Tony Tan Keng Yam
Singapore
“One of the problems which they have in Britain is that, up to recently, they have no means to stop people coming into Britain and preaching in their mosques messages of hate, jihad and violence. Here, MUIS monitors our mosques very carefully, what is being preached at Friday prayers.”
“Sir, I am not going to enter into a debate about whether the war in Iraq is justified or not. That is another issue. But I would say, Sir, that with all the measures which have been taken over the last three years since 9/11, including the war in Afghanistan, the war in Iraq, the arrest of the Al Qaeda leaders, the detention of the JI lea…”
“Sir, we are extending the CCTV coverage in our bus stations, MRT stations and other places in Singapore where people congregate. It is a part of life now. For example, at our MRT stations, all our CCTV cameras are those where the films are recorded and we can analyse them. Surveillance is one of the effective ways of deterring terrorism.”
“The Muslim community in the UK has contributed to the healing process and has worked hard with the other communities to strengthen the moderate voice of Islam.”
“I would say again, Sir, that what we should do is when you see something which is suspicious, if you see a bag which is left unattended, report to some authority. We will look into it. We have to. And I am glad that we are getting more reports today, be vigilant.”
“It could reach here. We have to live with it. We support the war in Iraq. We believe that it is good for us to join the coalition led by the US against terror. The fight against terror is worldwide. We cannot opt out by not taking part. We are in it. We must continue whatever the difficulties.”
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“Now, Sir, a few words on the Skills Development Fund which has been brought up by the Member for Yuhua and the Member for Boon Lay, Sir, the SDF has a crucial role to play in promoting and developing employer-based training and other activities which are critical to our economic restructuring. These activities have only recently taken off and are beginning to gather momentum. In fact, it was only last year that the SDF grant commitments began to exceed the levy collections. I would like to stress that the reduction in the rate of SDF levy should not be misconstrued to imply that we have reached a satisfactory level of training activity, mechanization or upgrading of our business operations. Economic restructuring is an on-going process that requires even higher levels of employer commitment and investment in these areas. Given the current economic conditions, the SDF will continue to ensure that generous incentives are given to maintain and to increase the momentum of economic restructuring. Sir, it may be pertinent to remind the House that the SDF levy was introduced to encourage employers to run training programmes which are designed to equip our workforce for the activities of the future. It was to be expected that initially, the SDF would accumulate at a rate faster than its grant commitments. Now that the SDF has accumulated sufficient funds to allow a reduction in the SDF levy, I have been able to reduce it. But, as I said, this rate of levy contribution will be reviewed in three years' time. Skills development involves the proper training and development of manpower in knowledge, in skills and in attitudes. As an investment in human resources, it is a necessary activity supporting the business of individual firms as well as the economy as a whole.”
“Having advocated that the Government should, if it is to be a good government, endeavour to incur a deficit rather than to earn a surplus, the Member then proceeded to criticize the scale of Government expenditure. He warns that Government expenditure is expanding too rapidly and we should take steps to curb the rapid rate of increase. Sir, these are sentiments with which I am very much in agreement with him. But if Government is to reduce its expenditure, then how can we incur a deficit? That is why, Sir, I think perhaps a second lesson in economics from the Member for Leng Kee would not be out of place. It is not Government expenditure itself, Sir, which is worrying. It is how Government spends its money. And here in Singapore we have not wasted Government funds on consumption. The bulk of our Government expenditure is on development, on productive uses which will enhance the competence, the ability of Singaporeans, to earn their own living and which will improve our economic and physical infrastructure and this will pay dividends in due course. Sir, we have not wasted the Government's funds. Sir, it is not my purpose to ridicule the Member for Rochore who is one of our Party's elder statesmen. But wrong impressions, unless corrected promptly, can soon be accepted as gospel truth by the public. I must say that the Member has made a number of interesting points in his speech and, in particular, I regard his advice to the trade unions that they should not use the suspension of payroll tax as leverage to get higher NWC payments this year to be very sound advice. I hope that those Backbenchers who are trade union leaders will take this advice to heart.”
“Now, Sir, I would like to comment briefly on some points from the speech of the Member for Rochore. The Member for Teck Ghee this morning has made an excellent rebuttal of many of the points contained in his speech, and it will not be necessary for me to cover the same ground. However, I think that it would be churlish of me to ignore his speech altogether, and therefore I would like to pick up and comment on one or two areas. Sir, in the Member's long speech yesterday, he was most critical of Government's economic policy. Indeed, if we take him at his word, everything that we have done in the last five years has been wrong. Sir, even by the laws of probability, this is not possible. I have great respect for the Member for Rochore as a politician and as a scientist, fields in which he is a recognized expert. But, Sir, in economics I would respectfully suggest to him that one tutorial from the Member for Leng Kee is not sufficient. The thrust of the Member for Rochore's remarks is that it is in some way strange or immoral for the Government to run a surplus in its overall account. He would prefer that we run a deficit, presumably the bigger the better. And I suppose we finance this deficit, first, by running down our reserves and, secondly, by borrowing massively overseas. Sir, this strategy will give us a few years of glorious living, and then what? A massive hangover when the party is over! An overseas debt which will break us and our children for generations to come, which is what many third world countries are suffering from today. Sir, prudency may not be as much fun as profligacy, but I assure the hon. Member that it is a much safer course. Then, Sir, I cannot follow the Member's economic reasoning.”
“Also, Sir, our extensive network of tax treaties facilitates foreign investment as a tax exemption in Singapore is often reciprocated by way of tax sparing in the overseas country. Now, Sir, while I do not consider it desirable to reduce company tax on this occasion, I would not rule out the desirability of a cut in corporate tax in future years when our revenue position allows us to do so. As our economy continues to mature, there is merit in the argument that our tax system should be non-selective and that tax should be levied on a nondiscriminatory basis. However, due conside ration will have to be given to sectoral demands. The move to lower the rate of corporate tax should also be tied in with the move to lower the maximum rate of individual tax. Previously, when the maximum individual rate was 55% and the company rate was40%, many high income individuals formed companies through which to conduct their activities and thereby legally avoided paying the 55% tax. One way these companies work is that most needs, for example, entertainment, transport and housing, were met through expenses charged against the company while the individual drew a low salary for his personal tax calculations. Such tax planning can only be practised by the self-employed but not by salaried workers. This is the reason why last year I reduced the maximum rate of individual tax to 40%, the rate of company tax. To avoid this problem in the future, it will be desirable for any reduction in the rate of company tax to take place at the same time or to be preceded by a lowering of the maximum rate of individual tax. This however, Sir, will have to be considered very carefully as it will lead to a further drain on revenue.”
“And if company tax were lowered by, say, 5% to be effective, this would result in a revenue shortfall of some $315 million. Therefore, if company tax is to be reduced, an alternative and substantial revenue source must be found. If the alternative source is to be indirect taxes, then we have to raise a large number of new taxes or raise the rates of existing taxes, like our road tax. And I think this would not be desirable. Sir, another good reason why company tax should not be reduced this year is because last year I introduced a three-year write-off for all plant and machinery in all sectors. Based on assumptions on capital equipment purchased and expenditure, the revenue loss for the first three years from this concession is estimated to be in the region of some $450 million. The effect of this concession on income tax collections will only be felt from this year onwards. This generous depreciation allowance helps companies to defer their taxes and thereby reduces the effective rate of tax and increases the companies' cash flow. And I would be wary about introducing further concessions before looking at the effect of the above concession. Sir, the 40% company tax rate should also be viewed in relation to our present system of tax incentives. Already companies in many sectors enjoy very low rates of taxation. ACUs pay only 10% tax or less on their profits, while companies which are granted pioneer status pay no tax at all for up to 10 years of their operations. A company which seeks to systematically invest and expand its operations in Singapore can therefore enjoy the benefit of these tax incentives to substantially reduce its tax rate. This system we have found to be most effective in stimulating further investment and economic growth in Singapore.”
“Sir, I come to the speech from the Member for Whampoa. Sir, in my view, it is an outstanding speech worthy of the close attention of all Members in this House. The Member has suggested, among other things, that Government should consider a cut in corporate tax in order to stimulate the economy. I would like to take advantage of this opportunity to brief Members on this important matter. It is important, Sir, to realize that we do not have a corporate tax in Singapore on the same basis as corporate tax in other countries. We have a one-tier taxation system in Singapore in that the income of a company is taxed only once, either as company profits or as shareholders' dividends. At the company level, the 40% company tax in Singapore can be viewed as a tax on undistributed profits. But if a company distributes all its profits, then the rate of tax eventually suffered is determined by the circumstances of its shareholders. This effect is achieved through the granting of a tax credit which no doubt many Members are familiar with. The impact of a reduction in company tax for most companies would therefore be to improve the companies' cash flow and to increase their after tax profits which will be available for ploughing back into the business. The above, Sir, is necessarily a very simplified explanation of the implications of company tax in Singapore. Now, Sir, I will explain why there are good reasons that it is not opportune at this time to reduce company tax. Company tax collection is the single largest contributor to Government revenue. In recent years, it has accounted for about $2.5 billion, or about one-quarter of our recurrent revenue. A reduction of 1% in the rate of company tax would imply a loss of about $63 million.”
“In this respect, Sir, I am heartened to hear from the Minister for National Development yesterday that HDB would be freezing the rentals of their shops for another year. And I am also pleased to read in the press that the TAS intends to reduce the tariffs for the international telephone and telex services. Sir, it never rains but it pours. JTC has just informed me that for the period from 1st April 1985 to 31st December 1986, they intend to give a 10% reduction in current rentals on industrial land and a 15% reduction in current rentals on standard factory buildings, terraces, workshops and flatted factories. [Applause] And they will review these rates after 1986.”
“Sir, the Member will never learn. Look at those countries which have generous unemployment benefits - Holland, England, Australia. Are their economies doing well? Are their workers employed? Does he want Singapore to follow these countries? Sir, in England or in Holland, workers can afford to go on holidays because of their unemployment benefits. On some occasions, a worker cannot afford to work because what he gets from unemployment benefits is more than what he will receive if he gets a job. Where then is the incentive to work? Under such a system, Sir, the most sensible course of action for you and I would be to draw our unemployment benefits and have a good time. It is stupid to work. And that is why the governments of these countries are crippled by enormous social welfare spending, enormous deficits, high taxes and a fragmentation of the fabric of their societies. I think, Sir, our system in Singapore is better - free enterprise, high growth, good wages for good work, no wages for no work. Then you will have full employment and a prosperous society. Now, Sir, I do not want to imply that the Ministry of Finance and the Ministry of Trade and Industry treat the economy of our country with benign neglect. We monitor very carefully the level of economic activity in Singapore and when measures have to be taken, they will be taken timely and appropriately. While keeping steadfast to our long-term economic goals, we will make sure that we do not price ourselves out of the world market, that our international competitiveness will not be eroded by too high tariffs, or rates, or fees, or statutory contributions.”
“Sir, the world of business is not a playground. Rather than complaining about high overheads or the intrusion of Government in the economy, I think that businessmen can more profitably spend their time looking for new business opportunities, working hand-in-hand with the appropriate Government agencies to seek new markets for their enterprises. Sir, in business, as in love, fortune favours the bold. The path to our economic success is clear: more education and training, more mechanization and automation. Only then will we have high productivity which will make it possible for our companies to pay high wages. What about those companies which can only survive on the basis of lowly-paid workers or which are badly managed? What will happen to them? The answer, Sir, is that they will go bankrupt. Should governments help these companies? The answer is no. Will their workers suffer? Yes, if we have been foolish or timid and we have not taken the timely measures which we did in the last few years. Then our economy would be stagnant - no growth, unions fighting with each other, unions fighting with employers, as the coal miners are doing in England, each seeking to preserve their share of an ever-diminishing economic pie. But, Sir, because we did not allow these temporary setbacks to divert us from doing what we knew was right, because we allowed the market to operate, we have had and we will continue to have full employment, with high wages for our workers, high wages that are justified by high productivity, whether this is in manu- facturing, in hotels, in services, in banking or in tourism. The Member for Anson has asked if the Government has any scheme to devise a plan for unemployment benefits to help those workers who are retrenched or who are thrown out of employment.”
“It is because, Sir, governments in Europe, Australia, New Zealand,have adopted ad hoc measures to prop up ailing sectors to protect jobs in non-viable industries trying, like King Canute in the legend, to resist the sea of market forces that have brought their economies to their knees. I ask the Members to ask themselves: why have we been able to weather one economic storm after another? The reason is not a complex one. The answer is very simple. Sir, it is because we have set our sights correctly, because we have had the courage and the determination to adhere to our chosen course, to overcome obstacles which arise in our way rather than choose to be diverted into dangerous and unsafe byways which may appear to be easier-going but which inevitably will lead us into the forest of economic stagnation if we give in to temptation. Sir, in case Members and businessmen have forgotten, I would like to remind them that business is not the civil service. Business is about taking risks, and making a profit if you are right and going bankrupt if you are wrong. No government can ensure the profitability of companies. I know that some governments have tried to their great regret, and to the regret of their taxpayers when the inevitable debacle occurs. Government can only create the necessary conditions - a free enterprise economy, political stability, predictable and stable rules. Businessmen must do the rest. Sir, business is not only about taking risks. Business is also about change and the mastering of change. We do not live in a static world. The company, the entrepreneur, who can adjust to market conditions, will survive and prosper. The businessman who believes that the world or the Government owes him a living will soon run into disaster.”
“Consider the facts. We have had five years of exceptional prosperity. We still have a severe labour shortage. We have overfull employment. Then because we expect that this year our growth rate would be, say, 6% as against 8.2% in 1984, does this mean that Government should hit the panic button, bring out the first-aid box, render some instant stimulants, irregardless of the long-term consequences? 3.34pm [Mr Deputy Speaker in the Chair] Sir, we are a young society and it is perhaps not surprising that we have not yet achieved the degree of serenity which older societies have. Singaporean,9 are often of a volatile nature. One day, we are jubilant when the sun is shining. Newspapers are filled with stories about our economic success -to such an extent that I worry. Because such stories tend to create natural feelings of resentment in our trading partners. But the next day, Sir, when there is a shower, we are plunged in gloom and we expect the sky to fall down on our heads. Newspapers seek out then the most sensational stories of bankruptcies and retrenchments that they can find. Businessmen, Chambers of Commerce, Members of Parliament, particularly Backbenchers, each have their own ideas about what kind of instant medicine that is required to bring our economy to life. Sir, I have to inform the Members of this House that the rumours about the impending demise of our economy are greatly exaggerated. And for us to prescribe a patent medicine in order to give our economy a quick-fix is precisely what we should not do.”
“Mr Speaker, Sir, let me begin my reply by first thanking all hon. Members for the more than usual interest which they have given to this Budget Statement and also for their numerous suggestions and comments. Judging by the speeches which we have heard in the last two days, it would appear that Members have gone through the Budget with a fine tooth-comb. The increases in road tax and petrol tax and the imposition of diesel tax on taxis have been given a disproportionate amount of attention by Members. And understandably so. Members must have received a lot of unsolicited feedback from their constituents and taxi-drivers, and I truly sympathize with them. But, Sir, fascinating as this topic may be, I shall resist the temptation of leading off with this subject, particularly as my colleague, the Minister for Communications and Information, has informed me that he intends to give a full explanation of Government's land transport policy during the debate on his Ministry's estimates in the Committee of Supply. I shall therefore leave it to him to do most of the difficult ork, and concentrate on elaborating the Government's economic policy. However, Sir, if there is time, I should like to make a few observations on the increase in petrol tax and the imposition of diesel tax on taxis. Now, several Members, I think the Member for Leng Kee first, then the Member for Rochore, Member for Anson, Member for Potong Pasir among others, have painted a gloomy picture of the economic and business situation in Singapore today. The implication, Sir, is that our economy is in serious trouble, indeed on the verge of collapse. And Government for some strange unknown reason has chosen to turn a blind eye to the plight of our businessmen and is doing nothing to help them. Is this true?”
“If the situation requires, we will consider amending the law to include such a provision in the Act.”
“The number of persons arrested by the Police for letting off fire-crackers or other fireworks during the Chinese New Year season was 15. The police also arrested 34 persons for possession of fire-crackers or fireworks. So far, seven persons have been charged in court for discharge and possession of fire-crackers or fireworks. They were fined between $100 and $800 each. In addition, five persons were caught for selling fire-crackers or fireworks. One was sentenced to three months imprisonment, two to one month imprisonment each, and another was fined $1,000. The majority of the reported cases occurred in HDB estates. Ang Mo Kio recorded the most number of cases with 34 incidents, followed by Clementi with 17, MacPherson 15, Bukit Merah 15, Yishun 14. Bedok North, Toa Payoh, Whampoa, Ghim Moh and Chai Chee had an average of 10 incidents each. The remaining incidents were thinly spread amongst the smaller HDB estates and other locations. Police have repeatedly warned the public against firing crackers. During the Chinese New Year period, police patrols were intensified to look out for persons discharging and possessing fire-crackers and fireworks. Further, all entry points int Singapore, especially at the Causeway, were closely watched by the Police, Immigration and Customs officers to pre vent as well as to detect smuggling of fire crackers and other fireworks. The Dangerous Fireworks Act, 1972, already provides for a fine of not exceeding $5,000 or two years imprisonment, or both fine and imprisonment, for all offences under the Act. There is no provision in the Act which specifically makes the sale of fire-crackers or fireworks an offence. Persons caught selling fire-crackers are charged with possession.”
“Mr Speaker, Sir, the answers are as follows: First, during the past 10 years (from 1975 to 1984) four legal suits were lodged against Government doctors for negligence or incompetence, The Ministry does not have data on malpractice suits taken out against doctors in private practice. Of the four cases lodged against Government doctors, two resulted in the death of patients. Sir, the Government is of the view that a "sue the doctors and hospitals" campaign is not necessary. Such a campaign would indeed have undesirable repercussions. The constant threat of litigation will induce doctors to practise what is called "defensive medicine", ie, to subject their patients to wasteful and unnecessary investigations, treatment and medication. Doctors will have to pay high insurance premium to protect themselves against lawsuits. The result will be higher medical bills for the patients. CRACKER FIRING OFFENCES (Penalties) 4. Mr Ng Kah Ting asked the Minister for Home Affairs and Second Minister for Law (a) if he will state the number of persons caught letting off fire crackers during the Chinese New Year season; (b) how many were fined and what was the fine; (c) in which areas did the cases occur; and (d) whether the Ministry of Home Affairs will consider (i) stiffer measures or penalties to deter the firing of crackers in the Housing and Development Board estates and other densely populated public places; and (ii) amending legislation to impose stiffer deterrent penalties on those selling fireworks or crackers. The Minister of State for Home Affairs and Community Development (Mr Wong Kan Seng) (for the Minister for Home Affairs and Second Minister for Law): Mr Speaker, Sir, may I reply on behalf of my Minister.”
“Our shortage of teachers is mainly in the English medium. As of 1st March 1985, we are short of 352 English medium teachers in primary schools and 300 English medium teachers in secondary schools and junior colleges. Half of the primary schools and about one quarter of secondary schools and junior colleges have their full complement of English medium teachers. In the remaining schools, the shortage is fairly evenly spread out with an average of 2 vacancies for each primary school and 3 vacancies for each secondary school. NEW TAXIS 4. Dr Arthur Beng Kian Lam asked the Minister for Communications and Information, Second Minister for Defence and Second Minister for National Development how many new taxis have been put on the road annually for the last five years; how are these distributed to the various taxi companies; and how many of these are owned by individuals.”
“05 pm ANNUAL BUDGET STATEMENT Order read for Resumption of Debate on Question [8th March, 19851. "That Parliament approves the financial policy of the Government for the financial year 1st April, 1985 to 31st March, 1986.". - [Minister for Finance, Minister for Education and Minister for Health]. Question again proposed.”
“Mr Speaker, Sir, I beg to move the motion* standing in my name in the Order Paper. *The motion reads as follows:-- That, notwithstanding the Standing Orders, an additional day, namely, Tuesday, 19th March, 1985 be allotted for the debate on the Motion for approval of the financial policy of the Government for the financial year 1st April, 1985 to 31st March, 1986 moved by the Minister for Finance on 8th March, 1985. Sir, 36 Members have indicated that they would like to speak in the Budget debate and it is unlikely that we would be able to finish it in one day. The purpose of this motion, Sir, is to provide an additional day for the debate on the Budget Statement. Question put, and agreed to. Resolved, That, notwithstanding the Standing Orders, an additional day, namely, Tuesday, 19th March, 1985 be allotted for the debate on the Motion for approval of the financial policy of the Government for the financial year 1st April, 1985 to 31st March, 1986 moved by the Minister for Finance on 8th March, 1985. BILL INTRODUCED 12.03 pm REQUISITION OF RESOURCES BILL "to provide for the taking of possession of or for the use of any land or for the doing of any work thereon by the armed forces and the civil defence force and for the competent authority or authorities to requisition property and services for defence and other purposes; and to provide for the payment of compensation in respect of the exercise of the powers conferred on a competent authority or other persons by this Act and for matters connected therewith", presented by the Minister of State for Defence and Trade and Industry (BG Lee Hsien Loong); read the First time; to be read a Second time on the next available sitting of Parliament, and to be printed. 12.”
“Regarding the concern about whether contributions will continue to be paid into a person's Medisave Account should there be adequate funds existing in his account, the Ministry is studying the possibility of setting a limit on Medisave balances beyond which contributions could be paid into other accounts within that individual's CPF account. CASH GRANT SCHEME FOR SMALL FAMILIES (Number of acceptances) 11. Mr J.B. Jeyaretnam asked the Minister for Home Affairs and Second Minister for Law what is the number of families that have accepted the offer of $10,000 for purchase of Housing and Development Board accommodation made by the government in 1984 to families who agreed to take steps to limit their children to two.”
“--- a complexity of purposes to serve. The lighting up of Chinatown and Orchard Road is to stimulate our tourist trade which will result in increased revenue for the shopkeepers in these areas and subsequently in increased revenue for Government which will enable us to buy the energy which we need. MEDISAVE ACCOUNT (Use of interest for purchase of health insurance) 10. Mr Heng Chiang Meng asked the Minister for Finance, Minister for Education and Minister for Health whether flexibility can be permitted in a member's Central Provident Fund Medisave Account for him to purchase life-long private health insurance policy with the interest earned on the balance in the Medisave Account and, if so, whether the CPF Board will cease transferring funds from the Ordinary Account into the Medisave Account when the interest earned is sufficient to pay the policy premium. The Minister of State for Health and Foreign Affairs (Mr Yeo Cheow Tong) (for the Minister for Finance, Minister for Education and Minister for Health): Mr Speaker, Sir, I am answering on behalf of my Minister. The Medisave Scheme was introduced in order to avoid the pitfalls of a general medical insurance scheme. The experience of countries where a third party, ie, an insurance company or the government, pays the medical bill has been that: (a) it gives the consumers an illusion of free medical services, resulting in increased demand for such services; and (b) it provides no incentive for providers of health care to economize since they are reimbursed on a fee-for-service basis. However, the Ministry has not excluded the possibility of Medisave accounts being used to purchase supplementary catastrophic illness insurance.”
“Mr Speaker, Sir, we must not be single-minded about this. Government has got ---”
“Mr Speaker, Sir, I mentioned in the Budget Statement that there are a number of constraints to Singapore's growth, and among these constraints one of the most critical is the supply of water for our domestic and industrial use. I believe this issue deserves public attention because the public should be reminded at all times of the need to conserve and to use water sparingly. One of the best ways in which we can make sure that water is not wasted is to have regular revisions of tariffs. Mr Speaker, Sir, I will not hesitate to raise tariffs again if I consider it necessary to ensure that water is not wasted.”
“(e) Healthy balance of payments. We are well on track towards meeting these targets. We should now consider how to fine-tune our economic strategy to make sure that we will continue to make rapid progress in the second half of this decade. With the experience of the first five years behind us, it is timely to set up a high level committee, comprising representatives from the Government, private sector and trade unions, to undertake an in-depth mid-term review of our economic development plan for the 1980s. The Committee will be chaired by the Minister of State (Defence and Trade and Industry) BG Lee Hsien Loong. The Committee will hold discussions with and invite representations from employer and professional associations, chambers of commerce, industry groups, bankers and trade unions in order to come up with specific recommendations as to how Government economic policy should be structured for the rest of this decade. In its deliberations the Committee will pay particular attention to the problems of our local industries and propose measures to foster greater entrepreneurship in our business community. In 25 years of government under the PAP, we have built a strong resilient economic base which is capable of taking hard knocks and which will not buckle when the going gets rough. We cannot expect that each year will automatically be better than the last. There will be occasional storms. But Singaporeans are a robust people with a robust attitude to life and its vicissitudes. With cooperation between the Government, employers and workers, we have overcome problems which many observers would have regarded as insurmounable. Provided that we continue with the same cooperation, we shall overcome whatever problems that may confront us in the future.”
“Therefore, with effect from 1st October 1985, I propose to extend the diesel tax of six times the annual road tax presently applicable only to private motor cars, to all diesel-powered taxis. The revenue gain for FY 85 will be about $37 million. Details of the above increases in road taxes and consequent increases in taxi fares are set out in the Ministry of Communications and Information's statement (Appendix II (Cols. 507 - 512) which, with your permission, Sir, I will now distribute to Honourable Members, [copies distributed to Members.] Appendix II - MINISTRY OF COMMUNICATIONS AND INFORMATION PRESS RELEASE (Cols. 507 - 512) CONCLUSION Mr Speaker, Sir, in contrast to last year's Budget, when I gave large concessions in personal income tax rates and estate duty to individual taxpayers, the focus of this year's Budget is on the corporate sector. This change of emphasis is deliberate. I expect 1985 to be a testing year as companies adjust their operations and trim their manpower to cope with a less buoyant economic environment. Some sectors may do less well than others. But we have the necessary reserves to ride through this bumpy period and Government will ensure that our economic poli- cies are sufficiently flexible so that no sector gets into major difficulties. But while coping with our present difficulties, we should not let ourselves be deflected from our long term objectives. In 1980 the Ministry of Trade and Industry put forward an economic development plan for the 1980s with the following broad economic targets:- (a) Real GDP growth of 8-10% per annum to reach the 1980 Japanese per capita GNP by 1990. (b) Productivity increase of 6-8% per annum. (c) Full, better paid and higher skilled employment. (d) Inflation lower than the world average.”
“In my Budget Statement last year, I mentioned the need to restrain the growth of the motor car population in Singapore in order to contain the problem of congestion on our roads. As a result of the substantial increases in registration fees and road taxes on cars, petrol duty and car park charges since October 1983, the growth of the motor car population was reduced from 12.1% in 1983 to 7.3% in 1984. However, this lower rate of increase is still much higher than the projected increase of about 3% per annum in the road network over the next 3-5 years. In view of this, I have decided that with effect from tomorrow, road taxes on motor cars and goods cum passenger vehicles will be increased by 15%. The revenue gain for FY 85 is estimated to be $32 million. Duty on Petrol I have also decided to raise the ad valorem duty on petrol from 50% to 60% with effect from today. This is one of the most equitable ways of discouraging excessive usage of motor vehicles and is in line with Government's energy conser- vation policy. The gain in revenue in FY 85 will be about $135 million. Diesel Tax on Taxis The diesel tax of six times the annual road tax has been levied on diesel-powered private motor cars since 1971. However, no diesel tax is imposed on diesel-powered taxis. Over the years, customs duty on petrol has been increased to restrain the growth of the motor car population. There was no similar increase in duty on diesel. This has resulted in a severe disparity in fuel cost between petrol and diesel operated vehicles. As diesel-powered taxis do not pay diesel tax, the fuel cost of taxis is unrealistically low compared to that of petrol-powered private motor cars. This is undesirable because taxis take up as much road space as other motor cars.”
“Tax Changes for Individuals In last year's Budget Statement, I announced substantial reductions in personal income tax rates and estate duty. With these reductions I am satisfied that the taxation of personal income and capital in Singapore today is equitable and not unduly onerous. I therefore do not propose to make any major tax changes for individuals this year. However, I would like to assure Honourable Members that the Government will review on a continuing basis the level and distribution of the tax burden. We will make adjustments when necessary to correct for inflation and to ensure that initiative and enterprise are not blunted by too high levels of income taxation. Tax Deductibility of Certain Educational Expenses for Individuals There is, however, one area of personal initiative which, in my view, deserves encouragement. Individuals who take the time, effort and expense to improve their skills and knowledge should be rewarded. In particular, those individuals who are in employment and take up pan-time or correspondence courses, or those who give up their jobs temporarily to further their education should be helped. I have therefore decided to allow tax deductibility of expenses incurred by individuals in pursuit of further academic and professional qualifications, or vocational qualifications related to their business, trade or employment. Tax deduction will be allowed for compulsory course fees, including examination fees, and will be subject to a maximum of $2,000 with effect from Year of Assessment 1986. No claims for textbooks, travelling or living expenses will be entertained. TAX INCREASES Road Taxes on Motor Vehicles Finally, I will deal with the tax increases.”
“Income from Professional Services rendered Overseas To encourage our firms and professionals to be more aggressive in exporting their expertise and services, I intend to give more favourable treatment than at present to income repatriated from certain countries. Currently, all income earned abroad and remitted back to Singapore is subject to Singapore tax. Where there is an Agreement for the Avoidance of Double Taxation (DTA) with the country of income source, Singapore will give a tax credit for taxes suffered overseas. This tax credit will be offset against the Singapore tax payable on the "grossed-up" foreign source income. However, there is no tax credit if income is remitted from a non-DTA country. In such cases, Singapore will tax the net income which has been remitted. Therefore, income which has been remitted from a non-DTA country suffers additional tax in Singapore. I now propose to extend a unilateral tax credit to service income remitted from certain non-DTA countries. With such a tax credit, where the income is remitted from a country with a rate of tax equal to or higher than Singapore's, no additional tax will be paid in Singapore if taxes have been paid overseas. Where, however, the income is remitted from a country with a lower rate of tax, it will be subject to Singapore tax, but credit will be given for overseas taxes paid. Even if some Singapore tax is payable, it will be less than what is due under the present system. This concession which will take effect from Year of Assessment 1986 will cover income from professional services such as accounting, legal, medical, engineering, architectural, computer-related, technical and other consultancy services rendered by firms and individuals.”
“In order to further promote the growth of the Asian Dollar market and to encourage banks to use Singapore as their regional loans management centre, I am removing the restriction that the assignor must be an ACU in Singapore, with immediate effect. In view of the rapid changes in financial services offered by banks and the intro- duction of innovative financial facilities, there is also a need to extend the stamp duty exemptions. I am therefore exempting with immediate effect not only offshore loan documents from stamp duty but also documents involving other offshore credit facilities such as under-writing facilities, letters of credit (including standby letters of credit), guarantees and performance bonds. Entertainments Duty To encourage the tourist industry in Singapore I have decided that, with effect from 1 April 1985, duties on entertainments, with the exception of racing of animals, vehicles, motor vessels or aircraft, will be reduced to 10%. With your permission, Sir, I would like to table a schedule showing the revised duties (Appendix I (Cols. 505 - 506). [Copies distributed to Members.] The revenue loss for FY 85 is estimated at $26 million. Appendix I - ENTERTAINMENTS DUTIES (Cols. 505 - 506) I also propose to remove the existing legislative control on cinema admission prices so that prices will be dictated by market forces. This is in line with our policy of less Government regulation of private enterprises. It will also remove the existing anomaly whereby cinemas are the only form of entertainment which is subject to price control.”
“10% Concessionary Tax Rate for Asian Currency Unit (ACU) Income When the 10% concessionary tax rate for ACUs was introduced in 1972, it was limited to income from the booking of offshore loans in Singapore. With the growth of financial services, the concession was similarly extended to cover new instruments and activities. Banking services have diversified from more traditional areas into fee-based activities. I am therefore extending the 10% concessionary tax on ACU offshore income to cover the following categories of income with effect from Year of Assessment 1986: (a) Income earned by ACUs from providing offshore guarantees, performance bonds and standby letters of credit, (b) Commissions and other income such as custodian and nominee fees, handling and registration charges earned in respect of transactions on behalf of non-residents (excluding permanent establishments in Singapore) in foreign stocks and shares and other securities denominated in foreign currency and issued by foreign companies defined for the purpose of this concession to be companies which are not incorporated in Singapore or Malaysia, (c) Commissions and other income earned in respect of offshore remittances, and (d) Income earned in respect of offshore transactions involving interest rate and currency swaps. Stamp Duty Stamp duty on offshore loan agreements was abolished in 1980. The exemption covered stamp duty payable in respect of assignments of an interest in such offshore loan agreements, provided that the assignor was an ACU in Singapore. Thus, an assignment made by a person outside Singapore to an ACU in Singapore, for example, would not enjoy the stamp duty exemption.”
“The main contributor to revenue is income tax, which accounts for about a third of total revenue. Because of anticipated poorer business conditions, income tax collections for FY 85 are expected to be $3.3 billion, some 8.2% lower than the revised estimate for FY 84. The decline in income tax collections will be offset by increased collections from property tax, customs and excise duties, interest and dividends and currency surplus. For FY 85, income from the Development Fund is expected to amount to $3.74 billion, bringing total Government revenue to $14.36 billion. With budgeted recurrent and development expenditure for FY 85 of $18.83 billion, there will be a deficit of $4.47 billion which will be financed by borrowings and drawing down from the Development Fund. TAX CHANGES FOR COMPANIES Payroll Tax and Tax on Telecoms Telephone Bills I now move on to the tax changes. In an Addendum to the President's Address at the Opening of Parliament, I stated that one of the objectives of the Ministry of Finance was to simplify the tax structure wherever possible. In line with this objective and to alleviate the burden of costs on companies, I have decided to suspend, with effect from 1 April 1985, the collection of: (i) Payroll tax and, (ii) Tax on telephone services and on trunk-call services to West Malaysia. The loss in revenue from these two sources is estimated at $176 million for FY 85. In Section I of my Budget Statement, I mentioned that the greatest promise for Singapore in future years lies in the area of sophisticated services, particularly banking and finance, tourism and technical services. I intend to give incentives to encourage the growth of these activities.”
“The provision for Public Debt is increased by $286 million or 15% to meet interest payments and Sinking Fund contributions on domestic borrowings which have grown in volume. The anticipated current revenue of $10.62 billion will be sufficient to meet the recurrent expenditure and leave a surplus of $2.26 billion for transfer to the Development Fund to help finance development projects. Total development outlay for FY 85 is estimated to be $10.47 billion, an increase of $1.48 billion or 16% over the FY 84 allocation, Expenditure on public housing, education and economic services takes up $9.03 billion or more than 86% of the Development budget. A sum of $5.0 billion or 47% of the budgeted Development expenditure is for the public housing programme. The allocation for economic services is $3.55 billion or 34% of the Development outlay. Of this, $2.09 billion is for land reclamation, Changi Airport expansion, development of industrial estates, the mass rapid transit system, roads and other infrastructure. Loans and capital assistance grants totalling $1.46 billion will be extended to industrial and commercial enterprises. The Development budget for education and manpower training is $480 million. This is for the school and junior college building programme, expansion of the National University of Singapore, Nanyang Technological Institute, Singapore and Ngee Ann Polytechnics as well as vocational and industrial training institutes. Section III Revenue Consolidated Fund receipts on existing tax rates are expected to amount to $10.62 billion for the Financial Year 1st April 1985 to 31st March 1986. The revenue of $10.62 billion for FY 85 represents a marginal increase of 1.6% over the revised estimate of $10.45 billion for FY 84.”
“My Ministry has completed the review and Members will be pleased to know that, with effect from today, a pro-rated NPAA will be paid to: (i) officers who retire during the year on reaching the compulsory age limit, on medical grounds, on abolition of office or who are medically boarded out; and (ii) the dependants of officers who die in harness during the year. The rationale for extending the NPAA to these categories is that the officers leave Service due to circumstances beyond their control and, as such, they and their dependants should not be penalized. I wish to emphasize here that this is a one-time payment restricted to those who leave the Service during a particular year and is different from pensions which are recurrent. Excluding Armed Forces expenditure, Other Operating Expenditure is expected to fall by $8 million. This is because of lower agency fees to the Urban Redevelopment Authority for managing the sale of state lands on behalf of Government, transfer of major purchases and replacement of equipment to the Development budget, and a smaller allocation for fees to banks and other agencies for management of Government assets. The allocation for Grants, Subsidies and Other Transfers is increased by $172 million or 13% because of higher manpower and operating costs of statutory boards and other institutions dependent on Government financing, larger pension gratuities, and a further transfer to top up the Advance Accounts for housing, home renovation and vehicle loans to civil servants. The bulk of the increase is taken up by the tertiary and technical education institutions whose total enrolment is projected to grow by 30% over the next year.”
“The allocation for recurrent expenditure for FY 85 is $8.36 billion, an increase of $875 million or 12% over FY 84. The increase is to cover higher manpower and operating costs as well as expansion of such services as education and manpower training. The rate of increase is, however, much lower than the average annual growth of 21% over the FY 79-83 period. The reduced growth in recurrent expenditure will make more funds available for development projects. Of the total allocation for recurrent expenditure, Expenditure on Manpower accounts for $1.95 billion or 23%, Other Operating Expenditure for $2.77 billion or 33%, Grants, Subsidies and Other Transfers for $1.50 billion or 18%, and Public Debt Servicing for $2.14 billion or 26%. Expenditure on Manpower is expected to go up by $289 million or 17%. A total of 766 permanent posts is provided for new or expanded areas of work, The additional manpower is mainly for new wards in existing hospitals, new schools, and extension of the Neighbourhood Police Post Scheme. The increase in the permanent establishment is partly offset by a decrease of 559 temporary and daily-rated posts, the majority of which are no longer required following the implementation of mechanization, automation, computerization and work reorganization schemes. It would be appropriate at this point to refer to the 13th month Non-Pensionable Annual Allowance (NPAA). Members will recall that during the Budget debate last year, the Acting Minister for Labour, who was then the Minister of State (Finance), agreed to take a fresh look at the long-standing practice not to pay a pro-rated NPAA in the case of those who retire on or b&ore 31 December of the year or who die while in service before that day.”
“Sir, I shall now continue. The Singapore and Ngee Ann Polytechnics, VITB and industrial training centres and institutes operated jointly by EDB and industry have also expanded their outputs. In 1980 only 1,600 engineering technicians graduated from the Singapore and Ngee Ann Polytechnics, In 1985 this figure will rise to 3,290. As regards the VITB and joint industrial training centres, their output of skilled workers has risen from 8,119 in 1980 to 10,701 in 1985. It is this systematic infusion of skilled and trained manpower, added to the pool of existing workers who are upgrading their skills through in-company training, which gives me confidence that our economy will continue to progress and that, in due course, we shall enter the ranks of the first league of industrialized nations. Section II Mr Speaker, Sir, I now turn to the FY 85 Budget. The FY 85 Expenditure Budget emphasizes the building up of economic and social infrastructure. The allocation for infrastructural and economic development is increased. A larger provision is set aside for education and training to expand the pool of skilled, technical and professional manpower required for upgrading the economy. Substantial funds are also provided to the Housing and Development Board (HDB) for public housing. Total Government spending in FY 85 is estimated to be $18.83 billion, about $2.35 billion or 14% higher than in FY 84. This rate of increase is lower than the average annual growth of 24% over the period FY 79-83 because of the completion of a number of major development projects and restraints on recurrent expenditure growth. More than 58% of the total outlay is for economic services, education, and public housing. Provision for recurrent expenditure takes up 44% of the total budget.”
“By contrast in 1985 with the first batch of practice-oriented engineers graduating from the Nanyang Technological Institute, the total output of engineers will increase to 784, a three-fold increase in five years. EXEMPTED BUSINESS (Motion) 3.58pm”
“Development charge is basically a tax on the enhanced value of land as a result of more intensive development or a change of zoning. It is fair that land owners should return to the community a sizeable portion of the enhanced value of land development, but the Government will review whether a lower rate may be more effective in fostering urban development thereby being more beneficial to Singapore in the long run. Even more crucial than land is our limited supply of water. Average water demand in Singapore in 1984 was 185 million gallons per day (mgd). This was an increase of 7% over 1983 demand and is higher than the average annual increase of 6% recorded over the period 1980 to 1984. In particular, restaurants and some non-domestic users have shown large increases in their consumption of water. We must bring down the rate of growth of our water demand. Otherwise we run the danger of using up all the available water supply in our reservoirs and from Johore in less than 15 years. Conclusion I shall conclude this first part of the Budget Statement by reiterating the basic fact that education and training is the cornerstone of our economic upgrading strategy and the key to a better life for our people. This is the reason why over the last five years we have expended great effort and money into expanding and improving our various educational and training institutions. The results of education and training take time to materialize. It is only this year that larger numbers of trained personnel from our institutions are coming on-stream. Over the last five years enrolment at the National University of Singapore and the Nanyang Technological Institute has risen from 8,640 in 1980 to 14,670 in 1984. In 1980 the total output of engineers was only 265.”
“There is a multitude of purposes which compete for the use of land in Singapore: housing, defence, commerce, industry, education, recreation and basic infrastructure such as reservoirs, roads, ports and airports. It is vital that we utilize our limited supply of land as efficiently as possible. The most effective way to ensure the optimum use of our land resources is, as far as possible, to allow market forces to dictate the allocation and pricing of land, We should try to remove bureaucratic hurdles which distort the economic use of land. As the major owner of land in Singapore, Government should ensure that there is an adequate supply of land in order to prevent prices from escalating. But Government should never release too much land at any one time so as to create a property slump, Until the demand for property catches up with the supply that is in the pipeline, I see no need for Government departments or statutory boards to embark on new commercial or office developments. There has been some concern in recent years that the high prices of properties and rentals in Singapore have lessened the attractiveness of Singapore as a place to do business. With the increased supply of housing units, shops, offices and factories that are now coming on-stream, the problem will be resolved through the operation of market forces. We should not let the temporary over-supply of property cloud our judgement. Land is finite in Singapore and it is desirable that we should constantly plan for its optimum utilization. In this respect I am of the view that it is timely to review the pre9ent level of development charge which is predicated at 70% on the enhanced value of land.”
“As an economic activity tourism is highly resilient. It has kept on growing even after the first and second oil crises. A Tourism Task Force set up in August 1984 has made a number of proposals which have been endorsed by the Government. The proposals will form the basis of the Singapore Tourist Promotion Board's efforts to develop Singapore as a major tourist destination. Government will provide financial assistance in order to enhance existing tourist attractions and to develop new ones. Tourist projects undertaken by private investors will be given tax concessions. To develop Singapore as an entertainment centre, the duty on most categories of entertainments will be significantly reduced from the current rates of 25% and 35%. Tax benefits will also be considered for those who participate in approved overseas sales missions. Over the longer term there is potential for the export of construction, hotel management, architectural, legal, accounting and engineering services. With the addition of 15,000 new hotel rooms, a new corps of hotel managers will emerge. Given time our hoteliers will be in a position to sell their services abroad. Land and Water Having discussed the domestic and external factors which can affect our economy, I now pass on to the two physical constraints which can ultimately circumscribe our capacity to grow. These are land and water. Although we have added 3,613 hectares, some 6.2%, to our land stock from 1967 to 1984 through extensive and expensive reclamation, there is no denying the fact that Singapore is a small island and we are severely limited in our land resources when compared to our neighbours.”
“This will require us rapidly to improve the quality and design of Singapore-made products and specialized services so that we can attain world class standards. In manufacturing, our comparative advantage will lie in:- (a) the products which we can manufacture for the regional market, and (b) the production of high value, skill-intensive, low-weight goods for the world market, for example, computer peripherals, medical diagnostic equipment and sophisticated control devices. There will also be opportunities in the production of high-value custom-designed, one-off products designed for specific purposes, for example, process plants, automation systems and ocean engineering equipment. Such specialized manufacturing will enable us to overcome the barriers of protectionism and distance from our major markets. However, the greatest promise for Singapore in future years lies in the area of sophisticated services. This is because world trade in services is today growing twice as fast as trade in goods. We must use our expertise and our experience in manufacturing to branch out into engineering and technical services, especially computer software. We should also move more aggressively into banking and finance, telecommunications, transportation and tourism. Our next stage of development as a financial centre will be in the promotion of fee-based financial services. This is a high value-added economic activity which requires high calibre expertise. It can generate spin-offs for the whole range of supporting services such as telecommunications, legal and secretarial services, financial, printing services, travel and hotel services. Another major area of promise is travel and tourism. Travel and tourism is the largest internationally traded service.”
“The Government will draw up appropriate programmes to help our exporters to achieve these objectives. In addition, new entrepreneurial talent will be identified and nurtured to become the next generation of Singapore exporters. The Trade Development Board (TDB) will help Singapore firms to increase their share of traditional markets overseas and to penetrate new markets. The TDB's network of overseas offices will be strengthened and an effective system will be developed to provide Singapore exporters with up-to-date commercial information. Another hurdle which Singapore has to face in our efforts to attract investments is the re-industrialization drive in the developed countries, sparked off by the large scale use of automation and mecha- nization. When a factory uses automate manufacturing processes on a sufficiently large scale, the unit labour cost is reduce dramatically. This can offset the differenttial in the cost of labour between the developed and the developing countries. Companies which have modernized their factories have less incentive to locate their manufacturing operations in off-shore production centres. Although we have, on the whole, been able to maintain a high level of foreign investment commitments, we have noticed a disturbing trend in the pattern o investments in the last few years. Excluding petroleum and petrochemicals, slightly more than half of all investment commitments in 1980 were by new foreign investors. In 1984 only 30% of such commitments were new, the balance coming from expansion and diversification by companies already operating here. To continue our economic growth we must seek to establish Singapore as a producer of specialized products and services.”
“In almost all our major markets we are facing an increasing array of both tariff and non-tariff barriers. The danger that protectionism can pose for Singapore can be gauged from the fact that our external trade is more than three times our gross domestic product. What this means is that we are more vulnerable than most other countries to protectionism. Our prosperity depends crucially on our being able to get continued access to overseas markets. Protectionism affects us adversely in two ways. First, and more obvious, it hinders our exports particularly our domestic exports, thereby impeding the growth of our domestic industries, Second, growing protectionism encourages multinational companies to invest in countries where the markets are rather than in countries which can offer more efficient off-shore production. If we try to combat protectionism by erecting protectionist barriers ourselves, we shall bring perdition upon ourselves. Our free trade policy has served us well and we will continue this policy. But we will have to work through GATT and other international organizations to press the case for a more liberal international trading system or at least to slow down further encroachments on free trade. The Government will do its utmost in this field but our exporters must also be more aggressive in their marketing strategies. Our exporters must search for the right niches in the world market where we can be internationally competitive, We must maintain our flexibility and be adept at adjusting to new developments and changes in our markets. Counter-trade, for example, has become a new feature of international trade. Singapore firms must quickly grasp the complexities of these new arrangements and seize the opportunities that will be thrown up.”
“Nevertheless the vast overhang of the developing countries' international debt amounting to some US$900 billion as at end-1984 still hangs over the international financial system. The situation cannot be regarded as healthy until a more permanent resolution of the debt problem is found. A further complication in recent years has been the very large budget deficit of the United States which has caused vast amounts of capital to be drawn into the United States from the rest of the world, forcing up interest rates and giving rise to currency instability. The US budget deficit has reached limits which would have been thought to be inconceivable even as short as five years ago. Everyone recognizes the dangers of a sudden loss of confidence in the US dollar at some date in the future but unhappily no economist or monetary expert has been able to come up with a convincing plan to get the world out of this quandary. Fortunately for Singapore our ample reserves, built up painfully over the last 25 years, and our sound currency have enabled us to mitigate the worst effects of the currency upheavals. A danger equal in magnitude to the instability of the world's banking system and perhaps even more malignant because it is less visible is the steady growth of protectionist sentiment in the developed countries. High rates of unemployment in the developed countries caused primarily by their inability, due to political and social factors, to make the necessary structural adjustments in their economies have resulted in pressure being brought by the electorate and trade unions on politicians and governments to resort to protectionist trade measures in order to protect domestic industries. These protectionist measures are often taken outside the framework of GATT rules.”
“In this regard I am glad to note that the Jurong Town Corporation (JTC) has decided to freeze its rentals on industrial properties. Also in June this year the Port of Singapore Authority (PSA) will revise and simplify its tariffs in order to give incentives and rebates to make it even more attractive for ships to call here. Vessels coming into our shipyards for repairs will pay up to 25% less in port dues while, for example, a third generation container ship will enjoy a reduction of about 10% in its overall cargo handling bill. PSA and JTC are good examples of statutory boards which have responded sensibly to market forces. Other statutory boards should follow suit. External Constraints on Growth I will now discuss the external constraints that can have an adverse effect on the economy of a developing country like Singapore. Among these external constraints, three are particularly worrying:- (a) Instability of the world's financial system. (b) Growth in protectionist sentiment, and (c) The re-industrialization drive in the developed countries. In 1982 the world's banking system teetered on the brink of collapse as the inability of a number of developing countries to repay their international debts threatened to bring down the fragile structure of international credit which lies at the heart of the world's banking system. Fortunately through swift and timely intervention by the international monetary agencies and the central banks of the major developed countries the crisis was averted and the debts were rescheduled. Since then there have been minor crises, as debts become due for repayment but each time temporary solutions have been found which have postponed the day of reckoning.”
“Now that our wages have risen to a level which is in line with the quality of skills of our workers, further increases can only be justified if there are corresponding increases in productivity. In addition to direct wages statutory contributions have, to a certain extent, added to the cost of doing business in Singapore. In this respect some employers have raised concern as to whether the rate of CPF contributions which now stands at 50% of wages, half from the employers and half from the employees, is likely to be raised further. It is Government's view that this rate of 50% is adequate in order to provide for the employee's old age needs as well as to help him to buy his home and for his medical expenses. There should be no need to raise CPF contributions any further. The Skills Development Fund has also been the subject of comment in the Press and among employers' associations in the last few days. The SDF has, in my view, served a useful purpose in that it has focused the attention of employers and managers on the need for training and manpower development and concentrated the minds of companies on the importance of investing in training to upgrade the skills of their workers. However, as the SDF has accumulated a sizeable balance, I am of the view that it would be possible to lower the rate of contribution without jeopardising the scope and effectiveness of SDF programmes. With effect from 1 April 1985 the SDF levy will be 2%. A review will be conducted at the end of three years to determine whether this rate will be maintained or revised. In addition to statutory contributions we must make sure that costs of operating a business in Singapore are not unnecessarily inflated by other indirect taxes, tariffs and fees.”
“Our repatriation policy on foreign workers should provide for the retention and assimilation of skilled workers who can form part of our permanent workforce. Unskilled foreign workers should be limited to sectors like construction and shipyards for those jobs where it has proved difficult to employ Singaporeans or, where necessary, to accommodate temporary shortages. Such unskilled foreign workers can form a revolving pool on short-term work permits. When their permits expire, they should be replaced by other foreign workers so that they will not sink permanent roots in Singapore. To ensure that the repatriation of foreign workers will not be detrimental to our economic activities, Government has therefore decided that the repatriation will be administered more flexibly taking into account particularly the needs of manufacturers, hoteliers, shipyards, construction companies and working mothers. Government will liaise closely with industrialists and employers so that they do not suffer undue difficulties with regard to shortage of labour. Let me, however, make clear that this more flexible policy on foreign workers should not be misconstrued to imply that we are re-opening the tap to an unending supply of foreign workers. Over dependence on unskilled foreign labour will retard our economic upgrading as employers will have less incentive to mechanize and automate their operations. Cost of doing business in Singapore I now turn to the problem of wages which, for most companies, comprise the largest component of their recurrent expenditure, Rapid economic growth in the last few years compounded by the shortage of labour has pushed up wages, sometimes beyond those warranted by increases in productivity.”
“The management of these companies is the responsibility of their respective boards of directors and senior executives and it would not be desirable, in my view, to hobble Government companies to such an extent that the managements are inhibited from making normal commercial decisions without reference to the Ministry of Finance. The Problem of Labour Shortage One of the major problems which has hampered the operations of the private sector over the last few years has been the severe shortage of labour. Since the 1970s Singapore has had, in a sense, overfull employment. Our economy has expanded faster than can be serviced by the number of new workers who join the labour force each year. Demographic projections show that in the next five years our indigenous workforce will grow by at most 1.5-2% per annum even if we succeed in encouraging more women to continue working after they have children. The solution to our labour shortage cannot be an indefinite and ever-growing dependence on foreign workers. The experience of countries, which have indiscriminately allowed large numbers of foreign workers to settle permanently, shows that this gives rise to social and political problems of such a magnitude as to threaten the cohesiveness and stability of their societies. The ultimate solution to a slowly growing workforce must be high productivity and a mature economy. In the meantime, however, we have to be realistic and recognize that our industries will require some time to upgrade to highly sophisticated brain-intensive industries. Repatriation of the foreign workers who are already here should therefore be more gradual in step with this upgrading process. It must not be too fast or too abrupt as to compound the labour shortage.”
“In the 1980s the engine of economic development should be the private sector and not the Government. The private sector must be encouraged to set the pace in leading Singapore to a new economic era. Towards this objective the Ministry of Finance has over the last year conducted a thorough review of Government's role in business activities. Following the review, the Ministry has decided that the following guidelines should be followed for all Government companies, including those which are owned by the statutory boards:- (a) Government will invest in new priority industries only where private entrepreneurs do not have the will or the money to undertake projects on their own or where it is essential for Government to provide the entrepreneurship; (b) Government will divest its shares in companies where it does not have a majority stake and where it is not essential for Government to have effective control; (c) Unlisted Government companies will, wherever possible, be listed on the Stock Exchange; (d) For critical companies which are considered to be vital to the national interest, Government will maintain a controlling interest but will invite participation from the public through listing on the Stock Exchange. The Ministry of Finance has also strengthened its control of Government companies. All companies owned by Government or statutory boards have been brought under the supervision of a high-level committee in the Ministry of Finance chaired by the Minister for Finance. This committee is responsible for reviewing expansion plans and setting the policy guidelines for investment and other important matters. This does not mean that Government is taking over the running of Government-owned or Government-controlled companies.”
“We are a young, impatient, high-achieving society who will not be content to wait for decades before acquiring the attributes and accoutrements of a modern industrialized society. To accelerate the pace of development it was necessary for the Government to intervene in the economy on a large scale. And over the last 25 years the Government in Singapore has ventured into areas which would traditionally have been regarded as being the preserve of the private sector and not within the province of government. In my view such intervention was necessary in order to build up our economic base. If the Government had not taken the initiative in areas where the private sector was hesitant, especially in the earlier years when the political climate was unsettled, our economic framework today would be a far cry from the strong, resilient structure which has enabled us to weather so many economic storms. The Government's involvement in business activities commenced in the early 1960s. Government then had a handful of companies under the auspices of the Economic Development Board and the Ministry of Finance. With intensified industrialization and steady economic growth, other Ministries and statutory boards started to form companies to carry out some of their operations which were more commercial in nature. The original objectives of Government companies were to promote economic growth, provide employment and to encourage domestic capital formation. But conditions have changed. There is ample capital in Singapore today and instead of massive unemployment we have a labour shortage. Policies which were correct when we were in the early stages of development are no longer appropriate now that we are on the verge of becoming a newly industrialised society.”
“9% in a period when double-digit inflation rates were the rule rather than the exception in many parts of the world. Our low rate of inflation is a direct consequence of our policy of maintaining the free-enterprise open trading system in Singapore so that our traders are able to import our requirements of goods and services from the cheapest suppliers in the world. Strong economic growth has generated a surplus in the balance of payments every year. The balance of payments rose sharply from $1.4 billion in 1980 to $3.2 billion in 1984. The Singapore dollar is regarded as one of the soundest currencies in the world. The strong confidence in Singapore by the international business community is reflected in the healthy level of investment commitments. On the average, about $1.7 billion of investment commitments were made annually in the last five years. These investments provide the cuffing edge to upgrade our industries to a higher level of sophistication thereby introducing a new range of skills and products to our economy. The Private Sector as the Engine of Growth So much for the past. What of the future? How can we continue to build on our strengths and minimise the adverse effects of our weaknesses? In what areas of economic activity do we have a comparative advantage over other countries? These are the vital questions which I will now address. By the standards of the older industrialized countries, Singapore is still a very young nation. The economies of the developed countries grew and matured over a period of centuries during which private enterprise flourished, laying the foundation for the modern industrial state to be found in Europe, America and Japan today. We have not had the luxury of time in Singapore.”
“As a result our per capita GNP increased from $9,400 in 1980 to $12,600 in 1984 at 1980 prices, a rise of 34%. As a proportion of Japan's 1980 per capita GNP of $19,100, Singapore's per capita GNP has risen from 49% in 1980 to 66% in 1984. If we continue to do as well in the next five years as we have in the last five years, we will attain our target of reaching Japan's 1980 per capita GNP before the end of this decade. Our workers have benefited substantially from this rapid economic growth. We have had full employment throughout the last five years. The highest unemployment rate during this period was just over 3%. The unemployed mainly comprised those who were in-between jobs or fresh school leavers or University graduates. Unlike the situation in almost every other country in the world, no worker in Singapore has been unable to get a job if he wanted one. With full employment and rapid economic growth the average earnings of workers in Singapore have increased significantly. After discounting for inflation, earnings have increased on average more than 8% per annum over the last five years. Consequently the standard and quality of life of workers in Singapore has improved. More Singaporeans are employed in better-paying and higher skilled jobs. With the setting up of more sophisticated industries and the diversification of our economic activities, the value-added per worker will rise further, particularly for those workers who upgrade their skills. Despite rapid economic growth we have managed to hold down our inflation at a level which is far lower than that experienced in other countries. The average rate of inflation in Singapore in the last five years was 4.”