-traditional Approach to Running Education”
“Sir, MOE has a very efficient and systematic secondary posting process, where pupils are ranked by merit according to their PSLE results and each pupil given a total of 6 choices for secondary schools. Each secondary school has its cut-off aggregate score and the previous years' scores are published by MOE. I must credit the Ministry for the transparency in the posting system. By and large, the yearly exercise has served us well. School principals would of course like to admit the best students of each cohort. I suppose the schools have their various KPIs and compete keenly among themselves to improve their school standing. As a result, many schools tend to adhere strictly to their cut-off points, turning away students who may have lived only a few hundred metres away even if they missed the cut-off points by a few points. I can understand the aspirations of our school principals. However, I feel neighbourhood secondary schools should take in a mix of students and due consideration should given to those who live near the school or have elder siblings studying in the school even as the PSLE aggregate score remains the main selection criteria. Students who live near the school save on transport costs and travelling time. The neighbourhood familiarity also helps in the studying environment besides building stronger community ownership. Having elder siblings in the same school also helps in the student’s development and provide convenience to the parents. MOE has schemes that exercise flexibility. For example, pupils from a primary school which has an affiliation are given some priority to its affiliated secondary school if they have opted for that school as their first choice.”
“Sir, while I agree with the Senior Minister of State that there is a long-term smoothing effect on the NIR, I would like to ask whether this expected long-term rate of return – which is determined by the boards of GIC and MAS, together with the MOF – would be lowered, going forward, given the long-term investment outlook. Indeed, that was the view publicly expressed by the leadership of GIC, where they said that the next 20 years are going to be more challenging than the last 20 years. Also, I understand that the NII does not have a long-term smoothing effect. So I would like to ask the Senior Minister of State, together with this lower long-term expected rate of return and the likely lower NII, how does it impact the ability of the Government to balance its Budget? Also, will it affect some of these long-term programmes that we have?”
“This has a direct bearing on our Net Investment Returns (NIR) and Net Investment Income (NII) and I would like to ask the Minister what does it mean to balancing of our future budgets. Sir, while the Government should rightly not interfere or influence the investment decisions of GIC and Temasek, MOF should, however, review the risks we want our reserves to be subjected to vis-a-vis the pace we want to grow our reserves and use our returns. The last thing we want to do is to go for return debt, we have been enjoying so far by taking one more risk. Going forward, should greater emphasis be placed on preserving the capital and its purchasing power, for example, instead of outperforming the indices benchmarks. Related to this strategic view, can the Minister share some thoughts as to what the size of reserves should be, relative to our GDP and our other macro and social indicators? What would be the ideal size of our reserves that we should maintain minimally from a national security standpoint? I ask this question knowing that I may not get any numerical answers from the Minister. But I hope that the Minister can still share the Government's thinking and philosophy behind this approach. Usage and Security of Our Reserves”
“Sir, the source of growth of our reserves has primarily come from the surpluses of our past Governments and the investment performances of our fund managers, GIC and Temasek. Thanks to our fiscal prudence, we have been able to generate fiscal surpluses and add to the growing pool of reserves. However, given our competitive tax regime and the increasing recurrent and developmental expenditure, this contribution from Budget surpluses to our reserves would be less likely going forward. We will now have to count more on our fund managers, primarily GIC and Temasek, to perform their task of not only generating the required returns but also to grow the reserves. The returns from our reserves have increasingly become an important balancing item for our annual Budget. Without the investment returns from reserves, our fiscal spending would either have to be reduced or we have to raise more taxes. In the last 20 years, the favourable economic condition has presented tremen- dous opportunities to long-term investors. Both GIC and Temasek have been able to very much capitalised on this bull run. And by most benchmarks, GIC and Temasek have delivered impressive returns for our reserves in the last 20 years. However, the investment environment post-crisis is likely to be a very different one. The world economy is presently undergoing some major structural changes now. One thing that is clear post-crisis is that the new world order is likely to be a less leveraged one, financially. Gone are the days for easy credit. Here, I would like to ask the Minister how does the MOF see the long-term investment outlook and whether it is still realistic to expect similar investment opportunities and hence similar levels of returns we have seen in the next 20 years?”
“Sir, still on noise. Unlike littering and smoking ban where there is quite a fair bit of public education and campaign, I think in the area of tackling noise pollution, it has been quite minimal. Perhaps the Ministry, in addition to tougher enforcement measures, should look into some public messaging and education urging everyone to be considerate, including the contracters as well, and spare a thought for the others.”
“The software – how we treat one another in this environment is just as, if not even more, important. Minimising noise pollution is an integral part of a good quality living environment and requires the cooperation of all stakeholders, legislation and consistent enforcement. Dengue”
“Sir, increasingly, Singaporeans value a quiet and conducive living environment in their homes and neighbourhoods. In my usual house visits to my residents at both the HDB and private estates, noise nuisance is one of the most common complaints I receive. Noise pollution is also a frequent grouse received by the workgroup on "Promoting Better Social Behaviour at Housing Estates" chaired by Senior Minister of State Grace Fu. In addition to noise nuisance created by immediate neighbours, we receive frequent complaints about construction noise and vehicular noise. Singaporeans’ tolerance towards noise, especially around vicinity of their homes, has obviously decreased. In the area of construction noise, can NEA step up enforcement and monitor construction sites more closely to ensure that the noise they generate stay below the limits implemented, especially during night time, weekends and public holidays? Similarly, on vehicular noise, can NEA also work with LTA to review standards? I am sure Singaporeans living near roads, and a great number of us do, would appreciate the Ministry's effort and consequent improvements in this area. While the noise nuisance at the public housing estates comes under the ambit of HDB, can NEA, as the leading agency for environment and noise pollution control, work with HDB and Town Councils to review the following: (1) Lower the noise limits in neighbourhoods during night-time; (2) Introduce a more effective enforcement regime; and (3) Step up on public education to cultivate considerate neighbours and minimise noise nuisance. Sir, the Government has committed substantial funds to create and maintain a livable environment in Singapore – this is the hardware.”
“Sir, Singapore imports all its resource needs and energy is no exception. With the price of energy likely to remain volatile and growing concerns with the environmental sustainability, we should have a forward-looking energy efficiency strategy targeted not just at individuals and their lifestyles, but also industries and businesses. I applaud the Government's efforts in the area of sustainable development in the last two years. During these difficult economic times, I can understand that the last thing on the mind of a company is long-term energy efficiency. However, it is important that we do not lose the momentum which has been built up in the last two years. May I ask if the Ministry has strategies and schemes in place to ensure the sustainability of the energy efficiency initiative? 2.15 pm In addition, will the Minister share with us his views on and plans in the area of energy efficiency, as to how it intends to encourage and incentivise private sector involvement? Carbon Footprint in Singapore”
“Sir, the Senior Minister of State, Mr S Iswaran, talked about ensuring competition at our energy market sectors. Three of our major gencos are now under foreign ownership and they have paid a significant price for the assets. I would like to ask the Senior Minister of State whether there are sufficient safeguards to ensure that our utility rates for both households as well as businesses remain competitive or even more competitive? And how do we ensure that these foreign gencos will continue to invest in long-term capabilities?”
“Hence, while we should rightly continue to attract and draw in foreign direct investments, I hope the Government will also spend and commit equally significant funds and resources to help our local enterprises in their set- up and assist them in expanding their capabilities. We should spare no effort in continuing to nurture and grow our steady base of home-bred and locally anchored companies here. I am glad to hear that in this Budget, $130 million will be spent to enhance our grants and training schemes to encourage enterprises across different sectors to refresh and develop new capabilities so as to capture growth opportunities when the economy starts to recover. I look forward to the announcement of further details as to how SPRING and IE Singapore can help local enterprises develop new capabilities and globalise. One of the recommendations put up by the Economic Review Committee in 2002 is to assist our domestic enterprises break out of the low-cost, low-efficiency cycle and move into the innovation-driven cycle of growth. Our aim then was to nurture our domestic enterprises to become the future growth engine for the economy. I would like to ask the Minister how much progress we have made on this front so far. New Market Development to Position for Future Growth”
“Sir, in the words of a senior MTI officer, this economic downturn is the "sharpest, deepest and most protracted" recession we have ever experienced. Singapore is among the first countries in Asia to enter into recession, and so far, it is indeed a sharp, deep and protracted one for us, judging by the business climate survey in today's Business Times. Can the Minister share his thoughts as to why we seem to be harder hit than many of the regional economies in this downturn and also amongst the first to enter into a recession? Is our economy destined to be always so volatile? While the key reason for the sharp drop in our manufacturing is due to the collapse of demand in our major export markets, some analysts have, however, pointed out that our lack of strong local industry anchors, especially in the manufacturing sector, is among the reasons why we are harder hit. Our manufacturing industries consist mostly of foreign MNCs. Thanks to the hard work of our economic agencies like EDB, we have been able to attract global MNCs to invest in Singapore. The Government also offered attractive schemes and incentives to draw in foreign direct and R&D investments. These investments have added value to our economy and created jobs. However, we have to be mindful and realistic that for some of these foreign companies, their business plans are drawn up by their head offices based outside Singapore. Their investments and business plans can change due to the challenges they faced in their home country or other regions they operate.”
“I certainly hope not as it is the right time to invest in infrastructural works now as well as the estate upgrading. Moreover, the size of the infrastructural works is also at the right bite-size for our local contractors, thus helping to stimulate the local economy. Besides the two regions, we have also read and seen exciting development plans for Sengkang, Punggol 21, Queenstown, and so on. As one of the MPs serving in Bukit Panjang Town, I am often asked by my residents whether there are similar exciting plans for a middle-age HDB town like Bukit Panjang. What plans would the Government have to develop the empty land parcels over there? Would the Minister give some indication or the planners at the Ministry take a look at it? Master Plan 2008”
“The economic contraction and the gloomy outlook have adversely affected the property market, one of the important pillars of our economy. Since the middle of 2008, prices and rentals have fallen and the demand across all property sectors has softened. I would like to ask the Minister if the Government has any further plans to pre-empt a severe slump in the property market that may impact asset values of homeowners and would also have further repercussions on other sectors of the economy. Also, how does the Government intend to help the real estate industry tide through this downturn in the market? The Finance Minister in the Budget 2009 and the Ministry’s subsequent press release has announced some measures to assist the real estate sector. The general feeling, as well as feedback from the industry, is that more could be done to stabilise the market and strengthen confidence. I would also like to ask the Minister how badly is the industry hit by the tightened credit and whether there will be any further help or new policy initiatives in the area of financing to ensure smooth functioning of the market. Given our very high home ownership, a severe slump in the property sector could have a serious impact on the equity level of our citizens, even those living in the heartlands. Master Plan 2008/Bukit Panjang Town Last year, the Minister announced an exciting decentralisation plan which involved developing and rejuvenating two additional commercial centres, the Jurong Lake District and the Paya Lebar sub-regional centre, over the next decade. I would like to ask the Minister if these development plans will be affected by the economic downturn and be put on hold.”
“The arrears will pile up and often leading to the dreadful consequences of compulsory acquisition. I hope that the Ministry will study ways to minimise this undesirable situation from recurring. Among possible measures – can HDB have dedicated financial counselling for these Singaporeans who are contemplating such a move so that they can be better advised on their new financial commitments? Also, can the Ministry also look at ways of incentivising first-time home owners who have enjoyed the generous grant to stay in their flats longer before selling? Sir, in this downturn, other than enhancing the AHG, I hope that HDB can also enhance the existing financial assistance schemes, helping those who have problem servicing the mortgage repayments due to the economic crisis. While downgrading to smaller flat is one option, there may be instances where high relocation and social costs make the downgrade not worthwhile. It is often the children who suffer when a family needs to downgrade and move to a new home, especially when it involves the change of schools. Single Parents”
“While I applaud the Government enhancements to the AHG, I also hope that MND can look into the unintended situations created in our efforts to make home ownership more affordable to the first-time flat buyer. Often in my Meet-the-People sessions, I have residents who come to see me with regard to the difficulty they face in servicing their mortgage loans. They are usually from the lower income group with earnings of less than $2,000 per month. Besides working on a shoestring budget, their income streams are often uncertain as they are the most vulnerable in a downturn. Occasionally, when they are faced with any unforeseen circumstances or mishap at home, they will run into arrears for their mortgage repayments. When I probe deeper into their situations, many of them are actually second or third-time home owners. In fact, what most often happens is that with the housing grants, the subsidised prices and the concessionary loans, they are able to get by with the purchasing and servicing of their first flat. They can manage the mortgage repayments because of the small loan quantum required. However, more often than not, the home owners would be tempted to sell their flats and cash out the gains as soon as the minimum occupation is served out. Given that they had bought the first flat at a subsidised price coupled with the generous housing grant, there is usually quite a tidy sum of cash proceeds. The problem begins when they buy another flat, now without the housing grant and the subsidised price. Their loan quantum will have to be increased and the corresponding monthly repayments increase sharply as well. So if the income level of these home owners has not increased sufficiently, they will soon run into problems servicing their mortgage repayments.”
“Sir, one of the most visible aspects of Singapore's progress and development is in the area of public housing. At 95% home ownership, mostly in public housing, Singapore’s housing achievement has been widely admired by many countries. This is a commendable feat. However, the severity of this downturn will impact Singaporeans’ financial ability to purchase homes and service their mortgages. In most countries, even in the best of economic times, such high home ownership would not be possible to achieve. There will be segments of the lower income group, perhaps the lower 20%, who will either be unable to afford the initial downpayment and/or not be able to obtain loans or the inability to service the loans. In fact, this could have been the case for Singapore as well. In Singapore, according to the Department of Statistics, our lower income 10% of the households earned an average monthly income of $1,310 in 2008. Given our cost of living in Singapore, this group of Singaporeans survives on very thin margin for error in their day-to-day endeavour to make ends meet. This is already the case even without housing commitments. It is, therefore, remarkable that we are able to maintain such a high home ownership rate, even for our citizens in the lower 20% of our income group. Three crucial features in our public housing policy make this high home ownership possible. They are, firstly, HDB flats are sold at subsidised price, secondly, generous housing grants, and thirdly, the HDB concessionary loans. I am glad that the Government has, in response to the severe economic crisis that we are facing, further enhanced the CPF Housing Grants. I look forward to hearing further details from the Minister on the enhancements.”
“It is not a corporate jungle, a chaotic and mercenary place where only the ruthless and savage survive. Instead, what I envisage is a true Garden City, still vibrant but well-tended environment where material wealth is not the be-all and end-all, but simply a means to fulfil our dreams. We can build that value system. With that, I support the Budget. 5.09 pm”
“In the public transport sector, for instance, balancing the needs of commuters and the interests of shareholders of the listed public transport companies remains a formidable task. We still hear of Public Transport Operators (PTOs) not willing to shorten their bus headways or run new routes because of shareholders' interests. Mr Deputy Speaker, Sir, this crisis is the starkest reminder to us that without a watchful eye, the market can spin out of control. We cannot assume that everyone in the private sector will always act in its long-term interest, and even less so, in the interest of the public. The crisis could have lasting impact on the way Singaporeans live their lives and the way our economy functions. We may even have to contend with slower GDP growth going forward in the lower leveraged world. The Government should undertake a review of our economic model and in areas of strategic sectors, continue to strengthen its visible hand. In a political economy like ours, we cannot afford to take a market purist approach. In my view, our aspired model should be to continue to be a balanced market economy, where there is room for private corporations of all sizes, nationalised companies, co-operatives and social enterprises to co-exist and work towards benefiting both corporate bottomlines and the public at large. In areas where public interest cannot be possibly aligned with the private's, we should look to the state or social co-operatives to fulfil that role. After all, we have one of the best social co-operatives in the world – NTUC FairPrice – which sets exemplary benchmarks in terms of social responsibility. Finally, let me paint a picture of the Singapore I have in mind.”
“In such chaotic times, this cleverly-struck balance between the free and the managed markets, has served the country well. China is now looked upon as a source of economic stability in this crisis. What then are the lessons here for Singapore? On the whole, we have adopted a pragmatic, rather than ideological, approach to managing our economy. Our markets are free, yet tempered with careful deregulations, and we retain the option to intervene whenever necessary to correct anomalies. In strategic sectors, we have, by and large, retained complete or partial state ownership, but they are always subjected to market-based governance and industry best practices. We should not feel apologetic for our occasional interventionist approach. After all, as an island state with an open economy and yet no domestic economic hinterland, it is only in our best interest that we do so. Some of the unique interventionist measures we have taken, for example, in the management of our Singapore dollar within a trade-weighted band or the third party war risk liability insurance cover by the Government for Singapore Airlines in 2003 has served us well and are necessary. In recent years, however, I have observed that the Government has leaned increasingly in favour of the market. Statutory boards, for example, are being corporatised one after another. Temasek-linked companies such as CPG Corp, Sembcorp Logistics and the only three major power generation companies have also been divested in swift succession. In addition, there continues to be misalignment of interests between the public and private sector in some areas.”
“Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity – myself as a specialist – are in a state of shocked disbelief. A critical pillar to market competition and free market system did break down." The consequences of market failure have led to a dramatic swing to governments, the capital of last resorts, for help and intervention. In the past few months, we have witnessed shareholdings of many iconic financial institutions changing hands from private ownership to government ownership; we have seen massive private and corporate de-leveraging taking place, only to be offset partly by rising government leveraging to fund more spending and bailouts. We have observed that governments rushing out stimulus packages to substitute the collapse of private demand. It is, therefore, timely for a serious re-examination of what some call a "savage" capitalism model. Yes, the free market has brought decades of prosperity but it has also grown too aggressively for its own good and has to be reined in. In other words, the balance between the visible hand of the state and the invisible hand of the markets will be recalibrated. As Nobel Laureate economist Joseph Stiglitz puts it succinctly: "Capitalism may be the best economic system that man has come up with, but no one ever said it would create stability. Government regulation and oversight are an essential part of a functioning market economy. The market, on its own, is not enough." China is well aware of this. Over the last 15 years, it has partially privatised industries so that local companies can tap on foreign capital and expertise, while continuing to assert control over more volatile sectors such as financial services.”
“Some political leaders and observers have even been quick to predict that this tsunami of economic hardships could trigger the end of capitalism. For example, French President Nicolas Sarkozy, who came to power on a right wing ticket, actually declared laissez-faire capitalism over. He said, "The idea of the all-powerful market that must not be constrained by any rules, by any political intervention, was mad." Historically speaking though, booms and busts are part of the economic cycles. Why then does this latest recession seem particularly damaging? Some say it is because of a free market system that has gone unchecked for the past 20 years. There are clear examples of excesses: reckless lending in the US housing market under a low interest rates environment, gross mispricing of risk by market participants, inflated compensations paid to company executives, and ­the list goes on. Indeed, liberalisation and deregulation has become the norm in the last two decades. Governments, on the other hand, got smaller and turned lassez-faire, believing that the market would sort out its own problems. Today though, it would be too much to expect the market to unravel this mess on its own. Too many parts of the system have been broken, and life would never be the same again. Even Alan Greenspan, the highly-respected former Chairman of the US Federal Reserve and a staunch believer in the free market, said that the meltdown had revealed an inherent flaw in the economic model he had propagated his entire life. In his testimony to the US Congress back in October 2008, he said, "This crisis has turned out to be much broader than anything that I could have imagined.”
“We must, as a matter of precedent, establish precise and transparent principles that govern the tapping of the reserves. Questions such as the circumstances that warrant such a move, the processes involved and how much we can spend, must be debated in this House. Here are some measures I would like the Government to consider: Clarity in the economic benchmarks for the dip. We suffered three quarters of sharp quarter-on-quarter contractions and two quarters of year-on-year contractions, with worse times to come. Are these economic conditions a basis for future drawdown? Would the basic budget deficits of 6% of GDP be another threshold for consideration? Should we restrict the tapping of the reserves to fund only temporary measures, such as the Jobs Credit Scheme and the Special Risk-Sharing Initiative (SRI) in this instance, as opposed to long-term Government programmes? The Constitution was recently amended to allow immediate spending of up half of our Net Investment Returns. In very difficult circumstances such as now, is it not better that as a principle, that we build changes into this 50% spending rule in favour of more current spending, rather than drawing on the principal amount of our reserves? The principles that govern how we spend our reserves will influence our long-term survivability as a nation. At stake, are our national values as well as how we would deal with future adversity. Mr Speaker, Sir, even as we inject much-needed resources into the economic bloodstream and do our best to weather the downturn, it is important to reflect on how the world got into this state in the first place. The global economy today is in bad shape, and by all accounts, promises to get worse.”
“Sir, while we are glad that we have ample ammunition to tackle the current crisis, we have to be mindful that the use of such fire power will also come with heavy responsibilities. Budget 2009 will most certainly be remembered for the unprecedented draw on our national reserves to fund the package. Such a move has very significant long-term implications. From now on, surely, we will have one eye on the reserves every time we are confronted with a painful economic downturn. And with the size of our reserves greater than the size of our GDP, it is tempting to look to it as the ultimate perfect, painless solution to our woes. Our accumulated national savings are our last, and crucial, line of defence in any crisis. Would the Government's move to guarantee all bank deposits last year held any water had it not been backed up by the size of our reserves? As for the current crisis, the Finance Minister has cited the extraordinary circumstances we face and the temporary measures we are undertaking as chief reasons that warrant the dip into the reserves. I am convinced by the case that the Government has put up, and support the draw on the reserves. I must admit though that this is not the scenario I had envisaged for such a move, which is more of a catastrophic situation that could undermine the survivability of this nation, such as a natural disaster, terrorist attack or a pandemic. Nevertheless, at this juncture, we urgently need a strong response to prevent more job losses and minimise lasting damage to our industries. We need our industries to stay afloat, keep their capacities intact to benefit from the recovery when it comes. Even so, the watershed decision to draw on our reserves will be an important reference point and benchmark for future Governments.”
“If countries around the world are also in a similar position to do what we have done, to offer such risk-sharing schemes to their banks, I am sure it would alleviate the global credit crunch and greatly lessen the impact of deleveraging. Given the multiplying effect of leverage, this measure can be more effective than any pump priming stimulus. Also, I support the Government's approach to target the supply-side measures, rather than attempt to shore up demand. In a small, open economy like Singapore, there is no way a Keynesian-style government spending can mitigate, let alone substitute lost global demand. Given how much we import, we will, in fact, be stimulating the economies of our trading partners rather than our own. The third T-test is that the package must be temporary. The size of the Resilience Package goes beyond what our operating revenue is able to fund. Even with contribution from NIR and NII accounted for, we would still run into an overall deficit of $8.67 billion. Other than borrowing or tapping whatever is left of our current savings, dipping into the reserves is the only option we have left. Clearly, this level of spending would be unsustainable if it becomes recurrent or built into long-term programmes. If we lose our fiscal prudence, the ramifications are serious; we could be losing our AAA ratings status, or cause a run on the Singapore dollar. Hence, I am glad that the Minister for Finance has given assurance to the President that such significant spending is exceptional and the measures taken are temporary. We must continue the practice of balancing our annual budget over the term of office.”
“So the sooner we prepare companies and Singaporeans for the further fallout ahead, the better their chances of surviving and weathering the downturn. These urgent measures now, to stimulate bank lending like the SRI and subsidise wages under the Jobs Credit Scheme, combined, could make a difference as to whether businesses will decide to lay off workers or to downsize their business. We can only hope that these measures would buy them some time as they find financial leeway to keep their company solvent and viable. Speed is paramount here. So with regard to the first "T", I salute the Government for the timeliness and urgency displayed in this Budget. The second T-test is that the package must be targeted. By now, we are clear the key focus of the Budget is about saving jobs and minimising long-term damage to our economy. The crisis started with the financial sector and has severely hit the valuations of financial markets. It has now moved on to the real economy, and companies across a broad spectrum are suffering as demand collapses. Foremost, on the minds of many businesses now, is to keep the cost low and to remain solvent. Hence, I agree with the Government that at this stage, the focus must be to help companies stay funded and incentivising them not to lay off workers. The Jobs Credit Scheme, which is pegged to each worker a company employs, will in some way slow down the retrenchment. The Government has also correctly identified that the root cause of the present credit crunch is that banks are more careful in lending in these troubled times. It has tackled this head-on, by taking on a significant share of the lending risks of our banks. And in my view, this is the most effective supply-side measure.”
“Mr Deputy Speaker, Sir, thank you for the opportunity to speak on the Budget. I will essentially cover three areas; firstly, my brief thoughts of the Budget package; secondly, my position on the decision to draw on our reserves; and thirdly, the lessons we can learn from this global crisis that is unfolding before us. Sir, a stimulus package to the tune of 8% of our GDP, chalking up basic deficits of about 6% of the GDP and requiring a dip into our jealously guarded reserves is, to use a simple description, gutsy. The task has fallen on our shoulders now to scrutinise and debate these gigantic Budget measures and, hopefully, forge a national consensus on the course of action we will take in this economic crisis, the worst of our lifetime. Around the world, governments are also urgently coming up with economic packages to resuscitate their respective economies. For example, the US government is currently pushing for a US$819 billion stimulus package through the Senate. In Singapore's case, the Resilience Package is no ordinary Budget package. Given its massive size and the daunting circumstances that we face, the package must pass what I call a "3-Ts Test", borrowing a methodology from a US Senator scrutinising President Obama's Stimulus package. The three "Ts" are: Timely, Targeted and Temporary. First, the timeliness of the package. Urgency as well as staying ahead of the curve is among the key imperatives of Budget 2009. By staying ahead, I am not only referring to the fact that we have brought our Budget forward by one month but, more importantly, the pre-emptive nature of the measures. The full impact of global de-leveraging has yet to take its course, and we may see the economy worsen in the coming months.”
“Growing our reserves beyond the global inflation rate benefits the current generation as well. It helps secure high international credit ratings, which would trickle down to lower borrowing costs for companies in Singapore and promote economic activities. It strengthens our hand in managing the Singapore dollar exchange rate and renews confidence among foreign investors. Every extra dollar of reserve we save will give us another ounce of insurance that we will survive as a nation. Have you ever wondered if Singapore is able to withstand and recover from a catastrophic attack similar in scale to the 9-11 terrorist attack in New York? At the end of the day, we must be able to say with responsibility to the man in the street that Singapore is built to last. The Norwegian Government Pension Fund - Global, which is the equivalent of GIC, actually enshrined as one of its ethical obligations that a reasonable portion of the wealth accumulated must benefit future generations. I hope colleagues of this House would join me to reaffirm this obligation even as we debate on the merits of the changes. Finally, as we debate over this happy dilemma as to how much we spend or save as well as how we should share our wealth between the current and future generations, let us not forget the past generations who have painstakingly built up this precious resource for us. Members of the House will agree with me that we owe it to our pioneering and past leaders for building up our reserves to its current healthy state. Let us not forget that without the vision and perseverance of men, like Lee Kuan Yew, Goh Keng Swee, Hon Sui Sen, we would not be in this privileged position of debating this topic in this House today. Sir, with that, I support the Bill.”
“This concept of smoothing is perhaps also the reason why the Finance Minister can be fairly confident that the new framework would contribute an additional amount equivalent to 2% of the GDP to the budget in the next five years. Can the Minister shed further light if this is the correct understanding and would we still have contribution from NIR in a situation where asset base is declining but the long-term expected real rate of return is still positive? I also note in the Minister's speech that he expects expenditure to move up slightly higher after five years, that is, more than the additional 3% of the GDP. How would the Government intend to fund this higher expenditure in five years' time? At the end of the day, what matters is not just the nuts and bolts of the changes, but also what do they mean to the man in the street. In the US, this man in the street is now famously characterised by "Joe the Plumber". In our case, what does this change mean to the heartlanders, the workers, the professionals, the retirees, the stay-at-home motherss, NSmen, students, and so on? On this issue of Net Investment Returns, we have to impress upon Singaporeans what the changes will mean to them, both in the short term – which essentially refers to what we spend – and long term – what we save. Of course, with this change in spending rules coming amidst an economic downturn in the near term, Singaporeans will hope that the Government will do more to strengthen the social safety nets. Tax-paying Singaporeans will be interested to know whether higher contributions from NIR would lead to the possibility of lower income tax. Would the step up in spending, in areas of capacity-building and infrastructure, lead to more jobs being created in the near future?”
“What is being done to ensure that the board, now also tasked to propose to the Minister for Finance the numbers pertaining to investment returns, is independent of the Government? Would there be a possible conflict of interest for the GIC board, which is also tasked to perform as a fund manager for the Government? Mr Speaker, Sir, the expected long-term real rate of return is THE vital component of this new spending framework. It requires a leap of faith that the expected long-term real rate will indeed be representative of the investment returns over the long run. The expected long-term rate of return figure derived is in effect like a pin number to the ATM machine. I hence hope that the Finance Minister can have this figure and all information necessary for its computation made known in the interest of transparency. This is not a case of the "devil is in the details" but, with a spending principle of this importance, the "god is in the details". The smoothing out of the asset base is also another critical component that needs to be further explained. The amount of capital gains that could be recognised hinges on the asset base in which the expected long-term real rate is applied upon. From the Minister’s Second Reading speech yesterday, I gathered that the asset base will be smoothed out over a period of time with higher weighting to the more recent years. In years of rising asset values, the smoothed out asset base value will be lower than the current value, hence enabling the capital gains to be recognised as NIR gradually over a period of time.”
“Perhaps, what would be most difficult for the man in the street to grasp is this concept of "expected long-term real rate of return". Those familiar with the endowment fund spending policy would know that such a spending approach involves basing fiscal expenditure on the long-term expected returns on investment, as opposed to actual returns earned year by year. The expected investment returns are then adjusted for inflation to preserve its purchasing power over the long term. The merits of such a system are also well-documented. It smoothens out fluctuation by avoiding the market volatility inherent in year-by-year investment returns. This, in turn, ensures a more predictable stream of income for the endowment administrator, in this case the Government, to tap on for its fiscal budget. The question is: how is the expected long-term real rate of return derived and what is this figure? Would the Government propose a bigger number if it foresees the need to spend more? Or would a far more conservative figure be used instead so that we do not run the risk of being over-exuberant in our projections? The answers seem to lie in the hands of a list of who’s who running the framework. It is stated that the expected long-term real rate of return is determined by the Minister for Finance, in consultation with the board of GIC and MAS. The figure is then submitted to the President, who then decides whether to agree with the proposed rate after consulting the Council of Presidential Advisers. Yet, while we can see that lengthy consideration and due process has been given to deriving the figure, we can expect more questions to surface: who comprises the board of directors of GIC and MAS, and how are they appointed?”