Parliament Highlights - 5 Mar 2014

Budget 2014 Debate Round-Up Speech by DPM & Minister for Finance Tharman Shanmugaratnam

Tharman maps out path to transform S'pore economy

Companies, jobs and social norms must change if effort is to pay off

By Leonard Lim, The Straits Times, 6 Mar 2014

DEPUTY Prime Minister Tharman Shanmugaratnam gave a progress report yesterday on Singapore's economic restructuring journey, and spelt out how companies, jobs and social norms must transform if the national effort is to be a success.

Productivity growth fell 2 per cent in 2012 and was flat last year, and numbers in recent years have been dismal, Mr Tharman, who is also the Finance Minister, acknowledged as he wrapped up two days of debate on his Budget statement.

But, referring to a graph that showed the change in productivity levels in several countries, he argued for a long-term perspective to be taken.

In 1980, Singapore's productivity was about 40 per cent of that of the United States. Today, it is 70 per cent of the US level.

This was a major shift, he said, adding that it was also slightly higher compared with Japan's, and was "not a bad achievement".

He set out how the pace of restructuring is also important, with Singapore avoiding shock therapy and plumping instead for change at a steady clip. Changes to foreign worker limits in specific industries, for instance, have been made in phases.

Singapore's productivity push also does not come at the expense of shedding jobs as is the case in other countries, but with the employment rate rising, he said.



Mr Tharman outlined a three-pronged approach for the future, with the first priority on transforming small and medium-sized enterprises (SMEs), by helping them tackle high business costs and a tight labour market.

The Government will continue to give them substantial help, he said, but added that the permanent solution to rising business costs is to raise productivity.

Second, Singaporeans will get help to prepare for jobs of the future. The Government will pour resources to create "one of the best systems of lifelong learning" to complement the country's "world-class" school system.

Third, there needs to be a broad shift in societal norms, a point he made in his Budget statement and which many MPs commented on during the debate.

He cited two examples: Seniors must want to keep working to preserve their self-worth rather than for money; and consumers accepting self-service as a norm.

Almost all the 54 MPs who spoke in the debate since Monday praised the Budget's centrepiece: The raft of health-care benefits in the Pioneer Generation Package.

Mr Tharman acknowledged their strong support but also cast his eye on the future, stressing that providing good quality health care at affordable prices for all citizens will remain a priority.

It poses a fiscal challenge, however, for the Government.

To give a sense of this, Mr Tharman noted that 450,000 Singaporeans, who are aged at least 65 this year, will benefit from the Pioneer Generation Package. But the next generation, aged 45 to 64, number one million and they will retire in the next 10 to 20 years.

Apart from the ageing population, official spending on health care will also rise as more treatments that improve the quality of life become available, Mr Tharman said.

Finding a balance between how much of the total bill is paid by the individual, employer and Government will be a very important challenge, he added.

He foresees the Government's annual spending on health care ballooning from $4 billion in 2011 to $8 billion next year, and $12 billion by 2020.

Expenditure on housing, transport and education will go up as well, he said.

But the principle of a fair and equitable tax system, with a low tax burden on the middle income, will underpin how the Government raises more revenue.

Amid murmurs of high living costs, Mr Tharman said the Government will ensure that the incomes of low- and middle-income families grow faster than the cost of living.

Ending on an upbeat note, he referred to a point made by Pasir Ris-Punggol GRC MP Penny Low - that the over-riding goal of the pioneer generation was for their children to do better.

"Because they are like that, Singapore is like that, we are like that. Every Budget must be focused on our future, investing in our young, opening up opportunities and helping them to create a better Singapore," he said.

Three challenges: Productivity, health and financing

Singapore is taking a middle path and avoiding shock therapy in restructuring the economy

"We have avoided shock therapy. That can work in theory, but in practice, there is high risk of good, viable firms being shaken out, as well as good jobs."

Providing quality health care at affordable prices for all is a priority

"This is... the key fiscal challenge for our future, controlling total health-care spending and secondly, finding a fair balance in terms of who pays for that bill. A fair balance between the individual, the Government, the employer."

Three principles will guide planning for future spending:

- maintain a vibrant economy

- ensure a fair and equitable system of taxes and transfers

- keep tax burden on middle-income group low

"We must be prepared for the years ahead and build up our revenues for the spending needs of the next decade and beyond."

BUDGET 2014: HIGHER PRODUCTIVITY & INCOMES

'Middle path' for productivity drive
Moving too fast could see good jobs, businesses 'shaken out': Tharman
By Toh Yong Chuan, The Straits Times, 6 Mar 2014

SINGAPORE has avoided "shock therapy" and instead taken a middle path in its productivity drive to give companies time to adjust, said Deputy Prime Minister Tharman Shanmugaratnam yesterday.

Market forces take time to kick in and moving too fast could lead to good jobs and good businesses being "shaken out", including promising ones, he added.

But Mr Tharman made it plain that the pace of the productivity push will be kept at a "steady clip". The pressure on companies to upgrade will not let up, despite calls by Mr Inderjit Singh (Ang Mo Kio GRC) and Nominated MP R. Dhinakaran to ease up a little.

Mr Tharman told Parliament that Singapore has narrowed the productivity gap with the United States in the past 30 years.

The Republic was about 40 per cent of US productivity levels in 1980, but is now around 70 per cent. It is on a par with Britain and Japan, "so it is not a bad achievement", said Mr Tharman.

He added that Singapore's "unique" achievement was that it grew productivity while maintaining full employment. "For us to be able to raise productivity while providing jobs for all our citizens... is a much bigger challenge than raising productivity by shedding jobs," Mr Tharman said.

He added: "That is, in fact, what has happened in many countries... We have found a way in which we can have an economy where everyone has a role to play... We should retain this inclusive approach."

He said the aim must be, as labour chief Lim Swee Say put it on Tuesday, to "make every job better", hence the progressive wage model, which is a way to raise wages in low-paying sectors.

Still, Mr Tharman said, "productivity cannot just be summoned up"; it needs entrepreneurial energy and business leadership and time for the market to work. The challenge is how to boost output without hurting the job prospects of lower-skilled and older workers.

The next phase of economic restructuring must be driven by transformations, not only in small and medium-sized enterprises (SMEs), but also in social norms and in preparing Singaporeans for new jobs that will emerge in the future.

The Government will continue to give "very substantial assistance" to SMEs and help will not be in a one-size-fits-all, cookie-cutter form, he said.

Companies will get a "broad base of support that is easy to qualify" for, and the Government will work with them on customised help to achieve real improvements in productivity within a period of time.

The bottom line is that the Government wants to see home- grown SMEs become dynamic players, Mr Tharman said.

"By applying new management concepts, by going for strategies that are seen amongst other firms... our traditional businesses do have a role to play in the future of the Singapore economy."

He also noted that there needs to be a parallel shift in societal values and cited two examples where change is necessary.

One is to have seniors keep working, not because of the tight labour market or for financial reasons, but for them to preserve their self-worth and dignity.

He also wants consumers to accept self-service as a norm.

To illustrate, he pointed to the banking sector where self-service modes such as ATMs and Internet banking are widely accepted.

One sector that can do better is real estate, he added, citing Australia as an example.

Its real estate agents post extensive information of properties online, allowing buyers to look at floor plans and take virtual tours before contacting the agents.

"In every industry, we can think of how self-service can, in fact, provide good service. It also saves on manpower and takes us to a new and higher level."

BETTER PRODUCTIVITY

Singapore’s productivity level in 1980 was only 43 per cent of the United States. It also trailed behind Britain and Japan.

That gap has narrowed considerably, with Singapore reaching 70 per cent of US productivity levels last year.

Singapore is now on a par with Britain and Japan.

Government helping with rising costs
By Chia Yan Min, The Straits Times, 6 Mar 2014

THE Government is helping individuals and businesses deal with rising costs.

Its approach is to grow incomes by more than prices.

It also intervenes to moderate the impact of business cycles, by increasing the supply of industrial land and commercial space.

And it is finding new ways to help firms lower costs by sharing services.

Responding to MPs' concerns on the issue, Deputy Prime Minister Tharman Shanmugaratnam warned against any measures that would weaken the economy and cause it to become less vibrant, as that is "not what our business community and Singaporeans want". And "neither can we fix rents and keep costs low", he said.

MPs had warned during the debate on this year's Budget that economic restructuring and the increased costs it brings could erode Singapore's international competitiveness, force firms to shut down or relocate and lead to escalating costs for the average Singaporean.

Mr Tharman's response was that the Government's priority is to make sure low and middle-income Singaporeans can increase their earnings to stay ahead of the cost of living.

That is something Singapore has "fortunately been able to achieve".

There has been "significant improvement" in the rate of real income growth for middle and lower-income households, he added, noting that both groups have seen their real incomes rise about 10 per cent in the past five years.

The Government is also helping firms deal with costs arising from such factors as the tight labour market and strong demand for industrial and retail space.

On dampening the impact of economic cycles, Mr Tharman cited as an example the supply of multiple-user factory space. The amount of such space that will be made available over the next three years is expected to be twice that of the demand seen over the last three years, which should moderate industrial rents.

A substantial increase in the supply of retail space is also expected, said Mr Tharman.

Industry clusters like the JTC Food Hub and Tuas Biomedical Hub also help companies save costs by sharing services.

More clusters will be developed so that firms, especially small and medium-sized enterprises, can reduce upfront investment costs that they would otherwise have to bear on their own.

"These are useful ways in which we can mitigate rising costs and help companies to have... more efficient ways of using their manpower and get more value out of the space they occupy," said Mr Tharman.

He also stressed that the "permanent and fundamental" solution to rising business costs is to raise productivity.

"As long as we remain vibrant as an economy, our costs will be similar to an advanced country. The only way for businesses to survive is to have advanced country capabilities in innovation, in the commercialisation of research and development, in managerial skills and in investing in employees so that they have deep skills."

Cost-of-living surveys reflect expatriate, not local, costs
By Janice Heng, The Straits Times, 6 Mar 2014

A DAY after the Economist Intelligence Unit ranked Singapore the priciest city in the world, Finance Minister Tharman Shanmugaratnam came out to say that such surveys which focus on expatriates do not reflect the living costs of Singaporeans.

He said he knew the report was making the rounds and attracting a lot of attention, and thus it was important to make clear that such surveys "are really aimed at measuring expatriate cost of living in different parts of the world".

The costs measured differ from those facing an average Singaporean in two important ways: the role of currency, and which goods and services are considered.

"An important reason why we've become expensive for expatriates is that the Singapore dollar has strengthened," said Mr Tharman, noting that the EIU report itself points out this reason.

That makes things pricier for an expatriate paid in a foreign currency, but it improves Singaporeans' purchasing power, both at home when buying imported goods and when travelling.

Mr Tharman also noted that the kind of goods and services included in the survey are "quite different from (those) consumed by ordinary Singaporeans".

The EIU consumption basket includes imported cheese, filet mignon, "Burberry-type raincoats", four best seats in a theatre, and three-course dinners in high-end restaurants for four people.

"And indeed for these items, Singapore's expensive," said Mr Tharman. But such items would not feature in the average Singaporean's consumption basket.

"It's not that these surveys are wrong, it's not that they are misguided," he said. "They're measuring something quite different from the cost of living for an ordinary local in different cities around the world."

Few surveys measure living costs for ordinary residents, but Mr Tharman cited one that did.

A 2012 Asia Competitiveness Institute report had separate rankings of living costs for expatriates and a typical local household.

Singapore was the fifth most expensive city out of 109 for expatriates but only 61st for locals, comparable to Hong Kong at 58 and Seoul at 60. "So that's the basic difference," said Mr Tharman.

"From time to time, these surveys will come up. I know some people will give it a spin, but it's measuring something quite different from the cost of living for our residents."

HIGHER PRODUCTIVITY & INCOMES
Coping with risk of job polarisation
By Toh Yong Chuan, The Straits Times, 6 Mar 2014

THE pace of technological change is putting Singapore at risk of job polarisation, a process where top-end positions are created while middle-end ones disappear.

The warning came from Deputy Prime Minister Tharman Shanmugaratnam, who told Parliament yesterday that the trend is already happening in the United States and Britain and that "we face that challenge here".

Singapore has avoided the shift so far because it has full employment due to a tight labour market, but DPM Tharman stressed that preparations to help workers take jobs that emerge in the future must start now.

He acknowledged that it is difficult to pinpoint exactly what those new jobs will be but added: "We know what the broad sectors are, we know there will be jobs."

These sectors include hospitality, health care and social services, with jobs requiring skills in technology, such as engineering, product design and systems management.

Schools have started preparing students, Mr Tharman noted.

The Ministry of Education is beefing up career guidance for students and sending them for job attachments.

Teachers and principals are also not spared from the drive to upgrade skills.

They can take time off for job attachments and to learn other fields so there is "constant infusion of skills and knowledge", Mr Tharman said.

But he emphasised that the effort to help Singaporeans cope with job changes extends beyond schools. "Our challenge is now to complement the world-class school system by having one of the best systems of lifelong learning as part of the continuum.

"We are developing a whole new continuing education and training masterplan which we will announce later in the year."

Besides government resources to train workers, Mr Tharman said firms should chip in too.

"Every business has to invest in its employees and, if everyone does so, we raise the human capital of Singapore society.

"Everyone moves up and benefits because in a small society like Singapore, what goes around comes around."

EMPLOYMENT RATE ALSO UP

Singapore's productivity and employment levels have both risen in the last 10 years since 2003, just as in Hong Kong and Switzerland.

In fact, its employment rate, which measures the proportion of residents aged 15 to 64 who are employed, overtook that of the United States and Hong Kong last year, and it was a tad behind that of Britain.

However, in the last 10 years, as productivity rose in Britain, its employment rate fell.

A similar trend was seen in the US as well.

HONOURING PIONEERS, AFFORDABLE HEALTH CARE
Affordable health care remains a priority: Tharman
He outlines impact of Govt's move to foot larger share of health bill
By Janice Heng, The Straits Times, 6 Mar 2014

WHILE the Pioneer Generation Package has grabbed the headlines, the Government underlined yesterday that providing good, affordable health care for all Singaporeans remains a priority.

"That is a very important challenge that we have to meet - how we can provide quality care in an affordable way," said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam in Parliament yesterday.

He noted that the Government has used recent Budgets to improve health care and keep it affordable.

He cited moves like increasing risk-pooling via MediShield Life, the Government raising its share of health-care spending, and the role of individual savings being retained as a key pillar in the system, in the form of Medisave.

To show the difference that the Government's move to foot a larger share of the health-care bill was making, he cited an example of a middle-income couple in their early sixties.

Say their income is $1,700 per person per month - the median household income here - and the husband has day rehabilitation care weekly while the wife visits the polyclinic and specialist outpatient clinics twice or thrice a year.

"The policy shifts that we've made to increase subsidies for the middle-income group, particularly outside hospitals, have meant that this couple would receive a quadrupling of the benefits that were in place a decade ago," Mr Tharman said.

"We've been making significant shifts, not just for the pioneer generation, but for all Singaporeans as they get older especially," he said, adding: "But we have a larger challenge in future."

There are 450,000 in the pioneer generation. The next generation, aged 45 to 64, is one million strong. These baby boomers will retire in the next 10 to 20 years.

In Budget 2012, the Government projected that its yearly total health-care spending would double from $4 billion to $8 billion by 2016. It is likely to hit the $8 billion figure a year earlier in 2015, and reach $12 billion by 2020.

Besides providing subsidies, it is also investing in infrastructure to boost hospital capacity and building more intermediate and long-term care facilities.

Outlining the challenge in financing health care for these groups, Mr Tharman said Singapore must keep two factors in mind.

First, spending more does not necessarily mean better health care.

He underscored this with a chart showing how much advanced countries spend on health per capita and how healthy they are, based on Bloomberg rankings. Singapore topped the Bloomberg ranking in terms of a healthy population and yet spends less than other countries. In contrast, the United States had poor health but high spending.

"People often refer to (the US) in articles and wonder why we're not spending as much," said Mr Tharman. "Well, they spend a lot of money but they've got very weak health-care outcomes."

There are reasons some countries are not getting as much bang for their health buck as others, he said.

Prices could just be higher while health care might be over-prescribed and over-utilised - deemed "a very serious issue" by Mr Tharman.

In some systems, for instance, doctors are paid more for just prescribing extra treatments - giving them an incentive to do more than is needed.

He also noted that many systems have subsidies for everyone, including the rich. This makes health care look cheap, but leads to much higher usage.

"People don't realise it, but they are actually paying for it in another way, through higher taxes," he added.

That was the second fact to keep in mind - "that there is, in fact, no free or cheap health care anywhere in the world".

It can look cheap or free at the general practitioner's clinic or hospital because insurance is covering it or government subsidies are being provided.

"But the public is ultimately paying for it either through taxes or hefty insurance premiums," said Mr Tharman, citing Germany, where co-payment at the point of treatment is "extremely low".

Yet that is only because employers and employees jointly contribute a 15.5 per cent payroll tax - coming out of wages - to a "sickness fund".

"When you finally go to the hospital or clinic, you think it's very cheap but actually you paid for it (earlier)," he said.

Singapore will spend more on health care as society ages and more treatments that improve the quality of life become available. But because nothing is free, the costs must be controlled, said Mr Tharman.

"We have to do it in a cost- effective way and prevent the total health-care bill from spiralling upwards, because everyone will have to pay for that."

HEALTHIEST NATION

Singapore's per capita expenditure on health care is the lowest among these advanced countries, as shown by its position on the far left of the chart.

Yet, it comes out tops in Bloomberg's 2012 ranking of the world's healthiest nations, based on indicators like life expectancy, percentage of underweight children and proportion of people with high cholesterol.

The United States is the polar opposite. Among these countries, it spends the most on health care per person, yet lies at the bottom in the health ranking.

Furthermore, the countries in the middle - scattered as they are - show "very little correlation between how much you spend and your health-care outcomes", said Deputy Prime Minister Tharman Shanmugaratnam.

Pioneers' Medisave top-ups in July
By Maryam Mokhtar, The Straits Times, 6 Mar 2014

THE first round of Medisave top-ups under the Pioneer Generation Package will be paid out in early July, a month earlier than anticipated.

A Pioneer Generation card that can be used at clinics will be posted to pioneers before September, Deputy Prime Minister Tharman Shanmugaratnam also announced yesterday. The card allows them to be easily identified to get additional subsidies.

Mr Tharman said that the two years' worth of Medisave top-ups will help the pioneer generation meet MediShield premiums before the new universal insurance scheme MediShield Life kicks in at the end of next year.

The lifelong annual top-ups for pioneers range from between $200 and $800 depending on age.

Mr Tharman also made clear that the MediShield Life subsidies, which are part of the pioneer package, will cover Medisave-approved private health insurance plans that many people have.

"The Medisave-approved plans are Integrated Shield Plans and they include the basic MediShield as a basic component, and in future, the plans will include MediShield Life as a basic component," he said.

"So those who are on Integrated Shield Plans will receive the same dollar amount of subsidies as those on MediShield Life."

Benefits under the Community Health Assist Scheme (Chas) that all pioneers will enjoy as part of the Budget package will also be brought forward from January next year to September this year.

These will kick in at the same time as enhanced subsidies are rolled out at specialist outpatient clinics.

The Chas scheme lets pioneers receive subsidised treatment at participating private GP clinics and dental clinics.

Several MPs had asked for the pioneers to be recognised in other ways, such as free entry to pools and tourist attractions.

Mr Tharman said the Ministerial Committee on Ageing will engage businesses and organisations to offer special privileges to seniors, as part of efforts to celebrate Singapore's 50th birthday next year.

BALANCING THE BUDGET
3 principles to guide Govt as spending increases
By Alvin Foo, The Straits Times, 6 Mar 2014

WITH expenditures set to rise due to increases in health care and infrastructure spending, three principles will guide the Government as it tries to balance future budgets.

These are maintaining a vibrant economy, ensuring a fair and equitable system of taxes and transfers, and keeping the middle-income group's tax burden low, said Deputy Prime Minister Tharman Shanmugaratnam yesterday.

Keeping the economy vibrant is central to social strategies because "an inclusive society is a hollow concept if we do not have fruits to redistribute and share", he added.

This is important as economic competition is intensifying globally, DPM Tharman said, citing the lowering of corporate taxes in Britain and Taiwan.

But this does not mean keeping taxes unchanged. There is further room over time to enhance asset taxes, and "we have to keep all options open", the minister said.

Another principle - ensuring that everyone has to pay some tax. He said: "Those who are better off contribute far more and those in need receive more benefits than the taxes they pay."

Singapore's means-tested benefits ensure that the poor get back far more benefits than the taxes they pay, he noted. For every dollar of tax paid, they get back at least $5 in benefits from childcare to retirement.

Mr Tharman also highlighted that last year, low-income households here received significantly more in transfers net of the taxes they paid, compared to 10 years ago.

He said Singapore's tax system is more progressive than many developed countries. For instance, the top 20 per cent in Britain pay 44 per cent of all taxes, while the top 20 per cent in Singapore pay just over 50 per cent of all taxes.

A progressive tax system takes a larger percentage from high- income earners than low-income ones.

Keeping the tax burden on the middle-income households low is also a key priority.

Mr Tharman noted that the average tax for the median worker here is "very low" by international standards, and even lower than that of Hong Kong. He said Singapore "still (remains) a relatively low-cost country, low-tax country for the middle-income group", even if other taxes such as car taxes and foreign maid levies are included.

The need for more revenues is necessary as Government spending will increase, by two percentage points of gross domestic product by 2020 and by another percentage point beyond that.

Infrastructure and health-care spending will be the key focus, with plans to grow the rail network by 100km in the next decade - more than any other 10-year period in Singapore's history. The Government's annual health-care expenditure is likely to hit $8 billion in 2015 - a year earlier than initially projected, said Mr Tharman, and reach $12 billion by 2020.

MORE BENEFITS OVER THE YEARS

Compared to 10 years ago, the government benefits received by low-income households last year were significantly more than the taxes they paid.

The net transfers given to the income group just above the bottom 10 per cent of households here – the 11th-20th percentile of household income – amounted to 81 per cent of their family income last year, compared to 43.8 per cent in 2003.

TAX BURDEN IN S’PORE SMALLER

The tax burden on an average wage earner in Singapore is much lower than that in other developed economies such as Hong Kong and the United States.

Taking income tax plus the Goods and Services Tax together and with the US as the base at 100, Singapore is at 29.

Harsh world or land of possibility?
S'pore is vulnerable in a harsh world but can take on the world - and win
By Chua Mui Hoong, The Straits Times, 6 Mar 2014

FIFTY-FOUR MPs and 15 hours of speeches later, three things can be surmised from this year's debate on Budget 2014.

One, MPs support the rise in social spending. This can be seen in the way every MP who mentioned it supported the $8 billion Pioneer Generation Package of medical subsidies to be set aside for those aged 65 and above.

Two, MPs gave strong support to the ongoing push by the Government to restructure the economy and get companies, especially smaller, less efficient ones, to raise productivity. But some wanted this slowed, fearing company shutdowns and job losses.

Three, there is a tension between the vision of Singapore as a vulnerable city in a "harsh world" and Singapore as a land brimming with hope and possibilities.

The most explicit statement of these two alternative visions came from Nominated MP Laurence Lien's call on Monday for "a more positive narrative that is grounded in optimism and trust in the people, away from one that focuses on scarcity, and our vulnerabilities and deficiencies".

He added: "If we think of Singapore as a sampan, we will not think of possibilities. We cannot go out to explore and conquer the world in a sampan. Since a luxury liner may give a wrong connotation of rest and leisure, perhaps we can think of ourselves as a large exploration vessel, always seeking to be ahead of our time."

Writer Koh Buck Song in an Opinion article for The Straits Times on Oct 28 last year, had said Singapore should not see itself as a sampan, but as a well- run global cruise liner. Prime Minister Lee Hsien Loong later retorted that Singapore was at best an upgraded sampan and its citizens could not afford to think they were cruising on holiday.

Foreign Minister K. Shanmugam disagreed with Mr Lien. Speaking yesterday during the debate on his ministry's budget, he reiterated the need for Singapore to be realistic about its options.

Singapore should learn from events in Ukraine - that a small country can be a pawn in the power play between big powers. Ukraine went from a well-functioning state, with embassies all over the world, to a country in crisis, "its political system is in limbo, foreign troops on its soil, facing the serious risk of dismemberment... reserves running low".

How long, he asked, would it take Singapore to unravel "if we do not constantly run hard to make sure that everything works, that we out-compete the world, that we can defend ourselves"?

"It is a harsh world with rules which are often ignored by many countries, including the major powers. Success is not pre-ordained."

He referred to Mr Lien's call for optimism and said: "We also have a duty to be honest with our people and tell it like it is and not sugarcoat the truth. It is best to be unvarnished about the truth."

The narrative of realism - or pessimism, depending on your point of view - can be gleaned from MPs' warnings about the risks of economic restructuring during the three-day debate.

It goes something like this: High costs are driving Singapore firms out of business, or out of the country. Malaysia's south Johor Iskandar Development Region is a threat on Singapore's doorstep, as MP Inderjit Singh argued. Many small and medium- sized enterprise (SME) bosses are struggling, as MPs like Ms Lee Bee Wah and Ms Denise Phua and NMP R. Dhinakaran recounted.

The narrative of hope and possibility goes like this: Singapore is well-positioned to continue to excel. Its fiscal position is strong. Many companies are adapting well. Labour chief Lim Swee Say told the story of social enterprise cafe Eighteen Chefs that invested in a machine to get soft-boiled eggs just right, at 64 deg C.

Deputy Prime Minister Tharman Shanmugaratnam mentioned other successful SMEs when he wrapped up the debate yesterday: "Many more Singaporean brands are now known abroad. It used to be SIA (Singapore Airlines) and Creative and SingTel. Now there are many other brands - Hyflux, Ezra Holdings in the offshore and marine sector, SC Auto in manufacturing, Charles and Keith in the retail sector, Eu Yan Sang in health care, and many other names."

His point when he wrapped up the debate on the Budget: Look how far Singapore has come.

Over 30 years ago in 1980, its productivity level was 43 per cent that of the United States. Today, it has narrowed the gap to 70 per cent, beating Japan (68 per cent) and Hong Kong (67 per cent).

If Singapore persists at the restructuring effort "at a steady clip" despite the pain, in a decade, the economy - and society - will be transformed, he pledged.

Is Singapore a land of possibility, or a land of vulnerability?

I would say: Both.

Many Singaporeans born in the 60s, like me, would have parents who lived through and subscribed to the "harsh world" view. But we are also post-independence children, who have witnessed and lived through incredible opportunity and possibility.

But I say: Let's not forget the grinning skull underneath our seemingly peaceful lives.

In the end, Singapore needs leaders and citizens who articulate these paradoxical hard truths: Yes, Singapore is an open, vulnerable city-state in a harsh world. These are the existential facts about Singapore, so long as we cherish our sovereignty.

But to survive and thrive, the country's leaders and people need to live up to another even harder truth: We can take on the world - harsh as it is - and win.

We need both that hard-headed realism and that overriding reach-for-the-stars confidence. The second helps us break out of being fearful people in a little sampan. But without the first, even a cruise liner could be blasted out of the waters.

PRIME MINISTER'S OFFICE

Government keeping eye on growth of population
It is committed to new strategic direction in White Paper: Grace Fu
By Andrea Ong, The Straits Times, 6 Mar 2014

SINGAPORE'S population growth is scrutinised regularly at a "very senior level" to ensure it keeps within planning parameters, said Minister in the Prime Minister's Office Grace Fu.

Ms Fu gave the assurance yesterday while reiterating the Government's commitment to the "new strategic direction" laid out in the Population White Paper, which is to grow at a slower, more sustainable pace.

That is borne out in demographic changes last year that saw the slowest population growth in nine years and a decline in the pace of foreign worker arrivals.

Mr Inderjit Singh (Ang Mo Kio GRC), who was speaking in the Committee of Supply debate on the Prime Minister's Office, asked for updates since Parliament passed the Population White Paper just over a year ago.

Mr Singh wanted to know what had changed in the Government's planning process to ensure infrastructure is built ahead of time and population numbers do not "over-run".

Ms Fu responded: "I think in terms of our long-term planning, such as the URA Master Plan, the planning process remains the same.

"But I would say that our population growth is now being watched closely and regularly at a very senior level, to make sure that we keep within the planning parameters."

She listed some "concrete steps" the Government had taken to moderate that growth and maintain a Singaporean core. These include the Fair Consideration Framework that gives Singaporean workers a fair shot at jobs.

Last year, the foreign workforce in non-construction sectors grew by 3.5 per cent - half the rate in 2012, said Ms Fu.

Total population grew by just 1.6 per cent last year, the slowest in nine years. But growth in the citizen population was slight as well: 0.9 per cent to 3.31 million through births and immigration.



With total fertility rate still low at 1.19, Dr Lam Pin Min (Sengkang West), Mr Gan Thiam Poh (Pasir Ris-Punggol GRC) and Nominated MP R. Dhinakaran called for more government help for Singaporeans to marry and raise kids.

Ms Fu said the Government's approach is to provide the "best support" in defraying the cost of raising a child while not undermining parents' responsibility. She called on employers to play their part by introducing family friendly and flexi-work arrangements.

With marriages between Singaporeans and foreigners on the rise, Ms Tin Pei Ling (Marine Parade GRC), Mr Lim Biow Chuan (Mountbatten) and Mr Png Eng Huat (Hougang) high-lighted the plight of foreign spouses who face difficulties in applying for visit passes or citizenship.

Ms Tin asked for a "definitive road map" for foreign spouses so families can plan their lives with more certainty.

Ms Fu said the Government's three key considerations in granting passes, permanent residency and citizenship are whether the applicant can financially support the family, integrate into society and commit to sinking roots here.

Foreigner-Singaporean couples should also demonstrate the stability of their relationships, she said.

But the Government is not considering releasing such a road map now as it has to guard against people "artificially improving" their applications to meet criteria.

Public Service 'committed to improving pay, skills'
By Andrea Ong, The Straits Times, 6 Mar 2014

THE Public Service is committed to working with unions to improve the pay and skills of its lower-wage officers, Deputy Prime Minister Teo Chee Hean said yesterday.

Lower-income staff such as operations support officers received a pay rise of $50 to $70 in December, the most recent example of how the service reviews salaries to stay competitive, said Mr Teo. The December raise came on top of increases of $60 in 2012 and $70 last year for Division Four officers.

Both rises were above the recommendations of the National Wages Council, he added.

About 2,200 civil servants have benefited from the three adjustments, with their monthly pay going up about 15 per cent, or between $180 and $200, over and above their annual increments.

Mr Teo, the minister-in-charge of the civil service, was responding to unionist Ang Hin Kee (Ang Mo Kio GRC), who asked how the Government could help lower-wage public servants

The Deputy Prime Minister noted that pay rises should go hand-in-hand with an increase in productivity, which is why the service encourages lower-wage officers to upgrade their skills.

Last November, the cash incentive for Division Three and Division Four civil servants who complete a relevant Workforce Skills Qualifications course was doubled from $100 to $200, as part of enhancements to the Training Incentives Scheme.

About 230 officers make use of the scheme annually, but Mr Teo expects the higher incentive will lift that number.

A training road map was also rolled out recently to help officers identify programmes and areas they are strong in so they can prepare themselves for better-paying jobs.

On top of that, the Public Service Division is working with unions on a pilot study of the skills and training lower-wage officers will need in the future.

Madam Koh Y.W., an operations support officer at the Environment and Water Resources Ministry, said the three raises over the past two years helped pay for household expenses and support one of her sons, who works odd jobs.

Madam Koh, 60, now hopes to take English classes to improve her performance at work.

Mr Teo, who was speaking at the Committee of Supply debate on the Prime Minister's Office, also underlined the importance of values and culture in maintaining the integrity of public servants, even as he reiterated the Government's zero-tolerance approach to those who try to bend the rules.

He was responding to Mr Seng Han Thong (Ang Mo Kio GRC), who spoke of the need to strengthen public trust in the service in the wake of several corruption scandals involving public officers.

Mr Teo said that besides introducing rules last year that require officers to declare casino visits, the service has prepared an easy-to-digest handbook on the code of conduct for all public servants, which could be a "very dry document".

The Ministry of Finance issued a government procurement code of ethics and professional conduct standards in January that set out the values and behaviour expected of procurement officers.

MINISTRY OF FOREIGN AFFAIRS

Lessons from Ukraine crisis
Country size, risk of becoming pawn highlight Singapore's vulnerability
By Goh Chin Lian, The Straits Times, 6 Mar 2014

THE crisis in Ukraine holds four lessons for a small city-state like Singapore, Foreign Minister K. Shanmugam said yesterday.

Size matters in international relations, and a smaller country can become a pawn when squeezed between two big powers or blocs.

Treaties to safeguard a nation's security are meaningful only if they are enforceable, and finally, the United Nations Security Council cannot always act decisively to protect small countries.

Mr Shanmugam made these points to highlight Singapore's vulnerability in the rough and tumble of international politics, during the debate on his ministry's budget.

He warned: "It is a harsh world, with rules which are often ignored by many countries, including the major powers. Success is not preordained for any country, let alone a small city-state. We ignore that at our peril."

The minister focused the opening of his speech - traditionally to give his ministry's update on Singapore's foreign relations - on the international crisis sparked by the Feb 22 ousting of elected Ukrainian president Viktor Yanukovych, followed by Russia seizing control of Ukraine's Crimea peninsula.

Mr Shanmugam said the crisis in Ukraine could affect the global economy, and hence, Singapore's.

Other countries are also watching the possible patterns of behaviour in the stand-off between a big country and a small one.

He cited the Crimean War over 150 years ago to show that Russia had always deemed its interests in Crimea as vital. Its actions against the Ottoman Empire then led to the war, which it lost.

While the parties' current considerations and plans are not known, Ukraine and its people would clearly have to face the consequences, he said.

He outlined Singapore's stance: It strongly objected to any unprovoked invasion of a sovereign country under any pretext or excuse. Russian troops should not be in Ukraine in breach of international law. The sovereignty and territorial integrity of Ukraine, and international law, must be respected, with no qualifications.

This stand was in line with Singapore's emphasis that all countries, big or small, must observe international law, he said.

It has consistently opposed invasions, such as in Timor Leste and Cambodia, even when bigger powers like Indonesia and the former Soviet Union were unhappy about its stance, he added.

On the limits of a treaty for protection, he noted that Russia had signed an agreement in 1994 with the United States and Britain not to threaten or use force against Ukraine's territorial integrity or political independence, or exercise economic coercion.

But, he noted, "if Ukraine cannot defend the treaty, and has no partners which will come to its aid - and I mean with deeds, and not just words - then the treaty by itself will not help Ukraine".

Also, a small country which cannot protect itself puts its sovereignty and its people at risk, he said.

He noted that Russia is vastly bigger than Ukraine, and its armed forces much more powerful. Russia is also a nuclear power, while Ukraine gave up its nuclear weapons in the 1994 treaty.

Such lessons are why he could not agree with Nominated MP Laurence Lien's call on Tuesday for Singapore to have a more positive narrative grounded in optimism.

At least in foreign policy, "that would require one to ignore the facts and stop being realistic and honest with the people of Singapore", he said.

TOUGH ENVIRONMENT

It is a harsh world, with rules which are often ignored by many countries, including the major powers. Success is not preordained for any country, let alone a small city-state.

We ignore that at our peril.

- Foreign Minister K. Shanmugam

Haze watch system 'delayed by others'
By Goh Chin Lian, The Straits Times, 6 Mar 2014

ASEAN countries have been unable to implement the regional grouping's haze monitoring system because other parties have yet to agree to do so.

Asean's credibility is thus at stake, said Foreign Affairs Minister K. Shanmugam, as he accounted for the less-than-rapid progress on arresting the annual air pollution plaguing the region.

He was taking MPs' questions on Singapore's ties with Indonesia and Malaysia, when he also commented on Malaysian media reports that Johor wished to review the price of raw water sold to Singapore.

On the haze, the minister said that the Asean Sub-Regional Haze Monitoring System, which the 10 Asean countries had agreed to last October, was "ready". But its implementation was stalled by the lack of agreement of "other parties", which he did not name.

The system uses high-resolution satellite images with land use and concession maps to pinpoint culprits which burn land illegally. It was to be implemented in Singapore, Malaysia, Indonesia, Brunei and Thailand.

But Mr Shanmugam welcomed a media report on Tuesday saying that the majority of an Indonesian Parliamentary Commission supported in principle the Asean Agreement on Transboundary Haze Pollution.

Indonesia is the only Asean country that has yet to ratify the decade-old regional haze treaty.

"Thus, once Indonesia agrees, the treaty can come into force," he said.

Singapore is also waiting for final approval from Jakarta before cooperation on the haze between Singapore and Indonesia's Jambi province can be resumed, he said.

Singapore had given it technical help such as setting up air and weather monitoring stations. The cooperation was "reasonably successful" until the memorandum of understanding lapsed in 2009.

Singapore has suggested to Indonesia to renew the cooperation, and officials have met several times. Jambi is also keen for the cooperation to continue.

On water prices, Mr Shanmugam said Singapore's position was "clear, consistent and unambiguous". It has been articulated several times in the House, including on Jan 25, 2003, by then Foreign Affairs Minister S. Jayakumar, and formally to the Malaysian government on several occasions, he said.

Singapore's position is there is an existing 1962 Water Agreement, which is in turn guaranteed by the Separation Agreement.

"Both agreements are international treaties which are vital to us, our sovereignty and our security. The terms of that agreement cannot be changed unilaterally," he said.

Also, under the terms of the 1962 Water Agreement, Malaysia has lost the right to review the price of water, the minister said.

He added: "What we have set out is the legal position under international law. How good is it? It is good as long as both countries observe international law."

Domestic crisis can also impact security
By Tham Yuen-c, The Straits Times, 6 Mar 2014

EVEN as MPs beavered away for the third day scrutinising Singapore's Budget 2014, a crisis roiling some 8,600km away grabbed the attention of the House yesterday.

Foreign Minister K. Shanmugam drew lessons for Singapore from the Russian incursion of Ukraine at the past weekend.

In measured tones, the minister said that, in essence, the situation was a stand-off between a big country and a small country, and it showed all too keenly that size does matter in international relations.

The lessons that Singapore can learn: A small country caught between two competing bigger powers or blocs can become a pawn that is sacrificed, and that the United Nations Security Council cannot always act decisively to protect it. Even if peace treaties have been signed, they are meaningful only if a nation has the ability to enforce them.

But even before pro-Russian forces took over government buildings in Ukraine's Crimea peninsula, trouble had already been brewing.

For more than three months, Ukraine had been plagued by anti-government protests in central Kiev. Protesters took to the streets in November after President Viktor Yanukovych announced the country would abandon a far-reaching trade deal with the European Union in favour of stronger ties with Moscow.

What started as peaceful demonstrations in Kiev's Independence Square, though, soon escalated into an all-out political upheaval.

In three months, the country's prime minister resigned, its president escaped and its government collapsed.

During this time, the Ukrainians of Russian ethnicity, many of whom reside in Crimea, had generally supported the pro-Russia camp. In fact, ethnic Russians make up 58 per cent of the population in Crimea, compared to 24 per cent Ukrainians and 12 per cent Tatars.

If the situation in Ukraine can offer yet more lessons for Singapore, it is that domestic crisis and ethnic strife within a country's borders can also affect its security.

Russia, when it finally sent troops to Crimea, had reasoned that it was acting only to protect the human rights of the ethnic Russians in Ukraine.

Singapore must never allow another country to give a similar excuse. On that score, it is a work cut out for all, not just the state.

MINISTRY OF LAW

Govt considering cap on loans from moneylenders
Move in response to calls by MPs for more measures to regulate sector
By Selina Lum, The Straits Times, 6 Mar 2014

A CAP may be imposed to limit the total amount of unsecured loans an individual can take out with licensed moneylenders, it was announced yesterday.

The measure would differ markedly from the existing rule, which caps only how much a person can borrow from individual moneylenders.

Senior Minister of State for Law Indranee Rajah told Parliament that the Government is considering the move in response to calls by MPs for more measures to regulate moneylending institutions.

Mr Zainal Sapari (Pasir Ris-Punggol GRC) cited the case of a security guard who took loans from 19 moneylenders.

She ended up having to repay $2,240 five weeks after taking out one loan of $1,600, which worked out to a "whopping" interest of 40 per cent.

Mr Zainal said every late payment incurred a charge of $800, with late payment interest a further 40 per cent per week.

He added that he has seen receipts where the effective interest rate amounted to as much as 159,000 per cent per annum.

Mr Zainal called for several measures, including a yearly cap on overall interest and other fees as well as setting up a centralised database that tracks a borrower's loans across all moneylenders.

Mr Lim Biow Chuan (Mountbatten) also urged the Ministry of Law to restrict the number of moneylenders in an HDB estate "so that borrowers would not be lured into thinking that credit is easily available just at their doorstep".

Ms Rajah, who was speaking at the Law Ministry Committee of Supply debate, stressed that the right balance had to be struck between allowing borrowers reasonable access to credit and providing adequate protection.

If the cap is too high, borrowers would be overcharged by moneylenders, but one set too low would mean that it would not make commercial sense for moneylenders to extend loans to those with a high credit risk. This would force borrowers to turn to loan sharks, she noted.

Ms Rajah said the ministry is consulting key industry stakeholders, including counselling organisations, in its review of the moneylending regime. Measures will be announced in due course.

The ministry is also studying setting limits on the number of moneylenders in a housing estate, but Ms Rajah noted that geographical restrictions may have limited effectiveness in a small country like Singapore.

Law Minister K. Shanmugam weighed in on the issue, underscoring the point that desperate people will do whatever is necessary to borrow money, and artificial curbs can drive the problem underground.

"So, it is a balance. But we have to try and protect the borrowers. And we will," said Mr Shanmugam.

Law Ministry to refine discharge of bankrupts
By Tham Yuen-c, The Straits Times, 6 Mar 2014

THE timeframe for individuals to be discharged from bankruptcy will be refined as part of a Law Ministry's review of Singapore's bankruptcy laws.

Currently, those who owe less than $500,000 can be discharged from bankruptcy after three years, if the Official Assignee decides to issue a certificate of discharge.

But with the impending changes, differentiated timeframes will be put in place where justifiable, Law Minister K. Shanmugam said yesterday during the debate on his ministry's budget.

These timeframes will be determined by various factors, such as whether the bankrupt pays back a targeted amount, his creditors object to his discharge and extenuating circumstances such as a debilitating illness had prevented him from paying his debt. The changes, said Mr Shanmugam, will make the bankruptcy regime more rehabilitative.

But to prevent the moral hazard of people borrowing haphazardly, the names of those discharged will likely be listed in a national register for a fixed period, he said.

For those who are uncooperative, their names will remain on the list indefinitely.

For creditors, knowing that bankrupts can be discharged after a fixed period will also encourage prudence when lending and assessing risk, the minister added.

Although the laws have yet to be changed, Mr Shanmugam said the Insolvency and Public Trustee's Office has been reviewing long-standing cases of bankruptcy to see if they can be discharged.

These include cases where bankruptcy orders were made more than 10 years ago.

Many of the bankrupts have not been discharged because they have made little payment into their bankruptcy estates or did not cooperate with the authorities on the administration of their bankruptcy affairs.

Mr Shanmugam urged these bankrupts to make a debt settlement proposal to their creditors if they want to be discharged.

Meanwhile, the Insolvency Law Review Committee has recommended that bankruptcy and corporate insolvency laws be unified into a single piece of legislation.

The Law Ministry is now considering the public feedback it received during a public consultation that ended in December.

S'pore paving way to be dispute resolution centre
By Selina Lum, The Straits Times, 6 Mar 2014

THE Singapore International Mediation Centre, which aims to provide world-class commercial mediation services, is expected to be launched later this year, Law Minister K. Shanmugam said yesterday.

He also announced that the Law Ministry is preparing various changes to the law, including the Constitution, to pave the way for the setting up of the Singapore International Commercial Court (SICC).

The SICC aims to handle disputes with little or no connection to Singapore.

Public consultations will soon be held on the legislative changes, he said.

Mr Shanmugam also told the House that the ministry is studying the feasibility of Singapore signing the Hague Convention on Choice of Court Agreements.

The convention aims to assure contracting parties that, when they agree on a court to hear a business dispute, that agreement and the resulting judgment will be recognised and enforced internationally.

The establishment of the SICC and the SIMC was announced by the Law Ministry last December.

Yesterday, Senior Counsel Alvin Yeo (Chua Chu Kang GRC) lauded the setting up of the SICC as a bold move to position Singapore as the Asian capital for cross-border cases that need to be settled in court.

But he highlighted two challenges: First, the need to ensure SICC judgments can be enforced overseas and, second, to dispel the notion that the SICC is a national court.

Mr Shanmugam said the SICC will be constituted as a division of the High Court of Singapore and its judgments will be treated, and enforced, as High Court judgments.

He said his ministry is preparing legislative changes to set it up. The legislations involved include the Constitution, the Supreme Court of Judicature Act, the Evidence Act and the Legal Profession Act.

Its judgments may be enforced by registration in countries listed in the Reciprocal Enforcement of Commonwealth Judgments Act and the Reciprocal Enforcement of Foreign Judgments Act, he added.

The Law Ministry is exploring ways to strengthen the enforceability of the court's judgments. It is also studying a suggestion of the SICC committee that Singapore consider signing the Hague Convention on Choice of Court Agreements.

Once the European Union signs the convention, the SICC judgments can be better enforced if Singapore is also a party to it, Mr Shanmugam said.

NEW BILL
Better protection for firms dealing in geography-linked products
By Selina Lum, The Straits Times, 6 Mar 2014

LOCALLY based businesses exporting or importing goods identified by geographical origin, such as Bordeaux wine, can look forward to better legal protection for their products.

A Geographical Indications (GI) Bill seeking to set up a registry and provide better protection for owners of such GI goods was tabled in Parliament yesterday.

A GI is a sign, usually the name of a town or a region, that identifies a product as coming from a particular location.

It is used to signify the quality of goods that are intrinsically linked to a particular place.

Well-known examples include Bordeaux for wine, Darjeeling for tea and Tuscany for olive oil.

Under the existing law, no registration is required, and all GI goods enjoy a basic level of protection.

This prevents any misleading use of the GI which suggests that a product originates from a place other than the true place of origin.

The majority of products labelled with a GI term in the local market are imported from the European Union.

Under the Bill, a registration process - similar to the trademark system - will be set up for businesses to apply to register GIs for wines and spirits, and certain categories of agricultural products and foodstuff.

GI owners will be able to ask Singapore Customs to detain suspected infringing goods that are to be imported or exported out of the country.

Consumers will also be assured that a product bearing a registered GI name truly has the characteristics that it is known for, the Ministry of Law said.