Thomas Thomas
Singapore
“Can I ask the Minister whether he can consider it a competition when commuters do not have a choice, whether they are being served by SBS or TIBS? They have to live with whichever public transport company runs the route along where they live or want to use?”
“Would the Minister consider that Singapore being very small and if there is one company sharing resources, just like the banks are being encouraged to merge and share resources and skills, we will have an even better public transport system?”
“Mr Speaker, Sir, I just want the Minister to clarify, because I do not understand. If it is managed competition with two, why can it not be managed competition with one? Since we always say that we are short of players, we have a concentration of players to give even better services.”
“One is whether Government will recruit; two is how do we prevent wages for lower income dropping too low such that they cannot maintain their living standards? And the third question is this.”
“The bulk of TIF is invested with established VCs. Several were able to raise more than their targeted fund sizes, though some of the first time early-stage funds (which are meant to help develop local VC expertise) are seeing a slow-down in fund raising and deal flows.”
“Sir, I am pleased to say that most of the points that I had wanted to bring up have already been addressed by the Minister. However, I would just like to ask what are the acceptable international standards for noise levels, in decibels, from expressways, and what is the general noise level from our expressways? 1.45 pm”
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“I think this is important. It is also important that the Government remains flexible. One of the main things I hear for years was that there would be no unemployment benefits. There would be no welfare benefits. But today, in this package, there is some relief for people who lose their jobs. You do not call it unemployment benefit. You call it by another name, but it still meets the need, and this is the flexibility that is needed. And I hope this flexibility will be reflected in many other things when we do a review. It is true that the present crisis has reduced our economic capital, but it does not mean that we will have to reduce our social capital. With this package in this crisis, we can actually review our policies and increase our social capital, and to come out stronger. Again, I want to say that I hope that our employers will take advantage of this relief to strengthen their businesses. I hope they will not use this relief as an example to lay off workers and add on to the pain and misery of the working people. And I am sure, just as we had overcome all past crises, we can work together to reduce pain in this crisis and come out stronger in the world after the crisis.”
“In that light, assistance to make businesses remain viable without resorting to retrenchments too easily is welcomed. As regards job creation, I would like to ask whether it is possible to give additional tax incentives to businessmen who start business investments now in this most difficult time. I also hope that the implementation of this scheme will be hindrance-free and administratively easy, just as it was announced. Many of the things that I wanted to say have already been covered. So I just want to talk about one other aspect. When we tackle the present crisis, we must not lose sight of life beyond this crisis. And one of the important lessons that we can learn from this crisis, or even the US system, is that even with the best of technology, with the best of things that the Americans have, technology alone was not able to help them when real disaster and difficulty happened. All the talk about high-tech, small government, was not there. When people are in deep crisis and who suffer most, they look to the government for help. They look for ordinary chaps, the unsung heroes, the underpaid people, the teachers, the nurses, the policemen, the firemen, the counsellors. They were important in their lives. The churches, the church leaders and other religious practitioners were the ones whom people turn to. When we do a review of our policies, in terms of economics, it is not just important to look at enhancing economic wealth - it is important, we need money, we need a good life - but we also need social cohesion, we also need welfare. So we have to strike a balance between economic and social needs, and I hope we keep it that way. And in this light, I wish to compliment the leadership for showing example by taking the lead in taking a pay cut.”
“Mr Deputy Speaker, Sir, when the DPM was giving his Ministerial Statement, he rounded up with the remark that it was the people working with the Government that helped Singapore overcome the past crisis. I completely agree with this sentiment. If we look at all the crises, not just in Singapore, but throughout the world, for every crisis, it is the ordinary men, women and children that suffer the pain and misery. It is the ordinary people and citizens of the country that have to make the greatest and most painful sacrifices. When times are good, when the economy booms, they are the forgotten lot. We think of the rich and the successful in terms of accumulation of wealth and position, but not the ordinary people. The September 11th incident is one example. Within hours of the collapse of the World Trade Centre, US companies were announcing lay-offs. They knew the buildings had collapsed but they also knew how many people they have to retrench, in terms of thousands. Retrenchment, throwing people off to the streets, was the first option for many US companies. Workers had to bear the brunt for the sake of capital and capitalism. I hope Singapore employers will not follow the US example. Retrenchments must not be the first option. It must be the last. I hope people understand that retrenchment does not only affect the worker, it affects his family and himself or herself, both emotionally and financially. I am therefore happy that this package actually has a focus that addresses the concerns of many citizens in this country. The concerns are a sense of job insecurity, fear of losing their jobs or retrenchments, fear of difficulty in getting another job, and the fear that they will not have enough money to meet even their basic needs.”
“Mr Speaker, Sir, I just want the Minister to clarify, because I do not understand. If it is managed competition with two, why can it not be managed competition with one? Since we always say that we are short of players, we have a concentration of players to give even better services.”
“Would the Minister consider that Singapore being very small and if there is one company sharing resources, just like the banks are being encouraged to merge and share resources and skills, we will have an even better public transport system? After all, many of the big cities of the world do not have too many bus companies or transport companies operating in those cities.”
“Mr Speaker, can I ask the Minister of State, when he is talking about world-class transport, are we comparing internally or are we comparing with the rest of the world to be the best in the world?”
“Can I ask the Minister whether he can consider it a competition when commuters do not have a choice, whether they are being served by SBS or TIBS? They have to live with whichever public transport company runs the route along where they live or want to use? Dr John Chen Seow Phun: In our case, by competition, we mean to provide a benchmark for comparison. So if you have only one operator, like what the Member is proposing, then really we do not have comparisons as to the efficiency and service levels, whether they have put in the best, and so on. But if we have two, then we can clearly compare, and I think that is a good thing to have.”
“" That is our way. And we have been able to achieve this only because in many of the programmes which we announced earlier, we have been able to work very closely with the NTUC. So the NTUC, in terms of attracting investments to Singapore, is really one of our most important weapons, and the point of our social cohesion is a very important one. And if there is abuse by employers in the way they treat workers or retrench workers, I say, "We come down like a ton of bricks on them because there is a social contract." These are the rules. We all work together because these rules apply to all of us. If you are not required to, then we bite our tongue and say, "Yes, that is your prerogative." But if you breach the rules, then I say, "MOM will go after them." And if we know of such cases, I say, "Let's blow the whistle." On the value of the Singapore dollar, we manage the Singapore dollar in order to preserve the value of the currency. We do not fool around with it in order to alter wage level. And that is the reason why we have been able to maintain the value of the CPF, and that is a policy.”
“One more. The last one is on the Singapore dollar. During this crisis we have a weakening Singapore dollar. The CPF has already been cut. How do we protect the value of the CPF? BG George Yong-Boon Yeo: Mr Speaker, Sir, on the employment of older workers, I assure Mr Thomas that the Government will not be a laggard in this area. On the importance of social cohesion at a time like this, I think many of us were very appreciative of NTUC's announcement yesterday to lower prices for low income groups and to help children of retrenched workers. I think that package touched a lot of people. And, where we can, all of us, in our own way, should help. In this way, the crisis bonds us more closely together and grassroots here will play a critical role. The role played by the NTUC in the restructuring of Singapore economy is an enormously important one. There are many things that we take for granted in Singapore which other countries cannot do, not because they do not have the knowledge, but because they face opposition. A few months ago, when a Japanese Minister visited us, he asked to visit PSA, and he wants PSA to take a stake in one of the Japanese ports. And he lamented that, when he was a young man, Yokohama was one of the world's great ports, but now Singapore and Hong Kong have surged so far ahead of Yokohama. He wants to turn things around. He cannot, not because the Japanese do not have the knowledge, but because the unions block change. There are two ways to adjust to change. One, you put friction, slow it down so that the pain is less. But the result is when the change comes, the pain will be much greater. Or you say, "OK, these are the hot spots. Let's lubricate. Let's be a bit more tolerant, send workers for training, give allowances, help the unemployed.”
“One is whether Government will recruit; two is how do we prevent wages for lower income dropping too low such that they cannot maintain their living standards? And the third question is this. In the last economic crisis, we heard about executives and people who, instead of being retrenched, were terminated and they had a lot of hardship because they lost their jobs and they had no retrenchment benefit, and there was some abuse of the system. What would the Government do about that? The other point is this.”
“Mr Speaker, Sir, first, I would agree with the Minister's approach that while looking at the difficulties that are presently before us, we should not lose sight that the middle and long-term prospects are not bleak but relatively good. And in preparing for it, I think we should also look at some of the lessons that we have learned from the last Asian currency crisis. Most of the problems then had been with the CPF and wage cuts and we are helping workers to adjust. I am quite enlightened about Government still continuing with recruitment. I would like to ask whether the Government will also recruit older workers. The other point is on the wage levels which we are talking about, especially with the lower income workers. You can say that there will be pressures to bring wages down, but there is also a problem of having, as Singaporeans, certain living standards and our own cost of living to maintain, and living standards have been down. If we allow freely the wage pressures to go down, it would mean lowering our living standards which is not good for all Singaporeans. Therefore, how are we going to do that and build social cohesion? The other element is that during the economic crisis ---”
“Sir, since PWD is now privatised and in the private sector, can the Minister of State tell us how much private-sector work is PWD doing?”
“Sir, can I ask the Minister to tell us what is the success rate in persuading employers to look at alternatives to retrenchments, particularly the use of a flexible wage system?”
“Could the Minister also try and explain the impact the performance of our foreign reserves, including Government-linked companies, have on Central Provident Fund balances and holdings?”
“The bulk of TIF is invested with established VCs. Several were able to raise more than their targeted fund sizes, though some of the first time early-stage funds (which are meant to help develop local VC expertise) are seeing a slow-down in fund raising and deal flows. Overall, the VC funds in which TIF has invested have raised US$11.7 billion out of the US$12.1 billion targeted fund size. These VC funds will continue to invest in promising companies here and abroad. They made more than S$1 billion of capital injection into 194 companies worldwide in the last quarter of 2000.”
“Sir, in view of the reassessment of the economic situation, can the DPM give an assessment of its impact on the labour market, in terms of job loss and job creation? BG Lee Hsien Loong: We will have to see. The unemployment rate went up in 1998 during the crisis. Last year, it had come down considerably, although not quite to the pre-crisis level. We have not got any figures this year yet. So I cannot say how much it will go up. It depends partly on whether we see more retrenchments and prospects for some retrenchments coming, because you can see the signs in America. Cisco has just retrenched; Ericsson has been talking about it. Other electronics manufacturers are also significantly affected. It is very unlikely that this is going to pass us over and leave us untouched. So we have to be psychologically prepared for that. TECHNOPRENEURSHIP FUND (Disbursement) 11. Mr Zulkifli Bin Baharudin asked the Minister for Trade and Industry (a) how much of the $1 billion technopreneurship fund has been disbursed; and (b) how has the fund been affected by the current problems affecting many technology start-ups. The Senior Parliamentary Secretary to the Minister for Trade and Industry (Mr Tang Guan Seng) (for the Minister for Trade and Industry): Mr Speaker, Sir, the US$1 billion Technopreneurship Investment Fund (TIF) was launched in April 1999. By the end of last year, about 85% of the fund have been committed in 45 funds. But only about 28% (S$407 million) of TIF's commitments have been disbursed. TIF has not been badly affected by the global slump of technology stocks for two reasons. First, we have teamed up with strong VC partners who are amongst the best in the industry. Second, the disbursement of committed funds has been gradual.”
“Sir, would the Committee be looking at the issue of older workers who actually need this medical payment and do not have the resources to accumulate for future use? They need it now. In portability, how would he intend to handle this issue?”
“Sir, I am pleased to say that most of the points that I had wanted to bring up have already been addressed by the Minister. However, I would just like to ask what are the acceptable international standards for noise levels, in decibels, from expressways, and what is the general noise level from our expressways? 1.45 pm”
“Sir, this point that I am raising on private tuition has been covered by the Minister earlier. But I just want to add on to the points and say that in the normal course of teaching, it should be sufficient for most students to learn everything they need to learn in a classroom and then maybe with a little bit of remedial teaching. But if our students have to have classroom teaching, remedial teaching, private tuition, in order to cope, then some fundamental questions need to be asked. Are we teaching the right way or is there something about the delivery of knowledge that needs to be relooked? Tuition also adds on to the stress of students, because I have come across children who say that they are very busy. I asked them why, and they said they have got mother's homework to do, school homework to do and tutor's homework to do. So they seem to be always laden with work, work, work. It may be a good way of starting off for their working life by being hardworking, but I think we should also allow our children to enjoy the fullness of childhood. The other point I want to make is that many of the less well-off parents, who may not be able to afford private tutors, may be at a disadvantage. So we should try to have an education system in which school teaching and remedial classes should be sufficient for all students.”
“Sir, as a clarification, if the foreign students are already here and they have problems, would there be some sort of apparatus or mechanism to address some of these problems and grievances? And would the polytechnics help the students to resolve these problems?”
“Sir, I just want to bring up one aspect of polytechnic education, and this is in regard to bringing in of foreign students into polytechnics in Singapore. I would like to request the Minister to review the current process, because part of it is done by direct recruitment, which I think is the best and preferred way. In some countries, they use intermediaries or agents to bring in the students. When doing this, I would ask the polytechnics to ensure that there is no profiteering in the process. Even if there is no choice and they have to use an agent, we could work out a scheme on the scope of work, what they are supposed to do, how much they are to charge for their services and things like that. Because they not only make money by bringing in the students, but once the students are here, they charge for settling in cost, housing, etc, and for some of these charges, eg, for housing, the margins are more than reasonable. The other possibility is for the polytechnics to do this service themselves. Maybe the Minister could do a review of this matter? [Mr Deputy Speaker in the Chair] 4.35 pm”
“And what steps are we taking to recruit more teachers to meet the shortfall? In addition to improving pay, developing teachers through education, etc, what are we doing to enhance the working conditions of teachers? The next point is that some time ago, there was an announcement about getting people who are already working and have made career changes into the teaching profession. What progress have we made in getting people from other professions to move into the teaching service?”
“Sir, as a member of COMPASS as well as a parent, I have the opportunity to visit many schools and have also seen teachers who teach my children. I must say that I have been very impressed with the commitment and dedication of our teachers. The recent salary revision to teachers was a right step in trying to remunerate them fairly. However, even with salary revisions, I see that the Ministry has not been able to meet recruitment targets. In 1999, the shortfall in teaching was about 6,300 teachers. Last year, the shortfall, according to the Budget, is about 4,600 teachers. Although there is an improvement, there is still a shortfall. The shortfall seems to be aggravated by two other factors. One is that a lot of experienced teachers seem to be retiring in the next few years. Another one is that the teaching service does not seem to be able to get enough males to join the teaching service. When you go round, you see more females. The question is: are there adequate male role models in the teaching service and what is its impact on our children? When I spoke to the teachers, I asked them, "Well, the teaching profession is well paid, why aren't people joining in?" The feedback I got is, "The workload is heavy, the stress is high." Then I told them, "But I thought the teaching service has now got administrators, operation managers in schools to help you cope with this workload." I was told that these are just layers in the hierarchy which actually generate even more work. So I do not know whether it is true. The other point is I also notice that, in this year's budget, the manpower numbers for the teaching service have been reduced by 500 places for the next financial year. Why is the number in the teaching service reduced, ie, why do we need less teachers?”
“There are other provisions of the Trade Unions Act which are restrictive and which actually make it difficult for unions to work. Rather than go through all the arguments and provisions here, I would suggest that we have a national committee to look at it and see how we could strengthen tripartism by strengthening the trade unions movement and other associated laws in order that workers will have a greater say and influence. If left alone, even in the normal course of events of employers versus the workers, employers have greater influence. It is with the assistance of Government, the rules and framework that there is a balance of power. So we should really look at the laws to make sure that these things are strengthened so that we could get on with the business of making Singapore more prosperous and a better place for everyone, including companies which want to make more money and workers who want to have a better life.”
“Sir, I beg to move, That the sum to be allocated for Head T of the Main Estimates be reduced by $10 in respect of Code TD 1500. The Trade Unions Act needs to be reviewed in order to strengthen tripartism and also to strengthen the trade union movement. I see unions are recognised as an effective body and have contributed to our economic and social developments. There is urgency in reviewing this for a few reasons. There is now the Singapore Business Federation in place, with compulsory membership for certain types of employers and companies, which would strengthen the employers' leg of tripartism which is good and proper. There are arguments which have been heard. I buy those arguments. But we also have to use the same arguments for labour movement because the unions are in a very peculiar situation. The union does not have the right to organise all classes of workers. They only can take workers who have a contract of service, not contract for service. But even then, there are categories of workers to be exempted. We are not allowed to organise. The other point is that the union is the only organisation that renders its service for free. Yesterday, during the debate on the Ministry of Finance, we were told that social responsibility also includes the charging of fees for services rendered. But for unions, when we negotiate collective agreements or NWC recommendations, a large number of workers benefit from it, a lot of employers benefit, but no fee is charged. So there is a big problem of free riders. I am not suggesting we have a closed-shop principle because that violates the freedom of association, but we can still look at the laws to see whether we could have an agency fee basis that those who benefit from it pay something for it. In that sense, it would be fairer.”
“Sir, during last year's budget, the Minister of State, Mr Othman Eusofe, told us that his Ministry is in consultation with NTUC, SNEF and other agencies on the ratification of ILO Conventions. I would like to ask him on the progress of these consultations. I hope the Government will ratify the ILO Conventions as in the Declaration of Fundamental Principles and Rights of Workers as soon as possible. Delay in ratifying will convey the impression that there is an abuse of labour, and it is blatant and widespread here, which is not true. Delay will therefore affect our image and would attract unwarranted attention.”
“Finally, we should also review the social safety net, because CPF has got its limitations. We keep hearing that in the new economy, workers will have to change jobs more often, which means they lose their jobs more often, and the law says that if you work less than three years, you are not entitled to retrenchment benefits. But even if you are, there are companies which do not pay retrenchment benefits. So if people lose their jobs in between jobs, we do not have adequate social safety measures for them. I would like to ask the Ministry whether it could also look into providing more comprehensive and wider coverage of the social safety net.”
“Sir, according to the Yearbook of Statistics 2000, in 1999 our workforce was about 1.9 million, but CPF contributors were only 1.22 million. There is a difference of 760,000 people, which even after deducting foreigners and foreign workers, we will end with a few hundred thousand Singaporeans not contributing to CPF. In fact, in the December 2000 Manpower News, it says 3.35% of workers in private sector establishments are under contract for service, which means they do not contribute to CPF. CPF is the main safety net in Singapore. Not being a member of CPF means these people may have difficulty with old age funds, medical care, home ownership, education of children, and the other things that Central Provident Fund covers. These are important things. I would like to ask the Minister how the Ministry is going about to try and get more people to be brought in as CPF members. The other point is this. If we look at the demography of Singaporeans, more of us are getting older, that part of the baby boomers are retiring which is a large number, and they will draw out CPF funds, but the people coming in may be less. Will this result in a net outflow of funds from CPF? And if more CPF funds are coming out than going in, what would be the consequence of this negative cash flow for CPF? Another point I would like to say is that many of us CPF members are investing in the stock market. Most of these investments are challenging and very interesting, but not all of them made money. But when you lose money with CPF savings, you are actually eating into your old age security and safety net. While, on the other hand, investment has risks, I think we should still help our members to make wise decisions and also give them information on this.”
“We have about 500,000 foreign workers, including 140,000 foreign domestic maids. We should substantively reduce our dependence on foreign workers. I would like to know what plans does the Ministry have to facilitate job redesign and re-engineering and how the Manpower Development Assistance Scheme (MDAS) can support such initiatives and how the Man-Year-Entitlement (MYE) system has helped address the issue of foreign workers in the construction sector. Has it helped to redress the issue of employers taking advantage of our foreign workers, ie, to stop the illegal employment practices and abuses in the construction sector? Would the Ministry consider shortening the time-frame in tightening the MYE further? The Ministry should also review the present work permit allocations system, such as changing the existing sectoral approach and re-classifying the foreign workers' needs and entitlement of the various industries by their job requirements. Sir, may I move on to the next cut?”
“And foreign workers earning above a certain salary have difficulties in getting a redress. Maybe we should also try to apply ourselves to solve this problem. Just as we were able to reduce the accident rate of foreign workers in construction sites, I am sure if we put in the effort, there would be results. I would also like the Minister to review the way foreign workers are sent back. Nowadays, it is very easy. Somebody just has to cancel the work permit and the worker goes back. On a number of times, we read that they protest because they said they have not been paid their wages, that are due to them. Could we have a better check and balance so that, at least, the employers do not exploit them and send them away and save money? The final point that I would like to make is that I am very happy that the Minister, in his reply yesterday, said that he would be making sure that the number of foreign workers coming in would be controlled so as not to deprive our workers of jobs. This is particularly necessary when we have such a high number of unskilled older workers. I think we should make sure that our local wages are not depressed and our terms and conditions of employment are not lessened. Mr Yeo Guat Kwang (Cheng San): Sir, with globalisation and rapid economic reform, the Ministry of Manpower should help industries that are heavily dependent on foreign workers to reduce its dependency by raising productivity, and encourage these industries to adopt innovative methods to redesign and re-engineer the work processes. We will have to import more foreign workers if we do not restructure our work processes and redesign our jobs fast. Today, the number of foreign workers in Singapore is very large.”
“Sir, in addition to the points made earlier, I would like to ask the Minister to review the way in which foreign workers are brought in. The present system of using agents is exploitative because workers come in, with promises and hopes, and they sold their property, borrowed huge sums of money to come in, just to get out of the poverty trap. The agents make money by bringing the workers in, so the more workers they bring in, the more money they make and, therefore, they try to bring in workers, even illegally. This is treating people like a commodity as with other goods and services, which is not appropriate with the civilised nature of our society. Can we work out ways to by-pass agents, or at least make it difficult for agents to profiteer from treating humans as a commodity? Just a few days ago, I heard that there are big companies which are allocated foreign workers and when they do not have work, they send them to other people and collect money, or just to ask them to do their work. And sometimes, when their work permits expire, the workers do not know about it because they do not have their passports with them and they are considered illegal immigrants, if they are caught, and the other employers are also in trouble. So we need to tighten up this allocation arrangement. I see that generally the living conditions of our foreign workers have improved. When you go to construction sites, their housing conditions have improved. Quite a number of employers have also improved their housing conditions, which are positive. But there are also many workers here who do not know of their rights and responsibilities, including those on employment pass. They come here on contracts, and when their terms and salaries are changed, they cannot do very much.”
“Sir, I too add my voice to the plight of older workers, many of them may not have sufficient schooling or skills. They are at the greatest risk of retrenchments and once they lose their jobs, it is difficult for them to get another job, even at a lower pay. At the same time, these older workers need a job badly, because they are usually at a phase in their life where their financial commitments are highest. They have a mortgage to settle, children to educate and families to take care. While they need jobs, employers are reluctant to employ older workers. We therefore need to get these employers to change their attitude and values of these older people. The needs of the older workers are beyond training and retraining. They need counselling and assistance to learn how to learn. If nothing is done and the situation is allowed to continue, we could be making a mockery of our legislation on the extension of retirement age. Older workers may not be forced to retire early, but they could be easily retrenched and not be re-employed on decent and dignified incomes. We should not allow this situation to continue and I would urge the Minister to work on this with some urgency.”
“Sir, I just want to say that the Companies Act needs to be reformed to better protect the interests of workers and small-time investors. Small-time investors are also basically workers who have been using their CPF accounts to invest in the stock market. And going by reports, they have not done well. One of the things that needs to be looked at is the rules on payments to workers of companies under liquidation and judicial management. Section 328 of the Act gives wages and benefits, including retrenchment benefits, preferential treatment in the event of liquidation. However, when there is judicial management, workers are not preferred creditors. I hope this will be addressed, together with the lifting of the maximum of five months' salary of $7,500, whichever is lower. This quantum was fixed in 1993. The other matter is that the small-time investors need information to make correct investment decisions. So the rules on disclosure, openness and transparency need to be reviewed. I accept that there are mindset obstacles for a prescriptive code on what should be disclosed. I know that even if there is a prescription, the companies will use this as a minimal standard, and stick to it. So I see that there is a role for the SIAS, as a voice for the small-time investors, in monitoring the market and helping the small-time investors to make wise decisions. However, I see that there is a need for legislation to give companies --- 5.00 pm”
“I believe his concerns were about the recent increases in public utilities rates, but this was linked to changes in crude oil and fuel oil prices which we cannot control. I have explained in this House last Wednesday, there has not been a runaway increase in living costs. The CPI has only increased by 1.7% per annum over the past 10 years and this is substantially lower than the average increase in incomes. On balance, most Singaporeans would be better off. As far as Government fees and charges are concerned, they are increased to recover actual costs increase and no more, and the increases are dependent on increases in the cost of wages. We should not subsidise the labour cost of services, and we generally try to reduce its impact by improvements in productivity. Where increases are necessary, in essential services such as healthcare, education and public housing, the increases are due primarily to wage increases and to improvements in the quality of service provided. Nevertheless, in all these cases, whether it is in public housing, education or healthcare, its costs are heavily subsidised by the Government. I think Mr Thomas knows that the health subsidies are substantial and I would not repeat it again since I have already mentioned it before. I think I have covered most of the issues raised.”
“In fact, the CSOP scheme is structured so that wages and bonuses paid out in cash are likely to remain the primary means of employee remuneration. Stock options should therefore be an additional means for motivating and retaining employees. Ultimately, it must be up to each company to decide whether it wishes to participate in the scheme and how it wants to structure its scheme to satisfy its individual conditions as well as to meet the needs of its company. It can stay with the stock options just to a select group, without offering options to at least half its employees, in which case, the recipients of the options will simply carry on with their benefits of the stock options, without the additional tax break under the CSOP scheme. 4.30 pm Mr Leong Horn Kee has also raised questions on the issue on the plight of pensioners. I understand his concern and I am sympathetic, but as I have already addressed this issue in the Budget round-up speech, I do not propose to go through it again in detail. But I would just like to point out that in addition to the Singapore Allowance which has been raised, although not by a very large amount, pensioners have also been given ex-gratia payments of quite significant sums, depending on the dates when they retired. I can assure him that the Singapore Allowance would be adjusted from time to time, depending on the impact of inflation and we would look at it again whenever an increase is warranted. Mr Thomas Thomas has expressed concern over the seemingly rapid way in which cost increases are passed through, in the form of Government charges, so that whatever we give away, we are taking back in a different form. I can assure him that this is not so.”
“He also says that since property tax is a wealth tax, which has an impact on business costs, whether they should not be reduced over time and, eventually, removed. We have already started to reduce it. But I have also said that it is not a tax we will remove altogether, because the total tax we collect is a substantial amount, and total removal would mean that the tax lost has to be recovered elsewhere. Mrs Lim Hwee Hua has raised issues on the question of stock options and the incentives provided. She is concerned that the incentives provided for stock options may signal to companies that stock options are the preferred way of remuneration. I can assure her that is not the intention. The recent measures to make the taxation of employee stock options (ESOPs) more attractive is in response to two emerging trends. One is the more widespread use of equity-based remuneration, and the actions of other countries to make taxation of ESOPs more attractive. As talent is internationally mobile and is increasingly awarded by means of stock options, there is a need for our tax treatment of ESOPs to be internationally attractive, to maintain our competitive edge. With regard to the company stock options (CSOP) scheme, one important objective of the scheme is to encourage companies to offer options to lower-ranked employees as well. As options are a means of sharing the benefits of a company's success with its employees, the scheme has been structured to encourage options to be more widely distributed rather than confined to a select group of people at the top. However, the Government has no intention to suggest that stock options are superior to wages and bonuses paid out in cash.”
“This is different from the purpose of the maid relief, which is to facilitate married women to raise a family and to continue to work at the same time. Hence, maid relief is not extended to their husbands. On the issue of tax rebates for individuals to look after their parents, it is not clear to me exactly what Mr Ong Ah Heng is asking for when he says that more than one sibling should be allowed to make the same claim. Is he suggesting that each sibling should ask for the same amount, ie, $3,500 multiplied by the number of siblings, or should they be allowed to share this relief, which is $3,500, for someone who does not live with the parents, or $5,000 for someone who lives with the parents? I do not think we can allow multiple claims because it would mean a huge increase in the amount of relief. So I am assuming the question really is: how should the relief be claimed or shared? The existing guideline allows only one sibling to claim this relief. This stipulation is a practical one. It assumes that the siblings would decide amongst themselves who should claim the relief. I do not think the Government would want to interpose itself and make a decision on their behalf. Mr Leong Horn Kee has raised the question of property tax, in which he says it is manifestly unfair to remove the 25% property tax rebate and replace it with a 2% cut. Arithmetically, he is correct. But the purpose is different. As I have said in the Budget debate, the 25% tax rebate was introduced to help companies during a recession period. That is largely over, and we are now cutting taxes permanently, as I said, by 2%, which gives companies certainty so that they can manage their financial affairs for the future.”
“Although the employee also faces a tax bill as a result of exercising the options, he could dispose enough of the shares to set aside money to pay the tax. This is a wise move. Many option holders, in fact, exercise and sell at least some portion of the shares at the same time, possibly to raise funds to pay off their future tax liability but, mostly, to reduce their risks should prices go down in future. I think the balance between risk and reward is best left for each individual to decide. Mr Ong Ah Heng has commented on the tax rebates for individuals, both on maid relief and parent relief. On the issue of maid relief, in most families, maids are employed to look after young children. Under the category of foreign maid relief, a married woman who employs a maid to look after the children is able to claim up to $8,280. This works out to be about $690 per month on average. Compare it with someone who cannot afford or is not willing to employ a maid to look after her children, can only claim a relief of $2,000 for each child. He says this would work out to an average of $166 per month and, therefore, appears to be manifestly unfair. Let me point out that tax reliefs are not meant to compensate taxpayers for any particular expenses incurred. They are only meant as a form of recognition for the individual's expenditures in specific areas. Child relief is recognition for the care of one's child. It should not be compared to maid relief, which is part of a wider package of tax incentives to encourage and facilitate women to have more children but still continue to work if they wish. A husband whose spouse has passed away, can apply to employ a maid to take care of his children.”
“There are also tax concessions to make the environment favourable for entrepreneurship, eg, through making employee stock options attractive, allowing individuals doing businesses to treat themselves as businesses when computing their tax liabilities, and allowing individuals to deduct the expenses incurred during the course of their businesses against their income. To change the system to one where we have a multitude of deductibles in personal taxes will, as I said earlier, highly complicate our tax system. Singapore is the envy of many countries because of the simplicity of our tax framework, which results in a high degree of compliance and predictability of tax liabilities. I think it is far better for us to take the approach of reducing the rate of tax overall, rather than vary tax rates depending on how well individuals make out their accounts and argue their cases. [Mr Deputy Speaker in the Chair] 4.23 pm On share options, I believe that taxing at the point-of-exercise is a fairer method than taxing at the point-of-sale, particularly since we do not have capital gains tax in Singapore. Let me explain. If we tax at the point-of-sale and the share price is higher at sale than at the point-of-exercise, there would be an additional tax equivalent to the difference in price. This, in effect, imposes a capital gains tax. Secondly, taxing at the point-of-exercise is fair, because the employee becomes a legal owner of the shares upon exercise. What the individual chooses to do after that, is a separate decision. Once the employee exercises the option and owns the shares, he is subject to the same risks in price fluctuations as other investors who buy the shares from the open market.”
“While such a proposal is clearly very helpful to these companies, such a flexible tax system will create problems of equity and tax treatment, and will be administratively very complicated too. Some of what he has asked for, such as the carrying forward of losses, are already available. Under existing provisions of the Income Tax Act, losses are already allowed to be carried forward without any time limitation, as long as the shareholders, in the year the losses are absorbed, are not substantially different from those in the year the losses were incurred. Also, under the partial tax exemption scheme, which will be effective in the Year of Assessment 2002, start-up companies will enjoy substantially lower tax rates. On the issue of pre-production expenses and interest income, I should point out that expenses incurred to acquire investments do not qualify for tax deductions, if the investments do not produce income. This is a tax principle provided under the provisions of the Income Tax Act and, where income is produced, the expenses incurred are allowed as a deduction against that income. We will take a look at this again, but I think the principle would be very difficult to change, as there may be a lot of adverse consequences. Consequently, any expense arising before the production day is not allowable and, conversely, any income arising before this day is also not subject to tax, since the company is considered as not having commenced business. Tax-wise, the most important thing the Government can do to nurture entrepreneurial behaviour is to keep up our personal income taxes at a low level so as not to discourage hard work and enterprise. Our tax rates are already one of the lowest in the world before the latest Budget announcement for individual income tax cuts.”
“On this basis, we would normally expect a budget surplus of 1%-2% of GDP. However, if our economy grows much more strongly than forecast because of exceptional external demand, as it did in 1999 and the year 2000, we would end up with much larger budget surpluses. I consider such a development as a bonus of good fortune to be enjoyed, and not to be lamented as a consequence of poor budget forecasting. 4.15 pm On the issue of whether budget surpluses would have a contractionary effect on the economy, the answer is no, because there are no signs of contractionary pressures on the economy at this time. Our interest rates have remained low and there is no shortage of funds. The economy has recovered sharply from the 1997/98 crisis, with solid performances over the past two years. I would also remind Members that, in addition to domestic liquidity, we also have large inflows of foreign direct investments, which have averaged some S$79 billion over the period 1990-1998. So, liquidity and availability of funds for investment have never been a problem for us. Mr Inderjit Singh has proposed several innovative tax changes to promote enterprise in the new economy, and we will take his suggestions into consideration when we next review our tax system. His proposals are directed at lightening the financial and tax burdens of companies in their early years so as to promote their development. He has suggested that all new companies which do not enjoy EDB tax incentives should be given a 10-year tax honeymoon, during which losses can be carried forward and companies are taxed at low rates according to their individual income profile.”
“We have, in fact, over the years, been reducing taxes to keep them competitive and it is not our intention to create budget surpluses by increasing taxes. Secondly, I have explained to the House the difficulty of forecasting revenue, and it has become even more difficult nowadays because the world changes very rapidly. I have said that our revenue growth strongly correlates to GDP growth and our ability to forecast revenue is therefore heavily dependent on the accuracy of our forecast of the growth of the economies of our major trading partners and, in turn, on their demand for our export products. Members should note that the Singapore economy is strongly export oriented with external demand accounting for over 55% of GDP. In the United States, which is a continental economy much less dependent on exports, even Mr Greenspan, Chairman of the Federal Reserve Board, has difficulty in forecasting the growth of the US economy. How much more difficult it is for us to have to forecast not only what the US economy will do, but of all the other trading partners' economic growth. Given these inherent difficulties, we have been generally conservative in our forecast of GDP growth, as it is important that we do not base our expenditure programmes on income levels which may not be realised. In order to keep Government expenditure under control, we have kept Government's recurrent expenditures at around 10% of GDP. And in recent years, we have been able to live within this cap. However, Government's development expenditures are not subject to any specific cap because they are project-based, and we invest in basic infrastructure as and when they are needed and can be economically justified. In most years, development expenditure has been around 6%-7% of GDP.”
“Sir, most people are quite happy with this year's budget and with the generosity that was given to them by the Minister for Finance. But our people are very concerned that what the Minister for Finance gives out, will be taken away by other Ministries, statutory boards, shop owners and others, and very soon, they will have a negative, rather than positive reaction. And the tendency to increase fees and prices has already started, whether it is hospitals or other places, they have already started. So we would like to ask the Ministry to please monitor these price increases and do not just pass every increase on to the consumers, the poor man-in-the-street. There is a budget surplus of $4.4 billion anticipated for this year, and it is expected to be 23% of Government operating expenditure, including running costs and transfers. There is some buffer to absorb some of these unforeseen increases or planned increases. There can also be productivity increases. So in this budget, it is important that the feel good factors should continue to the end of the year, and that we should have it at least carried on to the next Budget. Sir, my plea again is: let it not be said that what the Minister for Finance gives us is only waiting for other Ministries and statutory boards and companies to take it away. Please do not do that. The Minister for Finance (Dr Richard Hu Tsu Tau): Sir, on the question raised by Mr Leong Horn Kee on budget surpluses and whether the recent large surpluses might result in a liquidity squeeze on the economy, let me just start by reassuring Members that the budget surpluses were not brought about by higher taxes. I have said this many times in the past and I will repeat it again.”
“Sir, we will do what we can to make banking affordable and accessible, and I think we can do a considerable amount, but in the end, we cannot avoid some changes and we cannot avoid some charges. We will try to space out the adjustments over a period of time, rather than suddenly. DBS, I think, has taken a step back. They are adjusting their programme now. I have confidence that they will overcome their teething problems and provide the service which they promise Singaporeans.”
“I think we can have a network where there is a comprehensive set of branches, covering the whole of the island, where ATMs are also comprehensively available, perhaps not at every ferry terminal, but all over the island, and it is affordable for everybody. One of the things that we have done recently was to approve the use of cash-back services. In other words, when you buy something at a shop, if you buy $50 worth, you enter the ATM terminal for $70, you collect your purchases and you collect $20 from the cashier. This gives consumers the convenience and a choice of withdrawing cash at participating retail outlets, which means, instead of depending on 900 or 1,000 ATMs, you will have many, many more ATMs than that. Every shopping outlet becomes potentially an ATM. NETS is planning to launch this service soon, in collaboration with Fairprice and several other major retailers. Another thing which we propose to approve is to allow banks to set up limited-purpose branches on third party premises. In other words, you do not have to have your own branch, rent premises, have a full shop and have a full branch. You can rent a space, sublet somebody's HDB shop, for example, and put a little counter there, provide basic services. It is cheaper and more accessible. Then the banks can negotiate with third parties, such as post offices and supermarkets, and leverage on their staff and premises to provide basic services, including cheque desposits, cash withdrawals and other payments through existing retail networks. This way, banks can reduce the costs of delivering banking services, resulting in savings for consumers.”
“In some countries, banks have introduced basic no-frills bank accounts with limited transaction features, sometimes mandated by the government. But these are typically not free. For example, in New York State in America, a basic account allows eight free withdrawals, but you pay US$3 a month. In Australia, an account permitting eight free withdrawals will cost A$4 a month, if your balance falls below A$1,000. This is higher than the fall-below fee which DBS and the other local banks charge for small savings accounts with unlimited number of transactions. 3.00 pm On social responsibility, basic banking services must be available but to make them free, I think is not possible and was never promised. It was made quite clear right from the beginning that adjustments would have to be made, but they would go out of their way to make sure that they service this market. In fact, when introducing the fall-below fees on savings accounts, DBS automatically exempted about one million accounts belonging to Singaporeans, those over the age of 62, those below the age of 21, full-time National Servicemen and those on the public assistance scheme. In fact, if you ask whether DBS has lived up to its bargain, I would say yes, it has. But it cannot be responsible for providing free banking services for all. What can MAS do to help make banking services affordable and accessible? As I explained last year, Singapore is different from other countries. We do not have a big rural area population and remote villages, unable to be reached by bank branches. We are compact, we are a city.”
“It gave notice from 1st February, so customers had 19 days' notice, instead of the usual one-month notice. DBS could have done better, but I do not think this is a sign that ATMs are disappearing all over Singapore. The $500 fee which both Members raised again was something which we debated extensively last year in this House. As a result of the discussion, DBS introduced a scheme once we liberalised our CPF rules to allow low-income people who are drawing pay, to transfer $500 from their Special Account into DBS to meet this $500 requirement in order that they would not have to pay the $2 fee. So the mechanism is in place. If they really cannot afford the $2 fee, and if they really meet the $500 minimum quantum, they can make an arrangement to transfer from their Special Account, and DBS will waive the fee. The arrangement has been in place. I understand from DBS, in fact, 10,000 people applied, of whom 5,000 met the criteria. It is quite a small number. So the facility is available, but it is really up to people whether they want or do not want to use it. If DBS had been more careful and had done this first before imposing the fee, I think it would have gone down better, but we all learn from our mistakes. In fulfilling its commitment to offer basic banking services, DBS has to take into account commercial realities. Each ATM withdrawal costs the bank between 30 cents and $2, depending on how much economies of scale the bank has. The ATMs have to be replenished and serviced, and security checks have to be made. Transactions at the branch cost even more because the bank has to pay for rent, staff salaries, electronic facilities and security.”
“So, if we are looking at ATMs, I think the total coverage, the total number of points-of-presence where we can get service, is more rather than less. It has improved. In terms of branches, POSBank started with 126, DBS itself had 42 at the point of merger, excluding the head office, so together that was 168. Today, the total number of branches is 72 for POSBank, 37 for DBS, three extra DBS Business Centres with staff, adding up to a total of 112. So the total reduction is from 126 to 112, which is not significant, but the 112 presumably would be better deployed, better spaced out. The problem is that the integration of their branches has not taken place properly, delayed because they had Y2K problems. As a result, although there is a total of 112 branches, we cannot go to any branch and do anything, whereas for the ATMs, we can really go to any of these 800-odd ATMs, whether DBS or POSBank, and do transactions. But DBS has assured us they will have that done by the third quarter of this year and, once that is done, this service will be restored and, I hope, improved. I asked specifically about Mr Thomas Thomas' ATM problem because he had raised it, I think, last week during the Budget debate. This is at the ferry terminal, I believe, and the answer is that this was one of its less-used ATMs. Its utilisation was below half the average rate and so the ATM had to be closed. The expiry date of the rental was to be 31st January 2001 but, because of Chinese New Year, DBS negotiated with its landlord to hand over the premises one month later, 28th February. But DBS needed a week to take away the ATM, paint, touch up, and make good, so it terminated its services on 19th February, one week before the deadline for getting off the site.”
“It is rationalising its branch and ATM network, but it has no intention of leaving the mass market unserviced, leaving the small depositors stranded. The present problems are transitional teething problems, and DBS has assured MAS that it is doing everything possible to address them. It is really for DBS itself, rather than the Government, to justify to its customers and the public the bank's actions. DBS has explained publicly some of the steps it is taking, eg, it has imposed a temporary moratorium on further branch closures, it is enhancing the training of counter staff and educating customers on the use of ATMs, it is introducing cash acceptance machines so that customers do not have to queue up at the counter but just need to put the cash into a machine - faster and more convenient. And DBS has also stated that it is not cutting back on its ATM network and, in fact, plans to expand on the total number of ATMs that DBS and POSBank together had at the time of the merger. I asked DBS, "Frankly, are these queues a reflection of your intention to cut back on your service or is this a problem we have to solve?" They said, no, it is a problem they have to solve, they are not cutting back on their service. They have had to rationalise ATMs and branches, but their service coverage will remain. So I asked for the number of ATMs. POSBank started off with 654. When POSBank and DBS merged, DBS had 287, so together, they had 941. So, in fact, straightaway, if we are using ATMs, we have got more coverage rather than less. Now it is slightly down because they are in the process of renewing and upgrading the ATMs, so they are down to 878. But they expect by the end of this year to go back up to 920 better deployed, better ATMs.”
“At the same time, the backdrop globally in the industry was of banking mergers, because technology was advancing, regulatory barriers were coming down, consumers were becoming more sophisticated, demanding higher quality integrated financial services. So the banks had to find economies of scale, economies of scope, big enough and broad enough. So our local banks too needed critical mass to justify heavy but essential investments in new technology, markets and distribution channels. DBS recognised this need and made an offer to acquire POSBank in 1998. The Government accepted DBS' offer instead of putting POSBank up for bids, because it wanted POSBank to continue fulfilling a social function after the merger and DBS was willing to accept this responsibility, and Mr Sin and Mr Thomas have reminded us of this social function. So what has happened since the merger? DBS has rationalised its branch network, introduced charges for cheque services and savings accounts with balances of less than $500, and it did these because it needed to improve efficiency and recover at least part of the cost of servicing customer transactions. These changes have stirred public concerns over whether DBS is still committed to serving the mass market, and whether basic banking services will remain within the reach of all Singaporeans. We debated the matter in Parliament last year after DBS imposed a $2 charge on small savings accounts. But, recently, their concerns got stirred again because of long queues, delays in integrating POSBank, DBS branches, ATM failures and so on. DBS has reiterated its commitment to continue providing banking services that are accessible to all at affordable prices.”