Lim Hwee Hua
Singapore
“Mr Chairman, Sir, I believe the Minister for Finance has actually addressed that quite adequately in the Budget Statement. I will encourage the Member to read the Hansard. As I recall, he did say that our projections for revenue have been made for the next five years and we do not target a particular source of revenue.”
“Mr Speaker, Sir, I would encourage the Member to file a question for MCYS, if she would like to discuss safeguards further. What I would comment here is that at the outset when we conceived the whole Integrated Resorts idea, there were many business risks: whether it is country risk or the timing of the business cycle and so on.”
“Mr Speaker, Sir, the supplementary questions raised by Ms Denise Phua have actually been debated to some detail under the different heads, in terms of the intended strategy – why we are having Integrated Resorts and casinos in the first place. This has been debated quite extensively by the Ministry of Trade and Industry.”
“Madam, I take the Member's point about the need for checks to be done professionally, and indeed this is the case, and that is why the officers would be sufficiently trained to conduct these checks in a professional manner.”
“The proposed amendments are necessary in order to effect the new financing framework, to allow for greater contestability to be injected into the RTS industry, as well as to ensure security and continuity of the RTS operations. Madam, I beg to move. Question proposed. 4.28 pm”
“Because of the complexity of the issues and the need for us to continue consulting other players who have already been operating in that space, as well as consulting the business community in greater detail, the study would take the better part of this year. OUTCOME OF 50PLUS EXPO 6.”
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“Sir, even as I rise to support the intent of the amendments, I am mindful of the proliferation of trading and marketing arrangements in cyberspace in all form and manner beyond the now conventional B2B and B2C relationships. In this context, and against clause 2, which seeks to broaden and simplify the definition of "pyramid selling scheme or arrangement", the incidence of unwitting participation could in fact be raised. This really boils down to ignorance of the technical definition on the part of an increasingly Net-savvy population. I agree with the Government's philosophy of not over-regulating. However, I believe there is plenty of room for guidance, counsel and clarification for the man-in-the-street. Let me explain the challenges. Online retailing and marketing schemes emanating offshore As my colleague, Mr Leong, has alluded to, this poses a challenge. I believe many Singaporeans have e-mail accounts offered outside Singapore and are frequently presented with special deals. When a Singaporean participates in such a scheme, it seems straightforward enough. He is a wise and prudent shopper. Suppose he is asked to email as many of his friends as possible to urge them to join this shopping club for a small fee so as to take advantage of this privilege as well. In return for his effort, he gets credits which he can utilise to secure other goods and services. And the scheme goes on with more recruitment. Sir, would this now be considered as pyramid selling? This is not your typical get-rich-quick scheme with its telltale "make some easy money" carrot. Given the fact that many of these schemes are truly globalised and somewhat outside the jurisdiction of Singapore, how would such schemes and perpetrators be treated?”
“At the same time, of course, we were encouraging Singapore banks to merge and we wanted to build up a strong national champion, a player which would be substantial and efficient in Singapore and also in the region. And we cannot go round telling the private banks that they have to rationalise and they would look at us and say, "What about you, DBS and POSBank?" It makes sense. That is why we did it, and I think it was the right decision.”
“Given that there is a perception that POSBank was given to DBS "on a silver platter", and therefore by extension, there is the expectation that some of the social features should remain at least for quite a while, can the DPM kindly recap the reasons for not putting the POSBank business out for tender by the other non-Government-owned banks? BG Lee Hsien Loong: Mr Speaker, Sir, this was fully debated at the time the question arose why we gave POSBank on a "silver platter" to DBS Bank. In fact, it was not given. There was a valuation. There was an arm's length transaction. POSBank was sold to DBS Bank for $1.6 billion worth of shares of DBS Bank. This was two years ago, and DBS Bank shares have not done badly since then. So the Government has actually sold POSBank to DBS Bank for a very fair and substantial consideration. But the reason we did it with DBS, rather than with any other bank, or put it up to tender, is because we had a social objective: we wanted to promote savings, we had to consider the phasing in of the full commercial rigours of the operation and we were assured that DBS Bank would have a similar mindset and would understand this. And indeed, arrangements were worked out with DBS Bank to make sure that their proposed bank lending rates, for example, would only be phased in gradually over a period of four or five years. And at the same time, to compensate for that, the tax exemption on the POSBank deposits was also going to be phased out gradually, first, on big accounts next year, and then on all accounts come 2004. So there would be progressive steps forward.”
“I would like to ask the Minister to confirm that the cost of raising capital via bonds for statutory boards is actually lower than that from direct borrowings from the banks.”
“Chin Tet Yung asked the Minister for Home Affairs if he will indicate what are the steps taken to establish a Speakers' Corner. 7. Mr Low Thia Khiang asked the Minister for Home Affairs what is the purpose of setting up a Speakers' Corner and for what considerations has the Government changed its mind in setting up this Corner. 8. Mr Simon S C Tay asked the Minister for Home Affairs if he will outline the rules that will apply to the proposed "Speakers' Corner" in Singapore.”
“These range from the Euro-MTS, which was launched in Europe in June 1999 by 24 financial institutions who are primary dealers in the various European government securities markets, to exchange systems operated by stock exchanges like the New York Stock Exchange. Electronic bond systems bring several benefits to the bond market. For the issuer, it removes traditional geographical barriers and facilitates a wider reach and distribution of bonds. For the bond investor, electronic platforms offer greater transparency, lower transaction costs and more value-added services. However, more important than state-of-the-art electronic infrastructure are the fundamental conditions for efficient and liquid bond markets. Electronic bond systems are most prevalent in countries where the bond markets are already highly developed and liquid. Necessary conditions to create thriving and liquid bond markets include: A robust market making mechanism. This requires a group of financial institutions committed to making markets, both in government securities as well as corporate bonds. An efficient market structure. This includes a reliable government yield curve, and a liquid bond repurchase and futures market to enable market participants to hedge their S$ debt positions. A large base of diverse investors. This should comprise a mix of long term- institutional investors like insurance and fund management companies, short-term value traders, as well as retail investors. MAS will be taking steps soon to enhance the efficiency and liquidity of our bond markets. To support this, we are also studying ways to facilitate the introduction of electronic bond systems in Singapore. SPEAKERS' CORNER 6. Assoc. Prof.”
“Sir, may I ask the Deputy Prime Minister, regardless of whether the Government thinks that margin debt is the cause or the effect of a rising market, would the MAS use the percentage of margin debt to the stock market capitalisation as a benchmark when deciding on margin requirements? BG Lee Hsien Loong: Sir, I think the two have different parameters. The percentage of margin debt to total capitalisation is very small. We do not have an exact number, but I said it is about 1%. Whereas the margin requirement relates not to the size of that debt but to the volatility of the debt. Because if you bought shares worth $2,000, and you have paid $1,000, you still owe $1,000 secured against the $2,000 piece of paper - shares. If the shares go down to $1,500, you still owe $1,000, but it is only secured against $1,500 of shares. If your broker is slow to sell and liquidate the position, he may find the market has moved further against him and then he has a loss on his hands. So it is the volatility which concerns us when we have to judge how tight to make that margin financing limit. BOND EXCHANGE (Setting up) 5. Mrs Lim Hwee Hua asked the Deputy Prime Minister whether the Monetary Authority of Singapore will help set up a bond exchange, especially as an electronic platform, to facilitate bond-trading for both institutions and retail investors, as well as to further establish Singapore as a regional debt hub. BG Lee Hsien Loong: Mr Speaker, Sir, in the past few years, rapid advances in electronic bond technology has caused electronic bond trading systems to proliferate in the US and Europe.”
“Other commentators have observed that margin financing is only one form of leverage in the stock market, and is still only a small percentage of total market capitalisation in the US. MAS is reviewing whether to extend limits on margin financing across the broad spectrum of margin providers, and whether our present requirements provide the proper balance in our markets.”
“Hence, UOB could recently offer customers 100% share financing up to six times their monthly salary, so that they can buy shares without putting up any money upfront. Our banks are well capitalised. Margin loans form only a small percentage of their total loan portfolio. MAS is therefore not worried that the banks will become over exposed to the stock market. However, MAS is concerned that over generous margin loans may create froth in the stock market, and increase market volatility. They may also lead to an excessive expansion of consumer borrowing, and tempt individuals to speculate in shares beyond the limits of what they can afford. The US Federal Reserve Board (FRB) imposes margin requirements on brokers, banks and non-bank intermediaries. All providers of share financing are required to impose an initial margin requirement of at least 50%. There is thus a level playing field, unlike in Singapore. The US Federal Reserve Board requires investors to pay $1,000 upfront for $2,000 worth of securities. The exchanges also require margin calls to be made when the value of the securities falls below $1,333. This is more liberal than our threshold of $1,800, but, in practice, many American broker-dealers maintain stricter internal policies on initial margin requirements as well as margin calls. As the US stock market has risen, margin debt has grown sharply. There have been calls on the FRB to raise the margin requirement, especially after the recent volatility in US equity prices. The FRB has not agreed to do so. Its position is that the present requirements are adequate, but it is continuing to monitor the situation.”
“The contra buyer could sell on the fifth day after the initial purchase, and only pay the broker the difference between the purchase and sale prices after settlement of the contra sale, which was another six days later. In addition, brokers often extended informal credit, so that when the market entered a downswing, some customers would default, exacerbating the problem of contra losses. Now that we have shortened the settlement cycle to T + 3, contra trading has become less attractive. This may dampen market turnover. Brokers have responded by introducing new forms of financing for their clients, and reviving older forms. For example, at least one broker is giving its preferred clients up to 14 days interest free credit. Where securities firms are concerned, the Singapore Exchange (SGX) requires its members to impose an initial margin requirement of at least 50%. This means that if an investor buys $2,000 worth of securities, he must pay the first $1,000 upfront. SGX rules also require the broker to make a margin call when the value of the securities falls below $1,800. If the investor is unable to meet the call, the broker will sell the securities and liquidate the position. These margin requirements have helped to keep our stockbroking firms healthy and not over exposed to risk. They should adequately protect the firms should the market turn down. From the macro perspective, the rules have also prevented excessive leverage in the stock market, much like MAS' rules on property financing. However, these margin requirements do not currently apply to banks, or to other lenders that are not members of the SGX.”
“Sir, I would like to know whether, as a philosophy, the MAS would be inclined to be more stringent with regard to the granting of non-security backed on-line credit. BG Lee Hsien Loong: Mr Speaker, Sir, I have a Question to be answered next concerning credit for security. It is slightly different from unsecured lending. We have limits on unsecured lending of two months of salary, and it is basically an income requirement. We think that is satisfactory, because as incomes rise, the two months' salary automatically increases. Assoc. Prof. Toh See Kiat: Sir, I would like to ask the DPM whether he thinks that it is more effective to have legislation and to come out with a standard that banks, for example, must have when they advertise interest rates - like effective annual interest rates. CASE, being a members' association and not a Government agency, would lack the bite that legislation has. BG Lee Hsien Loong: Sir, let us see whether we have a problem. If so, then we can study the solutions, because I do not think, up to now, we have had a problem with banks making misleading advertisements of interest rates they are offering. So I would be inclined to wait for the problem to arise before examining possible solutions. NEW INITIATIVE ON SHARE FINANCING 4. Dr Lily Neo asked the Deputy Prime Minister whether the recent new initiative by financial institutions in relation to share financing will lead to excessive credit exposure by investors. BG Lee Hsien Loong: Mr Speaker, Sir, share financing is an integral part of the securities market. Before 15th March this year, under the old T + 5 settlement system, investors often did not have to pay up until 12 days after their trades were executed.”
“Sir, I would like to follow up on my colleague, Mr Inderjit Singh's theme to explore further afield for best practices in education. With the numerous developments on the education front as well as the fast-changing economy that we are trying to cater to, I would like to discuss the role of the private sector in education. Currently, the private sector plays an active role in both the pre-school and university segments. There is a wide variety of choices on both fronts and within the desirable framework; families can decide the type of services they want for the children. However, the private sector, by and large, does not participate in the provision of primary, secondary and pre-university education for Singaporeans. Recently, the Deputy Prime Minister, Dr Tony Tan, mentioned possible alternative routes to university, including the International Baccalaureate (IB). Pending a complete review to see if it should be offered by schools across the board, can the private sector meet such demand in the interim, in particular, where students are unable to cope in the current school system, rather than to lose them, and possibly the parents as well, abroad? This could well provide a much appreciated alternative.”
“Beyond the lesson, there is little understanding of how it works. Even if certain skills were picked up, such as logging on and logging off and the differences between the different disk drives, the emphasis is still very much on the content rather than the technology itself. Sir, we all know that we are experiencing ever-changing needs for a knowledge-based and driven economy. There is no doubt that technology is ever-changing and we can never master it perfectly. But it will be far better to be a part of its evolution than to have a long lag after proper schooling. I am asking for schools to incorporate the equipping of such skills in a timely fashion as curriculum proper and not be left as co- or extra-curricular activities, such as leaving IT club to teach web design. Finally, I would like to raise a related issue regardless of how technology is introduced in schools and ask the Minister to help change the mindsets of those involved in technology-related education, from being a teacher to a facilitator, so as to allow innovation to spring forth spontaneously.”
“Sir, we all appreciate the need to have clearly defined desired outcomes of education so that we will not stray from equipping our scarce human resources with the necessary skills for sustaining both our economy and society. We are also mindful of the competing demands for school time. Many an argument has been made to allocate more time to deserving needs, such as national education, inculcation of values, sex education and the list goes on. I would now like to urge the Minister to seriously consider including technology as a compulsory subject, at least from the secondary school onwards. This is not just to make them entrepreneurs or Net savvy. This is because technology literacy now ranks as high as language literacy. Without a working knowledge of technology or specifically of computers and the Internet, we will be handicapped. The world is now a little smaller if we go by traditional means of acquiring knowledge, such as reading hard copies of newspapers and periodicals, books from the library and news over television. If we explore all that is at our disposal via the Internet, we get the opposite effect, that is, information overload, too many sources, too many channels and too many possibilities. But obviously, to operate and survive in a global economy, we cannot afford to limit our ability to do more and know more. Hence, we should aim at ensuring that our students understand the Internet and related technology enough to navigate and choose. With technology literacy, they have a tool which they can exploit to maximise their own potential. Having computer-based education in schools is not quite the same nor good enough. Students probably regard the computer as a means to an end, say, completing a Mathematics lesson.”
“Sir, frequently after an Interim or Main Upgrading Programme, estates are renamed by residents to give better sounding names or ones that reflect the history or location. For example, Serangoon North Avenue 1 becomes Hwi Yoh Court. If I recall correctly, Serangoon North was so named as it was an estate lying to the north of Serangoon Central. Never mind the fact that many people still refer to the place as the Jalan Hwi Yoh area. But, Sir, we used to name a whole estate to reflect the history or location. For example, we adopted the series of Marine Terrace, Marine Drive, Marine Parade Central, etc, for the reclaimed land in the East Coast back in the 1970s. Somehow along the way, it appears we got less imaginative. We started naming streets, roads and avenues by numbers and sometimes letters. So we have typically an A, B, C avenue series, following by an A, B, C street series. We even classify them as Neighbourhoods 1, N1, N2, and so on, as depicted by a web on a large signboard, as one approaches newer estates, if one drives slow enough to take in all the details. 5.15 pm Surely we are not so devoid of imagination nor history as to fall back on a somewhat scientific method of naming our estates which get promptly renamed after upgrading. We are not like typical US streets which run on a grid system and for which both private and public housing estates have evolved over time. I would therefore like to ask the Minister to consider naming new estates which are more reflective of the history or significance of the locality right from conception.”
“But last year when these applicants moved in, they found to their surprise that prices had dropped dramatically for the unsold flats. The price drops ranged from $30,000 to as much as $100,000. In percentage terms, the range was from 15% to 35%. Naturally, the flat owners who paid these high prices would, of course, like to have their prices adjusted downwards to reflect a fairer deal. I think it is an example of the lack of coincidence between the expectation of the buyer and the approach by HDB. After all, the point that many buyers made is that HDB has the monopoly as far as public housing is concerned and potential owners do not really have the luxury of choosing their time to purchase. May I ask the Minister whether it is not desirable for HDB to have a fairly stable price structure whatever the market conditions are like, and whether in such an instance, HDB could consider adjusting the prices of those affected, ie, the Executive flat owners who paid substantially higher prices for their flats in 1997.”
“Sir, I would like to raise a point regarding the pricing philosophy for HDB flats. There is currently a gap, albeit not a serious one, in terms of expectations between buyers and HDB. It is not uncommon, especially during the crisis as well as during the property market boom, for many HDB dwellers to express frustration and uncertainty over what they would actually pay for their flat. Part of this can be attributed to the queuing time which can be inordinately long for the more popular zones. Apart from this, there is also little or a direct reflection of pricing by, firstly, the location of the new flat and, secondly, on a per square metre or per square foot basis. The latter is used throughout the private housing market for whatever benchmarking it offers. For the HDB, however, the emphasis is on room-type and although most Singaporeans understand the references quite well by now, a 3-room flat really has two bedrooms and both a 4-room and a 5-room flat have only three bedrooms. Some have expressed surprise too that the new 5-room flats somehow appear or are in fact smaller than the older generation ones. This sense of being shortchanged is misplaced and quite unnecessary. Can the Minister reveal how the sense of value for new HDB flats can be properly conveyed to would-be buyers? Assoc. Prof. Chin Tet Yung: Sir, I echo Mrs Lim's description of the problem concerning HDB flat prices. Let me just illustrate the problem. During the onset of the financial crisis, some applicants for HDB Executive flats, for example, were asked to select their flats based on pre-crisis prices. This was in November 1997. Even in March 1998 when they went to collect their keys and pay their 20%, the price remained unchanged.”
“Sir, I would also like to provide a slightly different perspective from Mr Lew on the same topic of Executive Condominiums (ECs). As I recall, the EC scheme was conceived a few years back to cater to the growing sandwiched segment, that is, Singaporeans who were closed out of the private upgrading market because of run away private property prices. We have yet to complete a cycle for the ECs, but already the Housing and Development Board is offering premium apartments, purportedly by a revamp of two existing design-and-build schemes. Based on the proposed design features and pricing levels for these premium apartments, and notwithstanding some differences, I would like to ask the Minister what would be the impact of this offer on the EC scheme and, indirectly, on the Executive Apartment Scheme as well, and its impact on the resale potential for such apartments. Would this scheme pose unfair competition for EC developers? Finally, I would like to echo some of Mr Sinnakaruppan's sentiments. A fundamental question would be the need for HDB to be involved in meeting needs beyond the basic level which, for the sake of argument, could refer to housing for first-timers.”
“Sir, I would like to ask the Minister to address the following policy and structuring issues: First, the role of the regulator post-exercise. To what extent will the regulator play a price stabilisation role, especially for households, for example, during periods of price volatility as players establish their relative market position? In several markets, price volatility can sometimes prevail for two to three years. Will the regulator be charged with any responsibility as far as the overall supply capacity is concerned, for example, during a downturn or simply an over projection of demand, which if given entirely to market forces, might cause prices to collapse, ultimately to the detriment of the generating companies? Whilst consumers may rejoice at collapsing prices, they may, at the same time, be shareholders of these generating companies. Secondly, the structure of industry. From the perspective of promoting certain industries, which may be energy-intensive, who would help ensure that prices make economic sense for them? A larger question would be whether the allocation of the pool by user groups, ie, households, large consumers, will be incorporated as part of the supply structure? Finally, would the transmission portion, ie, the existing Power Grid, which will be a natural monopoly, include the distribution role as well? Otherwise, would we run the possibility of over providing for energy distribution if each player were to build its own infrastructure?”
“Sir, the SME 21 is a comprehensive effort to develop the role and contribution of smaller companies to the growth of Singapore. At the same time, it also addresses the issues that vulnerable sectors, such as retail and construction, are facing and recommends some strategies for survival, for example, consolidation for small operators to achieve economies of scale. But, Sir, as my colleagues Mr Singh and Mr Magad have observed, we know that whilst a lot of effort has gone into formulating the blueprint, it is the follow-up, in terms of rendering actual assistance to target SMEs, that will make the difference. I would like to ask the Minister how the relevant agencies can proactively help such vulnerable businesses. In particular, will their efforts extend to the neighbourhood shop operators, especially those who are non-English speaking, or who may be unaware of the existence of the SME 21 altogether? Sir, many neighbourhood operators may have been running chronic losses but still feel they have no alternatives. For such operators, where cessation of business could well be the only solution, can placement and retraining assistance be extended as well?”
“Sir, much has been said already in this House about the role of Government-linked companies or GLCs in driving economic growth in Singapore. Also, many Members, including myself, have exhorted the Government to constantly review and identify candidates for privatisation where private sector pressures would make sense. Whilst privatisation may provide the best models in many cases, GLCs who prove their worth can continue to justify their existence. In fact, GLCs may well be a good intermediate step or model for certain Government-run operations. Specifically, the Government should review the extent to which sea port services should be deregulated and whether certain ports, such as Jurong Port which supports the Jurong industrial estate, should be corporatised or even privatised. I would like to ask the Minister to comment on the feasibility of such a transition.”
“Sir, as part of giving the promotion of technopreneurship a shot in the arm, the Government is establishing a Science Hub. For the Science Hub to fully realise our objectives, the least of which is to provide a conducive and vibrant environment for the nurturing of knowledge-intensive capabilities, I would like to ask the Minister what economic model would be used. I am especially interested in how the Government will drive this effort as there are multi-faceted needs to be met, such as nurturing, social and leisure requirements, if one were to use the Silicon Valley as a model. In addition, I would like to ask the Minister to indicate what the concentrations are likely to be.”
“Secondly, even though services, including financial services, constitute a substantial pillar of our economy, measures are few, perhaps inherently so. Nonetheless, as services are crucial to us, I would like to urge the Minister to continue seeking out appropriate measures and indicators. Trade statistics abound and are available on a monthly basis, but they do not form a complete picture. Hence, they may overstate the deterioration in the economy, as was the case for some months in 1998. 6.00 pm Thirdly, business cycles have shortened through the judicious application of technology. Therefore, frequency and timeliness of economic statistics are key to helping companies and individuals project ahead. Can the Minister explore how far this can be done?”
“Sir, allow me to begin my cut with an illustration. There was once a contract manufacturer which began a very successful operation in Singapore. It was able to meet the needs of a huge multinational electronics corporation that had decided to outsource some of its manufacturing activities. As time grew, more MNCs became its customers and in Singapore, capacity was gradually added. Every employee, including the non-production worker, could see and feel the pace of growth. Because the company's track record was so good, when its biggest client decided to produce in China, it was invited to set up supporting manufacturing facilities there. Growth there was soon exponential, well in excess of that in Singapore. Now, if the Singaporean employees were focusing only on the hive of activity at their own plant, they would not have shared the excitement of growth in China. Likewise, if there was a structural change which led to the MNCs ceasing production in China, they also would be none the wiser. However, if they had had a total picture of the entire network of operations, they would be better informed of their company's plight through thick or thin. Sir, I hope this illustration will convey the need to plug the following information gaps in the measurement and assessment of economic activity for Singapore. Firstly, to enable Singaporeans to embrace the global nature of our economic being, we should also highlight Gross National Product (GNP), or its equivalent, instead of stopping at Gross Domestic Product (GDP). This gives a broader reflection of our reach outside of Singapore. A quick look at the 1999 Economic Survey shows some differing trends, granted that comparison only in current price terms is available.”
“The consensus was that public education was crucial for several reasons: Firstly, as part of personal financial planning, not just for old age but also throughout one's life, to meet changing needs such as family and home establishment in earlier years to retirement provisioning in later years. Secondly, to enable Singaporeans to partake of the increasing variety of investible instruments, such as direct stock market investments, unit trusts or the slightly more esoteric derivatives, such as index futures. Thirdly, to enable Singaporeans to assume greater control and responsibility over their individual financial well-being by having the requisite awareness of the different risks involved and skills to make prudent investment decisions. Hopefully, this will minimise investments in financial 'lemons' through a discipline of understanding the underlying businesses. In this regard, the current dot.com fever is slightly worrying. I would like to ask the Minister what is the Government's philosophy with regard to investor public education. Whilst it is quite clearly in the interests of financial institutions to educate potential customers as part of marketing their products, would the MAS drive or play a coordinating role in the public education process? Also, would the MAS help ensure that related agencies, such as the Central Provident Fund Board and the Singapore Exchange, embark on a wider scale the raising of such awareness?”
“Sir, I move on to the next cut on statutory boards - tapping the open market for funds. As part of our efforts at establishing a meaningful and vibrant debt market in Singapore, statutory boards, such as the Jurong Town Corporation and the Housing and Development Board had begun to issue bonds, each to the tune of several hundred million Singapore dollars. These issues not only help to create sufficient critical mass by complementing the regular issuance of Government papers, but also allow some benchmarking and corporate debt rating exercises to take place. This exercise interestingly raises the question of whether selling bonds on the open market has indirectly pushed funding costs higher for these statutory boards, thereby leading to an inflation of cost of services to be provided by them. For example, the HDB may pay close to 5% on the open market for its longer tenure bonds whereas it typically borrows from the Central Provident Fund via the MAS, at a rate which is pegged to fixed deposit rates. The disparity could be quite marked. My point and question here is, aside from the intricate relationships between pools of funds at the different Government agencies, will tapping the open market for funds change certain aspects of public finance? Will this have implications, for example, for the way housing subsidies are and should be structured, including the need to link the interest rates of CPF to HDB? I move on to my last cut on investor public education. Sir, earlier on the Inter-Ministerial Committee on the Ageing Population Workgroup on Financial Security was trying to ascertain the degree of investor awareness and sophistication among Singaporeans.”
“Sir, the wide ranging financial sector reforms will pave the way for Singapore to play a bigger role as a financial services hub, at least for the Asian time zones. To complement the existing offering of primarily equity-linked instruments for both capital raising and investment, the Monetary Authority of Singapore should seriously consider the setting up of an exchange for bonds, particularly an electronic trading platform. This would facilitate bond-trading for both institutions and retail investors alike, the latter of whom have typically been forced to hold bonds till maturity. Complemented by the current equity capabilities of the merged Singapore Exchange, setting up a bond exchange should hopefully attract more infrastructural or telecommunications-related issues to Singapore. Hitherto, bonds have been traded on an over-the-counter (OTC) basis in most countries. However, technology has facilitated electronic trading to a large extent. The US market is replete with examples, such as BrokerTec, which aims to disintermediate interbank brokers, and Bloomberg Bond Trader which is developed with major US banks to focus on government securities. Notwithstanding some inherent problems with creating sufficient liquidity, especially at the initial stage, electronic trading promises ultimately lower issuance costs. An added bonus would be the opportunity to realise the potential of the untapped retail segment not just in Singapore but within the region. I would therefore like to urge the MAS to explore the possibility and feasibility of the SGX taking on a more active role in the debt market, beyond just listing bond issues. There are synergies to be reaped, especially in terms of marketing more variety to the same groups of financial investors.”
“Sir, much has been said about the competing demands and dilemmas faced by working women, which may conspire to incline couples towards not having children. Some women may choose or would like the flexibility of being able to take time off work for a period of time, following child-birth. Currently, this involves giving up a source of income. For those who plod on, they can claim the usual child relief and enhanced child relief of up to 5%, 15%, 20% and 25% respectively of earned income for each child order. There is no in-between compromise, ie, tax reliefs for the family whilst taking time off. I would therefore like to ask the Minister whether tax incentives can be extended to husbands instead, of women who choose to stop work following child birth? I would also like to echo several Members' call to raise the current level of tax relief of only $2,000 per child.”
“Sir, in the debate so far on entrepreneurship, much has been said and argued in favour of preferential tax treatment for individual holders of stock options issued by the companies that employ them. The recent concession to allow tax deferral for up to five years, upon assumption of the stock options, is indeed laudable. Sir, I would like to focus instead on the tax treatment for companies issuing such options. Increasingly, especially with hi-tech start-ups, ESOPs will figure significantly as part of staff compensation. Actual cash components would correspondingly reduce in proportion. This has tax implications for companies, depending on the scale of implementing ESOPs. I would like to ask the Minister whether he would allow companies to tax-expense the value of options granted, subject to acceptable option valuation methods? And if so, whether he would impose any limits. Sir, can I go on to the next cut?”
“Sir, recently, there was anecdotal evidence of excessive consumer spending arising from easy credit, which led to bankruptcy for those who could not curtail their credit card spending. Whilst the credit card has long been around, and the dangers of easy access to credit known to issuing banks, the advent of electronic finance has added yet more convenience to securing consumer credit on two fronts. Firstly, electronic retailing or e-tailing through the Internet provides even more choices for the consumer, and correspondingly, more temptation for excessive spending. Every transaction is only a mouse-click away. Secondly, Internet banking is likely to lead to an increase in demand for consumer credit on-line. Unless credit information is shared readily between banks, the consumer may soon find more credit at his disposal than desirable. This highlights the challenge of curbing excessive consumer credit via electronic access. I would like to ask what is the Government's philosophy and approach towards this potentially tricky problem. At the same time, intensifying competition in cyberspace may mean a more timely extension of other types of credit, beyond the more straightforward security-backed mortgages. Correspondingly, credit risk management by banks and financial institutions may eventually lag approvals or credit extension. The extent is obviously an issue, for should there be a severe economic downturn, there would be a huge multiplier effect stemming from an unwitting over-assumption of risk. Can the Minister explain what measures would be in place to build up overall credit risk management capabilities in tandem with rising demand for timely, on-line credit?”
“Sir, I would like to thank the Deputy Prime Minister for his comprehensive reply and beg leave to withdraw my amendment. Amendment, by leave, withdrawn. The sum of $152,943,930 for Head V ordered to stand part of the Main Estimates. The sum of $42,911,600 for Head V ordered to stand part of the Development Estimates. Head S -”
“It is perhaps inevitable that a performance-based variable may eventually dominate the overall compensation of a typical worker in Singapore. In the private sector, this already takes the form of actual bonuses paid out or stock options. An appropriate equivalent would have to be worked out for civil servants in the long run and, in fact, for all public sector employees. Otherwise, the call for them to be more entrepreneurial would ring hollow. I would therefore like to ask the Prime Minister on how the vision of a more entrepreneurial public sector will be realised.”
“Sir, I beg to move, That the total sum to be allocated for Head V of the Main Estimates be reduced by $100. Sir, in moving this cut, I would like to highlight a difference in motivating staff between the public and the private sectors. The private sector is driven by the bottomline, be it profit and loss or value-added. This philosophy is usually embraced by the entire organisation, literally through thick and thin, through mergers and acquisitions or through industry restructuring. Consistent with this, performance targets are in place for the majority of private enterprises. Employees contribute accordingly and generally cannot but feel the pulse of the underlying industry. This is most evident during the recession and the restructuring of the electronics sector. Retrenchment, as we all know, was a painful experience for those affected. The reality was that the profitability of their companies had a direct impact on them. By the same token and to complement a fast changing and technology-driven economy, the public sector will increasingly be expected to deliver acceptable value-added. This is particularly so as technology will force more transparency on the entire supply chain, including the delivery of public services. Thus, every public sector employee will soon be forced to focus on customer satisfaction at each level, and to be more innovative and entrepreneurial in his approach. Sir, our limited manpower resources would be another reason for narrowing any disparity in the terms of employment between the public and private sectors. If nothing else, a disparity makes for difficult deployment of capable civil servants to for-profit Government-linked companies or even the private sector.”
“Now, with a global marketplace and irregular working patterns, many consumers would simply want to be able to order their food needs online and have them delivered at some appointed time. So, e-tailing is fast evolving. And we can see from this example that the solution is not about opening supermarkets round-the-clock but really providing the avenues for customers to have their needs met. Sir, we all have certain mindsets that have evolved over time such as career and job aspirations, desiring after a known pattern to work and retirement. But many of these mindsets are not under scrutiny and they will need to be changed the sooner the better. Sir, many of my colleagues have suggested how we should change mindsets. So I will not belabour the point, except to say a 9-to-5 job for all of our working lives till we retire, with a stable employer such as the Government or a multi-national company, will no longer do. Instead, a good bet will be to contribute towards a 24-by-7 (24 hours by 7 days) solution that evolves with changing needs. That will require us to constantly think out-of-the-box, acquire knowledge and have an appetite for uncertainty without the comfort of safety nets. An assumption of risk and an open mind would have to be the working mantra. Contrary to throwing out old models, I believe that the risk-reward relationship will continue to hold true and that the rewards can be handsome for the innovative, diligent and adventurous contributor. On that note, Sir, I support the Budget as presented by the Minister.”
“However, as they utilise resources and play an important social role, there must be a shift in focus away from traditional budgetary mandates, such as cost-containment, to a semblance of P&L accountability or consumer satisfaction. The Government should consider setting benchmarks from the users' perspectives, which can be a modification of the stated Desired Outcomes and Productivity Measures. More importantly, public sector employees should be assessed and motivated at the individual level. As is already obvious, technology will continue to enable many Government agencies to better serve consumers of public services, including businesses. Yet, even though technology is fast becoming the most important input or resource, it is still widely viewed as a cost and not a means to exploiting distribution and existing infrastructure better. Mindset Changes Sir, as many of my colleagues have alluded to, it is no longer enough to maintain the status quo, even if it were possible. Neither is it about creating barriers to entry. The incumbent can frequently use its dominant position to build a competitive advantage but this cannot be achieved by imposing barriers. Neither is it about cutting costs to maintain a marginal price advantage, as the edge will not be sustainable. It is really about coming up with new ideas, about thinking creatively. If I may quote from Douglas Aldrich, it is about innovative actions that take nothing for granted, not existing monopoly, neither regulatory barriers nor market position. Remember how our fresh food needs used to be met only during the early morning hours at the wet market. With more dual career families, supermarkets offering fresh food like NTUC Fairprice and Cold Storage, soon became popular.”
“Very soon, it would not be enough for Ministries to just focus on total costs, as outlined in the Minister's Budget Statement. Sir, a private business is organised specifically to manipulate resources so that it can provide acceptable shareholder returns. Increasingly, the public sector must be organised in a similar fashion, so that it reaps economic and social returns for its shareholders, who are the owners of the Singapore economy. I would like to suggest two broad philosophies for the public sector to consider adopting: (a) Privatisation The Government should accelerate the privatisation process. As many public service agencies as possible should be corporatised or even privatised so as to emulate the private industry's more efficient way of managing resources. Where liberalisation or removal of anti-competition barriers will render a more level playing field for all interested participants, this should be undertaken purposefully, and as soon as it is economically viable to do so. I note that we have already made substantial headway in financial services, and recently in telecommunications. The Minister for Trade and Industry has also announced plans to deregulate power generation and supply. However, several segments are still outstanding, for example, sea port services, airport services, land transportation and eventually even broadcasting. These are all integral to the infrastructure necessary to support the digital marketplace and any inefficient link will be a weak link in the entire supply chain. (b) Focus on Performance Many public agencies have mandates which are not tangibly or directly related to the running of the economy, whether the old or the new, for example, the Ministry of Community Development and Sports.”
“Really, the shift in focus is towards creating digital value. The private sector has the greatest impetus to change as their focus on profit and loss or P&L is a strong driver. They have already taken all these challenges on board. We are constantly bombarded with news of yet another merger of, sometimes seemingly unrelated, businesses. There is a school of thought which seeks to explain the Dow's gravity-defying act - that technology has inspired consolidation and enabled businesses to record real productivity gains, hype notwithstanding. In this regard, for our economy, gaps may soon be evident and even widened on two fronts, firstly, the public sector and, secondly, the individual contributor. Role of the Public Sector The transformation brought about by technology is economy-wide, system- wide and "the excellence of every government is its adaptation to the state of those to be governed by it". The public sector is not immune to these dramatic forces of change. Just as businesses must transform themselves to survive and compete in the digital marketplace, so must governments. Our public sector, or parts of our public sector, may not be exposed directly to these same market pressures but for it to be a more efficient and effective service provider, it must remain relevant to the changing economy that it operates in. Sir, I am by no means expressing dissatisfaction over our public sector. On the contrary, I am very proud of the achievements thus far. In fact, I believe we have a relatively nimble and adaptable public sector which has made giant strides in supporting our economic growth. However, the evolution of the new economy may dictate a pace and an extent of change within the public sector far greater than expected or planned.”
“Mr Speaker, Sir, even as I rise in support of the financial policy for the short term, as outlined by the Minister for Finance, I am mindful of the multiple challenges that we in Singapore are currently facing for the longer term: Firstly, ensuring that we stay in play on the global front, even after emerging from the Asian crisis; Secondly, crafting the appropriate response to the onslaught of technology in traditional businesses, especially for sectors which are important to our survival and for which hitherto we have a competitive edge, whilst; Thirdly, putting in place measures to address potential social issues, such as an ageing population or a digital divide. Sir, given the confluence of the above challenges, maintaining the status quo will not do. Let me elaborate. In response to the economic crisis, we have implemented cost-cutting measures and made the necessary adjustments. By most accounts, we have weathered the crisis well. We need now to balance carefully the intention to restore the CPF cuts with staying competitive. Already, manifestations of our tight labour market, such as rising staff turnover, are emerging again. This is beginning to affect the smaller companies. Shift in Business Focus Sir, the global economy is transforming so quickly that old logic and management tools are no longer relevant. At the same time, the consumer's position has been strengthened substantially by the application of technology. He now has infinite choices at increasingly efficient prices. Market offerings will in tandem reflect more customisation for the individual consumer. For example, buying a customised motor vehicle, with gadgets and fittings reflecting one's preferences, will soon be commonplace in many countries.”
“Can I ask the Minister whether there were any accidents involving pedestrians using portable music sets? Assoc. Prof. Ho Peng Kee: I do not have the record for that. This is not a question relating to a music set while driving. But from recollection, I do not think that has been a direct cause of any accident, although we all say that when you drive, you should not use the music set because it can be distracting. Likewise, the argument can be used that if you walk along the road using a music set, it can also cause some problems because you will not be listening to cars and other traffic around you. So I think whoever does that must be very careful. SMALL AND MEDIUM ENTERPRISES (Assistance) 8. Mr Tay Beng Chuan asked the Minister for Trade and Industry whether greater effort will be taken by his Ministry to reach out and help the large numbers of small and medium enterprises (SMEs) which are currently run by the older generation of Chinese-educated or Mandarin speaking businessmen in their own traditional ways so that they will appreciate and take up the challenges posed by the new national SME 21 plan.”
“Sir, notwithstanding the experience of the other markets of falling prices, is there a philosophy that we would adopt with respect to pricing which will serve to preserve the interest of domestic consumers as well as from the perspective of the overall cost competitiveness of Singapore? BG George Yong-Boon Yeo: Our intention is, within the next two years, to move towards as free a market as is possible and adopt an ideal framework with marginal pricing. We believe that the interests of consumers are best met by allowing market forces to put pressure on the generators to reduce prices.”
“Furthermore, section 130H states that the Attorney-General's decision "shall be final and conclusive". It would appear, Sir, that these amendments, firstly, do not provide for the degree of transparency that would be expected of Singapore by foreign parties; secondly, do not allow for an appeal or further discussion to support an application; and, thirdly, would place the approving power solely with the Attorney-General. Can the Minister explain if inputs from either Government agencies or the industry would be incorporated? Finally, Sir, may I end on a short point of clarification. Subsection (6) of new section 81H proposes that a solicitor who is suspended would not be allowed to hold shares in a law corporation. While this is justified for those struck off the roll, in the case of a solicitor who is suspended for only a short period of time, the penalty may appear to be disproportional. Can the Minister kindly clarify, please? On that note, Sir, I support the Bill.”
“Sir, thank you for allowing me to join in the debate. I would like to provide a non-lawyer's perspective. Sir, as Singapore maps out its strategy to operate in a borderless economy, the underlying business infrastructure must be modified and necessary changes made to facilitate the realisation of these objectives, particularly in the financial services sector. Towards this end, the amendments to the Bill will go a long way, especially in view of the ballooning volume of cross-border transactions, as observed by many of my colleagues. The pro-business stance of Singapore is well known and often cited as one of the main reasons for investments by multi-nationals. The proposed amendments under section 103 will facilitate the formation of foreign law ventures and alliances, thereby allowing an integration of foreign and local expertise. This is especially crucial to enabling the services sector to cater to multiple jurisdictions in an efficient and effective way. Sir, from this perspective, I find the process and decision making relating to the application for a foreign law venture or alliance as outlined in the new section 130B, to be slightly inconsistent with the overall intent, and lacking in transparency. Allow me, Sir, to elaborate. Subsection (1) provides for the Attorney-General to consult "such authorities as may be prescribed". May I ask the Minister who these authorities are, and would the list be made public? In addition, I would like to echo Prof. Chin's call to publicise the guidelines for setting up such ventures and alliances. Next, as my colleague, Mr Shanmugam has raised, subsection (4) provides for the Attorney-General to refuse to approve an application "without assigning any reason".”
“There is never a final solution, but the cat is trying to get smarter all the time, and I think we will stay ahead. Mrs Lim's third and last question was on e-trading, and whether the amendments apply equally to electronically traded securities. The answer is yes. The legislation is technology-neutral. This is in line with one of the principles adopted by the International Organisation of Securities Commissions, that the fundamental principles of securities regulation do not change based on the medium. Of course, the Internet does show up difficult issues, but not totally novel ones. Technology will heighten the need for fine-tuning the Act, as we have done, for example, with the definitions of stock market and investment adviser. But where insider trading is concerned, the problems posed by Internet trading are more of detection and enforcement, and they have been with us from the old days of physical delivery of share scrips and rolling settlements. Indeed, it may be that as the Internet relies on electronic systems in communications, if you design your electronic systems properly, then you will create an electronic audit trail that may enhance the monitoring of illicit transactions. So I believe that the Exchange, MAS and the Commercial Affairs Division will be able to ensure that insider trading does not grow with the projected increase in on-line securities transactions. 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. - [BG Lee Hsien Loong]. Bill considered in Committee. [Mr Speaker in the Chair] Clause 1 -”
“Yes, the use of stock options will increase the number of employees holding options in their own companies, and all these employees, under section 103 of the Act, are considered to be officers of their company and therefore insiders. Therefore, they are prohibited from dealing while in possession of price sensitive information that is not generally available. This means that it includes exercising the stock options or possibly later on selling the underlying shares. But I do not know whether stock options will necessarily raise the level of insider trading. Because if the employee has inside information, which he does, and he wants to take advantage of it, even without the benefit of stock options, he could have just gone on to the market to buy and sell the shares himself. And even if he did not do so personally, he could have procured somebody else to do so and communicated the inside information to that person for that purpose. So companies should make a timely disclosure of material information, to put it in the public domain as quickly as possible. And in cases where the information has to remain confidential for legitimate reasons, they must set up proper security procedures to limit employees access to it. Also, if somebody is tempted to do an insider trade by his stock options, we have a good chance of detecting it. Because if an employee is dealing for himself, it is easier to detect than if somebody else was transacting whom we did not know was connected with the company. Not only will market surveillance by the Singapore Exchange pick up unusual trades to be matched against names of employees of the company, but the issuer company itself keeps record of when their employees exercise their stock options. So it is a cat and mouse game.”
“There are some jurisdictions which do not even allow an independent civil claim by investors. In other words, investors do not have a cause of action against an insider. Instead, only the state can take criminal action. That is the current position in the UK. In Australia and Hong Kong, investors can bring civil action for damages, but they have to show that their order was matched with the insider before they have a case. So if your order was not matched with the insider but matched with somebody else at about the same time, you have no case. Whether your order was matched with the insider or with somebody else a few seconds later, it is really a matter of chance. You do not have control over it. But you were affected whether or not the matching took place. So we have decided to go for this more encompassing approach of giving contemporaneous investors a cause to sue, and that is something which the US already has. The Americans do have widespread securities class action litigation. That means a group of people get together and sue on behalf of all the investors. The danger of this is that it could lead to frivolous law suits that may tie up innocent insiders and their companies costly litigation. So our independent civil action by contemporaneous investors with the ability to tag on their claims goes, I think, as far as is wise and acceptable in our jurisprudence. Let us gain some experience with this, and if we need to take further steps later, we will review the position after a few years. Mrs Lim's second question was on stock options and whether this increases the pool and level of insider trading.”
“It is always the case that insiders have more information than retail investors, and if the insider trading does not come to light, the retail investor would not even know that he has been taken advantage of. Even if he suspects something, the sheer complexity of establishing the facts of an insider trade and the need to prove all the elements of the contravention requires financial and legal expertise, both of which are very costly. So, we expect most investors to wait for successful criminal prosecution or civil penalty action by MAS before filing their claims under the proposed section 104E. This is already a big improvement from the present position, because presently you can only seek compensation after a prior criminal conviction and, furthermore, you have to do it within two years of the offence. So, if there is no criminal conviction or if the criminal conviction takes more than two years, then nobody can file and claim civil damages. Now you can claim civil damages within six years and, furthermore, you can claim it on the coat-tails not just of a criminal conviction, but of the civil penalties as a result of MAS' action. Also, we now allow contemporaneous investors to tag their claim to such criminal or civil proceedings. So you do not have to trade opposite the contravening trader. You do not have to sell directly to him. Even if you had sold to somebody else at about the same time when he was trading and taking advantage of the market, you can still have a case against him. So that is another significant step forward. If the Attorney-General's Chambers and the MAS decide not to pursue the matter, then, of course, it is up to investors to chart their own course. But that is the case in every contentious court matter.”
“There are numerous justifications for encouraging even more companies to consider this as part of the overall compensation structure, particularly as we are positioning as a hub of intellectual capital. Sir, I laud the efforts to promote such a scheme, as I believe it can indeed be an effective way of rewarding and retaining contributors to corporate innovation and energy. As the scheme takes off, it would soon be commonplace to have a larger pool of interested parties within an organisation. And, therefore, the potential for insider trading may rise in tandem. Whilst this may not be addressed specifically by any clause in the Bill, I would like to urge the relevant authorities, as a preventive measure, to help raise awareness of such possibilities of insider trading amongst the increasing pool of equity partners. E-trading Finally, Sir, on electronic trading, I would like to seek the Deputy Prime Minister's clarification. Fuelled by technology and further liberalisation, electronic trading is likely to increase by leaps and bounds, with many brokers already offering a variety of services. Would the amendments apply equally to those who have transacted electronically, be they the claimants or insider traders? Specifically, would the factors for consideration under the new section 104C encompass trades carried out through electronic means? BG Lee Hsien Loong: Mr Speaker, Sir, Mrs Lim has raised three questions. First, the difficulty for retail investors to initiate civil actions. The short answer is that indeed it is difficult for retail investors to bring independent civil action.”
“Sir, amongst other things, the amendments, which I support, seek to tighten the rules on insider trading and to offer those aggrieved by insider trading a less onerous route towards seeking redress. I would like to begin by focusing on some of the practical issues of the related amendments. Firstly, the civil action alternative is welcomed. However, it may still prove to be onerous for retail investors, especially for those who have already lost large sums of money to insider trading. If they are fortunate where, following action by the Authority, there is conviction or imposition of a civil penalty, they can then leverage their claims accordingly. However, if the Authority has not initiated any action, as provided for under the new section 104A, these retail investors themselves would have to mount civil suits on their own. While the level of proof in a civil suit is theoretically lower, retail investors continue to have limited access to necessary documents or information, especially if it is cross-border in nature. Would the Deputy Prime Minister consider making available a simpler process for retail investors to seek redress, whether it be opportunity to persuade the Authority to commence action or through the appointment of an ombudsman or a civil body, such as an investors' association? Stock options Sir, in relation to some of the inherent difficulties of initiating civil action by individuals, I would like to touch on an emerging trend, that of stock options for employees, which may add to the complexity of defining insider trading. Employee stock option schemes have a relatively short history in Singapore.”
“Sir, I have two supplementary questions for the Minister of State. Firstly, what would the Minister of State consider to be entry level housing, and whether the increase in the selling prices of such housing has actually kept pace with the increase in wages for the relevant segment of the population? Secondly, given the faster increase in prices of resale flats, whether the revision of the income ceiling for eligibility for direct purchase from HDB has taken this into account, and whether these have been made in tandem with the wage increase for first-timers; specifically, whether at least the same percentage of people is eligible with each revision of the income ceiling?”
“In much the same way, we Singaporeans should build upon our sense of ownership of Singapore by taking an active interest in all matters on board, such as identifying potential pitfalls and challenges for our economy and companies; isolating threats to our social fabric; continual upgrading of ourselves for a meaningful contribution; helping the less successful amongst us; and even adding to the enjoyment of the journey itself. Sir, for it is only when we have taken ownership of this unique Singapore Ship can we enjoy our hard-earned cruise. Singaporeans have demonstrated positively through this recent crisis our social cohesion, in spite of our multi-racial and religious composition. It is my personal wish that we will all continue to foster the Singaporean identity and contribute towards a safe, steady, fruitful and enjoyable journey.”