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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“To safeguard the confidentiality of customer information, the proposed amendment requires a foreign supervisory authority which intends to conduct an inspection of its banks' operations in Singapore to obtain prior written permission from MAS before conducting the inspection. In addition, the foreign supervisory authority must be prohibited under its domestic laws from divulging information obtained from the inspection to other parties. If not, the foreign supervisory authority would have to undertake to MAS not to divulge the information to other parties. The foreign supervisory authority would only be allowed to examine credit facilities and the internal control systems of the Singapore branch and, with prior approval of MAS, other matters relating to the operation of the branch. Foreign supervisors would be prohibited from accessing depositor information of the branch. Presently, the Act does not require persons who have access to reports produced by MAS, pursuant to its inspection of banks, to keep such reports confidential. The Bill proposes to include a new provision in the Act to ensure that information in such reports is not misused for purposes other than its intended objective, which is the prudential supervision of banks. With the new provision, any person, including staff of banks, who has access to inspection reports prepared by MAS, is required to keep the information contained in the reports confidential. It would be an offence for such persons to disclose the contents of these reports to parties who are not authorised under any written law in Singapore to receive the information.”
“One of the basic principles embodied in the standards is the need for home supervisory authorities to exercise effective consolidated supervision over their bank's global operations. One way of achieving this is for supervisory authorities to inspect their banks' overseas operations. Although MAS routinely inspects banks, including foreign banks in Singapore, the Authority has received requests from a number of foreign banking supervisory authorities to inspect their banks' branches in Singapore directly in order to fulfil their responsibility under the BIS principles of consolidated supervision. The US bank regulators have been particularly keen to inspect their banks' operations in Singapore as bank examination is central to their supervision process. The major international financial centres, such as the United States, United Kingdom, Japan, Australia and Hong Kong, allow home supervisory authorities to inspect foreign banks operating in their jurisdictions. As an international financial centre, it is important that Singapore should cooperate more closely with other banking regulators to strengthen the supervision of large international banks whose operations could threaten the stability of the international financial system if they are not properly supervised, provided that this does not undermine depositors' legitimate right to secrecy on their banking information. The Bill, therefore, proposes to allow foreign supervisory authorities to inspect the Singapore branches of banks whose head offices are incorporated in their respective jurisdiction, subject to certain safeguards.”
“1 billion and $1 billion, respectively, and should have no difficulty meeting the requirement within the five-year grace period through profit retention and capital injection. The Bill also proposes to raise the minimum paid-up capital for newly-incorporated local banks from $800 million to $1,500 million. In order to bring up the paid-up capital requirement from existing banks in line with that of newly-incorporated banks, the existing local banks may be required to increase their paid-up capital to not less than $1,500 million at any time five years after the Amendment Act has come into operation. MAS will give sufficient time for existing local banks to meet with the requirement, when it is introduced. The Bill also proposes that the Monetary Authority of Singapore (MAS) be allowed to grant subsidiary banks of the local banking groups a longer grace period to meet the new minimum capital funds requirement. Notwithstanding this provision, it is MAS' intention to encourage these banks to merge with their parent banks in order that they could make better use of their resources and reap the benefits of economies of scale. The second key amendment proposed in the Bill is to allow foreign banking supervisory authorities to inspect their banks' operations in Singapore, which is presently not permitted. The collapse of a number of financial institutions with cross-border operations, such as the Bank for Credit and Commerce International (BCCI) in 1991 and Barings in 1995, had led banking regulators to re-examine the supervision of large international banks which culminated in the issue of a set of supervision standards by the Bank for International Settlements (BIS) for the supervision of banks with substantial international operations.”
“As an international financial centre, it is important for Singapore to review its financial laws and regulations in the light of international financial developments and trends to ensure that the laws and regulations continue to be effective in maintaining the soundness of our financial system. Against this background, let me explain the rationale for the proposed amendments to the Bill. One of the key amendments proposed in the Bill is to increase the minimum capital requirement for locally-incorporated banks. Since the last amendment of the Banking Act in 1993, the total assets of the six local banking groups have increased by almost $38 billion, or 27%, from $141 billion to $179 billion. The four largest banks rank among the top 200 banks in the world in terms of capital funds and among the top 300 by assets. In view of the strong growth in our local banks' business over the last few years and their plans for expansion into international financial markets, it is prudent to require them to further strengthen their capital to better protect depositors' interest and ensure that they have adequate capital resources to compete effectively in the global marketplace. The Bill proposes to raise the minimum capital funds requirement (defined as paid-up capital plus retained earnings and published reserves) for locally-incorporated banks from $800 million to $1,500 million. Local banks would be given a grace period of five years to comply. Of the six major local banks, the `Big 4' are already able to meet the requirement. The other two banks, namely, Tat Lee Bank and Keppel Bank, have capital funds of $1.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Banking Act was last amended in 1993. Since then, the international financial market has witnessed the collapse of Barings, the massive fraud in the New York branch of the Daiwa Bank and losses suffered by leading international financial institutions from trading in derivatives. During this period, the Japanese banking system was also adversely affected by the large exposures of its banks to the problem real estate sector. A number of the smaller Japanese banks had to be bailed out by the Japanese government. In addition to the need for proper regulation and strong internal controls, one of the key lessons learnt from these events is the importance of having strong capital to underpin banking operations. As banks venture into more sophisticated financial instruments, the risk which they undertake also increases, hence the need for stronger capital. Financial institutions with stronger capital are better able to withstand financial crises and to undertake risk. Another lesson from recent events is the need for closer cooperation among banking supervisory authorities in the supervision of financial institutions with international cross-border operations. As the world's financial markets become more closely linked, disturbances in one market are now transmitted more rapidly to other markets. This further underscores the need for closer cooperation among financial regulators in protecting the integrity and soundness of the international financial system.”
“The figure of 100 is low, I agree, and the reason is that it is extremely difficult to tax a person on what he considers to be property gains, unless the person is an established property trader and does it regularly and frequently. It is precisely this problem that we are introducing amendments to the Income Tax Act to change the law so that anybody who sells within three years will be considered as having made property gains during this period. This is the reason for it. SINGER CUP CRICKET MEET (Wielding and using of canes for crowd control) 6. Dr Kanwaljit Soin asked the Minister for Home Affairs if he will explain the incident where employees of a security company were seen to be publicly wielding and using canes for crowd control during the Singer Cup Cricket Meet. The Senior Parliamentary Secretary to the Minister for Home Affairs (Assoc. Prof. Ho Peng Kee) (for the Minister for Home Affairs): Sir, Police investigation shows that the guards were not issued with canes during the tournament. The canes were actually flag markers pitched on the field during the tournament. Towards the end of the game, the canes were used by some spectators against each other. Security guards picked the canes up to prevent the spectators from using them in a fight. According to Police at the scene, at no time did they see guards using the canes as a weapon to control the crowd. PURCHASE OF PRIVATE PROPERTIES BY MINISTERS 7. Mr Chiam See Tong asked the Prime Minister (a) whether he will name all the Ministers who have purchased private properties in Singapore in the years 1992, 1993, 1994, 1995 and 1996 in the first, pre-launch and soft launch offers; and (b) whether he will identify those properties, the prices at which they were purchased and the percentages of discount given, if any.”
“The Stamp Duties (Amendment) Bill will be introduced today and it will be passed at a subsequent sitting of Parliament after the Second and Third readings, probably next month. The Bill will allow stamp duties to take place with retrospective effect from 15th May, 1996.”
“Mr Speaker, Sir, with effect from 15th May 1996, gains from all property transactions within three years of its purchase will be deemed as income and taxed at the individual marginal tax rate or corporate tax rate of 26%. Prior to 15th May 1996, there were about 100 taxpayers taxed on income derived from property trading per year.”
“Sons and wife, immediate family. SECURITY GATES AT HDB BLOCKS 4. Mr Low Thia Khiang asked the Minister for National Development whether the installation of security gates at Housing and Development Board blocks like the one proposed in the Interim Upgrading Programme for 11 blocks at Bedok is desirable and should be encouraged.”
“The wife is considered in law as part of the husband because they are not divisible. In other words, the wife would be a dependant in that sense.”
“Sir, the normal interpretation of "financial dependence" would be the dependence of a child on the parents. In other words, a child is dependent on the parent. Therefore, if the parent buys something on behalf of the child, the child is dependent. Another sibling or relative who is not financially dependent acts on his own, in other words, he buys things on his own account. Therefore, there is no linkage in that sense. That is the general guideline and I think it is quite a prudent and adequate one.”
“Furthermore, some related party-transactions involving the acquisition of foreign assets by the listed company may be subject to approval by the authorities here. The timing of such approvals is therefore frequently beyond the listed company's control. Except for these two differences, all other requirements under the revised Clause 1010 will also apply to listed companies' sale of properties to their connected persons. In addition to the new two-tier system, the SES will exempt certain related-party transactions where conflicts of interest are immaterial from Clause 1010. The main categories of transactions that will be exempted are as follows:-- (a) the grant of options, and issue of shares pursuant to the exercise of options under an employee share option scheme approved by the Stock Exchange; (b) transactions between a listed company and its partly-owned subsidiary or associated company if none of the listed company's substantial shareholders or director is a substantial shareholder of that partly-owned subsidiary or associated company in his personal capacity; (c) transactions between a listed company and another company where the only connection between the two is certain common directors who in aggregate own less than 5% of either company; (d) provision of financial services by a financial institution in Singapore on normal commercial terms and in the ordinary course of business; and (e) transactions with past directors and substantial shareholders. I trust this answers Mr Lee's question.”
“If the new two-tier system had been in place, only 22%, (or 38 cases) of the 172 related-party transactions last year would have required shareholders' approval. However, to be consistent with the Stock Exchange's latest guidelines on the sale of properties to connected persons and directors' relatives, this new two-tier system will not apply to sale of properties to connected persons. All such property sales must be approved by shareholders regardless of the value of the transactions. The Stock Exchange is of the view that sale of properties is different from other related-party transactions because properties are not homogenous products and the pricing of properties is complex and subject to frequent market changes. Furthermore, there have been public complaints about listed companies selling properties to related parties at discounts and giving them priority in selecting and booking properties. As such, the SES considers it more appropriate to subject all property sales by listed companies to related parties to shareholders' approval. Unlike the SES' guidelines on the sale of properties to connected persons, (which requires shareholders' approval for such sales to be obtained within six weeks of the sale or proposed sale) the new Clause 1010 does not specify any time period within which shareholders' approval must be obtained. This is because Clause 1010 applies to all related-party transactions, most of which require opinions from independent financial advisers and independent directors. As such transactions and their terms are usually much more complicated than property transactions, independent opinions can normally be given only after detailed evaluation and due diligence. This may require considerable time.”
“Mr Speaker, Sir, Mr Stephen Lee has asked whether the Stock Exchange of Singapore (SES) will issue new guidelines to exempt certain related-party transactions which are now covered under Clause 1010 of the Listing Manual. A transaction caught under this clause requires the approval of independent shareholders at the general meeting unless a waiver has been granted by the Stock Exchange. I am sure that Mr Lee would be aware by now that the Stock Exchange had issued a new set of guidelines on the sale of properties to connected persons and directors' relatives on 22nd April 1996, and subsequently, a revised Clause 1010 on 26th April 1996. After studying the operation of Clause 1010 in the past and similar rules in other jurisdictions such as the United Kingdom, Australia and Hong Kong, the SES issued an amended Clause 1010 which provides for a new two-tier system to regulate related-party transactions. Under this system, related-party transactions below the lower of $500,000 or 3% of the latest net total assets (NTA) of the listed company will not require shareholders' approval but only disclosure in the annual report by aggregating transactions with the same related party, where each transaction exceeds $5,000. Related-party transactions which fall between this first-tier and the lower of $3 million or 5% of NTA will not require shareholders' approval but must be announced immediately. Only related-party transactions above $3 million or 5% of NTA, whichever is lower, will require shareholders' approval. Based on the Stock Exchange's estimate, the new clause will reduce the number of related-party transactions which require shareholders' approval considerably.”
“Under this section, money-changers and remitters are required to keep and maintain records of all transactions of $10,000 and above by customers. The format for the register, which includes date of transaction, particulars of customer, and amount transacted, is stipulated by the MAS in a standard format. The records and register should be made available for inspection by the MAS from time to time. MAS has also the power to prescribe auditing procedures but it has been the MAS' policy to leave this issue to the auditors themselves to set their own standards. If an auditor appointed does not meet his obligations according to MAS, the licensee will be required to appoint new auditors. The purpose of the proposed annual audit of licensees by external auditors is to ensure that the licensee complies with the relevant laws and regulations and the customers' funds are properly segregated and accounted for. While this may increase the operating cost of licensees, it is considered an essential measure to protect the interest of the public and the remitters, particularly against a background of increasing volume of money-changing and remittance businesses due to increase in tourist traffic and foreign worker traffic. I think I have answered Dr Ow's questions Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. The House immediately resolved itself into a Committee on the Bill. -- [Dr Richard Hu Tsu Tau]. Bill considered in Committee; reported without amendment; read a Third time and passed. HOUSING AND DEVELOPMENT (AMENDMENT) BILL Order for Second Reading read.”
“So far, we have not encountered many more defaults. So, hopefully, this $100,000 is sufficient for the time being. Dr Ow also wants to know why there is no minimum capital fund requirements imposed on remitters and money-changers. Money-changers do not keep customers' funds as money-changing transactions are on-the-spot transactions. Therefore, there is no need to require money-changers to keep minimum capital funds to protect their customers' interest. They conduct on-the-spot cash transactions. In the case of remitters, they are required to furnish a security deposit of $100,000 in the form of bank guarantee. This is for the time being considered sufficient protection for the depositor rather than a minimum capital amount. The reason is because the minimum capital sum held by the company may not be entirely available for meeting defaults because if the remitter goes bankrupt, such capital funds would have to meet all the other creditors' requirement and only a portion will be available to protect the remitter's interest. So security deposit is a better form of insurance for the remitter. Dr Ow has also asked whether the penalty for contravening section 17A is sufficient for the severity of the offence. MAS, following an inspection of remitters in late 1994, discovered, as I mentioned earlier, that some of the remitters were handling remittance of more than $150,000 per month. In view of this, the penalties were increased with a fine of $50,000 or jail of up to two years. MAS considers that these penalties are sufficiently stringent to deter licensees from breaching this requirement for the time being. Dr Ow is also concerned whether the requirement under section 17B for licensees to appoint external auditors may not increase their cost unnecessarily.”
“However, the benefits of collecting these returns will have to be weighed against the additional cost that the licensees would have to incur in complying with the requirement. Dr Ow has also asked whether there was data available on the rise of complaints against money-changers and remitters. The number of complaints against money-changers and remitters has increased from 10 in 1990 to 22 in 1995. In the first quarter of 1996 alone, six complaints were received. A number of the complaints against money-changers were made by tourists. He has also asked whether there were cases where customers suffered losses as a result of default by the licensed remitters and, if so, what are the amounts involved. There was one case in 1991. Fortunately, the total number of such defaults has been relatively small. There was one case in 1991 where a foreign partner of a licensed remittance agency absconded with customers' funds amounting to $20,000. Prior to 1992, the security deposit for a remittance licence was only $10,000, so that the claimants could not be refunded in full. They eventually got back half of their remittance from the security deposit. Total losses of $10,000 were suffered by 34 customers of the licensee. As a result of these incidents, security deposit for remittance licence was increased from $10,000 to $50,000 in December 1991. Despite the increase in the security deposit, the number of remitters continues to increase and their scale of operations also expanded rapidly because of the large increase in the number of foreign workers. From MAS' inspection of remittance in late 1994, it was noted that some of the remitters handled more than $150,000 per month. Consequently, the security deposit was again raised to $100,000 in mid-1995.”
“Mr Speaker, Sir, Dr Ow has asked about the change in numbers of money-changers and remitters between December 1979 and end of last year. In 1979, there were 240 money-changers. As at the end of December last year, there were 452. As far as remitters are concerned, there were 54 in 1979 and today there are 99. Dr Ow also wants to know what is the estimated value of the money-changing transactions and the amounts of remittance handled per day. Unfortunately, complete information on the volumes of money-changing and remittance businesses is not available as many of these businesses are small sole-proprietorships and participants are also engaged in other businesses such as provision shop and stationery shop transactions and therefore do not keep proper records of their transactions. This is especially so for the large number of small money-changers. As for remittance businesses, the volumes vary widely, depending on whether the licensees conduct remittance business as their main business or as a secondary activity. Based on MAS' inspection of some remittance licensees, MAS has found that some of them who conduct remittance business as a secondary business handled only about $50,000 worth of remittance business a month. Some medium-sized licensees handle $500,000 worth of remittances monthly while some licensees whose main business is remittance can handle up to $3 million each per month. As one of the provisions of the Bill is to require licensees to keep proper records of their transactions, MAS may consider asking licensees to submit periodic returns on their business volumes in order to have more accurate information on the size of this business in the future.”
“A maximum fine of $50,000 or two years imprisonment or both, is proposed for any breach of this provision. Such segregation of customer funds from the own funds of a financial institution are also provided for in the Securities Industry Act and Futures Trading Act. Clause 12 also introduces a provision to require money-changers and remitters to appoint external auditors to conduct annual audits of their operations and compliance with relevant laws and regulations. The provision also empowers MAS to remove auditors whose standards of audit are found unsatisfactory. Presently, banks conducting money-changing and remittance businesses are exempted from the Act. Clause 14 proposes that the exemption be extended to: (a) merchant banks approved by the MAS; and (b) finance companies approved by MAS to conduct money-changing and remittance businesses. The implementation of the proposed amendments to the Act would serve to better protect the interest of the public and improve the standard of service provided by money-changers and remitters as they strengthen the effectiveness of the Act in deterring fraud and other misdemeanours. Sir, I beg to move. Question proposed.”
“Non-compliance would be an offence carrying a maximum fine of $10,000. Clause 9 also proposes that MAS be given the power to require licensees to submit returns and any other information required for its supervisory purposes. The proposed maximum penalty for non-compliance of this provision is a fine of $5,000 and a fine of $1,000 per day for a continuing offence. MAS is presently empowered under the Act to inspect the premises and the books and documents of a licensee or person suspected of conducting money-changing or remittance business without a valid licence. A person who fails to allow such inspection or to produce any book or document for this purpose is liable on conviction to a fine of not more than $2,000. As the maximum penalty for non-compliance with this provision is relatively light, the Bill proposes that the present penalty be increased to $5,000 as a more effective deterrence against any action to impede or obstruct MAS in its inspection. Further, a penalty of $1,000 per day for a continuing offence is also proposed. To allow MAS to take appropriate measures to protect the interests of the public, clause 11 proposes that MAS be empowered to issue directives to a licensee to rectify or restrict its operations where an inspection by MAS has revealed that such business had been conducted in a manner detrimental to the interests of its customers. There are similar provisions in the Banking Act and the Finance Companies Act. To prevent misuse of customer funds by remitters, clause 12 of the Bill introduces a provision to require funds received by a remitter from customers for remittance to be segregated from its own funds and to deposit these customer funds in a trust account with a bank.”
“The Bill introduces a provision to require licences to be displayed in a conspicuous place where such business is being conducted. Any non-compliance would be deemed an offence carrying a maximum fine of $5,000. The Act currently does not expressly empower MAS to determine the period for which a licence may be renewed. Clause 6 of the Bill clarifies that MAS may determine the period of validity of licences, which would normally be for one year. It also empowers MAS to prescribe different licence fees in respect of different classes of licences and clarifies that licence fees would not be refundable should a licence be cancelled or revoked, or if a licensee were to cease business, before expiry of the licence. To serve as a deterrent, a new provision is proposed in clause 7 to make it a punishable offence for any person to furnish false or misleading statements to MAS when applying for or renewing a licence. The proposed penalty is a fine not exceeding $10,000 or imprisonment not exceeding one year, or both. Currently, licences would be withdrawn from any licensee who becomes bankrupt. Clause 8 proposes to formalise bankruptcy as a ground for withdrawal under the Act. It also proposes that the Act be amended to clarify that a revocation order for a licence would become effective 30 days after it has been served on a licensee. However, if a licensee has appealed to the Minister within the 30 days, the order would not become effective until the decision by the Minister. A new provision is proposed in clause 9 to require licensees to keep complete records of all their money-changing and remittance transactions and to retain such records for at least six years to facilitate investigations for drug money laundering and other illegal activities, and for inspections by MAS.”
“In considering this proposal for more stringent penalties, Members of the House may wish to note that the Court had commented in sentencing an unlicensed money-changer and remitter in July 1995 that the present maximum penalties of $5,000 and/or six months imprisonment were too light. To ensure that licences are granted only to persons who are fit and proper, it is proposed that the Monetary Authority of Singapore (MAS) be empowered to request for any information as considered necessary to assess applications for or renewal of licences. In the case of a renewal, a provision has been introduced in clause 4 of the Bill to clarify that a licensee may continue with his business pending the outcome of his application. As a safeguard, remitters are presently required, as a condition of their licences, to lodge a banker's guarantee of $100,000 with MAS for the purpose of compensating customers for losses in the event of default by the remitter. Clause 5 of the Bill proposes to formalise this safeguard under the Act. A licensee who wishes to set up an additional place of business presently has to apply for a separate licence for each additional location as the Act does not expressly provide for branching. To streamline procedures for branching, clause 5 of the Bill also introduces a provision to allow branches to be established by money-changers and remitters with approval from MAS, and to allow MAS to charge licence fee for each branch. A fine not exceeding $10,000 is proposed for contravention of this provision as well as a fine of $1,000 per day for a continuing offence. Although stipulated as a condition of licence, it is a common complaint by members of the public that some money-changers and remitters do not display their licences.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Money-changing and Remittance Businesses Act has not been amended since its enactment in 1979. Over the last decade, the number of money-changers and remitters licensed under the Act has grown significantly to 452 and 97 respectively. This has been accompanied by a rise in the number of complaints from members of the public, including tourists. These complaints range from poor service, uncompetitive exchange rates, delays in remittance of monies to beneficiaries, to more serious cases of unlicensed operators and fraud. In one instance, a foreign partner of a licensed remitter absconded with monies of 35 customers amounting to $24,000. There is also concern that money laundering could be perpetrated through money-changers and remitters. It is therefore timely that the Act be revised. I will now explain the major provisions of the Bill. Remittance business is presently not defined under the Act. Clause 2 of the Bill introduces such a definition. It also clarifies under section 2 that any reference in the Act to a document or a record would include that stored on film, disc, magnetic tape or on any other medium. To deter illegal money-changing and remittance businesses, clause 3 of the Bill proposes to raise the maximum term of imprisonment for the conduct of such business without a licence from six months to two years, and the maximum fine from $5,000 to $50,000. For a continuing offence, a maximum fine of $1,000 per day is proposed.”
“Surely the public would know if the information is published elsewhere. Does it have to be in the Budget book? Would you like to publish it in the Hammer?”
“The answer is no. I said that we would not do it.”
“The figures have been published in the past.”
“I have said that I will provide the figures. Have you not listened?”
“The Member's notion is quite absurd. This is public information. I have said that if he needs the information, he can file a Question and he will get it. Removing the Appendices from the Budget book, as I said, was merely to ensure that we do not overload the Budget book with information which is unnecessary and easily available in the Parliament Library. Why publish all this information when it is occasionally needed by the public? Most of the users are the Ministries themselves. Mr Low Thia Khiang: Would the Minister agree that the figures are of public interest?”
“Mr Speaker, Sir, Appendix D has not been in the Budget book since FY 1994/95. It contains salary codes and the corresponding basic salary scales. Appendix C was taken out this year. It listed political appointments and their corresponding basic salaries and civil service personnel groups and grades together with their corresponding personnel and salary codes. Appendix D was dropped because since the general civil service salary revision which took effect on 1st January 1994, officers received, in addition to their basic monthly salary, the monthly variable component (MVC), the non-pensionable variable payment (NPVP) and the non-pensionable component (NPC). Furthermore, officers on the same grades but under different medical schemes are now on different salary scales. Appendix D would have had to be considerably enlarged to reflect all these changes. Appendix C was retained in the FY94/95 Budget book because even without salary codes, it was a useful central reference for the personnel codes which the Ministry of Finance needed to issue establishment warrants. It was removed this year because with the implementation of the Budgeting for Results programme and the lifting of head-count controls, this central reference is no longer necessary. Instead of Appendices C and D, a salary manual with details of civil service appointments has been prepared for use by the Ministries. A copy is available in the Parliament Library. For political appointments, if the Member files a Question, I will provide the information he needs.”
“Sir, I beg to move, "That the Bill be now read a Third time." Question put, and agreed to. Bill accordingly read a Third time and passed. APPOINTMENT OF SELECT COMMITTEE TO VERIFY THE HEALTHCARE SUBSIDY OF GOVERNMENT POLYCLINICS AND PUBLIC HOSPITALS (Motion)”
“Mr Deputy 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 Clause 2 of Article 148 and Clause 2 of Article 148(C) of the Constitution for additional expenditure in excess of the provisions authorised by the Supply Act, 1995. This additional sum has been presented as Supplementary Estimates which have been considered and approved by the House as Command Paper No. 3 of 1996. Sir, I beg to move. Question put, and agreed to. Bill accordingly read a Second time. Third Reading”
“Sir, I beg to move, "That the Bill be now read a Third time." Question put, and agreed to. Bill accordingly read a Third time and passed. SUPPLEMENTARY SUPPLY BILL Order for Second and Third Readings read.”
“Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time." In accordance with Article 148 of the Constitution, heads of expenditure to be met from the Consolidated Fund and Development Fund, other than statutory expenditure, have to be included in a Bill to be known as the Supply Bill. The purpose of the Supply Bill before Members is therefore to give legislative approval for the appropriations from the Consolidated Fund and Development Fund to meet expenditure in the financial year 1st April, 1996 to 31st March, 1997. The heads of expenditure and the sums that may be incurred in respect of each head are shown in the schedule to the Bill. These have been approved by the House in the Main and Development Estimates of Expenditure for the financial year 1st April, 1996 to 31st March, 1997, and appear on pages 39 and 40 of Command Paper No. 4 of 1996. The Supply Bill, when approved, will empower me to issue warrants, authorising expenditure up to the amount for each head as shown in the Bill to be paid out from the Consolidated Fund and the Development Fund. Sir, I beg to move. Question put, and agreed to. Bill accordingly read a Second time. Third Reading”
“Sir, I beg to move, "That Parliament doth agree with the Committee on the said resolutions." Question put, and agreed to. Resolutions accordingly agreed to. SUPPLY BILL Order for Second and Third Readings read.”
“Sir, I beg to report that the Committee of Supply have come to certain resolutions. First Resolution reported - "That the sum of $26,761,608,640 shall be supplied to the Government under the heads of expenditure for the public services shown in the Main Estimates for the Financial Year 1st April 1996 to 31st March 1997 contained in Paper Cmd. 4 of 1996." Second Resolution reported - "That the sum of $16,140,104,770 shall be supplied to the Government under the heads of expenditure for the public services shown in the Development Estimates for the Financial Year 1st April 1996 to 31st March 1997 contained in Paper Cmd. 4 of 1996."”
“Restrictions on foreign participants in domestic stockbroking firms were liberalised in 1987 when the Exchange allowed foreign financial institutions to acquire up to 49% of shareholdings in local SES members, and increased the level of participation to 70% currently. In 1992, the Stock Exchange created a new category of international members to allow reputable foreign companies to own 100% of their seats on the Stock Exchange, to service their foreign clients as well as wholesale domestic customers. To encourage more foreign security firms to participate in the Exchange, the Stock Exchange in early 1995 allowed foreign financial institutions to become approved foreign brokers of the Exchange. Approved foreign brokers are now permitted to have direct access to the Exchange's trading system and to trade in all securities that are quoted on CLOB in foreign currency. To date, nine foreign security firms have been approved in this category. The MAS and the Stock Exchange are committed to continue to expand the liberalisation of the stockbroking industry in Singapore. However, I think we should recognise that this expansion cannot be at an excessively fast pace, in order to ensure that the integrity of the system is not undermined. 4.30 pm”
“Sir, Mr Choo Wee Khiang has raised some detailed questions on tax incentives for companies investing overseas. As these are rather specific questions which would take time to explain, I will deal with him directly. Otherwise, we are going to run out of time again. Mr Leong Horn Kee has raised a question on the promotion of the stockbroking industry. Companies which want to engage in the business of dealing with securities need to be licensed under the Securities Industry Act, and MAS is the licensing authority. In issuing such licences, MAS has to take into consideration the track record of the applicant, his particular expertise, integrity as well as the adequacy of his financial resources. Foreign institutions will also be required to be properly regulated by their home supervisors. The number of licensed dealers in Singapore has increased by 59%, from 51 in 1985 to 81 presently. Of the 81 licensed companies, 48 are foreign financial institutions who are non-members of the Stock Exchange. The remaining 33 companies are members of the Singapore Stock Exchange and they comprise 7 international members and 26 full members, 11 of which are joint ventures with foreign shareholders. MAS has also licensed 123 foreign firms as investment advisers to engage in the provision of investment advisory service. Since 1986, the Stock Exchange has introduced several measures to expand the stockbroking industry. Following the Pan-El crisis, member firms of the Exchange were corporatised, and banks have been allowed to become members of the Stock Exchange.”
“For those questions I am unable to respond, I would suggest that the Members approach me directly. I have the answers here, anyway.”
“If he has specific questions, I suggest that he discusses them with me directly outside the House. Sir, have I run out of time?”
“Although this concession has been withdrawn, in general terms, retirement benefits accrued before 1st January 1993 will continue to remain tax exempt upon withdrawal by employees. And benefits paid out from CPF, death gratuities and compensation for disabilities would also remain tax exempt. Further, Government pensions and those pension schemes specified under the written law will also remain tax exempt, since pensioners suffer a higher tax liability due to their lower CPF contribution rates.”
“We have joint ventures with Malaysian Capital Ventures, the partners of which include the Malaysian Employees Provident Fund Board and financial conglomerate, Rashid Hussain. Furthermore, we have co-invested with the Thakral Group of Singapore which has investments in Hong Kong, China, India and so forth. We have co-invested with DBS Land, Orchard Parade, Temasek Holdings in various ventures in the region. In this way, Government hopes to provide seed money and the stimulus for our companies to go abroad and, hopefully, some of them eventually will turn out to be significant conglomerates. Mr Leong Horn Kee has also raised some questions about the Government's Autonomous Agency concept. I think I have said in my Budget speech that the BFR and AA reform system are intended to create a framework and culture to motivate public organisations to be more efficient, more effective and to be more performance oriented. And I do not think I need go into these details again. He has also expressed concern as to whether the introduction of AAs might lead to fee increases. In my Budget round-up speech, I have also given the assurance that this will not be so and therefore there is no need to take revenue collecting agencies out of the AA scheme. Whether other countries are operating such a system, as far as I am aware, the only country which has gone beyond us in this approach is New Zealand. I believe their system has been working quite well to date. Mr John De Payva has asked a question on tax exemption on retirement gratuities. I take it that he is concerned about the withdrawal of tax-free retirement gratuity, which was previously exempt from tax but in the 1993 Budget Statement, this concession was withdrawn. Is that what he was referring to?”
“At the present time, the bulk of Government's external assets are held in the form of financial instruments, with some holdings in real estate and venture capital funds. This is because these financial assets are the most liquid and the volume is available to accommodate the large size of Government's assets. The investments are highly diversified by country, by asset class and by currency. We have holdings in the major OECD countries such as the United States, Japan and Europe, and increasingly in the East Asian countries which are growing very rapidly. Our financial investments are principally in the form of equities or shares, fixed income instruments such as bonds, and are held mostly in the major reserve currencies which include the US dollar, Yen and Deutschemark, with varying amounts in the regional currencies. The Government's investment objective is to achieve good long-term returns on a sustainable basis. One of our key considerations is to protect the real value of Government's assets. We therefore do not take undue risks in order to maximise gains. Overall, investment returns over the last 10 years have averaged well over 5% in Singapore dollar terms. There is no fixed investment policy and the distribution of the assets between country asset class and currencies is reviewed periodically by the GIC board. On the question of whether the Government co-invests with companies, the answer is yes. And this is to avoid unnecessary competition with the private sector and to encourage Singapore companies to expand overseas. We invest with GLCs and other private Singapore companies directly, or with overseas partners of suitable quality. For example, we have co-investments in the Asian Infrastructure Fund with the American Insurance Group (AIG).”
“Finally, one more point raised by the Member. He asked whether there is a contradiction in the use of GDP as a proxy to the increase in measuring output. The Member should note that the output of the public sector is normally estimated by expenditure. This is agreed. Therefore, it would appear prudent to use the growth in Government expenditure as a proxy to ensure that this growth in Government expenditure does not rise faster than the GDP growth as a whole. In this way, we can ensure that Government size will not rise faster, as measured in terms of expenditure, than GDP growth itself. [Mr Deputy Speaker in the Chair] 4.15 pm Mr Lew Syn Pau has asked about Government's investment policy and whether there are guidelines on types of investments and geographical distribution of our investments. I would like to mention that the Government's assets are managed by three wholly-owned Government agencies. The largest is the Government of Singapore Investment Corporation (GIC), which is wholly responsible for the management of Government's external assets or foreign assets. The others are Temasek Holdings and MND Holdings who manage the bulk of Singapore Government's domestic assets. For Mr Lew's information, if he does not already know it, the GIC is a private investment management company and its board is chaired by the Senior Minister. Members of his board include Deputy Prime Minister BG Lee Hsien Loong, Deputy Prime Minister Dr Tony Tan, the Minister for Finance, Mr S. Dhanabalan and Mr Lee Seng Wee, the Chairman of OCBC Bank. Its Managing Director is Mr Lee Ek Tieng who is simultaneously the MD of MAS. They manage funds with a total team of 350, of which a large proportion are investment professionals.”
“Controlling the total amount of expenditure is a more effective way of controlling the growth of Government rather than trying to pinpoint specific items to regulate. The reason to give AAs more manpower autonomy is to allow AAs to have more flexibility to manage its resources to cater for increases in workload or demand for its services from the public. A strict manpower count may, in fact, restrict an AA's ability to respond to public requirements. We believe that it is very improbable that an AA, subject to overall financial control, will willy-nilly go out and increase its manpower requirement because the cost associated with it will immediately rise. And it is most improbable that a series of AAs will all go out at the same time, therefore blowing head count figures through the roof. Finally, the Member has asked about the progress of SIGMA. SIGMA was first implemented in April 1992. To-date, SIGMA has been implemented substantially in all Ministries. SIGMA is a management accounting system which requires public sector managers to access a management accounting system for full and accurate costing of their outputs in terms of goods, services and activities for the derivation of output-based funding formulae. Therefore, it is a necessary precursor to the introduction of AAs. It is also used in the formulation of efficiency targets, such as unit cost targets and financial performance targets, such as cost recovery ratios and the determination of fees and charges. The management accounting system is also essential as a performance monitoring tool to monitor expenditure so as to optimise utilisation of allocated provisions to attain pre-specified outputs as well as to measure deviations from efficiency targets so that corrective actions may be taken on a timely basis.”
“He has said that the introduction of the new control system has led some members of the public to be concerned that some departments may be over-zealous in their enforcement actions, particularly those departments which are responsible for enforcing regulations and rules, such as the Traffic Police and Hawkers Department, and therefore may in fact be obliged to issue more summonses or fines to justify their outputs. I would like to assure the Member that the Ministry of Finance will work with the AAs to decide on the appropriate indicators to be used for measurement of output. Clearly it would not be in the public interest to measure performance of Traffic Police on the number of fines which they can successfully levy. I would hope that Traffic Police will, in fact, do the opposite, that the measurement of their performance will be based on the reduction in the number of accidents, and in the case of Hawkers Department, improvement in the reduction of complaints from customers, and so forth. In other words, the criterion would be a positive and not a negative one. Dr Ow has also asked whether the lifting of the head count control under the new system is consistent with Government's policy of not expanding the size of Government. I should point out that Government's intent is to keep the increase of its expenditures at not more than the rate of growth of the economy as a whole. Previously, this was done by keeping a tight rein on head count as Government's operating budget is determined to a large extent on the manpower size. But under the BFR framework, the allocation of operating budget is now based on GDP growth rate which will still act as a way to control the growth of Government expenditure.”
“I wish to point out that the operating and development expenditure figures in the Budget book and the Annual Economic Survey (AES) are different because the Budget book figures are for the fiscal year commencing on 1st April while the AES figures are based on the calendar year. So there is a three-month gap in the estimates. As to which set of figures is more reliable, the Member must note that the FY95 figures in the Budget book remain at best an estimate because, at the time of budgeting, the fiscal year is not over. Whereas the AES figures are actual expenditures incurred for the year up to the calendar year in question. So clearly, the AES figures are more accurate. As I explained during the Budget debate, my Ministry has been taking steps to achieve better estimates and reduce under-spending particularly on development expenditures which have shown the largest fluctuations. The steps taken include the abolishment of the central block vote system under which the Ministry of Finance provides for urgent initial expenditures on new projects which have, in fact, not been utilised. We have also introduced a system whereby development budgets submitted by Ministries are moderated based on the contracted amount and their fund utilisation rates based on their track record over the past three years. And major development projects will now be monitored much more closely to ensure that progress is satisfactory. As a result, the Member may note that for fiscal year 1995, the difference between budgeted and revised development estimates is only about 4% compared to variances ranging between 12% and 25% in the past five years. I will take Dr Ow's comments on the reform of the civil service management system at the same time.”
“Sir, Dr Ow Chin Hock has asked about the number of individuals who would still be paying income tax after the structural changes proposed in the FY96 Budget. For the Year of Assessment 1995, the number of individuals still paying income tax is about 444,000. As a result of the structural change, the number is expected to decrease to 417,000. However, Members should note that as each year passes and incomes of the individuals rise, more taxpayers will eventually come back into the tax net. I have made available a table showing the tax burdens for individuals under the existing tax system and the proposed changes showing the amount of tax savings both in money terms and percentage terms under the two tax regimes. Dr Ow has also asked what is the total amount of tax and non-tax revenue collected from motor vehicles. The total amount of tax and non-tax revenue collected from motor vehicles was $2.864 billion in FY92, $4.089 billion in FY93, $4.589 billion in fiscal year 1994 and it has reached $3.644 billion in the first 11 months of fiscal year 1995. Dr Ow also suggested that we should treat HDB 3-room residents more kindly because they seem to be receiving less of Government's budget giveaways. This is indeed so because the majority of them do not pay income tax and therefore will not enjoy the income tax incentives. I am therefore prepared to review the rebates granted to 3-room flat residents and adjust the PUB rebates so that they get a more equitable share of Government's handouts. Dr Ow has raised questions about the accuracy of the operating and development expenditure figures reported in the Budget book and compared them with figures in the Annual Economic Survey.”
“4% of payroll. Employers must recognise that they are the ones who ultimately reap the benefits of training their employees. We understand that some employers fear that an employee might leave them after being trained. Others face shortages of manpower which restrict their ability to release their employees for training. In view of these concerns, tax route may not be the single best solution in encouraging more employers to train their employees. The National Productivity Board is now exploring other ways to further encourage the training and upgrading of employees. The Minister for Trade and Industry has also agreed that he will elaborate on this issue in the Committee of Supply. Finally, Mr Speaker, Sir, allow me to sum up. Singapore has come a long way. We have put in place sound fiscal economic policies. These will put us in good stead to face the challenges of the future. Nevertheless, we should remain vigilant in the face of increasing competition and uncertain environment. But I am confident that we will succeed. With our solid foundation and spirit, character and the quality of our people, we shall stay ahead. Let us proceed to ride on the momentum of our success to secure a brighter future for Singapore. [Applause.] Question put, and agreed to. Resolved, That Parliament approves the financial policy of the Government for the financial year 1st April, 1996 to 31st March, 1997. ADJOURNMENT Resolved, "That Parliament do now adjourn." - [Mr Wong Kan Seng]. Adjourned accordingly at Twenty-Seven Minutes past Five o'clock pm. Committee of Supply - ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL 1996 TO 31ST MARCH 1997 (Cols. 1045 - 1048) Annex 1 & 2 - SAVINGS FROM FY 96 BUDGET, NET BENEFITS FOR DIFFERENT TYPES OF FLATS (Cols. 1049 - 1050)”
“These were announced in the 1994 Budget. Furthermore, unilateral tax credits for overseas employment income and directors' fees are provided as a further incentive for those who venture overseas. According to the Department of Statistics, Singapore's direct investments abroad reached $37 billion in 1994, of which $21 billion or 57% was in this region. There has been some concern that the Government is not doing enough to encourage companies to train and re-train their workers, especially in the case of SMEs. The Government recognises the importance of encouraging companies to train and upgrade the skills of their employees to meet the changing needs of our economy and keep our workforce employable and competitive. At present, employers are allowed a tax deduction for expenses incurred in training their employees. In addition, grants are available from the Skills Development Fund and Economic Development Assistance Scheme. In 1995, the Skills Development Fund allocated $67.7 million to employers to defray their cost of training. Funds were used to support the training of 500,000 workers, about one-third of the workforce. A number of schemes have also been put in place by the National Productivity Board and Institute of Technical Education to assist companies in training their employees. These include schemes to help companies implement flexible and cost-effective on-the-job training as well as other programmes to upgrade workers with lower education levels. Despite the assistance available, not all SMEs are making use of it to train their employees. The challenge is how to encourage them to do so. Although employers on the whole invest about 3.4% of their payroll in training, companies with less than 25 employees are spending less on training, averaging only 1.”
“The Local Enterprise Technical Assistance Scheme provides grants to help SMEs to modernise, upgrade and improve their management and business operations. In 1995, a total of $9.5 million was given to 800 cases. Currently, these schemes are provided by an extensive multi-agency network. To derive maximum synergy, the Local Enterprise Upgrading Centre, under the soon to be formed Singapore Productivity and Standards Board, will provide an integrated package of services to assist local companies to upgrade and grow. For SMEs planning to go regional, an International Business Institute (IBI) will soon be set up. The IBI will provide information and knowledge on how to conduct business in the region. It will also conduct programmes to prepare executives, managers and their families for overseas attachments. The IBI is expected to be in operation by the second quarter of this year. A Member has asked specifically for the amount of venture funds disbursed to SMEs. The total pool of venture capital funds under management in Singapore at the beginning of 1995 was $5.3 billion. As at end December 1995, some 190 local companies, of which 80% are SMEs, have received venture capital funding. Of these SMEs, a total of 27 have gone public with a market capitalization exceeding $5 billion. The Minister for Trade and Industry has said that he will elaborate on SMEs during the Committee of Supply. Members have asked for measures to encourage regionalisation. Currently we have a number of measures to encourage people to regionalise. Apart from incentives aimed at companies, tax rates used to compute non-tax resident tax reliefs under the Income Tax Act have also been reduced. In addition, there is also tax exemption of CPF contributions in respect of overseas posted employees.”