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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“But his suggestion is not necessarily a bad one, and I will convey his proposal to the Board as and when it is formed. There is a question on whether other forms of gambling will be allowed. The other form of gambling currently allowed is the 4-digit operation and there is no present intention to allow other variants of gambling. The Member for Potong Pasir has suggested that the matter be referred to a Select Committee on grounds that the members of the Turf Club Committee were not consulted. I do not think this is really a sensible proposal. The Bill is intended primarily to correct an anomaly, an oversight which should have been corrected many years ago. We are merely following the precedent set in Malaysia where the Tote Board has been in operation for some years. In fact, in Australia and in many other countries legal gambling sanctioned by government is controlled by statutory boards and agencies (like the Turf Club's) carry on the day-to-day operations. It is not intended that the Singapore Turf Club will be dissolved. In fact, the intention would be for the Board to continue to appoint the STC as its agent to carry out day-to-day operations. There is no suggestion that the present committee has done anything wrong. So the need to consult them for a proposal in which the public interest is manifest, I think would be unnecessary and perhaps a considerable waste of public time. I suggest that if the Member for Potong Pasir has heard of any aspersions or reasons for the introduction of this Bill, he should have the courage to say it in public. But if he feels that this would be embarrassing for individuals, I will be quite happy to receive his comments in private.”
“Mr Deputy Speaker, Sir, I thought that the Bill would pass without comments, but obviously I was wrong, and I thank those who have risen in support of the Bill. I will now answer the questions in the order in which they were addressed. The Member for Siglap has suggested that history has proven that good intentions are not usually followed, but I will try to ensure that the new Board when appointed will use funds derived from horse racing and its associated activities will be used for the benefit of the public at large, including sports and other activities. As to the question from the Member for Whampoa about the apparent contradiction in clause 16, I do not see a contradiction at all. Clause 16(1)(a) and (b) makes it not an offence to publish the list of names of the people who are authorized agents of the Board or totalisator agencies, whereas subclause (2) of clause 16 is intended not to give carte blanche to proposals to advertise and induce people to gamble. The Member for Thomson has suggested that the creation of the Board might place the odium of gambling fully on the Government's shoulders. I think it is a matter of opinion because everyone knows that the turf club cannot exist without Government approval. At present, gambling operations are handled by a private club with tacit Government approval. It is no different from a Board controlling turf club activities as we are now intending. So I do not think it really changes the position as far as the public is concerned. He has also suggested that the Board should announce a fixed percentage of profits to be allocated to charities like the Community Chest. That is an issue which has to be decided by the Board.”
“The property and funds of the Singapore Turf Club are deemed to be held by the Club on trust for the purposes of the Board with effect from the appointed date, ie, 9 November 1987, when the Bill was introduced in Parliament. This is provided for in clause 22 and is necessary to safeguard the Club's assets in the public interest. Sir, I beg to move. Question proposed.”
“It was never the Government's intention to provide a small number of the Club's members such monopoly benefits. Therefore, any funds so accumulated not through business acumen or risks taken, but merely by collecting bets from the ordinary members of the public, should not be left for the sole benefit of the members. The establishment of the Singapore Totalisator Board will seek to correct this anomaly. I now turn to the main provisions of the Bill. The provision to establish the Singapore Totalisator Board is set out in clause 3. The principal functions of the Board are to operate totalisators in respect of race meetings and conduct four-digit draws. These are set out in clause 4. The Board will appoint the Singapore Turf Club as its agent to conduct racing business in accordance with an approved scheme, the scope of which is set out in clause 11. Essentially, the scheme deals with the establishment and operation of totalisators and totalisator agencies in respect of race meetings. Clause 14 enables the Club to regulate the admission of members of the public to the Club. The other provisions relating to the administration of the approved scheme are set out in clauses 12, 13 and 15 to 18. Since the profits of the Club come from the public at large, clause 5 of the Bill empowers the Board to use its funds for public, social or charitable purposes and for the promotion of culture, art and sport. The other provisions relating to the financial powers of the Board are set out in clauses 8 to 10. Clauses 19 and 20 confer on the Police the powers to deal with offences committed under the Act.”
“Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Singapore Totalisator Board Bill seeks to establish a statutory body to regulate the conduct of betting by its agencies, and to give legislative authority for the property and funds of the Singapore Turf Club to be held on trust by the Club for the purposes of the Singapore Totalisator Board. Although the Singapore Turf Club is a private club registered under the Societies Act, gambling by members of the public is allowed both within and outside its premises. They do so by placing their bets with the Club. It is, therefore, the only private club to which the public have legitimate access to gambling. Horse racing in Singapore has been the sole preserve of the Singapore Turf Club since the last century. Through exemption under the gaming laws, the Club has the virtual monopoly to conduct betting on horse races. Strict enforcement of the gaming laws by the Police has helped the Club to maintain its monopolistic preserve all through these years. As a result, the Club has been able to generate a substantial amount of profits annually. Thus in 1986, the Club had an after-tax profit of approximately $33.67 million. As of 31 December 1986, its accumulated fund and reserves had reached well over $286 million. The Club's register shows that it now has about 580 ordinary members. Only this small group can share in the distribution of the vast amount of its accumulated assets and future profits should the Club be dissolved. Such a possibility is not in the public interest. The Club was not set up as a business proposition. It has accumulated its profits by virtue of the monopoly conferred by the Government and paid for by the public.”
“Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The purpose of this Bill is to give legislative effect to the estate duty exemptions for: (a) gifts made to the National Museum; and (b) voluntary CPF contributions made by self-employed individuals. The estate duty exemption for gifts to the National Museum is part of the overall Government's scheme to encourage private collectors to donate artifacts, particularly those pertaining to Singapore's cultural heritage to the National Museum. Presently, gifts to the Museum are exempted from estate duty if they are made more than 12 months before the date of death of the donor. With the present amendment, gifts made less than 12 months can also be made exempt from estate duty. With effect from the Year of Assessment 1987, voluntary contributions to the CPF by the self-employed is exempted from income tax. The voluntary contributions will also now be exempted from estate duty. 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. SINGAPORE TOTALISATOR BOARD BILL Order for Second Reading read.”
“Mr Deputy Speaker, Sir, the question from the hon. Member for Siglap implies that the General Insurance Association (GIA) is proposing to introduce a rate cartel. However, I am assured that this is not the case. In fact, as a matter of policy, the GIA has abolished the use of minimum tariffs since 1981. What the GIA is presently undertaking is a statistical study of past experience of motor insurance with a view to devising a rating structure which will better reflect the risk characteristics of the motor vehicle and the driver to be insured. This is essential for prudent underwriting by insurers. The statistical study would provide an objective basis for risk classification and premium rating. Each insurer will be able to use the results of the study independently as a guide for underwriting motor risks. Indeed, the Insurance Commissioner has been assured by the GIA that the resulting rate structure and premium rates would only serve as a voluntary guide, and that there is no proposal for a rate cartel. WAGE REFORM 18. Encik Abbas Abu Amin asked the Minister for Labour how many establishments have concluded wage reform agreements; of these, how many are unionised and non-unionised and what steps his Ministry is taking to get non-unionised establishments to expedite wage reform.”
“Yes. I was just going to say that. I suggest that the Member for Potong Pasir should perhaps come for a short seminar at the Ministry of Finance and we will set him right.”
“I think investors know very well what they are doing and not the Member for Potong Pasir. The implication is that if the shares fall in price, Government should buy them back. If they rise in price, the buyers should retain the profit. Is that the implication?”
“Indeed that is the case. The suggestion seems to be that if ---”
“Mr Deputy Speaker, Sir, I understand the Member for Potong Pasir's question quite clearly. But what he has failed to do is to understand my reply. There is no obligation on the part of Government, even on the second tranche sale of shares of SIA at $13. When the second tranche of SIA shares were issued at $13, the returns on those shares at that price were considered quite attractive. In fact, there was a very large demand not only from local investors but also from foreign investors. So on the basis or principle that shares are issued at what SIA considers to be fair prices based on their potential earning power, I see no reason why, just because for the moment the shares have declined, in value, there should be a bail-out.”
“Mr Deputy Speaker, Sir, I do not know what the Member for Potong Pasir has in mind when he says "intervene". If he is asking whether the Government will prop up the local stock market, the answer is "no". I should point out that there are now substantial foreign investors in local shares, including those sold by the Government to the public, and any attempt by the Government to support the market will merely encourage speculation in these shares by both local and foreign investors. The Member for Potong Pasir seems to suggest in his question that the Government has an obligation to buy back shares that were sold to the public under its privatization programme, now that the shares have fallen in value. The Government does not have such a one-sided obligation. The original issue prices of shares in Government-owned companies were fixed at levels which would give investors a fair return on their investments, based on the companies' track records and future prospects. The prices of many of these shares rose substantially after issue due to strong investor sentiment and many purchasers made handsome profits when they resold the shares before the market crashed. Those who entered the market late and did not sell their shares before the market crashed were never encouraged or persuaded by the Government to buy. In fact, the Government had on more than one occasion reminded the public that investments in stocks and shares carried risks, particularly when prices paid for shares were well out of line of the fundamentals.”
“Mr Deputy Speaker, Sir, vegetables are not subject to import duty. There is neither a tax nor a levy on imported vegetables. STOCK EXCHANGE OF SINGAPORE (Government intervention) 8. Mr Chiam See Tong asked the Minister for Finance whether the Government has any intention to intervene in the local stock exchange, especially in relation to shares of companies which were first sold by the Government to the public who in turn bought those shares based on their confidence in the value of those shares held out by the Government to them.”
“We have never announced a breakdown of our investments and I do not propose to do so now. UNEMPLOYMENT (Measures to reduce) 13. Encik Abbas Abu Amin asked the Minister for Labour what is the latest unemployment situation and whether his Ministry has plans (i) to encourage part-time employment, (ii) to persuade employers in the private sector to increase the retirement age of their workers and (iii) to monitor the supply and demand on foreign workers so as not to jeopardize our own people of job opportunities. 14. Mr Lim Boon Heng asked the Minister for Labour what is the latest available unemployment rate.”
“Sir, the Government has always maintained a conservative strategy in the management of its overseas assets. Our investments are mainly in Government bonds, with the balance divided between gold, cash, stocks and shares, and real estate. Our stock portfolio has declined in value in line with world stock markets but as the bulk of our portfolio was purchased over a period of several years since 1982, our investments still show very substantial real gains even at present prices. The present fall in share prices should also be seen in its proper context. The worldwide bull market in stocks started in 1982 and the recent stock market declines merely bring share prices back to levels last seen in late 1986 in the United States and early 1987 in Japan. We were also fortunate that when share prices fell, bond prices moved in the opposite direction, so that the declines in our stock portfolio were partly offset by gains in our bond portfolios. Overall, the present crisis in world stock markets has had little impact on our overseas investments. I should also mention that our equity purchase policies have always been a conservative one. We are long term investors, concentrating on a portfolio of strong, low price/earning multiple companies with a large market capitalization, all well placed to ride through economic downturns.”
“Although the question is not relevant to the question being asked, I will nevertheless reply. I do not believe that it was a mistake and I think there is a presumption that all members who have used their CPF money have, in fact, lost money. This is not true. Some who have bought early should have made some money and those who have sold before the peak would also have made money. Undoubtedly there would be some who have taken on paper losses and one assumes that these people would not find it necessary to sell because the funds used were surplus to their immediate requirements and they should have bought only shares which were sensibly priced in the first place. It must be recognized that any investment carries a risk. The higher the rate of return one expects the higher the risk and one can assume that the majority of investors in Singapore are reasonably sensible, although one cannot exclude the possibility of those who want to speculate and therefore have to accept the risk. CRISIS IN WORLD STOCK MARKETS (Effect on Singapore's reserves) 12. Mr S. Chandra Das asked the Minister for Finance what is the effect if any, of the present crisis in world stock markets in New York, London, Tokyo, Sydney, Hong Kong, etc, on our reserves invested overseas.”
“Mr Speaker, Sir, the Singapore stockbroking industry has survived the recent worldwide collapse in share prices remarkably well. The ST index fell a total of 31% between 19th October 1987 and 2nd November 1987. Due to a combination of international and regional factors, this fall was only exceeded by the decline in Hong Kong and was substantially larger than the falls in New York and Tokyo over the same period. The Stock Exchange of Singapore (SES) was also able to cope with sharp rises in turnover without any hiccups. This performance provides ample evidence of the fundamental soundness of the stockbroking industry. The present stability of the industry is a direct result of reforms introduced following the Pan-Electric crisis two years ago. They included the Securities Industry Act of 1986, the reconstitution of the Stock Exchange Committee, the corporatization of stockbroking firms, and the more recent introduction of revised rules on settlement and delivery. Bank borrowings of the stockbroking industry totalled $260 million as at 30th October 1987, compared to $1 billion two years ago. These borrowings are well supported by aggregate shareholders' funds of $484 million so that stockbrokers are operating within the capital and debt-gearing criteria required in the Regulations. Stockbroking firms have extended only $100 million in margin financing to their clients and their own investment in stocks and underwriting exposures are relatively modest, amounting to $92 million and $53 million respectively. With a much improved capital base and a healthy flow of commission income, the firms are well placed to weather the present turmoil in the stock markets.”
“I think it is the Board which sets the qualifications. The Council's responsibility under the new proposed changes will be to confine to professional matters such as setting the standards but not approval of the final qualifications. They can recommend to the Board. The third question was on clause 16 on the question of "change of name". Clause l6 states: 'Every public accountant shall notify the Registrar in writing within one month of any of the following changes bearing on the particulars entered in the Register of Public Accountants:' It would be the change of name of the accountant's firm, I am assuming, under which he is operating his business. It might be the individual's name himself if he is operating under his personal name. 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. ECONOMIC EXPANSION INCENTIVES (RELIEF FROM INCOME TAX) (AMENDMENT) BILL Order for Second Reading read. 3.25 pm”
“Mr Deputy Speaker, Sir, I thank the Member for Chong Boon for his support of the Bill and for his proposal that public listed companies should have their auditors rotated every five years as in the case of statutory boards. I will certainly commend his proposal or recommendation to the Securities Industry Council and the Stock Exchange Committee for their consideration. The issue concerned is, of course, relatively complex but I think it is something definitely worth their consideration. The Member for Paya Lebar asked who should be setting the standards for the qualifications of accountants. I think it is undoubtedly the responsibility of the Public Accountants Board to set the primary qualifications. I did not quite follow his second question.”
“Before members are elected or appointed to the Council, they have to file a declaration with the Institute stating that they are not disqualified from holding office. Anyone who fails to make such a declaration is committing an offence and can be fined up to $1,000. A member of the Council is also required to vacate his office when he is convicted of an offence involving fraud or dishonesty, or is found guilty of professonal misconduct by the Council. The Bill also provides for penalties against any person or body corporate fraudulently posing as a public accountant or certified public accountant. The existing range of fines which is from $200 to $2,000 will be increased from $1,000 to $10,000. The Bill also restricts employment of disqualified persons by public accountants to put a stop to the current undesirable practice of some public accounting firms employing suspended or deregistered public accountants. Sir, I beg to move. Question proposed.”
“The Chairman of the Board will be appointed by the Minister from among its members. The Board will have powers to appoint inquiry committees to hear and determine any complaint of professional misconduct made against any public accountant. Each inquiry committee will comprise four certified public accountants and a lay person. The findings of the inquiry committee will be reported to the Board which will decide on the penalty to be imposed. If found guilty, an errant public accountant will face a penalty ranging from censure by the Chairman of the Board, a fine not exceeding $5,000, suspension for a period not exceeding two years, to deregistration. The Institute will have a Council comprising: (a) eight practising members elected by practising members; (b) eight non-practising members elected by non-practising members; (c) three members nominated by the Government; and (d) not more than two co-opted members. All members of the Institute, regardless of whether they are in public practice or not, will be allowed to use the common designation of Certified Public Accountant and the initials "CPA". The objective of a common designation is to enhance the standing of the local accountancy profession. To maintain high standards of ethics, members will be disqualified from election or appointment to the Council if: (a) a practising member has been suspended from practice for a period of six months or more, or whose registration with the Board has been cancelled, or who has been convicted of an offence involving fraud or dishonesty; and (b) a non-practising member ceases to be a member of the Institute or has been convicted of an offence involving fraud or dishonesty.”
“Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time." This Bill seeks to establish the Public Accountants Board to provide for the registration and control of public accountants and to repeal and re-enact, with amendments, the Accountants Act. It was drafted in consultation with the Singapore Society of Accountants (SSA). The registration and control of accountants currently comes under the SSA. The SSA performs a dual role of safeguarding professional competence as well as the social organization for its members. It would be better if the role of safeguarding or ensuring professional competence is discharged by a separate body, as in other professions such as engineering and architecture. Under the Bill, the main responsibilities of the Public Accountants Board will be to register and control public accountants. The SSA will continue to exist and be known as the Institute of Certified Public Accountants of Singapore. The role of the Institute will henceforth be confined to professional matters such as setting and maintaining standards; providing continuing professional education and training; conducting examinations and keeping in touch with developments overseas in the accountancy profession. All public accountants registered by the Board are required to be members of the Institute. The Board of 10 members will comprise: (a) the Accountant-General; (b) the Auditor-General; (c) a member from the Nanyang Technological Institute or from the National University of Singapore to be appointed by the Minister; and (d) seven other members to be appointed by the Minister, of whom three shall be appointed by the Minister on the nomination of the Council of the Institute.”
“Mr Speaker, Sir, the Member for Jalan Kayu will no doubt be already aware that our income tax system is a progressive one. Reliefs, though necessary, are by its very nature regressive. Expanding on our present system of dependants' relief would merely allow taxpayers with higher assessable incomes to benefit more in comparison to the lower income groups. I do not therefore propose to consider further revisions to our present system of dependants' relief. A general reduction in our individual tax rates is a more equitable one. The Government has over the years sought to reduce the burden of the individual taxpayer. Our tax rates have been reduced five times during the Years of Assessment 1978, 1980, 1982, 1985 and 1987. The complementary policy of granting tax rebates has been practised from Assessment Year 1984. ELECTRONICS INDUSTRY (Labour shortage) 10. Mr Chiam See Tong asked the Minister for Trade and Industry whether the rapid expansion in the labour-intensive electronics industry will create the same labour problems for Singapore as in the recent past when there were as many as 150,000 foreign workers in Singapore.”
“Bill considered in Committee; reported without amendment; read a Third time and passed. RUBBER DEALERS (AMENDMENT) BILL Order for Second Reading read.”
“Mr Deputy Speaker, Sir, I would like to thank the Member for Geylang Serai for his comments. But I should like to point out that it is premature to assume that the year as a whole would turn out to be so buoyant that we can abandon the wage restraint measures recommended and agreed earlier this year. I would prefer to urge a somewhat more conservative approach. The first quarter was strong indeed, 7%, and indications are that the second quarter is likely to be reasonably good. But for the year as a whole I would prefer to withhold premature comment until we see how things appear nearer the end of this year. The recovery has been strong in a number of sectors, particularly, electronics. However, there are still quite a few sectors which are depressed. Construction is one which has been mentioned. Others include the hotel industry. I think mostly the retail business is still depressed and it is only in some sectors of the manufacturing and financial services where you see strong growth. Overall, we have relatively uneven growth with prospects for stronger growth extending to other sectors in the second half. So my belief is that the measures Government has taken, which form part of the wage restraint measures accepted by the public at large, should be maintained until we see more clearly how the year progresses. On the second question as to whether additional payment might be made, it is certainly something we can take into consideration. Again, I would prefer not to make any promises in advance. 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].”
“Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time." Government has decided that wage restraint in the public sector should continue for another year with effect from 1st July 1987. The Ministry of Finance (Public Service Division) met with the public sector staff unions and associations in January this year and they reached a consensus that the wage restraint measure to be adopted by the public sector for the second year shall be (in addition to the withdrawal of the Incentive Payment) a reduction of the 1984 National Wages Council wage increase by 30% for all monthly-rated officers and by 10% for the daily-rated employees. As the payment of NWC wage increases is embodied as an express term in letters of appointment, legislation has to be introduced to effect the reduction of the 1984 NWC wage increase. Hence this Bill is now being introduced in Parliament. The Bill will not involve Government in any extra financial expenditure. In this connection, I would like to inform Members that the reduction of the 1984 wage increases applies to all employees in the public service, including those in any statutory body or authority, those on contract and part-time employment, as well as holders of political office and Members of Parliament. Other holders of public office whose remuneration is provided for under the Constitution have also consented to have their 1984 NWC wage increase reduced. Sir, I beg to move. Question proposed.”
“Sir, for the Member's information, there is an existing provision whereby brothers and sisters of handicapped children living in the same premises are allowed to claim deduction if the parents of the children are unable to do so. RETIREES INSURANCE SCHEME 10. Mrs Yu-Foo Yee Shoon asked the Minister for Labour since the Retirees Insurance Scheme was introduced, how many Central Provident Fund account holders have made use of the Scheme and whether there will be any educational programme to encourage more participation in the Scheme.”
“Mr Deputy Speaker, Sir, parents of handicapped children do get more relief than parents of non-handicapped children. Relief for non-handicapped children is given only up to the age of 16 or, if above 16, when they are receiving full-time education. Relief for handicapped children is given regardless of age, even if the handicapped child is employed provided his income is not more than $750. Parents of handicapped children are also eligible for the incentives recently announced to encourage procreation. Increases in tax relief for handicapped children are not contemplated at this time. Government is also supportive of the efforts to care for handicapped children. Donations to the institutions which provide needed services to handicapped persons are also tax deductible.”
“Mr Deputy Speaker, Sir, I beg to move, That this Parliament, in accordance with section 2 of the Local Treasury Bills Act (Chapter 72), resolves that the Minister for Finance be authorised to borrow by the issue of Treasury Bills in Singapore a sum not exceeding Singapore six thousand million dollars. Sir, on 7th March, 1972, Parliament resolved, in accordance with section 2 of the Local Treasury Bills Act (Chapter 72), that the Minister be authorized to borrow by the issue of Treasury Bills in Singapore a sum not exceeding $3,000 million. Since 1972, the demand for Treasury Bills has grown with the increasing number of banks and other financial institutions setting up business in Singapore. This demand for a short-term investment instrument is expected to increase further with changes in the liquidity requirements for banks and the activation of the Government securities market. The authority of Parliament is therefore requested to enable the Government to issue Treasury Bills up to an amount not exceeding $6,000 million. These Bills would have maturity of one year or less. Sir, I beg to move. Question put, and agreed to. Resolved, That this Parliament, in accordance with section 2 of the Local Treasury Bills Act (Chapter 72), resolves that the Minister for Finance be authorised to borrow by the issue of Treasury Bills in Singapore a sum not exceeding Singapore six thousand million dollars. COMMITTEE OF SELECTION”
“The regulations are far more detailed and are of a nature not appropriate for inclusion in the main legislation. I think I have covered most of the questions raised. Question put, and agreed to. Bill accordingly read a Third time and passed. TREASURY BILLS”
“However, there may be certain cases where, depending on the size of the company and nature of its operations, someone outside the auditor's profession might do equally well, if not better, and I think one ought to leave the discretion in this area to the Minister or to the Court on an exceptional basis rather than on a regular basis. The Member for Whampoa also has said that on page 76 there appears to be an omission. He has made reference to section 227K where such a provision has been made but the circumstances are not entirely the same. In section 227K there is a specific step to be made and therefore the word "forthwith" had to be included whereas in the section on page 76 the time frame will in fact be specified in the regulations. The Member also said that on the top of page 85, he wanted to know why there is a certain exclusion under section 227H. The exclusion refers to property held under fixed charges and I think an exception cannot be made to this rule because it will undermine the whole basis of priority in the liquidation process where holders of fixed charges always have prior claim to the assets of the company under liquidation. To do so would undermine the whole basis of section 328 of our Companies Act. A ranking of this sort with prior claims by secured creditors followed by floating charge creditors and unsecured creditors requires the exclusion in section 227I (2). Finally, he has asked why on page 89, section 227N, a reference is made to regulations but there seems to be no regulations published as yet. These regulations will, in fact, be issued simultaneously with the new legislation. It is a normal procedure that a complete set of new regulations will be issued in parallel with legislation, covering the implementation procedures.”
“Thank you for the clarification. Again, I do not think it is really necessary because he is a professional engaged to assist the judicial manager or the company and would be adequately protected under the terms of his contract. The Member for Whampoa has also asked whether under our new legislation more than 10% of companies could be rescued. That is a question which I find impossible to answer. No legislation can stop companies going under if they are badly managed or if circumstances turn against them. Legislation is only introduced in the hope that it can make it easier for companies which are not totally insolvent to be rescued and to avoid them being forced into liquidation by the precipitous action of one or two small creditors. It is a holding period and we will simply have to see whether, in practice, it aids in the recovery of companies which are fundamentally sound but may be encountering temporary cash flow problems which could lead to, under present regulations, premature liquidation. The Member for Whampoa has also asked why are companies and their directors not allowed to nominate anyone other than approved auditors whereas the Court and the Minister have such discre- tion. This is because we have to be very careful that people who are nominated to be judicial managers have the qualifications, knowledge and expertise to do the job properly, and we believe that approved auditors will normally have these necessary qualifications.”
“No. What I meant was that there need not be the formal appointment of such a consultant because the directors of the company are quite at liberty, before a judicial manager is considered, to appoint a specialist who might be able to help restore the company.”
“Other Members have been mainly complimentary for which I thank them. The Member for Whampoa, as usual, asked some very penetrating questions which I will attempt to address. He has suggested that we should perhaps add two conditions to section 149 which would make it obligatory for directors to be charged under this section for fraud if they continue to allow companies to operate when they are clearly insolvent. These are useful suggestions. But I do not think they are really appropriate additions to the legislation. They would be criteria used either by the Official Receiver or by the Minister in determining whether petitions should be made to the Courts for directors to be charged under this section. He has also suggested that on page 47, paragraph 11(a) and (b), should include a proposal to allow the appointment of an external consultant to assist the judicial manager to reconstruct the company. Again it is a useful idea but I would have thought that such a step ought to have already been seriously considered by the directors of the company. Dr Augustine Tan: The judicial manager is being protected under that section. The consultant should similarly be protected.”
“Mr Deputy Speaker, Sir, first, I would like to thank all the Members who have spoken, particularly for all their unstinting support of the Bill. They should really be directing their thanks to the Members of the Select Committee which include the Members for Chong Boon, Bukit Merah, Chua Chu Kang, Clementi, Leng Kee, Jalan Besar and the Speaker, for spending all their time in these deliberations. I will now turn to more specific issues raised by Members. The Member for Thomson has asked whether there are any specific criteria which can be used to identify directors who are going to be excluded or penalized for doing things detrimental to the company. I do not think there are any set guidelines for this because their transgressions should be fairly apparent and the Minister or the Official Receiver would from experience know what criteria to use. He also raised the question as to whether there would be sufficient people willing to undertake the job of a judicial manager and has made some proposals to remunerate them adequately through share option schemes and so forth. Of course, we really cannot tell in advance whether the judicial management system will work effectively. We will simply have to allow for a trial period. But I am fairly confident that this opens up quite a new range of work for approved company auditors and there should be no difficulty in finding sufficient people willing to undertake this job. As to the question of whether we should provide them with special incentives like share options, that is another issue altogether and the tax implications are being looked at by my Ministry in connection with other issues raised during the Budget debate. We will be announcing some of the decisions in due course.”
“It was decided not to proceed with these amendments in this Bill as it was felt that what was really required was a thorough review of the prospectus requirements in the Companies Act so as to make them more compatible with the rapid developments taking place in the securities industry. This review has become more urgent having regard to the need to promote the bond market both at the domestic and the international level and, at the same time, to liberalize the law relating to prospectus in circumstances where a lesser degree of protection to investors is justifiable. These proposals will be taken up in the next Companies (Amendment) Bill. Sir, I beg to move. Question proposed.”
“Although the Select Committee was not able to accept all the suggestions put to it, I believe that the suggestions that have been accepted and incorporated into the clause now provide a more workable scheme for the judicial management of companies. Nevertheless, it should be recognized that Part VIIIA introduces an area of law new to Singapore, that notwithstanding the amendments and refinements which have been made in Select Committee, only experience gained from observing how this new judicial management procedure works in practice will reveal other defects that may exist. Clause 60 which amends section 328 of the Act deals with the preferential claims of employees of a company in a winding up. A number of amendments were made to this clause in Select Committee. The most significant feature of these amendments is the removal of the limitation that only wages or salaries payable in respect of services rendered within a period of four months before the commencement of winding up can be claimed as a priority debt. An employee in a winding up would now have a preferential claim for wages and salaries up to an amount that is equivalent to five months' salary or $6,250 whichever is the lesser. This will ensure that on a winding up, an employee can expect to receive in priority a fair sum of what is due to him for notice pay, gratuity or retrenchment benefit pursuant to his contract of employment under an award or agreement, regardless of whether such sum becomes payable before, on or after the commencement of a winding up. As a final comment on the Bill, Members will see from the Report that certain amendments in clauses 2, 9 and 65 have not been proceeded with. These amendments were concerned directly or indirectly with the prospectus requirements under this Act.”
“Under the new section 149, guidance is also given to the Court on the matters it should take into account in deciding whether the conduct of a director is such as to render him unfit to manage companies. A notable feature of the new provision is that unlike the existing section 149, a director may be disqualified by the Court after only one insolvent liquidation. The Select Committee considered this to be an important and logical change in the shift away from a system based on automatic disqualification to one based on disqualification by Court order. Notwithstanding this somewhat stricter approach in this latter regard, the Select Committee is of the view that taken as a whole, the new section substantially reduces the harshness of existing section 149 as it will ensure that a full judicial inquiry is made before a person is disqualified. At the same time, the basic policy underlying the provision is preserved. In broad terms, this policy is to prevent incompetent, reckless or negligent directors who have been associated with one or more insolvent companies from carrying on trading under the protection of limited liability and causing substantial losses to other creditors and shareholders. I now move to clause 46 which inserts a new Part VIIIA dealing with judicial management. This clause was also the subject of numerous comments and criticisms though I should add that the general policy intent of this clause was almost universally accepted. Here again, I do not propose to reiterate the explanations given for the various amendments that appear in the Report.”
“I refer, in particular, to Clause 22 which relates to the disqualification of unfit directors of insolvent companies under section 149 of the Act (Clause 45) which introduces a new Part VIIIA to the Act on judicial management, and Clause 59, which is concerned with the priority of employees' wages and salaries in a winding-up. Much of the Select Committee's time was devoted to these three clauses. As Members will see from Appendix V of the Report, full explanations have been given for each of these amendments to the clauses. In my view, the amendments made to these clauses in Select Committee adequately deal with the criticisms levelled at them as they originally appeared in the Bill. For the benefit of Members, I will touch briefly on the amendments to these clauses. Clause 22 presents a new approach as compared with the original clause 22 in providing for the disqualification of unfit directors of insolvent companies. Rather than make minor amendments to ameliorate the harshness of existing section 149, the Select Committee decided that a fundamental shift away from automatic disqualification would be desirable. Disqualification will now be by Court order based on an application by the Minister or by the Official Receiver. This new provision is based broadly on the UK legislation. Certain concepts in existing section 149 have, however, been retained. These include the cut-off period of three years within which the insolvency liquidation must take place for a person who has ceased to be a director to be disqualified, and the definition of what constitutes a company going into liquidation.”
“Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Third time." Members are aware that the Companies (Amendment) Bill was referred to Select Committee for consideration. The Select Committee received 29 written representations, eight of which were received after the closing date and of which one was too late for inclusion in the Report. The Committee heard oral evidence from 47 persons in respect of 16 of the 29 written representations. The representations were by and large well-reasoned and well-argued and many of the suggestions 1152made were accepted by the Select Committee. I wish to express my appreciation to the numerous persons who took the time and trouble to give their views on the Bill. The Report of Select Committee was presented to this House on the 12th of March 1987 as Paper Parl. 5 of 1987. The Bill, as set out at Appendix I of the Report, incorporates the amendments made by Select Committee. Members will observe that a large number of amendments have been made to the Bill and full explanations for all these amendments appear in Appendix V of the Report. I do not, therefore, propose to burden the House by repeating these explanations clause by clause. A substantial proportion of the amendments are of a drafting nature. These serve to improve the language, remove inconsistencies or else contribute to greater clarity in certain provisions in the Bill. These do not require further comment. There are, however, some provisions that have aroused considerable public interest and discussion and which I believe deserve special mention.”
“On the first question, the intent is to move entirely to a scripless system. I have, in fact, said this in my speech. But we still have a residue of stocks which are issued in certificate form which would over time expire. But the intention is to move entirely to a scripless form. On the question of where the money should be invested, I have in my Budget round-up mentioned that any excess of savings which cannot be invested locally in a form which is attractive, because we have not the capacity to invest locally, would be invested offshore in secure securities. We only invest inforeign Government bonds, top quality equities and prime real estate. These offshore investments return an income stream to the Government which, in our current Budget, has helped to avoid the need to impose additional taxes. 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. COMPANIES (AMENDMENT) BILL (As reported from Select Committee) Order for Third Reading read.”
“Mr Deputy Speaker, Sir, on the question whether MAS will be issuing short-term bills which would provide liquidity, item 5 on the Order Paper later this morning addresses this question. The answer is, yes. It is the intention of MAS to issue short-term (up to one year) maturity bills for this purpose. On the overall question of whether Government borrowings will reduce the liquidity in the markets, I think the Member is aware that the bulk of the bonds are issued, to the CPF. Funds which come in through the CPF system, and are unutilized by members for purchase of houses and other approved uses, will come to Government and be exchanged for bonds. Liquidity in the financial market is managed by the MAS through the money market system and through swaps in the local market. I can assure the Member that the MAS keeps a very close watch on liquidity conditions in the market to ensure that there is no pressure on interest rates. As to whether the Finance Minister has too much discretion, I think it would be difficult to define exactly what he should or should be allowed to buy because of the large range of securities which are available. I think we ought to leave it to the discretion of the Finance Minister. Perhaps the most effective way of ensuring that thing do not get out of hand is to make sure that the right person is appointed in the first place. Dr Augustine Tan rose.”
“As a result, advance deposits will be paid appropriate market-related interest rates. Sir, I beg to move. Question proposed.”
“So funds raised in excess of Government's budgetary requirements will be recycled back to the financial system, largely through the MAS. 2) At present, physical certificates are issued to purchasers of Government securities. In the new legislation, a book-entry registration and clearing system is envisaged to eliminate the need to handle physical certificates. The advantages to be gained lie in reducing storage and handling costs and paper work; reducing the danger of loss, theft, destruction and counterfeiting; and permitting greater speed and efficiency in handling a large volume of transactions. Instead of securities certificates having to travel back and forth at each transaction, with side-trips to MAS, a computerized system for updating records in a central register maintained by the MAS will be substituted. Commercial banks and primary and registered Government securities dealers will each have two securities accounts with MAS, one for their own holdings and the other for holdings on behalf of their customers. The other change proposed in the Development Loan Bill is to provide more flexibility in administering the payment of interest on advance deposits. At present, the interest rate on deposits placed in advance of an issue of Government securities is tied to the coupon of the bonds finally issued. But if financial conditions change, the final coupon rate may not reflect conditions in the intervening period. The problem is that as financial markets have evolved, greater volatility now prevails than at the time when this provision of the Act was first drafted. I am now seeking to update it. The Development Loan Bill will authorize interest on advance deposits accepted by the MAS to be paid at such rates as may be determined by the MAS.”
“Among the changes required are those pertaining to the Development Loan Act. The changes are necessary for the following reasons: 1) The Development Loan Act, 1983, which came into operation in March 1983, authorized a sum of $15,000 million to be raised by way of loan for the purposes of the Development Fund. So far, loans totalling $6,130 million have been raised under the Act, leaving a balance of $8,870 million. This remainder will be used up entirely when bonds are issued to absorb the CPF's advance deposits which totalled $13,900 million at the end of February 1987. In addition, new floating rate bonds will be issued to the CPF to replace their existing holdings of fixed rate bonds. The CPF Board's earnings would then match the floating rate of interest paid to depositors, without incurring the risk of capital loss due to price depreciation on investments in fixed rate securities, in the event of rising interest rates. In addition to the needs of the CPF come the needs of the activated Government securities market. Regular issues will be made to meet the demand of banks, insurance companies, other financial institutions and corporate and individual investors. If approved, the new legislation would authorize the raising of a sum of $35,000 million. This is expected to satisfy demand for Government securities over the next four years. It is estimated that about 80% of the Government stocks issued will be to the CPF Board. In case Members are wondering whether the Government intends to channel the additional funds into increased expenditure, let me assure Members that budgetary requirements are determined separately from funding requirements.”
“Third, the development of the market will encourage the growth of skills relating to fixed income securities - from traders to market makers, bond salesmen and investment managers. These skills can be applied to offshore and other fixed income markets and would contribute to broaden the spectrum of financial services available in Singapore. Currently, a Government securities market exists, but in a fairly rudimentary form. The CPF holds about three quarters of the outstanding debt, another 20% or so is in the hands of banks, discount houses and insurance companies, which are required by regulation to hold these "safe" assets. The concentration of securities in the hands of such long-term holders has left little scope for trading activity. Moreover, the maturity of the bonds, mostly 20 years, was not attractive to other investors who might have been expected to deal more actively in the market. The infrequency of bond issues exacerbated the lack of liquidity necessary for the development of a bond market. These obstacles have been examined and resolved. A programme of regular issues of Government securities, initially of up to five years' maturity, carrying market- related yields will be offered. The minimum denomination is $1,000 for the notes and bonds, well within the reach of individual investors and $10,000 for the Treasury Bills which cater for corporate investors. Eight primary and registered dealers have undertaken to make markets in order to ensure liquidity. The would-be investor in Singapore Government securities can obtain price quotes from the primary and registered dealers as well as those commercial banks who elect to provide the service. Investors may also transact through stockbroking firms. The new Government securities market is ready to be launched.”
“Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The reasons for this Bill go back to July 1985. That was when plans were initiated by the MAS to activate the market for Government securities as part of its mission of developing a competitive and progressive financial sector. Advice was sought from officials and ex-staff of the Federal Reserve Bank of New York which presides over the largest and, reputedly, the most efficient government securities market in the world. Our people have considered what best to adopt from the older and more developed markets - the US securities market as well as the UK gilt market which underwent some radical modernization recently. The MAS has been working with representatives from commercial banks and the financial community to establish a market structure that will be suitable for Singapore. Essentially, the Singapore Government securities market will be a domestic market. Non-residents are free to invest in Singapore Government securities but interest earned will be subject to withholding tax. In developing the Government securities market in Singapore, the Government's objectives are as follows: First, to provide investors with an additional liquid investment alternative which carries no risk of default. At present, the main investment instruments are stocks and shares, bank deposits and real estate. Second, a liquid Government securities market will provide the base for growth of a debt securities market; this will bring together our corporate debt issuers who want to raise funds and investors who will buy the securities. The benchmark for pricing will be the yield curve on Government bonds, the best credit in the market.”
“Bill considered in Committee; reported without amendment; read a Third time and passed. DEVELOPMENT LOAN BILL Order for Second Reading read.”
“Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time." In order to activate the Government securities market, the MAS will be increasing the frequency and amount of Treasury Bills. This increase in the issue of Treasury Bills calls for a more efficient system of handling a large volume of transactions than the present system in which physical certificates are issued to purchasers of Treasury Bills. The Local Treasury Bills (Amendment) Bill 1987 seeks to allow a book-entry registration and clearing system to be used. The advantages of such a book-entry system lie in reducing storage and handling costs and paper work; reducing the danger of loss, theft, destruction and counterfeiting; and permitting greater speed and efficiency in handling a large volume of transactions. Instead of physical certificates having to travel back and forth at each transaction, with side-trips to the Monetary Authority for the registration of change in ownership, a computerized system for updating records in a central register maintained by the MAS will be substituted. Commercial banks and primary and registered Government securities dealers will each have two securities accounts with the MAS, one for their own holdings and the other for holdings on behalf of their customers. All transactions in Government securities will be reflected daily, in changes in these accounts. These institutions will, in turn, act as custodians of Government securities for their customers, rendering each an individual accounting of his holdings. 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].”
“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. ADJOURNMENT MOTION”