Richard Hu Tsu Tau
Singapore
“Sir, I think it is eminently fair, because the proposal really is for the Government to spend money to give shares to Singapore citizens. Either you agree or you do not agree. Or, if you agree, perhaps you consider the amounts insufficient or too much.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time". The purpose of this Bill is to make provision in accordance with Articles 148(2) and 148C(2) of the Constitution for additional expenditure in excess of the provisions authorised by the Supply Act, 2001.”
“I think the Prime Minister and DPM Lee have already explained it will be based on income levels, with people living in flats as a proxy. So there is no political content in it. It depends on the income level, whether you have served national service or whether you are an elderly person.”
“I really do not understand. I know you are arguing on technicality for which I agree that you may have a point. But, nevertheless, because it is a proposal to share Singapore's surpluses with the population, the distribution is not something which you can argue against.”
“As I said, the estimates will be available around mid-October. I do not think, at this time, I want to give a specific date when the second package will be announced, but it will be done as soon as practicable. IN-PRINCIPLE AGREEMENT WITH MALAYSIA ON OUTSTANDING BILATERAL ISSUES (Assessment) 4.”
“Mr Speaker, Sir, when the $2.2 billion off-Budget package was announced in July this year, we said that the Government would do more to assist Singaporeans if the global economic situation worsened in the coming months.”
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“Mr Speaker, Sir, Singapore is a small economy relative to the neighbouring countries in the region. The assistance that we can give through loans, grants and humanitarian aid would naturally be limited. Singapore should focus on areas where our help can be most effective. This would principally be in giving technical training, helping local companies establish economic activities in these countries, and offering humanitarian assistance where the situation requires. These are already adequately covered by well-established mechanisms. There is no need to start yet another development assistance programme. Singapore provides training and transfer of technical expertise to countries in the region through the Singapore Co-operation Programme (SCP), administered by the Ministry of Foreign Affairs. It comprises of two programmes, namely, the Third-Country Training Programme and the Technical Co-operation Programme. Approximately S$16.25 million has already been allocated to the Singapore Co-operation Programme this year, a considerable portion of which has been channelled towards Indonesia and Vietnam. Training is concentrated on areas where Singapore has special competency and experience, such as maritime management, information technology (IT), airport management, environmental management, economic and trade development and financial services. In 1997 alone, approximately 800 public officials from Indonesia, Malaysia, the Philippines, Thailand and Vietnam benefited from this programme. Singapore also provides help through the Regionalisation Assistance Schemes administered by the Economic Development Board for local companies venturing into the region.”
“There is already an administrative concession in place since 1992 to allow Singaporeans working overseas to repatriate their foreign income to Singapore without attracting any Singapore tax. Under this concession, Singaporeans and permanent residents can elect to be treated as non-residents where they have been employed abroad for a period of at least 6 months in any year. As non-residents, the foreign income which they remit to Singapore during any year in which they are treated as non-residents would not be taxed. Even if they choose to remit their overseas employment income after their return to Singapore when they have become residents and be taxed on the income remitted, they will be given a tax credit for any foreign tax suffered on it. Unless the foreign tax is lower than the Singapore tax payable, which is rare given Singapore's generally low tax rates, there should be no further Singapore tax on the remittance with the tax credit given. With the administrative concession and the credits for foreign tax, Singaporeans should not be deterred from accepting overseas assignments. REVITALISATION OF RETAIL SECTOR 2. Mdm Claire Chiang See Ngoh asked the Minister for Trade and Industry, with retail sales now in negative growth for eight consecutive months and showing no sign of reversal due to slowdown in visitor arrivals and declining purchasing power all round, what plans his Ministry has to help revitalise this sector.”
“Since January 1998, the Inland Revenue Authority of Singapore (IRAS) has received about 1900 objections. The number of objections received is not higher than that for the corresponding period last year. This is despite the fact that IRAS has reviewed the annual values of more properties and raised more new assessments this year. Taken together, this indicates that the rate of objection has fallen. IRAS' efforts to review the annual values to reflect the prevailing rental level as quickly as possible also explains why the rate of objections is not high despite the weakening rental market. Objections to annual values are always dealt with expeditiously. In cases where the owners provide sufficient information or grounds of objection, IRAS will ensure that these are dealt with within a month. Where more information is needed from the owners, IRAS will contact the owners to obtain more information or discuss their cases as quickly as possible. POLYCLINIC FOR PASIR RIS 41. Mr Ahmad Mohd Magad asked the Minister for Health if there is any plan for a polyclinic to be built in Pasir Ris and, if so, where it will be located and when it will be completed.”
“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. - [Dr Richard Hu Tsu Tau]. Bill considered in Committee; reported without amendment, read a Third time and passed. MERCHANT SHIPPING (CIVIL LIABILITY AND COMPENSATION FOR OIL POLLUTION) BILL Order for Second Reading read.”
“Currently, double tax deduction is granted for expenses incurred in the promotion of Singapore goods and services. As the current provision in the Act is rather restrictive with regard to the type and extent of expenses incurred that would qualify for the double tax deduction, clause 8 amends section 14B of the Act to provide for more flexibility in order to encourage the trading of Singapore goods and services. The third tax change relates to the tax incentives I announced in the 1995 Budget to promote offshore leasing of aircraft. Under the incentive package, aircraft leasing companies that operate from Singapore are taxed at a concessionary rate of 10% on their income derived from offshore aircraft leasing. To further boost the attractiveness of Singapore as a location for aircraft leasing companies, I have decided to extend the tax concession to cover the income derived by approved aircraft leasing companies from aircraft management activities. Clause 19 amends section 43I of the Act to provide for this extension. Finally, the last change is to improve tax administration. At present, the Act requires a person carrying on a trade or business to issue receipts and maintain records of such receipts issued for tax purposes. However, the Act also provides for the Comptroller of Income Tax to waive such a requirement for businesses such as fast food restaurants where the turnover is high but the value of each transaction is low, subject to the company being able to satisfy certain conditions. For ease of administration, clause 2 amends section 2 of the Act to enable the Comptroller of Income Tax to delegate the power to approve such requests to the Deputy Comptroller or an Assistant Comptroller of Income Tax. Sir, I beg to move. Question put, and agreed to.”
“Clauses 3 to 5, 7, 10, 12, 14, 16, and 21 amend the Act to provide for the following: (a) extension of the tax holiday granted to the Singapore International Monetary Exchange Limited (SIMEX) for another five years; (b) extension of the current 10-year limit for venture capital funds to enjoy tax exemption on the gains from the disposal of investments, for a further five years; (c) extension and liberalisation of the Tax Exemption Scheme for Syndicated Offshore Credit and Underwriting Facilities for a further five years; (d) liberalisation of the tax concession for the unit trust industry; and (e) removal of the yearly restrictions in the tax deduction limits for general provisions made by banks. Tax Changes Not Announced in the 1998 Budget Statement I shall now deal with the four tax changes that were not announced in the 1998 Budget Statement. The first tax change pertains to tax deduction for donation of computer equipment. At present, companies that donate computer equipment to educational and research institutions are allowed a tax deduction equal to the value of the donation. The scheme is to encourage companies to donate computer equipment to these institutions to help them upgrade and maintain the quality of information technology training at the forefront. To enable other organisations to also keep pace with the developments in information technology, I have decided to extend the tax deduction scheme to include donation of computer equipment to public libraries, community centres and voluntary welfare organisations. Clause 15 amends section 37(2) of the Act to provide for this extension. The next tax change relates to the promotion of trading of Singapore goods and services.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." Sir, the Income Tax (Amendment) Bill 1998 seeks to give legislative effect to the income tax changes announced in the February 1998 Budget Statement. Opportunity is also taken to incorporate four other amendments to the Income Tax Act. I shall begin with the tax changes announced in the Budget Statement. There are a total of 11 tax changes which require amendment to the Act. I have introduced a number of new tax incentives in the 1998 Budget and they are: (a) a tax concession to promote the bond market; (b) a tax concession package to help Singapore develop as an electronic commerce hub; (c) tax exemption on income for approved insurance companies deriving from writing offshore marine hull and liability insurance; (d) tax exemption on income derived from uplift of freight from Singapore; (e) one-year accelerated depreciation allowance for companies which acquire approved equipment or technology which meet certain criteria relating to noise and chemical exposure levels and, finally, (f) a further tax deduction to companies for approved relocation and recruitment expenses incurred in the hiring of talent from abroad. Clauses 5, 6, 11, 13, 17 and 20 amend the Act to provide for these incentives. I have also announced the extension and liberalisation of several existing tax concessions.”
“Downsizing projects would generally require large contracts to be broken down into smaller parcels. Apart from losing the economy of scale and lower prices achieved in large contracts, the public sector agencies would also incur higher overheads to manage a larger number of smaller projects. Nonetheless, my Ministry will encourage public sector agencies to study and consider such project downsizing where feasible and where there is likely to be minimal impact on procurement cost and administrative overheads. CENTRAL PROVIDENT FUND CONTRIBUTION (Reduction and servicing of housing loan instalments) 11. Mr Shriniwas Rai asked the Minister for Manpower if he will give assurance that there will be no reduction in Central Provident Fund contribution during this financial year ending 31st March 1999. 12. Mr Chiam See Tong asked the Minister for Manpower whether he will elaborate on the measures that the Government will take to ease the financial burden of the workers when the employer's CPF contribution rate is cut. 13. Dr Lee Tsao Yuan asked the Minister for Manpower how many Central Provident Fund Board members are currently withdrawing funds to service monthly housing loan instalments and of these, how many are currently withdrawing funds up to the maximum allowable. 14. Mr S Iswaran asked the Minister for Manpower how many Central Provident Fund (CPF) account holders will need to seek other sources of funds to service their home mortgage loans when there is a 5% or 10% reduction in the employer's contribution to CPF.”
“Generally, foreign contractors' competitive edge in large projects stems not from just doing the construction work, but by being able to provide a total solution or package, which includes integrating both design and technological know-how. They offer alternatives and win clients over with superior solutions, which save time and costs. Relaxing the registration criteria is not the solution to the current problem. It will not shift the competitive edge of foreign contractors over our local contractors in tendering for high value projects above $100 million where the local share of contracts awarded is significantly lower. Instead, it will lead to keener competition and cause more construction firms to get into difficulties, which is not beneficial to the construction industry at this time. Besides this, relaxing the registration requirement could compromise the objective of ensuring that firms tendering for jobs of different sizes have the capacity and capability to execute them satisfactorily. The reputation and credibility of the registration system as a guide to the firms' capacity and capability has been painstakingly built up over the years, and we should not change the criteria just to try and suit economic circumstances. With regard to the Member's suggestion to downsize large-scale projects as an alternative way to widen the opportunities for more local contractors to tender for the projects, CIDB's record shows that most of the above $100 million projects won by foreign contractors were private sector projects. The public sector projects won by foreign contractors were mainly those where the capabilities lie with the foreign contractors, such as for the MRT line projects.”
“Some $36 million will be spent to speed up public sector computerisation efforts to upgrade the operational capabilities of our uniformed services in the Ministry of Home Affairs. In addition, another $13 million is allocated to recruit more officers for our civil defence force, police, prisons and immigration departments. Additional funds have also been allocated to help our workers and companies tide over this difficult period. This includes an additional $80 million for the Economic Development Assistance Scheme, $20 million in interest subsidy for the enhanced Local Enterprise Financing Scheme, or LEFS, $20 million for the Skills Redevelopment Programme, and $5 million for TDB trade promotion and facilitation programmes to help our retailers and companies with overseas marketing efforts. In the second part of the question, the request is for information on the CIDB's programmes. The registration of contractors by the Construction Industry Development Board is an integral part of the Government's tendering process to objectively evaluate a contractor's capability and capacity to take on projects. In the past three years, local construction firms performed quite well clinching about 63% of total public sector construction contracts in value terms, or 94% in terms of number of projects. There are more than twice the number of local contractors compared to foreign contractors in the $50 million and above registration category of G8. In the last year alone, the number of local construction firms registered with CIDB had risen by 9%, from 1,361 to 1,485, with the number in the G8 class increasing from 61 to 65.”
“This question is in two parts. I will address the first part. In my Ministerial Statement on off-Budget measures, I have given some details of the key sectors and specific development projects for which the Government will release an additional $670 million in FY98. This sum comprises $460 million to speed up existing development projects or to start new ones, $125 million for assistance schemes for companies, and $83 million to increase civil service recruitment. I will now highlight the main projects which will receive substantial disbursement of funds under the off-Budget package. Additional spending on education accounts for the largest share of $282 million, or about 42% of total disbursement. This includes, in the area of IT development, $22 million for enhancing CAD-CAM facilities in the polytechnics, $22 million for upgrading computer facilities in NTU, and $30 million to incorporate IT in primary and secondary schools under construction. Another $38 million goes to accelerating on-going campus development at NUS and NTU, while $28 million goes to speeding up the acquisition of equipment for NUS. The recruitment of more teachers will cost $70 million. Additional spending on economic infrastructure this year includes $50 million to assist the commercial rollout of Singapore One, $22 million to put in basic infrastructure for industrial land sales, $15 million to develop Chinatown as the first Thematic Zone under the Tourism 21 Plan, and $13 million to further speed up the Jurong Island reclamation. A sum of $31 million is set aside to put in place the necessary basic infrastructure in HDB new towns such as roads and drains.”
“We will see. INDUSTRIAL PROJECTS TO ACCELERATE INCREASED PUBLIC SPENDING 10. Mr Tay Beng Chuan asked the Minister for Finance whether the Government will (i) provide specific details on the current and planned infrastructural projects to be accelerated to increase public spending; and (ii) consider relaxing certain registration requirements stipulated by the Construction Industry Development Board or downsizing large-scale projects, thereby widening the opportunities for more local contractors to tender for these projects.”
“I have not said that we do not intend to do anything, but we have to select the time and opportunity.”
“Of course, any rebate given in whatever form would help individuals. But I have said earlier that our objective, at this stage, is to help businesses reduce operating costs so that they can remain in business and provide jobs. This is our focus.”
“Mr Speaker, Sir, the property tax rebate is intended to ease the cost of doing businesses in Singapore. It is therefore granted only to commercial and industrial properties, and not to residential properties. On the question of re-assessment of annual values, IRAS has in fact already expedited the review of private properties. Since January 1998, about 47% of the private properties have already been reviewed. The balance of private properties will be reviewed before the end of this year. In the meantime, property owners can also inform IRAS if their new rents have fallen below the annual values of their properties, so that a review of these properties can be done earlier.”
“Mr Speaker, Sir, the current economic situation is due primarily to a fall in external demand as domestic demand accounts for less than 30% of total demand. As our GST rate at 3% is already very low, suspending GST is unlikely to affect domestic demand significantly. Suspending GST would also result in a revenue loss of about $2 billion a year. Even if we need to stimulate the economy by $2 billion a year, the money would be better spent in helping specific groups and areas rather than by lifting the GST across-the-board. PROPERTY TAX REBATE FOR COMMERCIAL AND INDUSTRIAL PROPERTIES (Extension to residential properties) 9. Mr Tay Beng Chuan asked the Minister for Finance whether (i) the property tax rebate for commercial and industrial properties announced as part of the off-Budget measures can be extended to residential properties since the property tax of 12% applies to all properties with the exception of owner-occupied property; and (ii) the Government will consider expediting its re-assessment of annual values of property in order to reflect significantly lower market prices.”
“The Ministry is currently undertaking a detailed study on the impact of GST on the various income groups, in connection with the review on the GST offset package which is due to expire on 31st March 1999. The outcome of the study will be made known in due course. ENGLISH MOVIES ON CHANNEL 5 OF TELEVISION CORPORATION OF SINGAPORE 4. Mr R. Ravindran asked the Minister for Information and the Arts, from June 1997 to May 1998, (a) what is the number of English movies shown on Channel 5, Television Corporation of Singapore (TCS) during prime time which have been shown before; (b) what is the number of times these movies have been shown before; and (c) whether there is a limit on the number of times movies are repeated by TCS. BG George Yong-Boon Yeo: TCS has two prime-time movie slots - on Mondays and Fridays at 8.30 pm. In the past one year up to May 1998, a total of 100 movies were shown during these two timeslots. Of these, 39 movies were re-runs, of which 12 titles had been shown more than twice. Re-runs are unavoidable. The number of blockbuster movies released by Hollywood in a good year is 10 to 15 titles. This is not enough to sustain two prime-time movies a week. Also, in the broadcast business, movies are normally priced and sold for multiple runs. TCS' research, however, indicates that re-runs of blockbuster movies are still popular as TCS spaces out re-runs on prime-time by at least 12 months. It is the response of the audience which sets a limit on the number of re-runs shown by TCS. NUMBER OF WORKERS RETRENCHED 5. Mr Chuang Shaw Peng asked the Minister for Manpower if he will indicate the number of employees retrenched from October 1997 up to the latest convenient date by (i) multi-national corporations and (ii) local enterprises.”
“RAISING OF INCOME CEILING FOR ELIGIBILITY TO PURCHASE HDB FLATS 19. Dr Lily Neo asked the Minister for National Development whether he will soon be raising the income ceiling for eligibility to purchase Housing and Development Board flats from the present $8,000, which has not been reviewed since 1994, so as to help the younger and first-time applicants.”
“The Government is sympathetic to the individuals and companies which face difficulties because of the economic situation. But it cannot help them by having Government agencies defer or forgive charges. Government agencies have to work on a proper basis. Building up arrears with JTC and PUB, etc, will not solve the problems of families and businesses facing financial difficulties. Companies will be helped by the supplementary budget measures being announced in the ministerial statement later today. There is also available a range of assistance schemes administered by EDB, PSB and other agencies. There are many schemes to help families which have difficulties paying their rent, utilities bills or other fees and charges. For example: Financial assistance: The CDCs and MCD offer financial assistance to individuals or families who need short-term help to tide them over difficult periods. People's Association's CCC provides financial assistance to needy residents from its Welfare Fund. Payment of rent and utilities: The CDC has a Rent and Utilities Assistance scheme to help families residing in 1-room, 2-room or 3-room HDB rental flats who need help on rent, utilities and S&C charges. Payment of mortgage loans: HDB allows lessees in financial hardship to reschedule the mortgage loan payment period. For deserving cases, where there is a sudden loss of income due to circumstances beyond control, they may even be allowed to defer payment of their loan instalments. Payment of medical bills: Medifund can help Singaporeans in genuine financial difficulties pay their medical bills at public hospitals, on top of subsidies already given. Ministry of Health will also consider remission or waiver of outpatient charges at polyclinics.”
“We have a whole package of measures we can use. ADJOURNMENT OF DEBATE”
“I agree. I know what you mean. Why have we not moved corporate taxes? Corporate tax affects you the year after. What we want to do is something which helps you now. So cost reduction is the most effective. We may have to consider corporate tax if things get worse. I am not excluding it. But right now, we do not need it.”
“Indeed, of course. If you do not make profits, we cannot tax you.”
“On the Main Upgrading and Interim Upgrading programmes, I think that is an issue which I will pass on to the Minister for National Development. But whatever that can be brought forward will be brought forward on the infrastructure side. How can we use new methods of attracting foreign investments? I think the EDB is actively doing that. They are stepping up their programmes and trying their level best to try to attract as many new investments as possible. This is why we are continuing to reclaim new lands in Jurong Island which will accommodate all the new industries in petrochemicals and refineries and so forth. So we will not stint and hold back investments which are necessary to provide the basic infrastructure to attract new investors. On the question of additional grants for voluntary welfare organisations, we can consider this but each case will have to be looked at on its own merits. I cannot give a blanket promise on this.”
“We will see when the moment arises. Mr Lew Syn Pau has asked about LEFS. So far the take-up rate has been very encouraging. I do not have the exact figures. But we will increase the amount available from $1.1billion to $2 billion, and any amount necessary if we need to. Shortage of funds is not a problem. It is the take-up rate. And there should be no constraint. If more companies need more money, we will provide it.”
“I think that is the difference. He, of course, is very worried. Quite rightly, he should. But we do not influence the outflow of money. It is a problem which is not peculiar to Malaysia but also affects other countries which face economic problems. I hope you understand that we have no incentive to undermine the Malaysian economy. If Malaysia recovers as quickly as possible, all our investments will increase in value, and that is really the only test. There was a final question on GST, whether we should not make a gesture. Although the percentage is small, the amount collected is not small. GST is 3%, but the total amount of money collected is not small and therefore if there is no need to change it, we should not do it.”
“On measures to help unemployment, the question has been addressed earlier this morning during Question Time in that a Tripartite Committee has been set up between the NTUC, Government and the Employers' Federation in which people who are unemployed will be helped to re-acquire jobs as soon as possible. If they cannot acquire jobs, they can be helped to retrain. So at this stage, I do not think we have reached a stage where there is mass unemployment. There are selective areas where people will be redundant and this Committee is set up precisely for this purpose. Government will continue to help fund all the programmes necessary to re-employ or re-train workers. There is no shortage of funds. What we need are good programmes. Dr Ker has suggested that we should show more sympathy for individuals who own two properties. I am afraid that I cannot show much sympathy. If you already own two properties, you are quite rich. Mr Chng Hee Kok has asked whether we are confident that the programmes are going to restore confidence. I hope so. It certainly should be. Let me just start from square one. We have all the resources necessary. I just do not want to splurge it unnecessarily. If necessary, we will continue to introduce whatever measures are required to restore the economy but we cannot influence external demand. So we need to do all the things necessary to keep our economy going during this difficult period, which basically are cost-reduction, retraining and re-investment. On the issue of Dr Mahathir, I think he is expressing, of course, a concern from the Malaysian point of view which we fully appreciate. If money continues to leave Malaysia, interest rates will rise because of liquidity problems. But we are not the ones responsible for that.”
“Questions have come so fast and furious, I do not think I can respond individually by name. First question is: why do we not allow the use of CPF for those who are in trouble? Of course, that is the easiest thing to do. But do not forget that CPF is, in fact, for old age. And if we deplete it now, how are you going to top it up? We have, in fact, from time to time, in the past, introduced CPF top-ups. But to open the door to use CPF for these particular situations, I think is a step which we are very reluctant to move at this time, unless things get really, really bad. And I would recommend against it. I think the Minister for Manpower had earlier on during Question Time already responded to this question that the bulk of money is, in fact, used for mortgage payments. It was suggested that the problem we are facing now is more severe than a flu. Well, it is a severe form of flu. What I was really saying is: do not expect the magic bullet to cure it. You have to take tough measures. But if you are fundamentally sound, like a healthy Singapore economy or a healthy Singaporean, sooner or later, you will recover. But you cannot cure it with antibiotics, just as we cannot cure it by pure domestic stimulation. The causes are external to us. So we have to wait for demand to pick up before we can hope to recover. SMEs, indeed, I agree they are not all exporters and equally the cost-cutting measures will be of help to them, because they will be able to stay in business and they will continue to be able to employ. So the cost-cutting measures affect everybody, not just exporters. But we hope that the exporters are the important components because they are the ones generating foreign income and foreign exchange for us.”
“Mr Choo talks about GST having a far-reaching impact on the cash flow. It is only 3%. It is already fully offset for all the lower income people. So removing it is not really going to stimulate the growth of the economy. As I have said earlier, our main objective in this exercise is to reduce cost so that companies which are in difficulties can remain in business and continue to employ Singaporeans. That is what we are trying to do. Trying to artificially give money back, hoping that the individual would then go and spend it, does not really help, because the bulk of the industry we want to support should be exporting.”
“South America has its own share of problems and I doubt that it would provide a major source of investment either for us or for exports into the region. Perhaps I could use an example. To use a medical analogy, the present problem we are facing is like a healthy person suddenly being attacked by a viral flu. As everybody knows, a viral flu cannot be cured by a large injection of antibiotics. It is simply this: if you have a healthy body, the doctor will treat the symptoms, give you panadol for your headaches and give you a lot of vitamins. If you are basically healthy, sooner or later you will recover. So do not expect a magic bullet.”
“I am not sure what other market the Member is talking about. Which other countries can provide this growth? Eastern Europe is in difficulties. Latin America is stumbling along. I do not know what other countries he is talking about.”
“Under present conditions, the likelihood is that if things continue to deteriorate, there will be further reductions rather than remaining fixed at any single rate.”
“The one year rebate, of course, can be extended, depending on conditions. So a year-to-year extension gives us more flexibility rather than a permanent change, because conditions do change.”
“Banks in Singapore are free to set interest rates in response to market conditions. MAS monetary policy is centred in managing the exchange rate and not on domestic interest rates. The Singapore Government, therefore, has no policy either to raise or lower interest rates in Singapore on the Singapore dollar or on any other foreign currency.”
“When spikes in the rates on ringgit do occur, they therefore reflect severe shortages of supply, suggesting that on those occasions currency speculators have been caught covering short positions. I would also like to point out that the globalization of capital markets allows currencies to move freely world wide. As long as there is an offshore demand for ringgit, whether by Malaysians or foreigners, any attempt to restrict the trading of such currencies will merely induce the traders to shift their activities to another foreign exchange centre such as Hong Kong or London. Even the Singapore dollar is traded actively in both Hong Kong and London, and this explains why even after our foreign exchange market closes in Singapore, the Singapore dollar exchange rate still moves because of trading in the other centres. It merely moves from one time zone to the other electronically. This can just take place at any time. So trying to restrict such trading activities of ringgit in Singapore is simply not feasible. As I said in the Ministerial Statement, the Government does not and cannot manipulate the level of interest rates even for Singapore dollar loans and deposits. Many laymen, whether in Singapore or elsewhere, believe erroneously that the Government plays a part in setting interest rates, but this is simply not so. Their belief arises because many governments, including the Malaysian government, directly intervene in the interest rate markets, quite legitimately, of course, as an instrument of monetary policy. I think many may assume that since other countries do it, we must also be doing it. But in our case we do not do it. Because of the small size and openness of our economy, Singapore cannot and does not use interest rates as an instrument of monetary policy.”
“The MAS has also earlier issued a statement that it does not regulate or influence the interest rates of bank deposits in Singapore, whether the money is in Singapore dollars or in any other foreign currencies. Although it has been said before, I think at this point of time it will be useful if I elaborate on the principles which have been announced earlier. Banks in Singapore are free to set interest rates on deposits in a wide range of foreign currencies. Currently, deposit accounts for over 25 currencies are readily offered in the Singapore Asian Dollar Market, covering all the G-7 countries' currencies, and most Asian and European currencies. Interest rates quoted for these deposits in these currencies are based on market supply and demand. Singapore is the fourth largest foreign exchange trading centre in the world, following London, New York and Tokyo. Of necessity, therefore, the Government cannot interfere in the foreign exchange markets. All currencies enter and leave Singapore freely, depending on demand for such currencies. In recent months, interest rates for off-shore Malaysian ringgit deposits have been very volatile, and have on occasion risen as high as 30% to 40%. Such high interest rates for the ringgit have naturally raised concerns in Malaysia, but it should be emphasised that the high rates were determined by market conditions and have always been of fairly short duration. In normal times, ringgit interest rates offered by banks in Singapore are not significantly different from those quoted by banks in Malaysia. The difference is probably a few percent. Today, the difference is probably about 4% to 5%, based on the risk premium, but no more than that.”
“This will allow businesses, which may face difficulties keeping their staff because they are unprofitable, to remain in business and therefore protecting jobs. Our investments in new infrastructure are also to ensure that we continue to attract foreign investments. And we have large programmes through the EDB to co-invest in new ventures and EDB is actively scouring the world for new investments. And through the generation of new types of industries, particularly high-tech ones, we hope to protect future jobs or generate new jobs for Singaporeans. Mr Chng Hee Kok has asked whether the $800 million deficit will affect the Singapore dollar. I would hardly think so, because we have very large reserves. As Members know, $800 million deficit is a small percentage of our total GDP and I doubt it will have any influence at all. He has also asked why there have been complaints from the Malaysian Prime Minister and from the Malaysian media in general on high interest rates for ringgit in Singapore. The problem arises from a misunderstanding of the nature of interest rates in Singapore. The Malaysian media have reported that Singapore banks are offering very high interest rates which tend to attract the outflow of ringgit into Singapore, therefore, reducing the liquidity in Malaysia and affecting their business. Some even suggest that this might be a deliberate attempt by the Singapore Government to damage the Malaysian economy. I would say categorically that this is not the case. We have to remember that Malaysia is Singapore's second largest trading partner, and Singapore is also one of the largest investors in Malaysia. So the continuing welfare of the Malaysian economy is of vital interest to Singapore. It is not in our interest to try and undermine their economy.”
“I had anticipated the question why nothing has been done for the individual. I would like to remind him that I started off by saying that the package of measures we are introducing is focused entirely, in this present case, on getting companies to be viable. Our main objective is to reduce costs so that they can remain in business and ensure employment. Giving concessions to individuals to stimulate the economy will have very marginal value at this point of time. For example, increased private consumption is not going to help companies in the export sector. Our priority is to help the businesses stay viable so that they can preserve jobs for Singaporeans. This also answers the question raised by Mr Lew Syn Pau on why we have done nothing for the individual. I would point out that we have, in fact, done something for the individual in my earlier Budget in March where we gave 5% rebate on personal income tax and rebates on HDB rents and S&C charges. For the time being, we do not consider it necessary to increase these rebates because its effect on domestic consumption will be marginal in helping us recover from our present dilemma. Mr Lew also asked about the domestic maid levy and the answer is what I have just said to Mr Leong. On the use of CPF for housing, we do not want to increase the individual's debt burden this time. Mr Low Thia Khiang has asked why Government is not doing anything to reduce interest rates. I will answer this question together with the question raised by Mr Chng Hee Kok on interest rates in general. Mr Lim Swee Say has asked what Government is going to do to stimulate the recovery so as not to allow unemployment to increase. There are several ways we have proposed to do this. Firstly, by reducing business costs.”
“Sir, I will answer the questions in turn. Mr Leong Horn Kee asked why the property tax rebate has not been extended to the private residential sector. The answer is fairly straightforward. The private residential sector is already paying very low property tax of 4%. In addition, with the GST rebates introduced over the last few years and other offsets, about 70% of the population of Singapore no longer pay property tax, particularly the HDB sector. So there is really little reason to give them further rebates. He wants to know why the Government should not be more accommodative on interest rates and fees charged. I think the impact of interest rates on fee collections is that the amounts are so small and I do not think it is going to affect the economy very much. But I will ask our officials to be more reasonable in pressing people who find difficulty in paying on time. He has also asked why we have not reduced the amount of cash required to purchase properties from 80% to 70%. We have said many times that this is undesirable. The last thing we want to do in a situation of an economic downturn is to induce people to increase their debt liabilities which, if uncontrolled and later if they should lose their jobs, would have a severe repercussion not only on the individual but on the banks which lend such money. He also wants to know why we have not cut the foreign worker levy. This was explained in the earlier question and answer session because a reduction of foreign worker levy will merely induce companies to increase their intake of foreign workers which we do not want at this point of time. In the case of the domestic maid levy, even at the current rate, demand has not slackened. So a cut at this time would merely increase demand.”
“Our financial and economic fundamentals are sound. We do not suffer from the problems which beset some other regional countries. Analysts and investors know this. To quote a recent report by SG Securities Research, "Overall the Singapore economy will face a difficult environment but, like a well maintained ship with plenty of ballast, state-of-the-art navigational facilities and a good crew, will safely navigate the choppy waters and not only stay afloat but slowly move against the storm". By taking appropriate measures now to counter the adverse conditions, and to develop our long term potential, we will emerge more resilient and competitive when the region recovers. [Applause.]”
“As a small open economy with extensive links to the region, we cannot generate strong economic growth through our own actions, so long as the regional environment and external demand remains depressed. Sustained resumption of economic growth can only come about with the stabilisation and recovery of the regional economies and increased global demand for the goods and services we produce. We must brace ourselves for slower economic growth during the next few years of regional transition and recovery. Some industries and companies will feel the fall in business demand and profits more acutely than others. Some may have to merge or relocate. Retrenchments will increase as businesses consolidate and re-structure themselves. This process will be painful but we must accept it as the only way to adapt to the changed economic conditions and resume growth again. The Government will continue to monitor the external and domestic economic situation closely and take additional suitable measures where necessary to maintain the framework for economic activity. With more retrenchments this year, workers should have more realistic expectations, accept wage restraint and retrain themselves to acquire new capabilities and remain employable. New jobs are being created, but Singaporeans must acquire the necessary skills and knowledge to perform these jobs. On their part, companies should streamline their operations, improve their efficiency and productivity, and upgrade their workers. They too should make the necessary adjustments to stay the course and position themselves to capitalise on the opportunities when the region recovers. The regional economic crisis poses us a formidable challenge. But there is no reason to be daunted or disheartened.”
“Again, the tax rate to apply will be that prevailing at the time when the provisions were made. Stamp Duty for Contract Notes At the same time, the Government has also decided to suspend the stamp duty on contract notes for share transactions for one year, with effect from 30th June 1998. This is in recognition of the marked weakness in the stock-broking industry. Compared to the average monthly turnover in 1997, stock market turnover in the month of May 1998 declined by over 40% in value terms. Consequently, earnings for stockbrokers as a group have also fallen sharply. The immediate outlook for the industry also remains weak. The suspension of stamp duty will help to lower transaction costs. This measure is estimated to cost the Government about $50 million. Hotel Sector Refurbishment Of Hotels The hospitality sector has been one of the most severely hit. Tourist arrivals have declined by about 17% in the first five months of this year. Hotel occupancy has also fallen. Government will give a tax allowance of up to 150% for qualifying expenditure incurred in the refurbishment of hotels, to encourage hotels to upgrade during this lull period. This incentive is applicable for a period of 5 years and focused more on hotels in the core zone. Conclusion The whole package of measures will inject an estimated $2 billion into the economy. Of this, about $1.6 billion is expected to affect the Budget balance directly. Based on revised revenue and expenditure estimates, the introduction of the package will result in a budget deficit of about $800 million for FY98. The Government believes that this level of budget deficit, relative to the size of our economy and at a difficult time like this, is still in line with our prudent approach towards fiscal policy.”
“The suspension will apply to applications made before the end of 1999. Third, we will allow the reassignment of government land sale parcels, as a temporary measure, until the end of 1999. This will allow consolidation within the property development industry, as some successful tenderers may no longer be in a financial position to complete the development. Fourth, we will defer payment of stamp duty by purchasers of uncompleted properties until TOP or time of subsequent sale, whichever is earlier. This will also apply to subsequent buyers of an uncompleted property. It will help to improve the cash flow of property purchasers. This is a refinement of the measure introduced during the May 1996 property curbs. The estimated revenue impact on Government is $85 million. The Ministry of National Development will be announcing more details of these measures separately. Financial Sector Tax Deduction for Bank Provisions Besides the property market, another key area is our financial sector. Our banking system is strong and sound. However, to encourage banks to make adequate provisions for loan exposure to the region and to further promote stability in the banking sector, the Government has decided to lift the current 3% limit on tax deduction for general provisions made by banks and merchant banks for Year of Assessment 1999, provided such provisions exceeding 3% are approved by the Monetary Authority of Singapore. General provisions exceeding 3% will be brought to tax when they are written back to the bank's Profit & Loss Account later. The tax rate to be applied will be the tax rate prevailing when the provisions were made. If at the end of 5 years, the general provisions still exceed 3%, the provisions in excess of 3% will be brought back to tax.”
“Measures For Specific Sectors Aside from cost reduction and infrastructure enhancement measures, the Government will adopt several specific measures to help stabilise and strengthen certain sectors of the economy. This is to ensure that such sectors, whose health affects the rest of the economy, are not subject to severe stress. Property Market The property market is one area of particular concern. A weak property market can affect confidence and asset values, and also have repercussions on the financial sector. In November 1997 and again during the FY98 Budget Statement, Government made adjustments to its land sales programme, to avoid aggravating the excess supply in the market. Since the last review, the property market situation has continued to weaken. To help stabilise the market, the Government will adopt the following additional measures. First, we will suspend sale of sites for private residential, executive condominiums and commercial development for the rest of 1998 and 1999, except for the following: a. Sengkang site to tie in with the development of the MRT/LRT station and bus interchange in Sengkang New Town. b. Clarke Quay MRT site to tie in with the development of the North-East MRT line. c. Four small infill sites within the Chinatown Conservation Area. The Government will resume selling a steady supply of land when the property market recovers. We will review the situation at the end of 1999 to decide whether to resume land sales in the year 2000. Second, we will suspend the 5% per annum premium that is currently levied on developers of private residential properties for every year of extension of their Project Completion Period (PCP). Developers can now apply for extension of PCP up to 8 years without penalty.”
“However, even as we seek to reduce costs to maintain our competitiveness, there are projects which the Government can undertake which contribute to building our economic infrastructure and enhancing our capabilities for the longer term. To put in place such economic infrastructure and capabilities for the future, Government will speed up several on-going public sector infra-structure projects as well as bring forward suitable new development projects. In total, close to $1.9 billion worth of new development projects have been approved. Together with the on-going projects which will be speeded up, it will result in an estimated additional $670 million in new disbursements in FY98 alone. Education will continue to be the key focus, accounting for over 40% of the newly approved projects. Human talent remains our most precious resource and we want to develop it to the maximum. Major projects brought forward will include the expansion of our Primary School Building Programme to increase the number of Primary schools to be built in new and mature towns from 18 to 27; the incorporation of IT into Primary and Secondary Schools under construction; upgrading of NUS and NTU; and enhanced computer facilities at our polytechnics. MOE will also expand its recruitment of teachers to raise the effectiveness of the education system. Economic infrastructure will be the other area of focus. Key projects include increased investment for commercial rollout of Singapore One; Jurong Island development; and development of industrial land. We will also provide additional funds for EDB's Economic Development Assistance Scheme Phase III which provides loans and grants support for companies and manpower initiatives, and for TDB to undertake more trade promotion and facilitation work.”
“Telecommunications Tariffs Similarly, as part of its regular schedule of tariff reductions, Singapore Telecoms has informed the Government that it will be offering further rate reductions on its International Direct Dialling, Subscriber Trunk Dialling, Local Leased Circuit, International Leased Circuit, and Frame Relay services beginning the second half of this year. These changes are expected to result in customer savings totalling $100 million. Electricity Tariffs Since corporatisation, Singapore Power has made substantial productivity gains, reducing costs and improving financial returns. It will give a one-off 3.5% rebate on the non-fuel component of electricity tariff for 1 year with effect from 1st July 1998. This is equivalent to a 2.6% reduction in average electricity tariff and is estimated to result in cost savings of about $81 million for all users. This is separate from any adjustments which will be made on the fuel component of electricity tariffs in line with movements in fuel cost every quarter. Water Tariffs The Government will not hold back or reduce the PUB water tariff increases for households, scheduled for 1st July. The increases are a long term strategic move to get water tariffs to reflect the true scarcity value of water in Singapore, and to make Singaporeans conscious of the vital importance of conserving water. The increases will not cause any hardship to lower income households, as they will be fully offset by the PUB rebates and service and conservancy charge grants for the HDB 1-4 room flat dwellers. Economic Infrastructure/Capabilities Building Public Sector Projects Given the open nature of our economy, it is difficult to stimulate domestic economic activity through pump priming or boosting consumption.”
“We were unable to do so earlier because the Parking Surcharge Scheme was an important component of the total traffic management system within the CBD. The Electronic Road Pricing (ERP) scheme will be a more flexible and effective way to control traffic congestion. With the extension of the ERP to the Restricted Zone from 1st September 1998, the Land Transport Authority (LTA) will be suspending the Parking Surcharge Scheme. The suspension will benefit the owners of car parks currently under surcharge. The Government urges these owners to pass on their savings in the form of lower parking charges to benefit their tenants, retailers, and motorists who use their car parks. This measure is estimated to cost $37 million a year. Retailers in the CBD have also requested that ALS hours be shortened on Saturdays to encourage shoppers to drive into the CBD. With the implementation of the ERP for the CBD, the LTA will be able to make this adjustment as well. The Ministry of Communications will release the details in a few weeks' time, when it announces full details of the new ERP charges. Port-Related Tariffs Responding to market conditions and customer requirements on an on-going basis, PSA Corporation has already extended various rebates to its shipping customers through its customised agreements. Similarly, it has reduced its distripark and warehouse rentals. For shippers who use Jurong Port, JTC will also offer a 20% rebate on Jurong Port tariffs with effect from 1st July 1998. This is estimated to save $20 million for some 1,000 companies.”
“Neither can Government instruct the banks to extend loans to companies. These are commercial decisions which the banks themselves have to take. The Government is not in a position to second guess their judgments, or to take responsibility for the consequences if the loans turn bad. However, what the Government can do to help local businesses continue to have sufficient working capital is to provide support through the Local Enterprise Financing Scheme (LEFS). Under this scheme, banks undertake the necessary credit assessment, while the Government co-shares the risks with them. This is a practical way to help local enterprises address the problem of credit availability. In the FY98 Budget the Government enhanced the LEFS scheme, to increase the loan line to $1.1 billion. We also increased the co-sharing of risks by Government and the maximum loan quantums, and extended the scheme to cover more local enterprises. The response so far to the enhanced LEFS scheme has been encouraging. The Government will now increase the LEFS loan line further, to $2 billion and more if necessary. We will also study further enhancements to the scheme to respond to changes in the credit situation. Services Charges Fees and service charges are a fourth area of business costs containment which Government will address. Suspension of Parking Surcharge Scheme Currently, a surcharge of $60 per lot per month is levied on all non-residential car parks with at least 5 parking lots in and around the Restricted Zone (RZ). The surcharge supplements the Area Licensing Scheme (ALS) as a road usage restraint measure to keep traffic free flowing within the CBD. The retailers have been asking the Government to suspend this Parking Surcharge Scheme for some time.”
“This includes establishing a new Skills Development Centre to cater to growing demand for training places, and expand the range of courses through the Singapore National Employers Federation and the network of industry associations. The Ministry of Manpower will be announcing further details when they are finalised. Costs of Capital The availability and cost of capital to support business activities are a third area of concern amongst businessmen during this period of uncertainty. Interest rates have indeed risen in recent months, but this is largely a reflection of the rising risk premium in Asia. In fact, Singapore's interest rates remain relatively low, compared to other countries in Asia with perhaps the exception of Japan. There have been calls from the public for the Government to reduce interest rates and to encourage banks to be more forthcoming in their lending. However, the scope for doing this is very limited. Given the openness of our financial system, MAS can only manage the exchange rate. The level of interest rates is set by market forces based on foreign interest rates and market expectation of the movement of our exchange rate. For individual loans, banks set the interest rates based on their cost of funds and their assessment of the credit risks of individual borrowers. If the MAS were to start pumping in liquidity to bring down interest rates, foreign investors would move out of the Singapore dollar. And then, we will end up with even higher interest rates because investors will start demanding a higher premium to hold Singapore dollar deposits. The banks would in turn have to raise their lending rates because their cost of funds would have gone up. So it is better for interest rates to be determined by the market.”
“As the National Wages Council has pointed out, wage restraint is an integral part of our response to the current problems, for both the private and public sectors. The civil service will take the lead in this. In February, the Government announced a freeze on salaries of Ministers and senior civil servants this year. In line with NWC recommendations, the civil service also reduced the mid-year portion of the Annual Variable Component (AVC) to � month, from the usual _ month. At the same time, the Government indicated that the end-of-year AVC would be reviewed when the economic situation and outlook became clearer. The deteriorating outlook has made it more probable that we will have to reduce the end-of-year AVC. We will decide on the actual adjustment nearer the end of the year, taking into account the economic conditions prevailing at that time. Wage restraint will complement Government's ongoing efforts and new initiatives for worker training, job matching and upgrading the employability of Singaporean workers. These include the Education Training Fund and various manpower development and training initiatives under EDB's Economic Development Assistance Scheme (EDAS). Recently, the Government and SDF contributed $50 million each to expand the Skills Redevelopment Programme (SRP). The SRP provides training courses to raise the employability of less educated and older workers by equipping them with certifiable skills, so that they can find suitable employment. The Government will extend an additional $20 million grant to expand the training facilities and capacity to support the SRP.”
“It has already reduced posted rents by 10% in the first half of this year, and will implement a further reduction of up to 5% in the 3rd quarter. In addition, HDB will also grant a net rebate on its industrial land leases of up to 20%. Tenants of HDB industrial and commercial space will enjoy a flat 10% rebate on their gross rents. These rebates are estimated to cost about $80 million. JTC and HDB will be releasing more details on these additional concessions shortly. Rental rebates by Civil Aviation Authority of Singapore (CAAS) CAAS will also extend a 15% rebate on the rentals for its office, warehouse and retail tenants for 12 months with effect from 1st July 1998. In addition, it will continue with the rebate on airport concession fees which was given in the first half of 1998. These additional measures are estimated to cost CAAS $54 million. Labour Costs Labour costs form a significant proportion of business cost in Singapore. Appropriate wage restraint will be a key measure to keep labour costs down. The priority must be to protect jobs. Cutting wage costs was also a key response during the 1985 recession. However, at that time our wage system was too rigid. To trim wage costs, we had no choice but to cut the employers' CPF contribution rate. After the recession, we set up the flexible wage system. Over the years, we have built up a variable component of wages which can serve as a buffer and be reduced during difficult times. Today, in the civil service the variable component has increased to over 20% of annual wages, while the corresponding figure in the private sector is about 16%. This sizeable variable wage component will provide a useful first line of defence to reduce wage costs.”