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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“Companies are free to give medical benefits even beyond this 2% figure if they wish to do so, but such benefits will no longer be tax-deductible. Government's aim is to pre-empt a future problem and not to deprive any workers of existing medical benefits. Most companies (85%) will be unaffected by this 2% cap, as their medical benefits form less than 2% of payroll. Government will give companies which have already exceeded the 2% cap in Year of Assessment 1992 time to adjust to the new rules. These companies will not have to pay tax on the entire amount of the excess above 2% immediately. In the first year, they will be allowed to deduct up to 4% of payroll or their percentage in Year of Assessment 1992, whichever is the lower. This transitional cap of 4% for such companies will be reduced gradually by 0.5 percentage point per year until it reaches 2% after 5 years. The cap for new companies will be 2%. For companies enjoying concessionary tax treatment, the resulting increase in income from disallowing expenses in excess of the cap will not be treated as concessionary income but will be taxed at the full corporate tax rate. Government is also reviewing the medical benefits of public sector employees. Details will be announced later in the year. I will now move on to deal with personal income tax changes for FY93. Personal Income Tax Changes Individual Income Tax Rebate Our economy grew by a satisfactory 5.8% in 1992. Singaporeans have worked hard to achieve this despite the sluggish world economy. As encouragement for continued effort, I have decided to give an across-the-board one-off rebate of 5% on individual income tax in Year of Assessment 1993. The estimated revenue loss to Government is $91 million.”
“This difference in tax treatment between medical benefits and cash salaries reduces the incentive for both employers and employees to be cost-conscious in consuming medical services, as part of the cost of these services is borne by the Government in the form of forgone taxes. In the US, employer-provided medical benefits enjoy unlimited tax exemption. As a result, these benefits account for 10% of all health care spending. According to a recent report on the US automobile industry, the cost of steel per US-made car is less than the cost of medical benefits per car. Many experts who have studied the problem of high medical costs in the US have concluded that this tax exemption is a major cause of the high costs, and that any serious attempt to contain health costs must include setting a cap on tax-free medical benefits. However, it is extremely difficult for the US to do so now, after medical costs have risen and the high medical benefits have become the norm. We do not as yet have a serious problem in Singapore. A recent survey of 325 companies by the Inland Revenue Authority of Singapore showed that in 59% (around 190) of them, health care expenditure formed less than 1% of the total remuneration for their employees. I refer Members to Table 3 (Cols. 587 - 588). In another 26% (or 85) of the companies, health spending was between 1% and 2% of total remuneration. However, a few astute employers paid medical benefits amounting to over 5% of total remuneration. Table 3 - Medical Benefits as Percentage of Total Remuneration in 325 Companies (Cols. 587 - 588) To prevent a problem from developing in future, Government will cap the tax deductibility of expenses on medical benefits by employers at 2% of total employees' remuneration with effect from Year of Assessment 1994.”
“(b) Tax exemption for non-resident beneficiaries of trusts where the trustee is an Approved Trustee Company. This is an extension of an existing incentive to promote trustee services in Singapore. (c) Extension of tax holiday for SIMEX by a further 5 years. (d) Provision for extending the Warehousing and Servicing Incentives for periods not exceeding 5 years at a time. (e) Extension of the tax exemption scheme for syndicated offshore credit and underwriting facilities, by an additional 5 years. (f) Exemption from tax for interest paid by members of the RAS Commodity Exchange. This is an extension of an existing incentive to enhance the international competitiveness of the Exchange. Mr Speaker, Sir, I will now ask the Clerk of Parliament to distribute copies of Paper 2 (Cols. 593 - 598) with details of these incentives. This paper also contains a proposal on the treatment of capital allowances and losses of companies enjoying tax incentives. Paper 2 - TAX CHANGES TO ATTRACT OFFSHORE ACTIVITIES TO SINGAPORE (Cols. 593 - 598) Cap on Deduction for Medical Expenses Hitherto, employers have been allowed to deduct for tax purposes all expenses incurred in providing medical benefits to employees without limit. This was not a problem in the past, when medical benefits were a minor expense. But in the long term, this arrangement will inflate health care expenditures and encourage over-consumption of medical services. It makes it worthwhile for both employers and employees to provide more medical benefits in their compensation packages than they would otherwise, rather than cash salaries. This is because employees have to pay tax on cash salaries while they enjoy medical benefits free of tax, and yet both medical benefits and cash salaries are tax-deductible to the employer.”
“A total of seven incentives to promote the development of an external economy are proposed. They are: (a) Unilateral tax credit for dividend income remitted from countries with whom we do not as yet have tax treaties. (b) Extension of the unilateral tax credit scheme for services income, to include income remitted from Fiji, Kampuchea, Laos, Myanmar and Vietnam, and to include other types of services. (c) Extension of the double tax deduction scheme for approved expenses incurred in the promotion of exports, to cover export of services. (d) Double tax deduction for approved expenses incurred in exploring and developing overseas investment opportunities. (e) Removal of a requirement under the Overseas Investment Incentive to form separate companies. (f) Tax exemption scheme for venture capital and regional funds to promote investments in the Asia-Pacific region. (g) Overseas Enterprise Incentive. This incentive provides approved Overseas Enterprises with tax exemption for qualifying income from approved kinds of overseas investments for periods of up to 10 years. I will now ask the Clerk of Parliament to distribute a paper entitled Paper 1 (Cols. 589 - 592) which gives details of the incentives I have described. Paper 1 - TAX INCENTIVES TO PROMOTE AN EXTERNAL ECONOMY (Cols. 589 - 592) Tax Changes to Attract Offshore Activities to Singapore I now move on to tax changes to attract offshore activities to Singapore. A total of six incentives are proposed and they are: (a) To promote Singapore as an international centre for the trading of arts and antiques, a 10% concessionary tax rate will be granted to approved art and antique dealers on income derived from transacting on behalf of non-residents with approved auction houses.”
“FY93 TAX CHANGES The thrust of this year's tax changes will be to promote our investments abroad. This is in line with our current economic strategy. There will also be tax incentives to promote offshore activities in Singapore. In addition, in view of the healthy revenue position, I will grant some one-off tax rebates for Year of Assessment 1993. These will benefit both companies and individuals. Tax Changes for Companies Property Tax Rebate For companies, I propose to give a rebate on property tax. It shall be a one-off 25% rebate for commercial and industrial properties for the year commencing July 1993. This will offset some of the business cost increases in the year and help maintain Singapore as an attractive location for doing business. The revenue loss to Government is estimated at $145 million per annum. The rebate is intended to be shared between landlords and their tenants. In order to demonstrate this, HDB, JTC and other Government agencies owning properties will pass on most of this rebate to their tenants. The Government strongly encourages other private landlords to do likewise, and pass on at least half the rebate to their tenants. Tax Incentives to Promote an External Economy While I recognise the importance of building an external economy, I must stress that tax-wise we must not make outward investments generally more attractive than domestic ones. Foreign incomes therefore cannot be exempt from tax across-the-board. This is to avoid a hollowing out of our domestic industries. An across-the-board exemption will also open up a tax loophole for local source income to make a round-trip and return disguised as foreign income to enjoy tax exemption. For these reasons, the exemption of foreign incomes from tax will be given only on a case-by-case basis.”
“Mr Speaker, Sir, I shall now move on to describe our fiscal position and the proposed tax changes for FY93. I will also be announcing the corporate, personal and other indirect tax changes which form part of the GST package. We have a healthy budget balance. Government had a surplus in FY92, mainly because its operating revenue was buoyant. For FY93, operating revenue is estimated to be $17.2 billion, whilst the operating and development expenditure is budgeted at $15.5 billion, so that a modest operating surplus of $1.7 billion is expected. Given sustained economic growth, revenue should remain buoyant and if costs are kept under control, we should continue to have budget surpluses in the next few years. The target date of April 1994 for the introduction of GST has already been announced. Our favourable fiscal outlook will allow the GST to be implemented in a revenue-negative way. The GST will be introduced with a generous package of offsets, comprising corporate and personal income tax reductions, rebates and subsidies which, taken together, will exceed the GST collected in the first few years of its implementation. We will ensure that as far as possible, no household will be worse-off when the GST is implemented. This year, I will discuss proposed tax changes in two parts. Part I will be concerned with tax changes specific to FY93. It will also deal with initiatives we are introducing this year to develop an external economy and to attract new investments into Singapore. Part II will be concerned with GST-related changes. It will deal with corporate and personal tax cuts, property tax rebates, compensating adjustments to existing indirect taxes, as well as additional rebates and expenditures to help lower income groups cope with the GST.”
“SIGMA will now be fine-tuned to make it more user-friendly, and extended to all departments in these ministries. I am also pleased to report that the extension of SIGMA to all other ministries is ahead of schedule. By April this year, working management accounting systems will be in place in all ministries. By April next year, they would have been extended to all departments. Statutory boards are also being encouraged to introduce similar systems. I am confident that over time public service managers will use these management accounting systems to become more productive and deliver a higher quality of public service at lower cost. Zero-base Reviews The Auditor-General's Office is responsible for conducting periodic zero-base reviews of individual ministries. The principal objective of these reviews is to ensure that ministries consciously and constantly monitor their own performances to keep their practices, operating procedures and policies current and relevant in achieving Government's priorities. Over the past year, the Auditor-General's Office has conducted zero-base reviews of the Ministries of Education, Trade and Industry, Foreign Affairs, the Prime Minister's Office and the Attorney-General's Chambers. Reviews of the Ministries of Labour and Law are in progress. Three other ministries are scheduled to be reviewed over the next one and a half years.”
“To sustain the push towards greater industry-related R&D, a sum of $350 million or 0.4% of GDP will be allocated to the R&D Fund to be administered by the National Science and Technology Board. This represents an increase of 27% over FY92's allocation. It is in line with the policy to increase funding for industry-related R&D. Another $1.4 billion or 1.7% of GDP in capital grants will be given to other statutory boards. Projects which require capital grants in FY93 include the Woodlands extension to the MRT system, a new campus for Temasek Polytechnic, and the expansion and upgrading of the 2 universities. Capital grants are also required for economic development schemes administered by the Economic Development Board, development of tourism infrastructure on Sentosa, and development and improvement works to community centres. MANAGEMENT AND CONTROL OF GOVERNMENT EXPENDITURE Let me now touch briefly on progress made in implementing management accounting systems in Government ministries and zero-base reviews conducted by the Auditor-General's Office. Management Accounting Systems Phase I of the programme to install centralized computer based management accounting systems in all Government ministries and departments has been completed on schedule. Management accounting systems, or SIGMA, have been operational in the Ministries of Finance, Education, Health, Environment and National Development since April last year. Management reports generated by SIGMA are being used in these ministries to allocate resources and generate an awareness of the true costs of delivering public services. This will allow managers in Government ministries and departments to identify and weed out inefficient and unproductive practices.”
“Higher grants to the Economic Development Board, National Productivity Board, Singapore Broadcasting Corporation and the National Arts Council account for the rest of the increase. Pensions expenditure is expected to remain under 0.5% of GDP. In dollar terms, it will increase by some $13 million or 4% over FY92. This is due to an increase in the number of pensioners and the rising cost of medical subsidy for pensioners. Development Expenditure $5.8 billion or 7% of GDP is proposed for development expenditure in FY93. This is around 37% of total expenditure, up from 32% in FY92. It is also closer to the medium term target of keeping development expenditure at no less than 40% of total expenditure, in line with the objective of allocating an increasing share of the budget towards development expenditure. Direct Government development expenditure will increase by nearly 50% to $3.1 billion, or 3.8% of GDP. Major projects include land reclamation at Changi East and several other sites, the schools building programmes, provision of computer facilities for secondary schools, construction of Revenue House, and the development of Eastern General Hospital and the new Kandang Kerbau Hospital. The capital subsidy for public housing is projected to reach $900 million, an increase of nearly 50% over FY92. HDB will need substantial increases in subsidies to build more flats and implement its Flat Upgrading Programme. More funds will also be needed to provide higher capital grants to Town Councils and a grant to HDB for the discount given on the sale of tenanted HDB shophouses. R&D, or Research and Development, is increasingly recognized internationally as being of strategic importance in enhancing industrial competitiveness.”
“6% or about 600 posts to nearly 99,500 posts in FY93. The decrease is due to Nanyang Polytechnic taking over the training of nurses and radiographers from the Ministry of Health, as well as restructuring and privatisation activities. Around 88,000 persons are currently employed in the Civil Service and Government-funded statutory boards. This is about 600 persons less than a year ago. It shows the success of the Zero-Growth in Manpower Policy. Whilst Government remains committed to this policy, we will nevertheless ensure that it does not lead to a decline in standards or quality of public services. Wherever possible, increases in workload or manpower needs for new areas will be met through retraining, redeployment and productivity improvements. Where this is not possible, increases will be granted. For example, 116 new posts will be created in FY93 for the Ministry of Community Development to cater for the expansion of sports facilities and new community centres. Another 292 posts will be provided to the Ministry of Education to keep pace with the increase in student enrolment in schools and other teaching institutions. Other Operating Expenditure or OOE is projected at $5.1 billion or 6.2% of GDP. The OOE provision is an increase of $325 million over FY92, due mainly to the provision of agency fees for the Inland Revenue Authority of Singapore, reimbursements to restructured hospitals, and bursaries for the training of nurses. Higher expenditures will also be needed for estate management and the maintenance of roads. Grants-in-Aid will amount to $1.9 billion or 2.3% of GDP. It represents an increase of $141 million over FY92's provision, which is largely to meet the higher operating costs of schools and polytechnics, and the rising cost of subsidised medical care.”
“In keeping with this philosophy, the Government will increase its FY92 capital contribution to the Edusave Endowment Fund from $1 billion to $1.5 billion. The additional $500 million will come from the projected surplus for FY92. Supplementary Estimates to effect this will be tabled in Parliament next week. With this transfer, the total allocation for education in FY92 will amount to 5.5% of GDP, which exceeds the allocation for every other sector, including defence. A further sum of $500 million has been earmarked for transfer to Edusave in FY93. This will bring the total Edusave endowment to $2 billion, double the current amount. Government will also make its first capital transfer of $200 million to the Medical Endowment Fund in FY93. This Fund will eventually be built up to $1 billion. A one-off allocation of $5 million has also been provided to enable disbursements to be made from the Fund in FY93 itself for the benefit of Singaporeans who cannot afford basic medical care. Allow me now to elaborate on the FY93 expenditure proposals. Operating Expenditure Operating expenditure comprises Expenditure on Manpower, Other Operating Expenditure, Grants-in-Aid and Pensions. For FY93, operating expenditure is projected at $9.7 billion. This is about 9.4% more than the revised FY92 expenditure of $8.9 billion. Some 25% of Operating Expenditure will go towards Expenditure on Manpower, which is projected to rise by $358.6 million or 17.1% to $2.5 billion in FY93. This is 3% of GDP, compared to 2.8% in FY92. The increase is mainly to cater for salary increments, some salary adjustments and the filling of vacancies. The authorised staff complement for ministries, organs of state and Government-funded statutory boards will decline by 0.”
“In FY93, operating expenditure is forecast to increase from 11.7% to 11.9% of GDP while development expenditure is projected at 7% of GDP, up from 5.5% in FY92. Together, operating and development expenditure will amount to nearly 19% of GDP. In dollar terms, total Government expenditure for FY93 is expected to reach $15.5 billion, an increase of 18% over FY92. Social and Community Services will continue to have by far the largest share, taking up nearly 40%. Expenditure in this area is mainly on education, health care services, environmental protection, community development and subsidies on public housing. National security, covering Defence and Home Affairs, will take up the second largest share of more than 33% of total expenditure. The proposed budget allocations reflect the priorities of Government. They are to provide infrastructure as a basis for economic growth, ensure national security, house our people in decent, affordable housing in a clean and green environment, invest in quality education as well as provide good basic health care and a wide range of social amenities. Let me at this juncture take a moment to re-emphasize Government's commitment to education. As members are aware, Government will build up the Edusave Endowment Fund to $5 billion, to put in place a strong permanent foundation for educational standards to be continually upgraded. This is crucial, for the experience of many countries has shown that the surest way to secure continued success in an uncertain world is by investing in the education of future generations. A well educated and highly skilled people will always remain the fundamental objective of Government.”
“We will continue to welcome foreign capital and encourage R&D. There will be no let-up in the development of human resources and physical infrastructure. When we develop this external dimension, Singapore's economy will have the prospect of many more years of prosperous growth. PART II - THE FY93 BUDGET Mr Speaker, Sir, allow me to move on to the Budget for the next financial year. EXPENDITURE POLICY The Government's expenditure policy will continue to be guided by the philosophy of investing in the future. Expenditure will focus on areas which promote and support future growth. These are education, economic infrastructure, health care, public housing and national security. Quality of life in Singapore will be sustained through greater funding for the arts, sports, cultural and recreational activities. Control of costs will remain the cornerstone of expenditure policy. As the flagship of Singapore's economy, the private sector must play the leading role. The public sector will therefore be kept lean and trim to make available to the private sector a bigger share of national financial and manpower resources. All operating and development expenditures will be met from operating revenues. Moreover, a substantial part of the surplus expected in FY93 will be channelled towards building up the Edusave Endowment Fund established last year and the Medical Endowment Fund which will be set up in April this year. Together with Government subsidies and Medisave, the Medical Endowment Fund will ensure that no Singaporean is deprived of basic medical care. The FY93 Expenditure Estimates The Government's medium-term policy target is to keep total operating and development expenditure within 20% of GDP, with 12% for operating expenditure and 8% for development expenditure.”
“This, and other cost-cutting measures, gave a significant boost to our competitiveness and helped the economy to recover speedily. However, since then many other countries (including the developed countries) have reduced their tax rates significantly. (See Table 2 (Cols. 587 - 588)) This trend has eroded the margin we enjoy. Although we cannot match every country's tax rate reductions, we must take cognizance of such developments and make the necessary adjustments in good time. We must also note that Singapore has comparative disadvantages in higher land and labour costs compared with many emerging economies in the region. A lower corporate tax rate will help to offset this disadvantage. Table 2 - Top Personal Tax Rates (Cols. 587 - 588) In the long term, Government aims for a 25% corporate tax rate and a slightly higher top personal tax rate. Given sustained economic growth, we can achieve this with the 3% GST, without needing to raise the GST rate further. The GST rate will stay at 3% for at least 5 years and thereafter for as long as revenue needs are not pressing. The re-orientation of our economic development strategy and the change in the tax system will take time to work through. I am confident that the private sector will respond favourably to the steps outlined. Those who succeed will encourage others to emulate them. Momentum will build up. The results will no longer be constrained by Singapore's size but by the ingenuity of individual and corporate Singaporeans. In time a second pillar of the Singapore economy, comprising strong local companies and their foreign operations, will become a major contributor to our national wealth. At the same time, we will continue with our efforts to be attractive to foreign MNCs, who will always remain important to us.”
“Over half of our operating revenue is from direct taxes, while the bulk of indirect taxes fall on only a few items. We need to shift the burden of tax from direct taxes to indirect taxes with a broad base. Hence the introduction of the GST. This major change in our tax system is in line with tax reforms in other parts of the world. In the 1960s and 1970s, countries like the UK and New Zealand relied heavily on direct taxes to fund Government expenditure, including generous welfare programmes. Top marginal tax rates were as high as 75% in the UK, 70% in the US and 50% in New Zealand. This "soak the rich" approach did not work. In practice, high nominal tax rates were tempered with various loopholes that allowed the rich to avoid taxes. The result was that few really paid taxes at the very high rates, while unproductive work was expended on tax avoidance and lobbying to enhance or maintain special concessions. Talented people who could not dodge taxes voted with their feet by moving to lower tax countries. These countries have since reformed their tax systems and reduced income tax rates. Usually the result has been higher, rather than lower tax collections from the high income groups. We should never forget these costly experiences of other countries, and unwittingly diminish the incentive to work and to invest. It is far better to encourage the talented by taxing them lightly than to tax them punitively and force them to under perform, evade taxes or leave. Recent international developments give greater urgency to tax reform. Our last major revision of direct tax rates was in 1986, during the recession, when both the corporate tax rate and the top personal tax rate were reduced from 40% to 33%.”
“Since 1988, Government operating revenue, which includes Government taxes, ARF, COEs and foreign worker levy, have formed about 20% of GDP. This compares with about 22% of GDP before the 1985 recession. The figure for 1992 was slightly higher, at around 23% of GDP, but this still gives no reason for alarm that taxes and levies are consuming an unprecedented and unsustainable share of national income. (See Chart 4 (Cols. 583 - 584)) Chart 4 - Government Operating Revenue As A Proportion of GDP (Cols. 583 - 584) Our figure of taxes making up 23% of GDP is comparable to that in other Asean countries and NIEs, and significantly below the 40% to 60% in OECD countries. (See Table 1 (Cols. 585 - 586)) The gap between us and the developed countries gives us a competitive advantage and helps us to attract investments. Table 1 - Government Revenue As Proportion of GDP (Cols. 585 - 586) The only Government with a significantly lower operating revenue than Singapore is Hong Kong. In Hong Kong, operating revenue forms 15% of GDP, compared to Singapore's 20%. However, there are fundamental differences between Hong Kong's circumstances and ours. Hong Kong is not a nation. Singapore is. Hong Kong does not have to provide for defence, which alone consumes 5% of our GDP each year. Nor does it have a heavily subsidised public housing programme, which is a major component of the Singapore Government's social policy. This is why Hong Kong's corporate tax and top personal tax rates can be much lower than Singapore's. It is impossible for Singapore to emulate Hong Kong's example. Although the overall tax burden on Singaporeans is not high, our revenue structure needs to be improved.”
“Keppel, Sembawang and the companies in the Singapore Technologies stable have also participated successfully in regional ventures. These examples give us confidence that these companies can do much more. The question is how can they link up with the private sector, which is also doing regional business on its own. The Government will find ways for statutory boards and GLCs to work with private companies in overseas ventures. This could take the form of consortiums or joint ventures where both parties take the risks and share the rewards. Commodore Teo Chee Hean's Committee to Promote Enterprise Overseas will be examining this and many other related issues over the next few months. The private sector has proposed changes in tax incentives and tax rules to facilitate the drive to go offshore. The Government will take up some of these proposals in this Budget. I shall elaborate on these later in my speech. Whilst there is merit in building into our tax regime incentives for specific offshore activities, the more comprehensive approach is to lower direct taxes, both corporate and personal income taxes, across the board. This will encourage enterprise, both within and outside Singapore, and in whatever activities that businessmen choose. Individuals will be encouraged to take part in risky but highly profitable ventures, knowing that if they dare and succeed, Government will not cream off a large share of their rewards. This is why the Government will reform the tax structure to reduce corporate and personal income taxes, and introduce a Goods and Services Tax (GST) next year. The Government is sometimes accused of levying increasingly heavy taxes on Singaporeans. Figures, however, disprove this.”
“Such people are still far too few, however, compared to opportunities waiting to be seized. If we can overcome the hindrances that hold others back, more entrepreneurs will in time emerge. The difficulties of getting Singaporeans to work abroad have been discussed extensively elsewhere and I will not repeat them here. We must be realistic about our weaknesses and find ways to overcome them. We must also build on our strengths. Our main strength is in organisations with proven professionalism and collective competence, not an abundance of individual mavericks with the touch of gold. Companies like SIA, Keppel, Sembawang, and Singapore Telecom, and statutory boards like PSA and PUB, have created strong management teams, with a depth and breadth of expertise equal to their competitors in the region. Some of them are starting to make their presence as corporations felt outside Singapore. We must leverage on this strength to go offshore, not only as individuals, but systematically in corporate teams. Government-linked companies (GLCs) and statutory boards are among our strong companies. We should tap their expertise to spearhead the regionalisation drive. Some concerns have been expressed that statutory boards and GLCs are not ready for this role because their priority is their domestic mission, or worse, because they are not business-minded. I believe that once the broad direction is set and the proper incentives are put in place, they will give more emphasis to their overseas operations. For example, STI, the international arm of Singapore Telecom, has invested US$150 million in 11 countries. It is involved in mobile phone ventures in Vietnam, India, Sri Lanka and Pakistan.”
“We have also participated in large projects in Batam and Bintan. Since the economic reforms in China, Singapore companies have also established a presence there. Singapore companies are involved in a wide variety of businesses in China - property development, industrial estate development, leisure and resort development, manufacture of computer peripherals and parts, software development and confectionery. In Vietnam and Cambodia, Singapore companies have invested in the food and beverage, textile and furniture industries. Statutory boards and Government-linked companies are well-represented in infrastructure projects in the region - industrial estate development, airport planning and design, and telecommunications. To be realistic, the external economy will not supplant the domestic economy as the main engine of growth. Even in Switzerland and the Netherlands, income earned from overseas assets accounts for only 8% to 9% of GNP. The external economy is however valuable because of its ability to improve the economic structure in two ways. First, it generates business and economies of scale for companies operating in Singapore, making the domestic economy more productive. Second, it strengthens our links with other rapidly growing countries in the region, so that we will not be so heavily dependent on the developed countries for growth and markets. Regionalisation is not just a matter of sheer numbers. It requires that we find the right projects and the right firms with the ability to turn a promising idea into a profitable business. Since the subject was highlighted, many Singaporean entrepreneurs have contributed their ideas on the subject. They have among them accumulated valuable experience in working and investing in the region.”
“The potential of the Asian market is vast, but sometimes underestimated. China and India both have official per capita GNP of less than US$400, but they have pockets of an emerging middle class in urban areas. It is reckoned that at least 5 Chinese cities - Shenzhen, Guangzhou, Shanghai, Beijing and Tianjin - have per capita incomes above US$1,000. This places them on par with countries like Thailand. In India, the middle class is estimated to number between 100 and 350 million. This is up to 100 times the size of the Singapore market. The emerging middle class is demanding consumer durables like TV sets, refrigerators, motor-cycles and eventually cars. Moreover, the Asian region is expected to grow faster than the more established markets in the OECD countries where growth will be no more than 2% to 3%. The size of the Asian market and its growth potential represent a source of business opportunities for Singapore entrepreneurs, which we cannot afford to neglect. Some Singapore entrepreneurs have already ventured abroad to do business in the region. As at end-1990, Singapore companies had invested a total of $27.8 billion overseas. Direct investments amounted to $7.5 billion which is equivalent to 12% of GNP. This is lower than Switzerland's and the Netherlands'. They have the equivalent of one-third of their GNP in direct investments overseas. Over time, as Singapore entrepreneurs gain experience, our overseas assets will also grow. In a recent study, the Ministry of Trade and Industry found that two-thirds of our direct investments overseas were in Asia and Australasia. Malaysia was the largest single destination, with $1.7 billion invested. In the last few years, we have become the largest foreign investor in Johor in terms of the number of projects.”
“STRENGTHENING THE EXTERNAL DIMENSION OF THE SINGAPORE ECONOMY For the next few years, we can achieve a growth rate of around 5% to 6% provided we keep our competitiveness on an even keel and the world economic situation remains stable. In the longer term, however, high growth rates require new policy orientations to overcome the supply-side constraints of labour, land and services within Singapore. Emerging NIEs in the region are better endowed with land, labour and natural resources. They are becoming more competitive. Singapore must find the right response, to avoid becoming a failed NIE, namely, one which did not fulfil its early promise and failed to make it to become a developed country. In the race of nations, it is impossible for us to stand still and try to preserve what we have. Efforts to improve productivity and restructure the domestic economy to squeeze more out of each unit of resource will face diminishing returns, as we are already starting from a relatively high base. This has happened in all developed economies. The way out is to build an external dimension to our economy, in order to help us to overcome the problems of a small mature domestic market and a limited resource base. This is what the other NIEs have done in the past 5 years and what some developed countries like Switzerland and Japan have done over a much longer period. Many new business opportunities are to be found in the high growth countries around us. Foreign MNCs which come to Singapore have not done so with the primary aim to sell to the domestic market. They have always depended on markets in the developed countries and, increasingly in recent years, the fast-growing Asia-Pacific region. Singapore entrepreneurs must do likewise.”
“In the latest survey of business expectations, a net balance of 9% of firms in the manufacturing sector expect business conditions in the first half of 1993 to be better than the preceding 6 months. Firms in the electronics industry are optimistic, with a net balance of 29% expecting better business. Business in the commerce sector is expected to be more moderate after the year-end high. The transport and business services sectors are optimistic about prospects. The leading indicators, which indicate economic activity about three quarters ahead, continue to show an upward trend. Although our relative competitiveness position has declined slightly, investors are confident about Singapore's fundamentals. Investment commitments in the manufacturing sector amounted to $3.5 billion in 1992, a record high. These high-quality new projects, with projected incremental value added per worker of $240,000, or about 4 times the existing average, will boost the productivity of the manufacturing sector. In view of the generally favourable external and domestic conditions, the Ministry of Trade and Industry's assessment is that growth in 1993 will be between 6% and 7%. The Government will therefore adjust the CPF contribution rates by another half a percentage point with effect from 1st July 1993. The employers' contribution rate will be raised by 0.5 percentage point to 18.5% while the employees' contribution rate will be reduced by 0.5 percentage point to 21.5%. If the world economic environment remains favourable in 1994 and our economy continues to grow satisfactorily, Government will further adjust the CPF contribution rates in 1994 by an additional 1.5 percentage points, bringing the contribution rates for the employer and employee to 20% each on 1st July 1994.”
“However, with our weaker productivity performance relative to our competitors and a robust exchange rate, our relative unit labour cost against the other NIEs deteriorated slightly in 1992. I refer Members to Chart 2 (Cols. 581 - 582). The profit share in nominal GDP also fell marginally from 47% in 1991 to 46.2% in 1992. This is shown in Chart 3 (Cols. 583 - 584). Charts 1 & 2 - Unit Business Cost of Manufacturing 1980-92, Singapore's Relative Unit Labour Cost Against The Other NIEs In Manufacturing, (1980=100) (Cols. 581 - 582) Chart 3 - Profit Share of Nominal GDP 1980-92 (Cols. 583 - 584) OUTLOOK FOR 1993 The global outlook for 1993 is cautiously optimistic. Although forecasts by the OECD and IMF in the last 2 years have been scaled down repeatedly, their most recent forecasts point to better prospects in the industrial countries. The OECD and IMF expect the US economy to grow by 2.4% to 3% in 1993. This bullish assessment is supported by data showing good quarterly growth rates and stronger consumer confidence. The UK and Canada are also expected to recover from recession. However, the other two large industrial economies, Germany and Japan, are slowing down. Overall, the industrial countries are likely to grow by 1.9% in 1993, up from the 1.5% in 1992. The growth prospects in East Asia, which accounts for one-third of our non-oil domestic exports, remain good. Taiwan, South Korea and Hong Kong expect to grow by 7%, 6% to 7% and 5% respectively. Malaysia and Thailand are expected to grow by 8% and Indonesia by 6.5%. China is likely to register double-digit growth again in 1993. The business community expects business conditions to be stable in the first 6 months of 1993.”
“3% for the whole of 1992, on the back of strong growth in the output of electronics products such as personal computers, disk drives and telecommunications equipment. The financial and business services sector was also stronger in the second half. This was due to higher demand for financing of regional projects, sustained growth in domestic loans and advances, and a more active foreign exchange market. Growth for the sector was 5.4%. Transport and communications continued to do well, riding on the strong regional economies. This sector grew by 9.2%. The construction sector continued to register double-digit growth, at 18%. The commerce sector was, however, sluggish. Retail trade was adversely affected by the change in composition of tourist arrivals, weaker tourist spending and cautious domestic consumer sentiment. The slower growth moderated cost pressures. The labour market eased somewhat. The unemployment rate in June 1992 stood at 2.7% compared with 1.9% in 1991. This moderated wage cost increases. Nominal wages grew by 7.5% in 1992 compared with 9.2% in 1991. Productivity growth recovered in the second half, in line with the cyclical recovery in output. Productivity growth for 1992 averaged 3.1%, up from 1.5% in 1991. In the manufacturing sector, slower growth in unit labour cost together with reduced utilities and interest costs helped to moderate business cost increases considerably. The Unit Business Cost Index for the manufacturing sector rose by only 1.9% in 1992. I refer Members to Chart 1 (Cols. 581 - 582). This compares favourably with the average annual increase of 4.9% between 1987 and 1991.”
“Mr, Speaker, Sir, i beg to move, That Parliament approves the financial policy of the Government for the financial year 1st April, 1993 to 31st March, 1994. PART I - REVIEW OF THE ECONOMY ECONOMIC PERFORMANCE IN 1992 After the 1985 recession, the Singapore economy rebounded strongly in 1987 and 1988. Quarterly growth rates then started falling steadily, from 11% in the first quarter of 1988 to 4.9% in the second quarter of 1992. This decline and the continued weakness of the US economy raised fears of a recession in Singapore in 1991. In particular, manufacturing growth fell rapidly from 11% in the first quarter of 1991 to 1.4% in the fourth quarter. The pessimistic outlook gained further support when the US economy only managed a weak recovery and the manufacturing sector recorded negative growth in the first quarter of 1992, the first time since the recession of 1985. Meanwhile, the financial sector was adversely affected by the consolidation of international banking activities and offshore risk management business. Consumer spending was also depressed due to weak sentiments. Fortunately, the Singapore economy was diversified and regional growth was strong. Robust growth of the transport and communications, and construction sectors helped to keep overall growth in 1991 and the first half of 1992 at around 5%. With the gradual moderation in cost pressures and better external conditions, the economy bottomed out in the third quarter of 1992. For 1992 as a whole, the economy grew by 5.8%. This is a creditable performance when compared with the other NIEs. Taiwan grew by 6.1%, Hong Kong by 5.0% and South Korea by 4.9%. The manufacturing sector recovered from negative growth in the first quarter to register growth of 2.”
“Mr Speaker, Sir, I beg to move the Motion* standing in my name under item No. 6 in the Order Paper. *The Motion reads as follows: That this Parliament, pursuant to section 7 of the Civil List and Pension Act (Chapter 44) resolves that the Schedule to that Act be varied by deleting the figures "$51,000", "$2,013,200", "$393,000" and "$55,700" in the second column and substituting the figures "$53,000", "$2,249,900", "$411,300" and "$146,600", respectively. Sir, it is proposed to increase the provisions for the entertainment allowance and salaries of personal staff to $53,000 and $2,249,900 respectively. These increases for FY 93 are necessary to provide for anticipated higher entertainment expenditure and increases in staff remuneration. A higher sum of $411,300 is required to meet Expenses of the Istana household in FY 93. The increase is to cater for higher expenditure on public utilities. The allocation for Special Services in FY 93 is increased from $55,700 to $146,600. The higher expenditure in FY 93 is for the replacement of a car and other machinery and equipment which are beyond economic repair. It is, therefore, necessary to vary the provisions in the Schedule to the Civil List as indicated in the Motion before the House. Question put, and agreed to. Resolved, That this Parliament, pursuant to section 7 of the Civil List and Pension Act (Chapter 44) resolves that the Schedule to that Act be varied by deleting the figures "$51,000", "$2,013,200", "$393,000" and "$55,700" in the second column and substituting the figures "$53,000", "$2,249,900", "$411,300" and "$146,600", respectively.”
“Mr Speaker, I beg to move, "That Parliament doth agree with the Committee on the said resolution." Question put, and agreed to. Resolution accordingly agreed to. CIVIL LAW (AMENDMENT) BILL Order for Second Reading read.”
“Mr Speaker, Sir, I beg to report that the Committee of Supply have come to certain resolution. Resolution reported - "That the sum of $25,449,410 shall be supplied to the Government under the Heads of Expenditure for the Public Services shown in the First Supplementary Main Estimates of Expenditure for the financial year 1st April 1992 to 31st March 1993, contained in Paper Cmd. 4 of 1993".”
“I take it that this would be in addition to the investment guarantee provisions. This is one area that we have not been actively looking at because we are not aware that it is in great demand. But we will certainly consider if there is sufficient interest. PAP MPS' OFFICES AT HDB VOID DECKS (Quit notices) 18. Mr Cheo Chai Chen asked the Minister for National Development if he will state (i) the number of quit notices which have been served by the Housing and Development Board on People's Action Party Members of Parliament to recover possession of their offices situated at the void decks of HDB estates, (ii) the number of such premises which have been recovered and, of these, the number which have been demolished and (iii) the number of such premises which are still in use.”
“At present, there are already a number of measures in place to assist our local companies to venture overseas. For example, EDB administers the Local Enterprise Finance Scheme (Overseas) which provides fixed interest rate loans to local companies for acquiring fixed assets for overseas projects. The loan repayment period could stretch up to 10 years with monthly effective interest rate ranging from 5.65% to 6.5%. The Trade Development Board also provides a Market and Investment Development Assistance Scheme which provides a grant to offset the expenses incurred in activities such as feasibility studies, overseas missions and marketing and development trips. There is also the Export Credit Insurance Corporation of Singapore which provides some form of insurance to companies exporting abroad. The Government has also signed a number of investment Guarantee Agreements with various countries including the ASEAN countries, People's Republic of China, Vietnam and Sri Lanka. This has greatly reduced the political risk faced by local companies when venturing overseas. The Committee on Promoting Enterprises Overseas, chaired by the Minister of State (Finance), Cdre (Res) Teo Chee Hean, is currently looking into how we can assist local companies to venture overseas. The Committee will consider further financial measures needed to help our companies venture abroad.”
“I will look into it. JTC INDUSTRIAL PROPERTIES (Sale to sitting tenants) 15. Mr Chia Shi Teck asked the Minister for Trade and Industry whether he will consider selling the industrial properties of the Jurong Town Corporation to sitting tenants.”
“I understand. For example, the effective interest rate for a car loan could be substantially higher than the nominal rate.”
“I see. I will ask MAS to look into this. I am not aware that there is a major problem.”
“By "effective interest rate", does the Member mean the average interest rate over the life of the loan? Is that the idea?”
“I am not quite clear about the Member's question. His question is to enforce effective interest rates.”
“The total number of complaints received by the Monetary Authority of Singapore (MAS) was 186 in 1990, 301 in 1991 and 209 in 1992. The types of complaints include those on disputed interest, foreign exchange, penalty rates and service charges, dispute over claims and premium charges, quality of service and unprofessional conduct, unauthorised transactions, and complaints against the institution's management and its policies. The MAS has followed up on all these complaints with the financial institutions concerned and help seek redress where the complaints are genuine. It will continue to encourage the banking and financial community to improve its services to customers.”
“$91 million. LINKING OF CENTRAL EXPRESSWAY AND TAMPINES EXPRESSWAY 8. Mr R. Sinnakaruppan asked the Minister for National Development if his Ministry will consider linking the Central Expressway (CTE) to the Tampines Expressway (TPE) ahead of the proposed schedule. The Minister of State for National Development (Mr Lim Hng Kiang) (for the Minister for National Development): Mr Speaker, Sir, at present, the Tampines Expressway runs from the PIE/Upper Changi flyover in the east to Lorong Halus in the west. Construction of the last phase of Tampines Expressway, from Lorong Halus to the Seletar Expressway, is in progress. Several flyovers and bridges, as well as short lengths of the expressway's main carriageway, are presently under construction and are expected to be completed by late 1994. In response to the MP for Kampong Glam's request, the Public Works Department (PWD) will call tenders for the remaining stretches of the expressway later this year. Construction can then be expected to be completed before the end of 1995 ahead of the original schedule. Tampines Expressway will then be linked to the Seletar Expressway. As the Seletar Expressway forms the northward extension of the Central Expressway, motorists can look forward to a continuous link between the Tampines Expressway and the Central Expressway by the end of 1995. HOUSING AND DEVELOPMENT BOARD'S UPGRADING PROGRAMME (Annual value and property tax of upgraded flats) 9. Mr Cheo Chai Chen asked the Minister for National Development, under the Housing and Development Board's Upgrading Programme, (a) whether the annual value and, therefore, property tax of the upgraded flats will go up; and (b) whether, due to inflation, owners will have to pay more for the upgrading of their flats carried out at a later date.”
“Sir, I am not sure exactly what he wants.”
“The companies suffered an overall loss in 1991 of $91 million.”
“Yes, they lost money. The number of companies which I listed did lose money.”
“Sir, Government companies are held under three group companies, namely, Temasek Holdings, MND Holdings and Singapore Technologies Holdings. At the group level, Temasek Holdings and MND Holdings have been profitable in every year from 1988 to 1991. In the case of Singapore Technologies Holdings, it was profitable in 1988, 1989 and 1990 but suffered a loss of $91.1 million in 1991. The loss arose as a result of losses incurred by a subsidiary company, Singapore Technologies Ventures, and reasons for the loss were given in this House in response to a question from Mr Low last year. 1992 results for the three holding companies are not yet available but all the three are expected to be profitable. On Question No. 7, the number of Government-owned companies including the three holding companies, namely, Temasek Holdings, Singapore Technologies Holdings and MND Holdings and their first tier companies which were profitable since 1988 are as follows: 1988 - 34 companies 1989 - 33 companies 1990 - 36 companies 1991 - 34 companies These companies which lost money during those years were 6 in 1988, 7 in 1989, 7 in 1990 and 10 in 1991. The number of profitable companies therefore exceeded the number of companies which incurred losses in each of the years from 1988 to 1990. The excess profits over losses of these companies are as follows: 1988 - $1,215 million 1989 - $2,764 million 1990 - $2,521 million 1991 - $1,954 million”
“Mr Speaker, Sir, as Questions 6 and 7 are related, may I take them together?”
“Mr Speaker, Sir, the tax relief for foreign maid levy was introduced with the objective of encouraging married women to join the workforce and at the same time to have children. It is not meant to help all employers of foreign maids. MEDISAVE (Transfer of funds from CPF ordinary account) The following Question stood in the name of Mrs Yu-Foo Yee Shoon - 5. To ask the Minister for Health whether a person whose Medisave account is exhausted can have funds from his/her ordinary account transferred to the Medisave account to pay for medical expenses.”
“A total of nine blocks are currently being upgraded in Marine Parade GRC under the Demonstration Phase of the Upgrading Programme. The Ministry of National Development (MND) is in the process of identifying the second batch of precincts to be upgraded under the steady state phase. As MacPherson estate in Marine Parade GRC has some of the oldest flats in Singapore, it is very likely that these flats will be included under the second batch of steady state precincts for upgrading. The second batch of steady state precincts will be announced sometime early this year. MND is currently reviewing the cost-sharing arrangements for the steady state phase of the Upgrading Programme in the light of experience from the Demonstration Phase. Every effort will be made to ensure that the flat owner's share of upgrading cost is kept at affordable levels. WRITTEN ANSWER TO QUESTION NUMBER OF FILMS SCREENED AND TICKETS SOLD UNDER EACH CLASSIFICATION 1. Mr Peter Sung asked the Minister for Information and the Arts if he will give (i) the number of films screened in Singapore cinemas under each classification and (ii) the number of tickets sold for each of those films for the periods (i) July to September 1992 and (ii) October to December 1992. BG George Yong-Boon Yeo: The number of films screened and tickets sold is as follows: Classification G PG R(A) No. of Jul-Sep 92 1 160 11 Films Screened Oct-Dec 92 1 212 10 No. of Jul-Sep 92 19,117 4,366,165 562,717 Tickets Sold Oct-Dec 92 56,654 5,341,770 522,359 The above statistics were compiled from figures furnished by film distributors and exhibitors.”
“My Ministry has been looking into how the income tax system can be fine-tuned to encourage Singapore companies develop business opportunities overseas, and to facilitate the flow of incomes from Singapore investments abroad. The changes will be announced in my Budget Statement on 26th February 1993. MEDISAVE (Use for cancer screening) 8. Mr Low Thia Khiang asked the Minister for Health if he will consider allowing the use of Medisave for medical check-ups that screen for cancer.”
“Over the next five years, HDB plans to complete construction of 326 flats for sale in Marine Parade GRC. Work has started on 50 4-room Model A flats, and 76 5-room Improved flats, at Circuit Road. These flats were put up for booking in the second quarter of 1992, and will be completed by end 1994. Work on another 200 flats at Pipit Road is expected to commence in early 1995, and be completed in late 1997. FOREIGN WORKER LEVY 27. Mr Chia Shi Teck asked the Minister for Labour whether he will reduce the foreign worker levy in view of the weak economic condition currently prevailing in Singapore.”
“Adjourned accordingly at Twenty Minutes to Two o'clock pm to a date to be fixed. Appendix I WRITTEN ANSWERS TO QUESTIONS FOR ORAL ANSWER NOT ANSWERED BY 1.30 PM NEW HOUSING AND DEVELOPMENT BOARD FLATS IN MARINE PARADE GRC 20. Encik Othman bin Haron Eusofe asked the Minister for National Development if he will provide details of the Housing and Development Board's programme to develop new sale flats in the Marine Parade GRC.”
“A collecting bank will be protected from liability for crediting the proceeds of such a cheque to the wrong account, if it can demonstrate that it has acted in good faith and without negligence. These amendments are contained in clauses 4, 5 and 6 of the Bill. They are similar to amendments in the UK Cheques Act 1992 which were first proposed in a UK White Paper on Banking Services issued in March 1990. I now move on to the other amendments of the Bill. Clauses 2 and 3 seek to amend sections 57(b) and 72(d) of the Act to enable the Court to award judgments in foreign currencies in respect of bills of exchange dishonoured abroad. These amendments are of a law reform nature to bring the Bills of Exchange Act, which has not been amended since 1970, up-to-date with developments in the United Kingdom. They are also consistent with our standing as an international financial centre that our courts be allowed to award, where appropriate, judgments in foreign currencies on dishonour of bills. Clauses 7 and 8 of the Bill seek to make related amendments of a similar nature to the Arbitration (International Investment Disputes) Act and the Reciprocal Enforcement of Foreign Judgments Act to enable various awards and judgments given in a foreign currency, and registrable for enforcement in Singapore, to be registered in the foreign currency instead of Singapore dollars. Sir, I beg to move. 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. ADJOURNMENT Resolved, "That Parliament do now adjourn to a date to be fixed." -[Mr Wong Kan Seng].”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Bill seeks to amend the Bills of Exchange Act to give legal status to the words "account payee" or "a/c payee" written on the face of a crossed cheque. This proposal arose from a recent Court ruling that an "account payee only" crossing on a cheque does not, in law, prevent transferability of that cheque. The Court also ruled that a "not negotiable" crossing would not preclude such a crossed cheque from being transferred. As a result, there was a surge in the number of cheques being crossed "non-transferable", as cheque issuers were concerned that their cheques would otherwise not be paid to the named payee. Under the present law, a "non-transferable" cheque requires that the paying bank to ascertain from the collecting bank that the proceeds of the cheque have been credited to the account of the named payee. To minimise the risk to the paying bank for wrongful payment, the collecting bank is required to manually indicate on each non-transferable cheque that the funds have been credited to the named payee's account before the cheque is presented for clearing with the paying bank. As manual clearing is time-consuming and labour-intensive, the Association of Banks in Singapore decided to impose a handling fee for clearing such cheques. The public, however, misunderstood the rationale and expressed dissatisfaction with the surcharge. To resolve the issue, amendments are proposed to the Bills of Exchange Act to give legal status to the words "account payee" or "a/c payee" written on the face of a crossed cheque. Such a cheque will be non-transferable and can only be paid into the account of the named payee regardless of any purported endorsement.”
“Mr Speaker, Sir, the issue has been raised by other Members in the past. I have explained that the Singapore Allowance was revised in 1980, 1982 and 1986. The Ministry of Finance reviews the Singapore Allowance periodically and if there is justification, a revision will indeed be made. UPGRADING OF SPORTS FACILITIES 17. Mr S. Chandra Das asked the Minister for Community Development what plans his Ministry has to upgrade some of the existing sports facilities.”