Ow Chin Hock
Singapore
“Thirdly, I believe that Mr Simon Tay referred to links with ASEAN+3. Let me say that we do not preclude any such flexibility. Indeed, APEC is an established forum linking Australia and New Zealand with ASEAN and East Asia.”
“Sir, I am not an expert on the Constitution, but I am aware that the Supreme Court's ruling is different from Mr Estrada being impeached and convicted in the Senate. NUCLEAR WEAPONS AND UNITED STATES ARMED FORCES IN SINGAPORE (Facilities) 2. Mr J. B.”
“However, we are mindful that nowadays, Singaporeans who like to experience living and working overseas, have many other attractive career options, in both private and public sectors.”
“Sir, let me thank the Minister on behalf of the 3-room flat dwellers. My supplementary question is: in future, if any rebates are given, will the Minister consider making the amount of the rebates inversely proportional to the size of HDB flats, in other words, the smaller the flat the greater the amount of rebates?”
“Lastly, clause 8 of the Bill also proposes to amend the Banking Act to allow the Singapore branches of foreign banks to transmit information to their head offices or other overseas branches for data processing.”
“These requirements would help to ensure that such businesses are run in a proper manner, and that records are kept to provide an audit trail of transactions, in order to deter illicit transactions from being conducted via such businesses. However, these requirements impose additional costs on the licensees.”
The complete record
Every one of 460 lines we hold for Ow Chin Hock, in date order, each linked to its source. Free to read, in full, without an account. Page 3 of 10.
“GST collected at every stage of the value-added chain - from the raw material supplier to the manufacturer to the wholesaler and finally to the retailer - should add up to GST paid by the final consumer. If we use the 1994 private consumption expenditure of $42.3 billion as a base, then the GST revenue should be $1.27 billion, and not $1.5 billion. At 3%, $1.5 billion revenue has to be collected from a PCE base of $50 billion. May I ask the Minister what are the other reasons for these discrepancies, say, between the original estimate of $0.96 billion and the revised figure of $1.5 billion and between the $1.5 billion and $1.27 billion? There are several questions here, Sir: (1) Has the PCE been consistently under-estimated? (2) Have some businesses ended up in paying GST themselves, even though they are supposed to be mere collection agents? (3) Are there any outstanding claims for tax refund at this point which has not been provided for because of time lag? (4) Has the revised estimate of $1.5 billion GST collection attempted to include the multiplier effect of the income tax cut and the non-tax offset? Both will increase the disposable income and the PCE, and hence GST collection. Finally, is GST imposed on bills, inclusive of tax, for example, tax on PUB charges and water consumption tax? This is tax on tax. Sir, similarly, the GST offset package has been revised upwards to $1.7 billion, 41.7% higher than the original estimate of $1.2 billion. I am glad that the Minister has given a breakdown of the revised package into revenue forgone for income tax cut, property tax rebate and increase in subsidies for education and health services. But what is the amount of HDB rental and S&C charge rebates?”
“Sir, I beg to move, That the total sum to be allocated for Head N of the Main Estimates be reduced by $100. Sir, under this amendment, I wish to focus on Goods and Services Tax. Based on the first year's experience, the implementation of GST can be said to be successful. The much feared increase in inflation rate did not materialise. It was kept at 3.6% last year. I agree with the Minister that credit should be given to retailers, other businesses, CASE and grassroots organisations for their efforts and cooperation in containing increase in prices and guarding against profiteering. However, we must acknowledge that the low inflation last year was partly attributable to the strong Singapore dollar, which checked imported inflation at 0.7% level. However, both the GST collection and the GST offset package are much larger than the originally estimated figures. The Minister attempted to explain the variance yesterday, but I am not totally convinced. So I am moving this amendment to give the Minister another opportunity to explain. Sir, the GST revenue collection has been revised to $1.5 billion, 56% higher than the originally estimated $0.96 billion. The much larger GST collection cannot be explained away just by "unexpectedly high economic growth" alone. GDP at current market prices increased by 14.5% in 1993 and 14% in 1994. These are higher than the projected growth figures, but this cannot explain the 56% under-estimation of GST revenue collection. GST is a tax on consumption. So the more relevant figure is private consumption expenditure (PCE), but PCE increased by only 11.4% in 1993 and 8.4% in 1994.”
“In this context, may I ask the Minister for Finance whether he will consider channelling part of the collection of the foreign workers levy to enlarge the resources of the Skills Development Fund so as to provide more incentives and programmes, particularly on-the-job training. Sir, increasing the proportion of young Singaporeans going into post-secondary education will no doubt enhance our economic competitiveness. However, at the same time, it will put pressure on the second challenge, ie, of Singapore becoming a more middle-class society. Even if we assume the aspirations for material well-being of each successive cohort of better educated young Singaporeans remain unchanged, the sheer increase in the number of such middle-class members will mean higher demands for properties and cars which will be increasingly difficult to meet as our land area is finite. I agree with the Minister for Finance that Singaporeans should take the quality of life as a package, including a vibrant arts scene, a safe home, and efficient amenities, and not just material rewards such as a car and landed property. To do so, the Minister himself should be prepared to allocate bigger budgets for the arts and sports. More importantly, we should instil a sense of belonging and inculcate moral and family values among Singaporeans from young. This will help the more successful Singaporeans to adjust their aspirations for a better life to a more realistic level as defined by Singapore's long-term realities and constraints, and also to develop a sense of obligation to help the less successful fellow citizens. Only then can we meet the future challenges, and build a cohesive and gracious society.”
“Manpower development will help to maintain our competitiveness in three ways: (a) attract foreign investments with higher level of technology to Singapore; (b) raise labour productivity to ensure that our products can compete effectively in international markets; and (c) carry out R&D activities and management restructuring benefitting both domestic operations and ventures abroad. The heavy investment in education and training has raised the proportion of young Singaporeans going into post-secondary education from 19% in 1980 to 71% in 1994, and the aim is to raise this proportion further to 85% by the year 2000. The entry of each cohort of better educated, better trained young Singaporeans will raise the education profile of our workforce. However, as the backlog of less educated workers remains large, 53% of the workers had primary or lower education in 1984, the overall quality of our workforce cannot be upgraded too rapidly. Greater efforts must be put on retraining of existing workers. Many workers are not inclined to go for retraining because of inertia and also because they have to forgo part of their already low income during training. Some employers are also reluctant to train their workers because these workers may job hop after training. Retraining of existing workers, particularly those with lower skills, is important. These workers should not allow the present tight labour market to blur the potential danger of unemployment in view of the keen global competition. Government, employers, trade unions and workers themselves must put up a concerted effort in retraining.”
“I am glad that the Prime Minister chose to discuss this issue openly. Sometimes it is desirable for the Government to share its worries and concerns with our citizens. Third, long-term competitiveness. More important than tax changes is the long-term competitiveness of our economy. Last year, for the first time, the World Economic Competitiveness Report presented one consolidated ranking of the competitiveness of all the 44 countries or areas, and ranked Singapore Number 2 in terms of overall competitiveness, second only to the United States. We should be very happy with this assessment. However, the question is whether we can sustain our competitive edge in the face of global competition. The emergence of large Asian economies such as China, India and Indonesia has intensified the competition for capital and markets. Capital has no national boundaries; it flows to places and projects with higher returns. Ample supply of labour and land in these large Asian economies offers low cost production bases. Their large domestic markets are added advantages in attracting foreign investments. This creates a capital diversion effect. Further, products from these countries are exported and they compete with our products in the international markets. All this means that unless we can constantly maintain our competitive edge and upgrade our products, jobs will be lost. The threat is particularly serious for unskilled workers as labour in these large Asian economies is much cheaper. One key response to this challenge is manpower development. As the Minister reported in his Budget Statement, Singapore has invested heavily in education, training and retraining.”
“The Minister for Trade and Industry may also want to give an analysis on water consumption by domestic users by different types of households and non-domestic users in terms of industries and activities over a period of time. I also suggest that MTI and PUB launch another public education campaign to encourage Singaporeans to conserve water. The previous public campaign was a success. Sir, you may recall the slogan "Every Drop Counts" and the cartoon character Bo-Bo. I think this slogan and the cartoon character are still vivid in the minds of those Singaporeans who are above 35 years old. Another suggestion is that PUB should give more information on the supply side of water, for example, the full capacity of the reservoirs, water work projects and the long-term plan to maintain water supply including desalination plant and its cost. This will help Singaporeans to have a better understanding of the current and future situations on the demand and supply of water. Mr Chiam See Tong was quoted as saying "at the moment, there is really no danger of shortage of water as in the past. I think we have got the local reserves in place, and actually the alarm bells have not sounded yet." [The Straits Times, 2nd March 1995.] I am disappointed with Mr Chiam's reaction. I think he is wrong. He is learning the Chinese language. Perhaps he should learn two Chinese proverbs: wei yu chou mou [ ] and lin ke jue jing [ ]. Wei yu chou mou [ ] simply means `save for a rainy day'. And ling ke jue jing [] means `dig a well only when you are thirsty'. Water consumption is a national issue concerning all Singaporeans, now and the future. It also reflects our vulnerability. All Singaporeans should take this long-term issue seriously.”
“Apart from disappointment over no tax concessions, businesses are also concerned with the rising business cost. This is a more valid concern as a cut in corporate tax rate benefits only profitable companies whereas rising costs affect all businesses. While the unit labour cost for the whole economy rose by only 1.9% last year due to fairly strong labour productivity growth, other costs such as rent and the foreign workers levy continue to rise. The cut in property tax by 2% point is welcome, but businesses are concerned that the valuation of properties will be adjusted upwards. The Minister for Finance has urged landlords to share the tax savings with their tenants but businesses wonder whether JTC and HDB will do so. Sir, rising domestic costs will erode our economic competitiveness. May I ask the Minister: if the economy is over-heating, where are the coolants? Second, water consumption. Among all tax changes, the increase in water conservation tax by 5 percentage points is most significant. This increase sends a signal to remind Singaporeans that water is precious. If Singaporeans do not make an effort to conserve water now, they will face even more painful measures in future. There were some concerns expressed about the impact of the increase in water conservation tax on low-income households, particularly those with more family members. I suggest that the Minister for Finance work out the additional tax burden of different households living in 1- to 5-room flats, based on the water consumption patterns of these households. I believe the additional tax burden of water conservation will be more than offset by the savings in personal income tax, HDB rental and S&C rebates. Sir, I have an amendment in the Committee of Supply on the Ministry of Trade and Industry.”
“Mr Speaker, Sir, I support the motion standing in the name of the Minister for Finance. The Feedback Unit held a dialogue session on 7th March 1995. Let me summarize the main points raised in the session: (a) Most participants were happy with the personal income tax rebate, HDB rental and service and conservancy (S&C) rebates and the CPF top-up; (b) There was no objection to the increase in water conservation tax, although it was suggested that the minimum 20 cubic metres of water consumption level should be adjusted according to the household size; (c) Representatives from the Chambers of Commerce and other business associations were disappointed because there was no cut in corporate tax rate and no tax incentive to small and medium-sized enterprises (SMEs). The retail sector is facing some difficulties; (d) SMEs also requested for incentives and assistance from the Government, the suggestions ranged from training of sole proprietors to setting up of a research centre; (e) Most participants also realised the importance of training and retraining of workers; and (f) Other participants also expressed their concerns about the high expectation, including the expectation from the Minister for Finance, to hand out goodies every year in the Budget Statement, and stressed the importance to inculcate in young Singaporeans moral values. Sir, our GPC has met the resource panel. We will be raising some of these issues and other matters in this debate and in the Committee of Supply. Let me now focus on three main issues. First, business costs. The high expectation, particularly among businesses, was due to the excellent performance of our economy in the last two years, and another reason was that many also expected 1995 to be an Election year.”
“Clause 20 prohibits such practices and other activities which run against the interest of the investors, such as front-running and cross-trading. Clause 26 seeks to establish and maintain a fidelity fund for compensating small investors, or non-accredited investors, because of a defalcation committed by a member of the Exchange. One significant fact is that the fund, initially set at a minimum of $5 million, is paid by the Exchange itself. The fund will be increased by a sum equal to 10% or more of the net income of the Exchange per year. I would like to ask the Minister how is the $5 million arrived at, and whether the sum is too small in relation to the value and the volume of Forex and leveraged Forex trading by SIMEX members. The proposed sections 49(I) and 49(J) also set two limits on the payments out of the fund: (i) the total amount to be paid by a member of the Exchange shall not exceed $500,000; and (ii) any claim shall be 75% of the actual loss subject to a maximum of $100,000. I wonder how these limits are set. I am amused by the name "fidelity fund" but I support and welcome the setting up of such a fund. Sir, a final issue, in 1987, two officers of a commodities trading firm, Futurelink, were jailed for cheating more than 1,500 clients of $19 million over two years. In 1993, the Commercial Affairs Department was reported to have investigated a director of Credit Consultants Asia Pte Ltd, another commodities futures firm. May I ask the Minister whether he has plans to bring non-SIMEX firms that offer facilities in commodities futures under the regulation of the Futures Trading Act or any other statute? 4.00 pm”
“The Minister was reported to have said that "the recent proliferation of unregulated companies offering such services is an 'area of concern' and it was time to introduce measures to protect the public." [Business Times on 10th January 1995.] The Minister just now mentioned that MAS has received complaints. May I ask the Minister what is the estimated number of such unregulated operators of leveraged Forex firms in Singapore? In tightening the regulations, clause 10 seeks to widen the grounds for refusal of an application for a licence. These criteria spell out the type of quality required of the operators by MAS. I welcome the inclusion of criteria such as the education and qualification and experience of the applicant or his shareholders, directors and employees. However, some criteria appear to be subjective. May I ask the Minister whether MAS will give the reasons of rejection to an applicant so that he can make up for his shortcomings? Clause 14 seeks to amend section 24 of the principal Act to enable the MAS to prescribe minimum financial requirements for a futures adviser. However, clause 24 only stipulates that minimum financial requirements are to be prescribed by the MAS, and no specific sums are stipulated. If I heard the Minister correctly, he has already mentioned the sums. So I would not pursue this matter. Other major provisions of the Amendment Bill are in clauses 20 and 26. Both clauses seek to protect the interests of investors. It is common practice for unregulated foreign exchange trading firms to take opposite positions against their customers. By taking the opposite side of the transactions without hedging their risks, the firms are effectively betting against their customers with respect to the movement of foreign currencies.”
“Mr Speaker, Sir, I support the Futures Trading (Amendment) Bill. Like the Banking (Amendment) Act and the Finance Companies (Amendment) Act, this Amendment Bill is another step to safeguard the integrity of our financial system. This Bill also seeks to protect the small or non-accredited investors. To safeguard the integrity of our financial system, we must insist that operators in the financial sector have a high standard in terms of financial resources, track record, experience and qualified personnel. MAS' efforts in safeguarding the integrity of our financial system should be commended. Sir, regulation is only one side of the coin. The Act and the Amendment Bill only set out the ground rules to ensure fair play and an orderly market. The other side of the coin is that potential investors themselves must fully understand the nature of the market, the derivatives and the risks involved before entering these markets. This is particularly important in the futures trading as futures markets are highly volatile and trading in futures is done on a margin basis. Even experienced traders can get their fingers burnt. The latest financial crisis of Baring Futures is a lesson for investors and potential investors to learn. May I take this opportunity to ask the Minister to inform the House what is the current position of the Barings crisis and what is its impact on the local financial sector? What measures have been taken or will be taken to prevent such a crisis from happening again? Sir, the major provisions in the Amendment Bill are the expansion of the scope of the Futures Trading Act to include the regulation of leveraged foreign exchange trading. This implies that these are firms which have engaged in leveraged Forex trading without being subjected to any regulation.”
“This amendment is again the same as the Banking (Amendment) Act, 1993. May I ask the Minister whether the exposure to single customers is more serious or widespread among finance companies than among local banks, and whether the reduction of the limit from 30% to 25% will affect finance companies more adversely than local banks as finance companies generally have a smaller capital base? The new section 23, subsections 1(b) and 1(c), extends the prohibition of finance companies' dealings to cover all precious metals, and stocks and shares and debt securities denominated in any foreign currency. However, under the new subsection (2), finance companies with not less than $100 million capital fund can apply for exemption from subsections 1(b) and 1(c), subject to the 10% limit of its capital fund and other conditions imposed by MAS. This can be seen as a relaxation as the existing subsection 1(b) under section 23 prohibits any finance company from dealing in "gold or foreign exchange of whatever kind". This should be welcomed by finance companies. As one finance company puts it: "finance companies have been given a new lease of life." However, may I ask the Minister: why is the exemption not extended to finance companies with capital funds of between $50 million and $100 million? Sir, apart from these queries and clarifications, I support the Bill.”
“Sir, you may recall that under the Banking (Amendment) Act, 1993, local banks are required to meet the capital fund of $800 million within five years. May I seek some clarifications on the amended section 7? (1) how is the $50 million minimum capital fund for finance companies determined? (2) the second question which I wanted to ask is: how many existing finance companies will not be able to meet this new capital requirement? But I have noted that the Minister has just mentioned that 13 of them have no problem. So may I ask the Minister to provide a breakdown of the existing finance companies by their present capital funds, eg, those companies which have capital funds of between $50 million and $100 million and those with capital funds of more than $100 million? This $100 million benchmark is relevant to Clause 9. Sir, I also note that, under the new section 7A, the minimum 12% capital adequacy ratio for finance companies is the same as that for local banks. I have some questions here: (1) how many existing finance companies do not meet this ratio? (2) will the Minister consider extending the grace period or exercise some flexibility in the event that some finance companies fail to maintain this ratio? (3) compared to local banks, finance companies generally have lower capital funds and a higher level of risks in their loan and investment portfolios. In this regard, why is the minimum capital adequacy ratio stipulated for finance companies the same as that for local banks? Let me now turn to clause 9. Clause 9 re-enacts section 23. Under the new subsection 1(d), the exposure limit to a single customer or a group of related customers will be reduced from 30% to 25% of the finance company's capital fund. A two-year grace period is given.”
“However, it should be noted that, for three consecutive years since 1991, the growth in finance companies' deposits was slower than the growth of their loans. Hence, apart from updating the regulation, I feel that it is necessary to amend the Finance Companies Act to cope with the increasing size and risk exposure of this important sub-sector of our financial system. Sir, in discussing this Amendment Bill, we should bear in mind the interests of depositors versus the commercial interests of finance companies. Similarly, we should also balance between the regulations which safeguard the integrity of our financial system and the flexibility which liberalises the scope for its growth. The Minister for Finance should be commended for nearly achieving the equilibrium between the diverse interests in this Amendment Bill. Sir, let me now turn to two clauses. Clause 5 of the Amendment Bill re-enacts section 7. This new section 7 requires every finance company to have capital funds of not less than $50 million after a 8-year grace period. Clause 5 also introduces a new section 7A which stipulates that every finance company should maintain a 12% capital adequacy ratio within one year. These two requirements "will strengthen the financial fibre of finance companies in Singapore" as a finance company puts it. These new requirements also help to protect the interests of depositors and safeguard the integrity of our financial system. At the same time, the Minister is perhaps mindful of the impact of these new requirements on smaller finance companies. He has thus granted these smaller finance companies an unusually long period of eight years to meet the minimum capital sum.”
“Mr Speaker, Sir, the Finance Companies (Amendment) Bill is a logical extension of the Banking (Amendment) Bill that this House passed on 31st August 1993. Indeed, the two Amendment Bills share some common objectives. First, both Bills seek to tighten the admission criteria and financial and prudential requirements for financial institutions by raising the minimum capital sum, stipulating a capital adequacy ratio, and controlling certain credit facilities, such as single customer limit and unsecured loans to related parties. Second, both Bills make new provisions to facilitate the investigations of drug trafficking offences when a customer of a financial institution is involved in money laundering. These provisions in both Bills are complementary to those provisions in the Drug Trafficking (Confiscation of Benefits) Act. The Finance Companies Act was last amended in 1984, one year after the Overseas Union Finance Ltd was asked to wind up. Sir, I have also obtained some data on the growth of finance companies in Singapore. The Yearbook of Statistics and Economic Survey show that during 1983-1993, finance companies' loans and advances increased from $5.3 billion to $11.5 billion, a growth of 117% over the last 10 years. During the same period, finance companies' deposits increased from $4.6 billion to $10.6 billion, a growth of 130%. However, their capital funds only increased from $1.04 billion to $1.85 billion, a growth of 77.8% during the same period. In 1993, credit expansion of finance companies grew by 20%, double the 1992 rate. This was mainly due to high demand for car loans, housing loans and personal loans to finance share investments. In 1992-1993, the finance companies' share of non-bank loans in the domestic financial system reached 12%.”
“In other words, there is a cap on the amount to be withdrawn. For example, if a Science course tuition fee for local university is, say, $1,000, then the overseas student can only withdraw $1,000 for a Science course overseas. The rest he has to top up himself. This arrangement will also be fair to the overseas student who should be given the same opportunity as the local student on the use of CPF for tertiary education. Let us be fair to these students. At present, there is no such opportunity. They should not be deprived because they are studying overseas. Our tertiary institutions cannot cater to the aspirations of all our young people, whether in terms of the number of places or in a variety of disciplines. In deciding how to allow the use, we must not be too strict when we match courses here against overseas courses. We must be as broad as possible in our classification, for example, classifying Science, Arts course, rather than subject classification. The new direction in our economy will open a whole new field of opportunities for Singapore graduates. This new direction in our economy demands that we have sufficient tertiary graduates to meet the challenges of overseas assignments and postings. Exporting expertise means getting qualified people to organise, to manage and to sell. Graduates have a better starting position and especially if they have overseas experience and contacts. I hope the Ministry will consider my request in the light of these changing needs.”
“But of late, I have come across Singaporeans who emigrated to Australia and elsewhere playing the role of a catalyst in business. If we continue to have an open policy on immigration, we will not totally lose them. There is also less chance of our students not returning as our environment, business and otherwise, is very different from 10 years ago. Not only are our opportunities and job prospects better now, but a whole social, educational and physical environment is changing for the better year by year. There is a plus side to studying overseas, and that is the experiences gained of learning and living abroad, making new friends and establishing ties that would carry them through their university and working life. These contacts build trust and possibly strong business links later on. These should put such Singapore students in a better position to accept overseas postings in future and thus giving more thrust to our move to create an additional wing. 2.00 pm Another argument against its extension for overseas education was the problem of having to list universities qualifying for CPF funds because it amounts to not recognising those not listed. But with the listing of the universities approved for the study overseas of medicine and law, this argument is no longer valid. The other factor is cost. How much CPF money would you allow for withdrawal, considering the varying tuition fees for different tertiary institutions abroad? At this point, I want to make it clear that I am asking for tuition fees, not travel allowance or accommodation. I would like the Ministry to consider this formula. I suggest that the amount to be withdrawn should be the same for a similar course of study in our local tertiary institutions.”
“New directions are being charted for our economy and, in particular, Singaporeans are encouraged to go overseas to do business and invest. In the field of education, we have set new guidelines as to where you can go overseas to do your law and medicine, if you want recognition. In the light of all these changes, Government should do a re-thinking on the matter of extending CPF for studies at overseas tertiary institutions. The development of a second wing for our economy requires investment in human resources. In other words, we must build up our pool of graduates, both from our own tertiary institutions and abroad. Most Singaporeans want their children to study at NUS or NTU. If our local institutions do not meet the demands of our young Singaporeans, then they will want to study abroad. There is always a risk when students go overseas to study. They might not return. This risk factor has always been used to argue against this request to use CPF for studies at overseas universities, but now I am no more swayed by this stand. This risk factor is again weakened by two developments: (1) venturing abroad, where risk taking is a norm: (2) the Enhanced Investment Scheme. This scheme encourages Singaporeans to invest their CPF money on stocks and shares. There is a bigger risk element here. Therefore, there are risks in whatever we do. At the end of it all, we must give Singaporeans a choice to decide. To weigh the pros and cons of whether to risk the CPF on their sons' and daughters' education, local or overseas, or risking it in the stock market. I used to subscribe to the belief that Singaporeans who left Singapore usually cut off their links with us.”
“Sir, most Singaporeans welcome the CPF Share Ownership Top-Up Scheme. Of course, there are those who feel that $300 is too little, but there are others who are concerned about the social consequences of the Share Ownership Scheme. They observe that investments in the stock market may promote a "get-rich-quick" syndrome and encourage speculation and gambling. What we want is a share-owning society, and not a share-speculating society. Hence, they suggest a public education programme on investment in shares. Will the CPF Board and the next privatised GLC consider this suggestion? My next point is this. Currently, CPF members can use their CPF savings for investment under the Basic Investment Scheme (BIS) or the Enhanced Investment Scheme (EIS). One basic difference between the two schemes is that EIS is for members who have higher CPF balances in excess of $50,000 as compared to the balance in excess of the current Minimum Sum of $34,600 under the BIS. Different investments are also specified under BIS and EIS. Logically, investments under BIS should be less risky than investments under EIS. However, some relatively low-risk investments, such as Government bonds and bank deposits, are under EIS and not BIS. May I know from the Minister what are the criteria used in identifying investment under both schemes? Dr Tan Cheng Bock (Ayer Rajah): Sir, there were numerous calls to extend CPF for tertiary education at overseas universities. They were rejected for various reasons. I am bringing this issue up once again and question some of the reasons offered for its rejection. Since the approval to use CPF for education some six years ago, many changes have been made to our CPF.”
“Sir, I beg leave to withdraw my amendment. Amendment, by leave, withdrawn.”
“Finally, was there a trend for the retail business to shift from the CBD area to the suburban areas or HDB new town centres, even before the whole-day ALS was introduced?”
“Sir, under this amendment, I would like to bring up the issue of retail business. Despite the strong growth of our overall economy, the retail business sub-sector grew by only 4.9% last year. Within the retail sub-sector, the two main activities are (a) the distribution of motor vehicles and other transport equipment, and (b) supermarkets, departmental stores, and general provision shops, each accounting for about 25% of the total retail turnover. The growth in the retail sub-sector last year was mainly contributed by motor vehicle sales. If we exclude motor vehicle sales, then the volume of retail business grew by only 1% last year, as compared to 5.2% in 1992. According to the Annual Economic Survey 1993, departmental stores encountered dismal sales, and a few departmental stores have in fact reported interim losses for the six-month period ending September 1991 and there were also closures of some retail outlets. At the same time, the number of tourist arrivals reached 6.4 million, an increase of 7.3% over the 1992 figure. Although the average stay went down from 3.7 days to 3.6 days, the total tourism expenditure was estimated to be around $9.36 billion, or 9.4% higher than the 1992 figure. Against this background, may I ask the Minister for Trade and Industry a few questions on the retail business and tourism? (a) How many percent of the total demand for retail business came from tourists? What was the average expenditure, other than expenditure on hotel, food and beverages, per tourist per day? (b) What is the present status of the retail development plan? (c) To what extent will the retail business be affected by GST? Is the machinery for refunding GST to tourists now in place?”
“4 Finally, EDB and TDB should organise more dialogue sessions with SMEs and Chambers of Commerce on a regular basis to exchange views and information. There was a related suggestion that EDB and TDB can help to set up an association for Singapore overseas entrepreneurs and businessmen to share their experiences, and to provide a forum for the private sector to interact with statutory boards, GLCs and relevant Ministries and departments. May I have the Minister's comments on these suggestions?”
“Sir, the Economic Development Board (EDB) and Trade Development Board (TDB) have done a good job in promoting our economic growth in the past. They have now taken on a new mission in helping Singapore enterprises venturing abroad. Existing schemes are modified, eg, EDB's Local Enterprise Finance Scheme was expanded to include financing approved overseas projects, and TDB's Market Development Scheme was extended to include investment development activities. However, there are also rising expectations among local SMEs on what EDB and TDB can do and should do in helping them going regional. Let me summarise some suggestions and feedback from local SMEs and the business community on the role of EDB and TDB: 1 EDB and TDB should collect and provide more detailed investment and business information on targeted countries. The information should include investment environment, business regulations, tax policy, exchange rate policy, and labour quality. The TDB's resource library needs to be beefed up. 2 Internally, EDB and TDB should be more proactive in disseminating information on their incentive and assistance schemes. Apart from the Enterprise Promotion Centre, such information can be channelled to various Chambers of Commerce and relevant trade associations. The information should make the criteria for eligibility for various schemes as transparent as possible. 3 Externally, overseas offices of EDB and TDB should be adequately staffed so that they can be more effective in assisting Singaporeans overseas, and in collecting information on investment and business conditions. In this context, I wish to know whether the turnover rate of the two statutory boards in the last two years was more serious than in the past, especially among the more senior staff.”
“8% per year in 1980 to 1986, and only 1.7% in 1986 to 1992. I was quite surprised by the results and I believe this was partly due to the measurement problems of total factor productivity. For example, what should be the weights assigned to labour, capital and other factors, and what should be used as the price for capital? I do not have technical notes on how NPB measures total factor productivity. But I suggest that NPB work closely with the relevant departments in NUS and NTU to come out with a better measurement of productivity.”
“Sir, last year, labour cost increases were moderate despite our exceptionally strong economic growth of 9.9%. This was due to the fact that last year's economic growth was propelled by the financial services sub-sector and the electronics and petroleum industries. The financial services sub-sector and the two industries are traditionally considered as capital intensive. Moreover, there was excess capacity in the economy last year. This was put into use. As a result, real wages increased by only 3.9%. On the other hand, labour productivity growth rate was higher at 6.4%. This was the first time in the last five years that productivity growth rate has exceeded the real wage growth rate. The result was lower unit labour cost. I have checked the Economic Survey for 1993. For the whole economy, the unit labour cost index fell from 129.6 in 1992 to 129.0 in 1993. Although it is marginal, it is significant. The experience last year underlines the importance of improving productivity and raising the workers' skills. I advocate that wage increase should be tied with productivity growth, so as to avoid inflation, and to reward workers for their better performance. However, we need a better measure of productivity than labour productivity. While labour productivity growth reflects higher educational and skill level, better work attitudes and greater efforts on the part of workers, labour productivity can also be influenced by other factors, eg, higher capital-labour ratio, and use of labour stockpile or excess capacity. A better indicator of productivity performance is total factor productivity (TFP). TFP measures contributions by labour, capital and other factors of production. NPB's calculation shows that the TFP average growth rate was -0.”
“" While I agree with the Minister for Finance that fee increases are sometimes unavoidable, I wonder which body monitors Government fee increases and decides whether these increases are justifiable. Is this within the purview of the Committee on Inflation and Profiteering? Similarly, I agree with the Minister for Finance that "more frequent and smaller adjustments" are better than "one time big jump over a long time period". I agree with that principle. However, I would like to ask the Minister for Trade and Industry to urge his colleague, the Minister for Finance, to balance this consideration against the possible erosion of Government's moral authority to act against businesses which raise their prices beyond the cost increases. After all, GST is not just an economic issue, but also a political issue. To make GST more acceptable, we must allay the people's fear of inflation, and here the Government has an opportunity to set an example in containing price increases.”
“This is a reply from the Permanent Secretary, Ministry of Trade and Industry on 3rd February this year to my Unit. If we want grassroots leaders and members of the public to help us counter profiteering, we should give them a clear understanding of what constitutes profiteering. Perhaps, a set of criteria or guidelines should be provided by the Committee on Inflation and Profiteering to help them. Wage-price spiral If inflation goes beyond 6%, unions and workers may demand higher wages so as to protect their real income from being eroded by inflation. Further, expectations of rising prices may lead some unions and workers to ask for even higher wages in anticipation of inflation. Both will lead to higher costs and higher prices. Hence, it will trigger off a wage-price spiral. I hope that both unions and managements will act responsibly and exercise restraint to come to a fair settlement on wages, because wage-price spiral will hurt our economy and eventually hurt every Singaporean. Compliance costs of GST incurred by businesses I have dealt with this subject before but suffice for me to point out that, even with the tax saving from the 3% point corporate tax cut, a part or the whole of the compliance cost will be passed on to consumers and, hence, it will raise prices even higher. Finally, Sir, last Monday, I suggested that fees and charges of the Government departments or statutory boards be frozen for one or two years after the implementation of GST. The Minister for Finance has said that a two-year moratorium on Government fees and charges is not wise and he gave two reasons: (i) the fees need to be increased to "recover manpower, material or operating costs" and (ii) "delaying fee increases would only result in larger and more painful adjustment later.”
“Sir, I beg to move, That the total sum to be allocated for Head W of the Main Estimates be reduced by $100. Sir, under this amendment, I wish to raise the issue of profiteering and inflation. The most important challenge for the Government in implementing GST is how to contain the inflation rate at below 6%. The average rate of inflation based on CPI is 2.4% per year, from 1980 to 1993. I believe this will continue unless something unexpected happens. As the GST rate is 3%, this should lead to a one-off 3% inflation rate. However, we should not discount the other sources of inflationary pressure which may raise the inflation rate to beyond 3% GST-induced rate. These sources are (a) profiteering, (b) wage-price spiral, and (c) compliance cost of GST being passed on to consumers. Profiteering I wish to report that the Feedback Unit received a total of 51 complaints about price increases in the last four months. In quantitative terms, 51 complaints out of the total of 837 inputs received during the four months constituted only 6.1%, a very small percentage. However, from these 51 complaints, I detected two serious perception gaps between the public and the Government. First, the Government's repeated assurance that it will monitor prices closely and act against profiteers has raised the public expectations. They want the Government to take action against what they perceive as errant traders, but so far, they see no such action being taken. Second, grassroots leaders and members of the public seem to take any price increases they deem "unreasonable" as profiteering. The Government, or at least the Ministry of Trade and Industry, feels that "profiteering can exist if there is a monopoly on the supply of a commodity or if a real shortage exists".”
“Sir, the Minister said "he is improving", but I suggest to him that he needs further improvement in handling MPs' questions, reactions and feedback from the ground. Sir, I beg leave to withdraw my amendment. Amendment, by leave, withdrawn.”
“Sir, three questions have not been answered. First, whether small businesses will be allowed to submit their GST returns every six months. Secondly, whether losses incurred by overseas ventures will be allowed to be offset against domestic income during the initial years. Thirdly, the. treatment of GST on imports by the petrochemical industries.”
“Finally, Sir, contrary to what the Minister has said about what I said, I did not say that "partnership with GLCs is a hindrance", and I still believe that one non-tax incentive for SMEs to venture overseas is partnership with GLCs. Why do I believe this? Because at least in China, the Singapore Government is much respected. Anything that has to do with the Singapore Government is considered good. So the partnership will be seen as an indirect endorsement by the Singapore Government and hence add value to the investment projects. However, there are misgivings and mistrust among SMEs about entering into a partnership with GLCs. I have given the details about these misgivings and mistrusts last Monday. But, as I said last Monday, and I repeat it now for the benefit of the Minister, "Nonetheless, I still believe that the Government can narrow the gap between GLCs and the private sector. GLCs and the private sector should be complementary to each other. At the same time, the Government, through its statutory boards and GLCs, should play a catalytic role in promoting overseas ventures."”
“Sir, I agree with the Teo Chee Hean Committee's Interim Report that "To develop an external economy, we will need to give more emphasis on our tax system to outward expansion. We need to make overseas investments as attractive as those in Singapore." This is a quotation from the Interim Report on page 23. Sir, tax measures and fiscal incentives for venturing abroad should aim at two objectives, namely, (1) to encourage Singapore entrepreneurs and enterprises to go regional; and (2) to facilitate the repatriation of factor income earned overseas back to Singapore. In last year's Budget Statement, the Minister for Finance announced seven incentives to promote the external economy. These incentives include unilateral tax credit for dividend income and service income from specific countries, and double tax deduction for approved expenses incurred in project development and other specific activities. I welcome these specific tax incentives, but I observe that these incentives are more geared towards the second objective, and benefit the successful ventures. Participants at the Feedback Unit's dialogues with SMEs and local business leaders felt that a more comprehensive tax package is needed to encourage Singapore enterprises to go regional. One constant request is that losses of overseas companies be allowed to offset against domestic income. I have pointed out that the Teo Chee Hean's Committee has rejected the suggestion on the ground that our domestic tax base should not be allowed to subsidise overseas venture. Nonetheless, the participants still hope that the Minister for Finance will reconsider allowing the offsets, at least for the initial two to three years when the projects are subject to greater risks.”
“4 billion investments in the industry will be spent on imports of machinery, equipment and facilities, 95% of the industry's output will be exported, and the gestation period will be long. How will GST be treated in this case, and has IRAS resolved the problem with the petrochemical industry?”
“The second issue is compliance cost incurred by businesses. I reported to the House last Monday that some businessmen who participated in the dialogue session felt that, as the Government's collection agents, they should be compensated for their costs in collecting GST. The Minister replied that the tax saving from the 3 percentage point cut of corporate tax is meant to offset the GST compliance cost. I agree with him. But this applies to companies or businesses that make profit. In any case, to the extent that compliance costs are not fully offset, the compliance costs will be passed on to the consumers. This will raise the GST-induced inflation rate to beyond 3%, even without profiteering. Nonetheless, I welcome the Minister's announcement that IRAS will conduct a survey on cost of collecting GST one year after its implementation. The third point is that the UK and New Zealand experiences have been quoted again and again. The experiences of these two countries show that compliance cost, as a percentage of turnover, declines as turnover increases. I believe this is due to the economies of scale. Apart from the economies of scale, businesses with large turnover in cash may also collect interest income from the GST collected. On the other hand, smaller businesses will not enjoy these benefits, ie, benefits from the economies of scale and collection of interest income. So as an incentive, may I ask the Minister whether smaller businesses can submit their return six monthly instead of quarterly so as to lower their compliance cost? This was also a request by the Estimates Committee. Finally, Sir, our GPC met representatives of one Chamber of Commerce. One interesting point was raised: this concerns the $3.4 billion investments in the petrochemical industry. Most of the $3.”
“Sir, I beg to move, That the total sum to be allocated for Head N of the Main Estimates be reduced by $100. Sir, under this amendment, I wish to raise several issues concerning the implementation of the Goods and Services Tax. First, the Government machinery. The IRAS and the Customs and Excise Department (CED) are responsible for the collection and enforcement of GST. The Estimates Committee, under the Chairmanship of Mr Chew Heng Ching, met the officers from IRAS, CED and Ministry of Trade and Industry on 28th September 1993. The Committee was told that 296 additional staff would be required by IRAS and 86 additional staff would be required by CED to discharge their responsibilities in collecting GST. Out of this total of 382 additional staff required, 105 could be obtained from internal sources, ie, by internal transfer and re-deployment. The remaining 277 staff would have to be recruited. I remember at that time I asked the officers, given the labour shortage, whether IRAS and CED would be able to recruit the new staff. The Minister announced in this year's Budget Statement that "the operating framework for GST is now in place". May I take it that IRAS and CED have recruited all their additional manpower required? And if so, are these additional staff new entrants to the labour market, for example, `A' level and Polytechnic Diploma holders, or are they poached from the private sector? Is the manpower cost within the budgeted manpower cost of $6.3 million? Another major item is the development of a computer system. May I ask the Minister whether the computer system developed for GST collection is ready for operation now and what is its cost? And the last question is: how many businesses have registered for GST so far?”
“While we may need to relax some of our financial regulations in response to the changing market conditions and keener competition, this should not be achieved at the risk of exposing our banking system to potential scandals and defaults. We should aim for steady growth on a sound and solid foundation. Hence, I support the Banking (Amendment) Bill.”
“Mr Speaker, Sir, banks are important institutions in modern economies. Banks contribute to the growth of other sectors and in turn they grow with the economy. Scandals, defaults and failures of banks have serious financial, economic and even political consequences. Apart from the notorious BCCI (Bank of Credit and Commerce International) disaster, there were also reports on problems of the banking sector in other countries, for example, the difficulties of Japanese banks in meeting BIS (Bank for International Settlements) standards in September 1990 or the so-called Black September, the troubles of American Savings and Loan industry, the banking crisis in Sweden, Norway and Finland due to de-regulation and supervisory shortcomings, and the problems of some Australian state banks due to over-expansion of credit. These examples and cases all underline the importance of financial prudence and discipline. They also illustrate the need for continuous regulation and supervision by central banks and other monetary authorities. The Monetary Authority of Singapore (MAS) should be congratulated for refusing to give a banking licence to BCCI. The right decision has protected many Singaporeans from the big swindle. The Prime Minister had complimented MAS for its firm stand against the BCCI application in his National Day speech in 1991. As our financial sector continues to expand, and as the financial market becomes more sophisticated in terms of credit instruments and technology, the regulatory and supervisory authorities (in our case, MAS) should be more vigilant and more prepared for potential problems. The authorities must also be determined to act.”
“Sir, most of my points have been covered by the previous speakers. May I be allowed to make two points? First, I agree with Mr Goh Chee Wee that the influx of foreign workers tends to depress wages of local workers. The foreign workers' levy is to protect our local workers. From that view point, the foreign workers' levy is a protection fee for our local workers. The foreign workers' levy also serves another purpose. It helps to internalise the external diseconomy of foreign workers. Through the levy, employers pay part of the social cost imposed by foreign workers. Social cost should not all be paid by taxpayers. Second, I disagree with Mr Robert Chua's suggestion to use the Skills Development Fund to train foreign workers. The fund should be used for the training of local workers.”
“You can express the principle and the philosophy of a particular culture through its original language better. Therefore, I agree with the saying quoted by Dr Ow. A Member of Parliament argued that we should raise the language standard in order to achieve a higher cultural level. I agree with him that we must raise the standard of Chinese and, at the same time, raise the consciousness and awareness of the students on the importance of Chinese culture. Of course, this can also be achieved through more extra-curricular activities, in addition to the normal lessons. On the teaching of Chinese language, all our primary schools are encouraged to offer Higher Chinese to their students if the student number is adequate to form a class. Last year, the number of SAP schools was increased from 10 to 15. This will provide the students with more contact and exposure time with the Chinese language. At the same time, we will soon inform all our schools that we will continue to allow the SAP schools to have two additional periods of Chinese lessons in the Primary One and Primary Two classes. In Primary Three and Primary Four classes, they can have four extra periods, and the schools can also retain the extra number of teachers. All these actions show that the Government is determined to improve the teaching of Chinese so as to enhance the standard of Chinese in schools. We can also organize more extra-curricular activities such as drama performances by the Drama Society, cultural activities by the Chinese Language Society, excursions or visits to exhibitions, like the Silk Road Exhibition, to strengthen the students' awareness of the Chinese culture and civilization.”
“On the question of whether the officials of the Ministry of Education have been "overtly agreeing and covertly opposing" and dragging their feet in the implementation of these recommendations, I heard stories to this effect before I joined the Ministry of Education. But after I have joined, particularly in supervising the implementation of the recommendations of the Chinese Language Review Committee Report, I found that although the officials in charge had different views during our discussion, they are, nevertheless, serious and conscientious when it comes to the implementation of these recommendations. So, the allegation is not quite true and there is no need to be too worried about it. Secondly, whether the standard of Chinese can be improved after the implementation of the recommendations, I can say with certainty that the standard of Chinese will be raised. The reason is that once these recommendations are seriously implemented, there will be positive effects in the teaching and learning of the Chinese language. Under the better arrangement as recommended, students will be able to learn the language in accordance with their own ability, and thereby do better in their study, and hence the standard of Chinese will be raised. Thirdly, Dr Ow asked whether I agree with the theory that "language is the carrier of culture", and the saying: "With the skin gone, what can the hair adhere to"; implying that a culture cannot exist without its language. I agree that a thought or an ideology can be expressed in any language through words, but the more complicated ideas or thoughts will be more effectively and most appropriately expressed in the original language. Of course, a language and its culture are closely related.”
“During the two dialogue sessions - one was in English and the other was in Chinese - the complaint from the participants was that it would not be proper to allow students to make use of their dictionary during the Chinese essay-writing examination. As I mentioned just now, this issue is a controversial one. When the Chinese Language Review Committee was deliberating on this matter, there were differences in opinions. But in the end, their conclusion was to request the Ministry of Education to allow the students to make use of their dictionary during the GCE "O" level Chinese essay-writing examination. As the Chairman of the Monitoring Committee, I have to abide by the decision of the Chinese Language Review Committee and implement its recommendations accordingly. As to how many meetings we have held, I would like to inform Dr Ow that after the Minister had declared that the Ministry of Education would accept most of the recommendations of the Chinese Language Review Committee and appointed me Chairman of the Monitoring Committee on the implementation of these recommendations in June last year, we held our first meeting in August. Subsequent to that, the Committee had to allow adequate time for Ministry officials to implement the recommendations. Since I am also holding office at the Ministry of Education and I am in daily contacts with the Ministry officials and many members of the Committee, I could monitor the implementation of the recommendations very closely. I would like to report that most of the recommendations have been implemented or are in the process of being implemented. The Monitoring Committee would be having another meeting soon.”
“Sir, thank you for this opportunity. (In Mandarin) In addition to the question that I raised yesterday, I would like to ask the Minister or the Minister of State for his views on the present standard of Chinese language in Singapore. Will the implementation of the recommendations in the Report of the Ong Teng Cheong Committee help to raise the standard of Chinese in Singapore? Secondly, does the Minister of State agree with the proposition that "language is the carrier of culture ( )"? In other words, Chinese language and Chinese culture must go together. Mr Low Thia Khiang also referred to this matter yesterday. For many years I have been vocal in expressing my views and suggestions on this matter, both inside and outside this House. I do not know if the Minister of State is aware of the saying: "With the skin gone, what can the hair adhere to ( )?" If the standard of Chinese keeps on falling all the time, we will probably lose one important key, and that is, the key to the treasure of a few thousand years of civilization of the Chinese people. Finally, I believe the Ministry of Education has set up a Supervisory Committee, chaired by the Minister of State, to supervise the proper implementation of the recommendations of the Ong Teng Cheong's Report. I would like to ask the Minister of State how many meetings have the Committee held since April of last year. Dr Ker Sin Tze( In Mandarin): Sir, yesterday, Dr Ow asked why, since the publication of the Report by the Chinese Language Review Committee and the Feedback Unit had held dialogue sessions, the Ministry of Education had not responded to their views. Dr Ow sent me reports on the dialogue sessions held by the Feedback Unit, and I have read them.”
“Sir, a point of clarification. May I know when would Dr Ker, his Minister of State, reply to the question on Chinese Language. Would it be under Amendment No. (4)?”
“My final suggestion is this: I wonder whether some of the premises of the universities and polytechnics which are not utilised at night or at weekends can be rented out to the Open University or other institutions so as to generate some income.”
“Sir, the cost of tertiary education has been increasing. This cost increase will lead to higher fees, even the recovery ratio is kept at the present level. The major component of the cost is manpower cost. I would like to ask the Minister what control measures have been implemented to contain these rapid cost increases. I am not suggesting that there should be a change in the student/staff ratio of about 11:1 because this will affect the quality of teaching. However, I submit that it is not necessary for senior teaching staff, like a full Professor, to repeat the tutorials on the same topic many times per week. Teaching assistants may be engaged to conduct these repeated tutorials where senior teaching staff can devote more of their time to give lectures or large class interactions. The second point is about the question of ratio of academic staff to non-academic staff. Academic staff may be regarded as producers of education services whereas non-academic staff are merely supportive or service personnel. I suggest to the Minister that it may be necessary to conduct a review of non-academic staff strength in the tertiary educational institutions. The final point is on modulisation. I support the idea of modulisation. This is a mixed system between the British system and the US credit system. This will make our tertiary educational system more flexible. However, in its implementation, we have to be careful of the cost implications. Courses which are currently available in different years have to be offered at the same time. In other words, some courses cannot be offered only in sequence but have to be offered in parallel. This is to benefit the students by offering more options, but this may also increase the cost.”
“Sir, unless I am getting old, I cannot remember the Minister mentioning in his Budget Statement the number of Ministries and departments covered by the system. I do not think he has mentioned it.”
“Sir, I beg to move, That the sum to be allocated for Head N of the Main Estimates be reduced by $10 in respect of Code ND 1500. The Ministry of Finance has briefed our GPC members on the Singapore Government Management Accounting System (SIGMA). SIGMA is designed as a management tool to help the civil servants in the management of their manpower and operating resources. Our GPC members support the development of SIGMA. I simply want to raise the following questions and ask the Minister to update us on its current status: (a) How many Ministries and departments are covered by the system? (b) Has the system been utilised to its fullest advantage? (c) Apart from the initial capital expenditure incurred, has the cost of implementation gone up?”
“Sir, I beg leave to withdraw my amendment. Amendment, by leave, withdrawn.”
“Sir, I would like to seek one clarification from the Minister. I was referring to the taxpayer's owner-occupied first property or only property and not the second property or property occupied by his parents. The question is whether the Minister can consider revising the $75,000 upwards.”