Debate on Annual Budget Statement

Mdm Speaker, I rise in support of the Budget. There are many things that I like about this year's Budget. I like the fact that the Government is trying to prepare Singapore for the future economy and to sustain employment for the seniors. I like the budgetary provisions to help all of us build an inclusive society and to strengthen our economy. The CFE's recommendations are important and relevant proposals. If well executed, they will help Singaporeans prepare ourselves for the future economy.

I also believe that the young couples hoping to start a family would appreciate the generous increase in housing grants. It is a clear indication that the Government cares for our younger generation. I hope that younger Singaporeans hoping to start a new family will consider the option of buying a resale flat with the increased housing grant. I also want to say that I appreciate the increase in GST Voucher, U-save rebates, the cash special payment and the increase in S&CC rebates. All these would provide much needed relief for the average Singaporeans who face a higher cost of living expenses.

The additional support of up to $100 million for the VWOs, $6 million for the self-help groups and the support for people with disabilities and mental health conditions send a very strong signal that this budget is to enable all of us as Singaporeans to move forward together.

However, Madam, allow me to express the concerns of many smaller businesses which are facing serious struggles to survive in an unpredictable economy and who are also facing declining sales. The reality is that not every business is not doing well over the past few years. Some of these businessmen were hoping that Budget 2017 would provide them with some form of financial relief or reduced costs.

However, it seems that their hopes may not materialise. The feedback which I have received is that many of the budgetary measures in this year's Budget would only help a specific segment of the business community. The focus of the Government is to strengthen capabilities for the future. Thus, for some of the smaller businesses, this year's Budget may not be a major event. It has little positive impact for them. And instead, some of the measures taken to protect the environment and the water price increases may hurt them more.

I do not believe that businesses are hoping for a handout from the Government. What they are appealing for is a business climate which is less costly and friendlier to businesses. As it stands, property related costs is still very high. I urge the Government to consider some additional measures, for example, a rental rebate for all tenancies where JTC or HDB is the landlord, or a property tax relief which landlords of private properties must pass on to their tenants.

Although there is a SME working capital loan, the feedback is that not many SMEs are aware of the loan or how it works. There is also the perception that it is not easy to get such loans. How can the Government do more to reach out to the many SMEs who are looking for a lifeline for their businesses? Can the Government elaborate on their plans to conduct more outreach to the SME on all the available help? Would the Government also consider a one year stay on all foreign workers' levy (FWL) hike until the economic situation has stabilised?

Next, allow me to express my concern for the middle income Singaporeans. I have a large number of such middle income residents in my constituency. Many of them are PMETs who are living in condos or five-room flats. I also have a number of retirees living in private homes which they had bought many years ago after saving for many years.

For this category of residents, they feel that they have been left out in this Budget. They feel penalised simply because they were trying their best to live their aspirations in the past. For the retirees, they have no income and are relying on their savings, their pension or on their children to provide for them. For the PMETs, their income is unlikely to rise due to wage freeze in many companies.

Yet, these retirees and the middle income PMETs, they will face increases in water pricing; increases in car park charges and increases in S&CC charges. Some of the PMETs may also face job insecurity.

This group will not benefit from many of the support measures of Budget 2017. If they stay in HDB flats, they may receive a smaller S&CC rebate. If they stay in private properties, they will not benefit from the GST U-Save vouchers, the S&CC rebate or the GST cash special payment. And the retirees also do not benefit from the tax rebate.

So, I urge the Government to consider ways in which we can allow the retirees and middle income Singaporeans to share or enjoy the growth of the country and to move forward together as a nation. We should find other more equitable ways to share and re-distribute the country's wealth rather than rely on the home type as a proxy for measurement of their wealth.

Let us do more for the middle income so that they too can find the theme for this year's Budget − "Moving forward Together" − a meaningful theme for them as well.

Finally, I also want to urge the Minister to consider a stay on water price increases for this year. There is never a good time to raise prices for utilities. However, increasing the price of water in times of economic uncertainty is definitely not a good time. Let me stress that I totally agree with the Finance Minister that water is critical to our survival and we need to take adequate measures to conserve water. But sadly, the 30% increase in water prices seems to have distracted from the main intent of the Budget. And due to rumour-mongering, many people seem to have been so caught up and so concerned over this 30% water price increase such that they seem to have forgotten or ignored the various other measures that the Government has introduced to help Singaporeans mitigate the price increase.

Thus, it seems to have distracted many of us from the much important message that all Singaporeans need to focus on, which is how to plan our future, how to develop stronger capabilities in a fast changing world. That is the main message of the Budget but seemingly, when I go for feedback sessions, everybody's first question is about the water price increase. And I felt that it is really an unnecessary distraction for all of us.

If it is really not possible to defer the water price increase, then I hope that the Government would consider measures to ensure that businessmen do not profiteer from this water price increase. And this may be similar to the Committee Against Profiteering (CAP) which was set up some years ago, when GST was raised.

Mdm Speaker, I support the Budget.

Mdm Speaker, in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] Mdm Speaker, in Mandarin.

I am very concerned with some of the measures announced in this year's Budget. First of all, the increase of water tariffs by 30% and the imposition of water consumption tax.

In this year's Budget, the announcement by Finance Minister to raise water tariffs by 30% left many Singaporeans anxious. Not only was the increase of water tariffs sudden, the scale of increase is also higher than expected. At the same time, the Government has also decided to impose a water consumption tax, which will increase the burden of the people during this water tariff hike.

Although the Government has said that it will be giving rebates to some families through GST vouchers U-Save rebates, most Singaporeans and industrial/commercial users will be affected, as they do not fulfil the criteria to enjoy rebates or will be receiving only token rebates. Companies and industries that uses a lot of water, such as the F&B industries, will be affected the most. I am concerned that this large increase in water prices will have adverse knock-on effects, leading to price hikes of other daily necessities and increasing the cost of living, which will in turn, increase the burden of the people. How can the Government ensure that the rise in water tariffs will not lead to price increases at hawker centres, coffee shops and other products?

Many industrial and commercial activities require the use of water. This rise in water tariffs mean that operating costs and living expenses will increase. With uncertainties in our economic prospects and growth, the hike in water tariffs will make the situation worse. So, I would like to know if the Government will offer assistance to industries that will be adversely affected by the increase in water tariffs, especially those that require a lot of water.

What puzzles me, is that the Finance Minister has mentioned in his Budget Statement, that water is essential to our survival, so the pricing of water must reflect the higher production cost of desalinated water and NEWater. My question is, we have had desalination and NEWater plants for some time now. In recent years, water reservoirs, desalination plant and water supply from Malaysia and other water issues have been better resolved. We already have more choices when it comes to water supply. Then, why the sudden mention of higher cost of water? Why was this not mentioned in recent years?

Second, I am also very concerned about the increase in diesel tax by 10 cents per litre, which applies to car diesel, industrial diesel and bio-diesel. The reasons given for the increase in diesel tax are firstly, diesel is a source of pollution; and secondly, to encourage users to reduce consumption by imposing diesel taxes. I can understand and agree with the problem of pollution, but I do question the timing and scale of increasing diesel tax. I believe that it is not the right time to increase diesel tax under the current difficult economic situation.

The tax increase will cause diesel prices to go up, and this will directly affect transport costs, such as those of taxis and buses, as well as school buses and buses ferrying workers. Can the Government assure the people that our transport cost will not increase? Can the short-term road tax rebates ensure that transport costs will not increase?

The Finance Minister has also announced a cut in Special Tax for diesel cars. For taxis, even if taxi companies were to return the savings of $850 from the reduced special diesel tax to taxi drivers, the taxi drivers would still have to come up with cash to make up for the increase in diesel prices. This is calculated based on the distance of 250 km to 500 km that a taxi needs to travel every day, assuming they will need to consume 25 litres to 50 litres of diesel a day.

Diesel is the general fuel for delivery trucks, vans, lorries and other heavy vehicles. With the 10-cent increase for every litre, transport and delivery costs will also increase, and this will also affect the operating costs of businesses that depend directly or indirectly on transport services.

Mdm Speaker, after the budget was announced on the 20th of February, the general consensus among businesses is that SMEs and Singapore-based companies are not getting sufficient help from this Budget amidst the difficult and uncertain economic climate. The increase of diesel tax at this point will only add on to their operating cost.

In view of the economic uncertainties and anxieties over job prospects, it is regrettable that the measures announced by the Government in this budget have not given the people a stronger sense of security. Instead, they have increased the cost of living of the people.

[Mr Deputy Speaker (Mr Lim Biow Chuan) in the Chair]

Economically, the VUCA environment that businesses are operating in has led to the shortening of business cycles and the increasing occurrence of creative destruction. The biggest causalities of these changes are jobs. Employees in every sector and industry are at risk of experiencing structural unemployment that resulted from skill obsolesce. The danger of being replaced by automations or algorithms is real. In view of these economic headwinds and strategic challenges, we must continue to safeguard the employment of Singaporeans by creating good jobs and by helping our economy transit into the next phase.

While we are living in the VUCA environment, Mr Deputy Speaker, Sir, earlier on our colleague Assoc Prof Daniel Goh mentioned this image of us living in darkness and in fear. I think, perhaps, that may be exaggerating the image somewhat. I do not believe that we are living in a wait-and-see mode, but rather using the analogy of military exercises, it is more of a mode that we are anticipating what will happen, we are preparing for what could come up next. This is something that I feel very strongly about.

It is easy to take a big broad brush and try to solve a situation by bombarding with artillery, for example. What you end up with is you have very much collateral destruction. I think the Prime Minister is aware of the impact of too much artillery in a situation.

I prefer to see us not so much as Marines but a Seal Team Six, Mr Deputy Speaker, Sir, whereby we work fast, we work sharp, we are small, we are nimble, we are strategic. And we are far from a people cowering in fear and darkness. I believe that we use this time to focus, we use this time to regroup, we plan our strategy and we move forward.

So, this year's Budget is really a strategic one that aims to help Singapore grow despite this global uncertainty that we are living in. It also reflects a paradigmatic change in how the Government views our economy. The shift from the traditional intensive-driven Budget to the current strategies-driven one demonstrates the Government's appreciation that Singapore's economy is, indeed, becoming increasingly more complex and intertwined with the rest of the world. We need to take a mid- to long-term view of our economy and implement a Budget that will continue to meet our long-term objectives.

Yes, there are several "pain points" in this year's Budget where the prices of some goods and services have to be adjusted to reflect the cost of providing those services or to increase social awareness about environmental sustainability. But these "pain points", however, are also mitigated by the various grants and subsidies that that Government will implement. These policies will ensure that those in our society who need an extra helping hand should not be in a significantly worse off position after the adjustments. I would like to elaborate on some initiatives in the Budget that I think will help to continue to steer Singapore on this right path to keep us going as that "nimble" Seal Team Six.

First of all, helping SMEs. We all agree that SMEs form the bulk of the number of businesses in our economy. Despite their significant contributions to our economy, however, our SMEs do face serious challenges moving forward.

First, many continue to lack in their digital capabilities and the ability to tap on newer technologies to improve productivity and service delivery. Second, they lack the resources and expertise to truly internationalise. Finally, there are few, if any, holistic industry-wide initiatives to help them transit their businesses to the new economy. I am glad that the Government is cognisant of these challenges and the Budget has targeted programmes to help our SMEs overcome them.

It is crucial that we help our SMEs scale up their digital capabilities in the era of e-commerce and "click 'n' mortar" businesses. While it is unlikely that digital platforms and online business models will completely supplant traditional modes of business, our SMEs cannot afford to assume that they can continue to operate the way that they have been operating. So, the implementation of the Industry Digital Plans and the setting up of the SME Technology Hub will provide our SMEs with the much needed baseline assistance to digitalise their businesses, and I am eager to hear more details from MCI during the COS debate.

We should, however, go beyond this baseline assistance. The crux to a successful digital transformation is to have a talent pool that businesses can tap into. This is especially important for SMEs since SMEs are traditionally not the first choice of employment for many of our graduates. While the Government can help to nurture a pool of digital talent, I believe SMEs themselves need to ensure that they can provide a good career path for these talents.

The career paths in SMEs can be increased by potentially increasing their level of internationalisation. An SME with regional or global presence is definitely in a better position to offer attractive careers to digital talents and also other professionals, as the scope and nature of their operations will offer the requisite job challenge and development opportunities. The International Partnership Fund proposed in the Budget will help catalyse the regionalisation of our SMEs. The devil, of course, is in the details of implementation.

The Government is not in the business of picking winners and losers, so guidelines and assessment processes must be put in place to ensure that the funds that are set aside are used to support SMEs that have the best potential to internationalise. The assessment criteria and methods must be appropriate and transparent, and support must be given to high-potential SMEs regardless of their size.

Mr Deputy Speaker, Sir, I would like to speak a little on supporting families in housing. The Government has, in recent years, implemented a number of different measures to help Singaporeans own their own homes. I am glad that this year's Budget has continued on this trajectory by providing greater financial support to Singaporeans who wish to purchase a flat in the resale market. This group of Singaporeans are typically those who wish to start their family and also want to live near their parents for the supportive network.

The current CPF housing grants for both 4- and 5-room flats are similar at $30,000. The new grant structure, however, would provide those who purchase a 4-room flat a higher grant than those who purchase a 5-room flat. While I appreciate the rationale that the Government would not want to subsidise those who purchase bigger flats too much, as they are likely be from a higher income group, I think we cannot ignore that some consumers might choose to purchase a 4-room flat due to the fact that it is more expensive than a 5-room flat because of its location, age and other factors. Conversely, some consumers with a lower income might have to purchase a 5-room flat, as opposed to a more expensive 4-room flat in other locations, due to their family requirements as well.

In view of these idiosyncrasies, would the Government consider providing a percentage-grant based on the purchase price of the flat? But this amount would be subject to an absolute ceiling amount, and whichever amount is then higher would be given to the qualifying purchaser as the housing grant.

On to household measures, Mr Deputy Speaker. The recent Budget saw increases in the prices of water and diesel, and soon, Town Councils will be increasing their S&CC rates to meet rising costs, especially with regard to servicing and eventually replacing lifts.

Singaporeans are concerned that that is too many bullets to bite at a go. Although Singapore has experienced modest GDP growth over the past few years with real median wage growing by 2.6% per annum, from 2009 to 2016, the impact of these growth figures has not be felt equally across all sectors of the economy and strata of the society. Indeed, some segments of the population are concerned that the recent increases would pose additional constraints on their finances, and these concerns are somewhat justified.

I am thus heartened to know that the Budget has provided various avenues of support through the form of GST Vouchers, S&CC rebates, and personal income tax rebates. As Singapore's economy enters a period of low growth and more employees are at risk of losing their job due to structural changes in the economy, I hope that the Government will review its existing assistance schemes from time to time so that it remains responsive to the needs of the people.

Mr Deputy Speaker, Sir, this year's Budget is unique in its approach in laying the necessary foundations to support Singapore's growth for the next five to 10 years. Rather than having a broad-based Budget that hopes to raise all boats by lifting the overall level of the tide, the Budget is measured and its initiatives are targeted at giving specific help to those that need help the most.

More importantly, it reflects the Singapore ethos of fiscal prudence and the belief that the future of Singapore depends on the strong partnership between Government, business and people. And I stress again, we are people that are not cowering in the dark or in the cold and the wet, we are people that are getting ready and preparing ourselves, whatever may come next. It is not so much wait and see but being prepared.

I believe that implemented well, this year's Budget, together with the recommendations of the Committee on the Future Economy, will form a roadmap that will help us to navigate the global uncertainty and possible economic headwinds that Singapore will face. With that, Mr Deputy Speaker, Sir, I conclude my speech in support of the Budget.

Mr Deputy Speaker, I have three points to make in my speech.

First, in connection with the Government's measures to support businesses, I wish to highlight the cash flow problems faced by some SMEs arising from big companies holding back on prompt settlement of their invoices.

From feedback received, some big companies leverage on their economic power against SMEs by delaying payment on invoices for goods and services. If the shoe was on the other foot, these big companies may not hesitate to impose interest for late payment in addition to the principal amounts.

Micro SMEs are in particular vulnerable because, on one hand, they do not want to upset the commercial relationship with the big companies. Yet, on the other hand, especially in a period of slow economic growth, the delay in payment may tip the SMEs to cash flow difficulties, higher litigation risk and even insolvency.

To ameliorate the effect on these SMEs, I have two suggestions.

First, I wonder if the Government could consider extending the scope of the SME Working Capital Loan, under which the Government assumes the risk for loan defaults, to allow SMEs to collateralise their receivables owed by big companies for loans at low interest rates. This would give SMEs more flexibility in managing their cash flow. Whilst factoring arrangements may be available to SMEs, this comes at a cost and means a further erosion of their profit margin.

Second, I suggest that the framework in the BCA Security of Payment Act for the building and construction industry, which allows the employer to make payments directly to a subcontractor when the main contractor fails to do so, be extended to other industries where such multi-tiered relationships also exist. In this way, SMEs may, in appropriate situations, utilise the framework to obtain payment on overdue invoices.

The next point I wish to make concerns the Wage Credit Scheme. Under this Scheme, the Government co-funds 40% of wage increases for Singaporean employees earning gross monthly salaries of $4,000, which is roughly about the 50th percentile of wages in Singapore, and below. This Scheme is extended by two years under the Government's plan to continue supporting businesses.

As may be recalled, the Wage Credit Scheme was introduced in Budget 2013. The purpose behind the Scheme is to help businesses cope with rising wage costs in a tight labour market. The idea is to encourage businesses to invest in and make productivity gains. These gains are to be shared with the employees.

In light of the Government's decision to extend the Scheme, may I please ask if the assessment in this economic climate is still that the businesses are continuing to face a tight labour market vis-Ã-vis employees at the 50th percentile of wages and below?

Also, I would be grateful if the Minister could please let us know whether the effort to improve productivity amongst the businesses participating in the Scheme is paying off. I do appreciate it may be difficult to get details or data on a specific industry basis but, perhaps, at least at the general level.

Without the linkage to productivity and sharing of the gains with the employees, we run the danger of providing just a wage subsidy which, given the second extension of this Scheme, may become a crutch for the Government. This is something we should avoid.

Finally, I refer to the Government's plan to implement a carbon tax at a rate of between $10 and $20 per tonne of greenhouse gas emissions from 2019 on upstream emitters. I note that the industry consultation on the proposed carbon tax will take place from March 2017 with the final carbon tax and exact implementation schedule decided thereafter.

In principle, I support the premise behind the imposition of a carbon tax; that Singapore should do her part to address climate change, to create a sustainable environmental future for our children and generations after.

Indicating a carbon tax range, as opposed to a specific rate, however, may create some uncertainty as companies would not be in a position to properly make business decisions in anticipation of the precise carbon tax rate which can be anywhere between 10% and 20% per year. This may have knock-on effects, for example, companies prematurely passing costs to consumers in advance of the implementation of the tax, something we must certainly guard against, or not provisioning or investing sufficiently to mitigate the effects of the carbon tax on their businesses.

As a comparison, with respect to Goods and Services Tax (GST), the Government issued a White Paper on GST on 9 February 1993, in which the 3% rate was stated. Thereafter, the GST Bill was introduced later in the same month with the rate of 3% also stipulated in the Bill itself. Further, during the debate of the GST Bill in Parliament the following month, the Government gave an undertaking that the GST rate of 3% would not be changed for at least five years.

For the above reasons, I respectfully suggest that the consultations be speeded up and a decision be made as soon as practicable on the precise carbon tax rate, the implementation schedule and the measures to ease the transition for affected companies. With the uncertainty removed, the companies will be able to focus on the improvements they need to make to reduce greenhouse gas emissions.

Notwithstanding the points that I have made, I support the Budget. In my view, the hon Minister for Finance has, in his speech, properly identified the main economic challenges that we face as a country and clearly outlined a rigorous plan to strengthen our economy and allow us, as a nation, to continue to move forward together.

In this regard, I respectfully disagree with the hon Non-Constituency Member of Parliament Assoc Prof Goh's categorisation of this Budget as a minimalist Budget. A cursory review of these Budget details will reveal otherwise. Just for an example, $600 million is being set aside for the Wage Credit Scheme to allow companies to use this Scheme to pay wage rises for Singaporeans. In particular, the serious investment in relation to helping Singaporeans deepen their skills, companies to deepen their partnerships, and to basically look out for opportunities in the digitalisation space.

So, this is far from being a static Budget. It is a Budget that would allow us to reposition ourselves and focus on the opportunities for the future.

Sir, thank you for allowing me to join in the debate. In the week of the CFE report and also the Budget Statement delivered by the Finance Minister last week, there has been much discussion on the economy in the lead-up to this particular debate.

There are three central questions that we need to think about. The first is where the opportunities are; the second, how do we position ourselves to seize them, and the third, what do we need to do to deal with some of the short-term challenges. These involve important policy decisions and trade-offs. These are questions that several Members have echoed today. I would like to share my views on this.

First on the economy as a whole. Last year our economy grew at 2%, with growth picking up in the final quarter. Between 2011 and 2016, we averaged 3.1% which is comparable to other advanced and regional economies, as Members can see from the chart. The Committee on the Future Economy (CFE) expects annual growth of 2% to 3% over the next decade. This may be less than what we have been accustomed to in the past, but it is totally consistent with our stage of economic development, our demographic profile. So, we need to ensure that within the context of where we are today, we continue to emphasise productivity and innovation as part of the basis for our continued growth. Because even at these levels of economic growth, which are not insignificant by international comparisons, it will continue to allow us to create opportunities for our businesses and jobs for our people.

This point is further enhanced when we consider the context that we are in, that is the region. We are in the heart of a region that is an important driver of global economic growth. ASEAN, China and India are bright spots, with the ASEAN-5 countries expected to grow at 4.9% this year, China at about 6.7% and India at about 6.6%. Their growth emanates not just from the key regions and main cities or metros that we are all quite familiar with but, in fact, they come from the next tier of cities and regions with which we might be less familiar. In China, from the Central and Western regions; in India, from secondary cities like Coimbatore, Pune and Jaipur; and in Indonesia, cities like Semarang and Medan offer interesting opportunities.

In fact, the recent data that the Singapore Tourism Board put out on visitor arrivals, which was strong last year, were actually significantly supported by the efforts that STB made in the secondary markets and regions with the consequential response from the markets. So, we need to go beyond traditional spaces and we need to deepen our knowledge and acquire a more nuanced understanding of these new markets.

In tandem with this growth in the region, we are seeing rapid urbanisation and the rise of the Asian middle class with greater disposable incomes and sophisticated demand in sectors like retail, lifestyle, F&B, education and healthcare. These opportunities play to our strengths, those that we have developed over the years.

One example I want to cite is in the area of infrastructure and urban solutions. McKinsey estimates that the demand for infrastructure in emerging Asian markets, particularly China, Southeast Asia and South Asia, will grow by about US$20 trillion between 2016 and 2030. China's Belt and Road initiative has heightened interest in regional infrastructure projects, whether it is road, rail, ports, airports. India's plan to build 100 smart cities needs adaptable and high quality urban solutions. Our infrastructure and urban solutions companies are generally held in very high regard and they can participate in these opportunities, in partnerships with their Chinese, Indian and Southeast Asian counterparts.

This is not just an opportunity for the big players in this space. In fact, it extends to SMEs like Memiontec and WaterTech Private Limited, who tapped into the demand for small-scale water and energy solutions in the region, and there are many of these that are emerging. This is one of the reasons why in this Budget, in particular, there was an effort to enhance the measures that we have already taken to support infrastructure. If Members would recall, when the ESC concluded its findings, this was about six, seven years ago, one of the initiatives was to set up the Clifford Capital which is just to finance many of our infrastructure projects. In this Budget, a key initiative is really the extension of our IFS Scheme to Non-Recourse Financing. I will elaborate on that but, essentially, it is aimed to help our smaller businesses who are in this space to go regional, to seek out new opportunities.

The other area I want to emphasise is the digital economy which also presents unprecedented opportunities. Think about it. The smallest company can now seek out customers in the furthest markets as long as there is digital access. What it means also is that through the digital platform, they can transact with their business partners, they can coordinate logistics and they can effect payment systems. This is literally transformative and it is transforming industries and offering new ways to overcome our constraints and seek out new opportunities.

That is why in the CFE, we have emphasised the importance of enabling our companies to harness digital technologies and platforms. Some companies have already made the move. I can just give Members one example from a somewhat traditional sector − HipVan. It is a company in the furniture business but they have inverted the traditional furniture business model by going online. Customers transact with them over the Internet and then they work through logistics and delivery, and this is a new model for this company, quite different from what we understand to be furniture businesses.

So, companies are already moving and similarly, we are seeing good collaborative initiatives from big players and others coming on board. For example, just today, Singtel, which is a co-founder of the 99% SME movement, announced a partnership with Lazada to set up an SME e-marketplace. That will help SMEs step into a wider online customer base.

I can go on and give Members many other examples, whether it is in advanced manufacturing and Internet of things, and so on. But my key point is this. There are significant opportunities available to us. Our challenge is ensuring that our companies, especially our SMEs, are geared up for the longer term, so that they can seize these opportunities. This is especially important if we are to sustain our competitiveness because others around us have also seen this and are also adapting. It is a race. But we think it is a race that we can compete in quite effectively. So, a key focus of the Government's economic efforts is, indeed, in how we bring about such transformation. Hence, the Industry Transformation Maps. They are the key modality with three broad areas.

First, to grow top-line and scale, through support for companies and internationalising and financing.

Second, to stay competitive by supporting capability development, both to innovate and to raise their productivity.

Third, to develop deep skills in our workers.

In all of these efforts, the primary focus and beneficiaries are our SMEs. I want to emphasise that. They are the primary focus and beneficiaries. And this is for good reasons.

Firstly, they are of a significant part of our economy. They account for about half of our GDP, two-thirds of employment. If you are really going to effect change and transformation in industry in the economy, the SMEs are key change agents. They have to accept the reality, embrace the change and be change agents.

Secondly, individually, SMEs often lack the scale to make the investments that are necessary to cope with the changes taking place and to benefit fully from the technologies that we are talking about.

Finally, we also believe that SMEs are a key engine of growth for the future in Singapore, and integral to the competitiveness of our economic clusters. As they scale, SMEs will create more opportunities and jobs for Singaporeans.

So, the Government is resolute in our commitment to help our SMEs make this transformation successfully. Large companies do not necessarily need this breadth and depth of support. In fact, it is the small companies that need them.

Let me outline five areas in which we are actually delivering this support.

Firstly, internationalisation. If you are a company taking the first steps towards internationalisation, you can tap on IE's Market Readiness Assistance and Global Company Partnership Scheme, and so on. It has about $40 million in grants. Essentially, the aim is to help our businesses go international. Some are taking tentative steps, others are a little bit more experienced. But they have to go into newer and more risky markets. In general, we are trying to help them to take that move forward. I want to stress here that the Government can be an enabler, but we cannot make the decision for the company. But once a company makes the decision ‒ the leadership and the people ‒ we can support them in the effort.

In this Budget specifically, there is a $600 million International Partnership Fund. It is a co-investment effort with firms as they expand overseas. In other words, beyond loans and financial assistance and grants, the Government is prepared to come in through equity as well. This is an important commitment on the part of the Government, and we are putting our money where our mouth is, quite literally.

Secondly, financing. The Government has a suite of loan programmes which will collectively catalyse $5 billion in loans up to 2020. I do not want to get into a laundry list, but it includes, for example, the SME Equipment and Factory Loan, which is for expansion overseas. So, if you are going overseas, you have done your market studies, you have decided you want to go, but there is capital expenditure (capex), this scheme helps you. You have got to make the move. The MAS has also recently reviewed regulations that will enhance the ability of finance companies to provide financing to SMEs.

I mentioned earlier the infrastructure sector. In this Budget, the specific announcement was on the Internationalisation Finance Scheme (IFS) for Non-Recourse Financing to help SMEs participate in these opportunities. This scheme is designed to encourage financial institutions to provide non-recourse loans to SMEs once projects move into the post-construction stage, so that SMEs can free up their balance sheets to take on new projects. The constraint today is that, if you are a small business going in for a $50 million or $100 million project in the region, you will have to tie up your resources either through personal guarantees or corporate guarantees, and it limits your ability to take on new projects. This scheme is targeted to help our businesses do more and do it in an effective way. Over the next five years, we expect to catalyse $600 million dollars in loans, which will probably correspond to about $1 billion in infrastructure projects. And I am talking here about the small businesses, not the big players.

Thirdly, on innovation. We want SMEs to create new products and services ‒ that is what they want to do as well ‒ to differentiate themselves in the market, but they are constrained by resources that are available. I think several Members talked about this earlier. So, we have a range of schemes. One is to help SMEs commercialise intellectual property through our network of Centres of Innovation, and a substantial amount of funding has been committed, about $100 million for this. And to help them build up their innovation capabilities, we also have the secondment of our public sector researchers through our SMEs. They go there, they help them come up with their R&D blueprint, and they also, in many cases, end up joining the SMEs, sometimes to the chagrin of the research centre's director. But, in general, we are supportive of this because it is an important productive flow of talent between the public and the private sectors.

In this Budget, there are two specific ideas which have been mooted and pushed out. One is A*STAR's Tech Access Initiative. Basically, it is to help SMEs access the more costly specialised equipment and to also get training and advice. In other words, this may be in our research institutes, and SMEs cannot afford to have it on their own, but they can go in there and use it under certain arrangements. The Headstart Programme, where A*STAR allows SMEs to enjoy royalty-free and exclusive IP licences for up to 18 months until recently. With this Budget, it has now gone up to 36 months.

The fourth point is on capability development. The SMEs can tap on this grant ‒ Capability Development Grant (CDG) ‒ for larger scale projects. So, if it is automation, there is the Automation Support Package, and I think Members are familiar with the scheme that was introduced last year. There is also the Innovation and Capability Voucher (ICV). Importantly, the point I want to stress is, we have what we call the Partnerships for Capability Transformation. This is where SMEs collaborate with big companies in order to develop new capabilities. This is key, because many of our SMEs are an integral part of a cluster. They work with the core company ‒ a big player ‒ international, local or foreign. And the SMEs' capabilities reinforce the competitiveness of the cluster as a whole and its sustainability in our environment.

Many Members have talked about the Go Digital Programme. I do not propose to elaborate on it other than to observe that this is, again, a key plank. Big companies do not need a Go Digital Programme. It is the SMEs that need it, and that is why we are doing it. In total, we have about $1.5 billion of grant support for such capability development of SMEs.

Finally, a word on skills. We are making significant investment in developing the skills of our people. Members are very familiar with this through SkillsFuture. The SMEs can tap on these, whether it is SkillsFuture initiatives like the SME Talent Programme, SkillsFuture Mentors Scheme, and the SkillsFuture Earn and Learn programme.

I have taken Members on a tour of the kind of things that we are doing with our companies. Sometimes, the criticism is "Oh, it is all too complicated and so on". It is not so much that there is too little, but there is too much and too variegated. Even on that score, our agencies have worked on how we can make Government support more accessible to SMEs. So, they have got the Business Grants Portal, SME Digital Technology Hub and the new IP Master Agreement.

But let me cut to the chase. If you are an SME, you have a need in these areas, go to an SME Centre or go to one of the economic agencies. There is no wrong door. They will help you navigate and sort it out. That is a backend issue. The key point is we have this plethora of support.

So, I am surprised when Mr Leon Perera earlier said that we have missed an opportunity to strengthen local enterprises. I have just given Members a complete ‒ and this is not an exhaustive ‒ list of the various initiatives that we have undertaken. So, how is it a missed opportunity? Perhaps, the key point the Member was trying to make is that the Government should get into the business of picking more winners, because I think the Member described it as a bold initiative. Go in there, back a company. If it fails or does not meet up to expectations, pull out. It is an interesting idea, but Mr Perera has omitted important details and how we would execute this and why the Government would be the right party to do this. Because if the Government backs a company, it goes with whatever initiative, and then the initiative goes south, and then Government decides that it is going to withdraw the support, I think we can anticipate the kind of debate we would have and, indeed, the kind of questions that Mr Leon Perera will then pose on "Why did you do it in this way? Why did you waste your funds here?" or "Why did you withdraw your support?"

So, I think we have to have a sense of perspective and balance. The Government is an important enabler. The Government is taking a view on certain industries and directions that we want to go. But, fundamentally, what we are trying to say is this: you are in an inherently more uncertain environment. Therefore, the emphasis on the broad range of capabilities that I have outlined and the broad scheme of measures that we have, are going to be the key platforms to raise the industry as a whole. Sure, the companies that are prepared to move further and go faster will receive more support. But that does not mean that we are picking winners. The winners are picking themselves and adapting to our schemes.

I want to emphasise that the impact of such schemes is really significantly amplified when we can get a collaborative effort going. That is why we have stressed the role of trade associations and chambers. We do not want to substitute business judgement or trade associations' and chambers' assessment of market conditions with bureaucratic views. We want it to be a complementary exercise.

One example I want to just share with Members is the logistics industry. Container Depot Association (Singapore) (CDAS) − probably not something that many Members are familiar with. But they have been involved in a major effort in terms of launching electronic container trucking system and they want to track the movement of their trucks, and it is going to enhance their supply chain and how they introduce efficiencies and the way they deploy their fleet and so on. This is an initiative that the CDAS came up with. They worked with SPRING Singapore and they got this executed. We want to see more of this because they understand the need, their members tell them what their issues are, we can appreciate that there may not be enough resources, but that is where we come in and may complement.

Similarly, Singapore Logistics Association (SLA) has made initiatives in terms of going into a new market overseas and how they can help smaller businesses do that and also in the training of our workers.

So, I hope Members would agree with me that there is actually no lack of Government resolve or resources that are available to support our companies, especially our SMEs, make the transformation. But I know that there is a view ‒ and I think many of us have echoed that sentiment here ‒ that the current reality is the issue. We have challenges because of the cost and the pain and so on. The reality is also that the economic situation is variegated. You have sectors like electronics that grew at 15% last year. You have a sector like transport and storage that grew by 2.3% last year. You have a sector like marine and offshore engineering that has contracted for nine successive quarters. How do you come up with a programme that is supposed to help SMEs in all of these, beyond the measures that we have already undertaken?

So, these variations are there because the different sectors face diverse cyclical and structural challenges. For example, lower oil prices ‒ and some might argue that this might be a permanent shift ‒ have changed the demand patterns for the marine and offshore industry. It does not mean that they cannot do business, but they may have to adapt and also look at new opportunities.

The retail industry is going through a major change because of disruptive technology, in particular, e-commerce. In fact, the adoption of e-commerce in Singapore is at a lower rate, compared to many markets around the world. So, if anything, the challenge is going to get greater, not lesser. It would really be quite futile for us to argue that we should resist such an overwhelming system level change, which, in fact, in aggregate, will bring benefits to consumers through businesses that respond to it and adapt to it and to the economy as a whole.

Having said that, I think we are very clear that we recognise that there are immediate challenges that our SMEs are facing and we will continue to provide certain forms of short-term relief where they are necessary and through the system of broad-based support that we have built up over the years. One example is the Wage Credit, the Special Employment Credit and the extension of the additional SEC in this Budget to end of 2019. Collectively, this is about $1 billion in cash pay-outs to businesses in March this year. It is no mean sum. It is a significant outlay from the Government to alleviate some of the cost pressure on our businesses.

Also, in terms of liquidity, we have introduced the SME Working Capital Loan in 2016, which has basically catalysed about $700 million in loans to about 4,300 SMEs. If you go beyond that, and you look at the broader pattern, I think there was some reference to rental and other business costs. I know that this is an area of concern. It comes up in many of our industry engagement exercises. But the reality also is that industrial, retail and office rentals have all deep fallen, and they fell in 2016 as well. And we, on our part, will continue to maintain a steady pipeline of industrial land and space to ensure that there is competitive pressure in the market and rentals remain affordable.

So, let me put it together to say that we have not introduced further broad-based measures because they are not quite warranted and properly not even appropriate for the circumstances that we are in. But have sustained what we already do − in some cases, extended down − and at the same time, put in place additional customised support for specific industries because of the circumstances that are quite divergent. As many Government leaders have said, we will continue to track the situation closely and to intervene where necessary.

So, if I can just give you an example − Marine and Offshore Engineering sector. Last December, we introduced the bridging loans and international finance scheme. It is not a panacea; it is not going to prevent consolidation which will occur to some extent in the industry. But what it will do is help address some of the liquidity issues that some of the strong companies are facing and potentially, also help them get financing for expansion when they go for new projects overseas because there was a general tightening for financing in the sector.

Another example is in the construction industry. It has been weighed down by the property market slowdown and economic uncertainties but we are bringing forward $700 million of public sector infrastructure projects which will start in FY17 and FY18.

These measures are an illustration of the Government responding with a more targeted response and support for SMEs and other businesses. It is a complement to the broad-based measures we already have in place, in response to the varied needs in the economy. And importantly, it is one aspect, even as we look at the longer term challenge and how we need to gear up for that.

Mr Deputy Speaker, Sir, if I can summarise, we have significant opportunities before us. But to seize them, we have to invest in the capabilities of our economy, of our people and our enterprises, and especially so, with our SMEs. The most durable solution really lies in moving up the value chain, innovating, offering products and services that others are not offering, and adopting methods and techniques that will allow us to close some of the big gaps in productivity that we see when compared to international best practices.

As for the Government, we are resolute in our support, through broad-based and targeted programmes, to help our SMEs make the transition successful. We do not engage in the art, or perhaps, Mr Perera thinks it is the science of picking winners, but we will support companies that are prepared to make these important transitions because they see the benefit and they are prepared to take the important steps to move the organisation. In all of these efforts, the SMEs would be our central focus.

Ultimately, creating a vibrant, competitive industry with strong capabilities is the surest way of ensuring success of all our businesses, including the SMEs. And so we look forward to working closely with the trade associations and chambers, and the unions to ensure that we have a diverse enterprise eco-system, from start-ups to SMEs, to large local enterprises, to multi-nationals − we have a thriving SME community, and an economy that is rich with opportunities. Thank you, Deputy Speaker. [Applause]

Mr Deputy Speaker, this year's Budget has brought the focus on cost of living issues by way of an increase in water prices amongst other things. This increase comes on the back of a 15%-odd increase in HDB car park charges, higher electricity and gas charges and the announcement of higher Service and Conservancy rates all in the space of about three months. The Straits Times noted that the Government feedback channel REACH had identified cost of living as a key pre-Budget concern among Singaporeans.

I have a few questions for the Government to understand the decision-making processes around the latest round of increases in water prices. The last time an announcement was made to raise water prices in 1997, prices were raised by 120% for households and 30% for industrial and commercial users over a four-year period.

The Government has stated in previous parliamentary replies that it prices water according to its Long-Run Marginal Cost or LMRC. To this end, the water tariff, water conservation tax and used water charges or waterborne fees are priced to reflect the cost of producing the next drop of potable water, which is, I quote, "is likely to come from desalination and NEWater."

In announcing the opening of the fifth NEWater plant last month, the Minister for the Environment and Water Resources noted that there has been upward pressure on costs because of increases associated with asset replacement, energy and manpower. Can the Government share details on how the components of Long-Run Marginal Costs for water pricing are computed by the Public Utilities Board (PUB) and how it assesses when to increase the price of water?

Can the Government also clarify if the maintenance and upkeep, and the associated manpower costs of current PUB assets, including thousands of kilometres of transmission networks and so forth, would have already been factored into the calculation of LRMC before the latest round of price hikes? Even so, it would be helpful to understand which variables of LRMC have changed from 1997 when the last price hike was announced, what is the range within each variable, and how often is the LRMC determined or re-determined?

Can the Government also share how much it costs each desalination and NEWater plant to produce water today, especially since some of these plants operate on a private-public partnership basis? How do they compare with plants directly run by the PUB?

Finally, when the PUB refers to the long-run in LRMC, what sort of time horizon is used for projection purposes and what are the population parametres for these projections? Are we looking at 2061 when the Water Agreement with Malaysia comes to an end, or is it when the PUB expects a doubling of Singapore's consumption in absolute terms for a much larger population and when 85% of our needs are projected to be met by NEWater and desalination? If this is so, what are the projections for expected water price hikes as the population grows?

It is noteworthy, Mr Deputy Speaker, that the PUB was able to bring down the cost of NEWater production from 2002 to 2004 from $1.30 to $1.15 per cubic metre as a result of more competitive membrane technologies. In 2003, a Straits Times article quoted then Prime Minister Goh assuring Singaporeans that, and I quote, "the price of PUB water, which now costs $1.52 a cubic metre, would stay below $2 for some time, reversing all earlier projections. The sums were redone because desalinating sea water was cheaper than thought; and NEWater, even cheaper to produce."

The same year, it was reported that the Tuas desalination plant desalinates water at the cost of $0.78 per cubic metre. This compared very favourably against about $0.90 per cubic metre produced by the Ashkelon desalination plant in Israel, considered in 2003 to be the one of the cheapest producers of desalinated water. In 2008, Sembcorp, which secured the bid to design, build, own and operate the fifth and largest NEWater plant, submitted a first-year price of about $0.30 to produce a cubic metre of NEWater. A 2011 Business Times' report also noted that Singapore would produce the world's cheapest desalinated water by 2013. How does the PUB adjust its Long-Run Marginal Cost projections with the advent of new technology so as to keep water prices affordable and to keep its profits within reasonable limits, on an on-going basis?

From parliamentary replies in the past, it would appear that energy is the real cost variable that can be difficult to track with a sufficient degree of accuracy. In view of the lower cost of producing water over the years, can the Government reveal how much NEWater and desalination costs have fluctuated over the years as a result of energy prices?

In 2008, the Siemens Water Technologies Team was awarded a $4 million grant from the Environment and Water Industry Development Council (EWI) for successfully designing a more energy efficient desalinisation technique which produced a cubic metre of drinking water on 1.5 kWh of power as compared to PUB's current desalination method using 3.5 kWh per cubic metre. In addition, the 2015 PUB annual report highlights PUB's collaboration with a US water technology company which has piloted electro-deionisation technology which has achieved reductions in energy consumption in the desalination process by more than 50%, and this pilot would be expanded in 2016. Can the Government share details of this project and its prospects going forward?

Separately, Mr Deputy Speaker, the announcement of an increase in water tariffs bookends a two-odd year period when Singaporeans were repeatedly reminded of water scarcity issues as a result of very low water levels in the Linggui reservoir in Malaysia, a water supply source five times the size of all of Singapore's reservoirs. At the start of each respective year, the water levels were at 84% in 2015, 49% in 2016 and 27% in 2017. We have been informed by the Minister of Foreign Affairs in response to a Parliamentary Question in January this year that there is a significant risk of the water levels in the Linggui Reservoir falling to 0% this year should there be a dry spell in Johor.

In view of the low water levels in the Linggui Reservoir from 2015 onwards in particular, how often has Singapore drawn less than the 250 million gallons a day it is legally entitled to under the 1962 Water Agreement and what has been Singapore's average daily rate of abstraction from the Linggui Reservoir since 2014? To that end, what role, if any, have the low water levels in the Linggui Reservoir played in the latest water price revision especially since the Government's position as late as 2013 confirmed no need to raise water prices?

In the middle of last year, on the back of the Singapore International Water Week, a PUB official stated that should the Linggui Reservoir fail, there ought to be no cause for panic in Singapore as there were new and indigenous capacities in Singapore to meet such a contingency in the form of NEWater and desalination. However, the Minister of Foreign Affairs only last month stated that the failure of the Linggui Reservoir would cause severe problems for Singapore and Malaysia. Can the Government elaborate what are its contingency plans in the event of such an eventuality? Do these contingencies include the possibility of another rise in water prices, especially the water conservation tax since its policy rationale is aimed at reminding the taxpayer about the importance of saving water and separately, to account for the Long-Run Marginal Cost of desalination and NEWater? That would also prompt a corollary question as to whether the latest water price revision was set with a view to account for the complete failure of the Linggui Reservoir.

Even so, in the middle of 2016, it was reported that Johor was studying plans to divert water from two rivers into the Linggui Reservoir. The first proposal was to build a low wall to channel about 50mgd of water from the Sayong River catchment area at the cost of about RM$250 million. The second plan called for the building of a dam at the Ulu Sedili Besar River to transfer about 110mgd to the Johor River at the cost of RM$660 million.

At the end of the last Leaders Retreat between Prime Ministers Lee and Najib in December last year, it was reported that Malaysia was looking at measures to increase the supply of water at the Linggui Reservoir.

Can the Government comment, in the event Malaysia successfully diverts water to the Linggui Reservoir allowing Singapore to draw its full entitlement of 250mgd or more, would such an outcome end up reducing the price of water for consumers in Singapore? And if so, would Singapore consider co-funding the diversion of the two rivers or re-negotiating some aspects of the Water Agreement with a win-win prospect in mind especially since Singapore has not hesitated to supply Malaysia with more treated water than it is required to in its time of need particularly in times of drought and over the Ramadan period last year?

This brings me to my final point about the public messaging on water conservation policies and the outcomes the Government seeks from the water conservation tax and how these outcomes can be improved. About a month before the 2015 General Elections, the Prime Minister said, "In Singapore, water will always be a precious resource. Never take it for granted or waste it."

In the middle of last year, on the back of the Singapore International Water Week in a piece entitled "How Singapore Will Never Go Thirsty", the PUB CEO announced that Singapore, in spite of being water-poor, had "significantly overcome the challenge of water scarcity" and later that "Singapore is not short on water".

While I understand the PUB official was showcasing to an international audience the good work over many decades of our water specialists, there is a risk that over amplifying self-sufficiency can have a dampening effect on efforts to encourage water conservation. The fact is self-sufficiency comes at a high price for the consumer.

In fact, Singapore's per capita water consumption rates have been dropping steadily from 2005 when it was 162 litres per day to 151 litres per day today. It would appear that the answer to the question of whether we can reduce consumption without price increases is a yes − perhaps not as resounding a yes as the experts would wish for − but a yes nonetheless. Even with our hot and humid climate and cultural practice of not using dishwashers, perhaps as a result of the spices, sauces and seasonings in Asian cooking, progress on water conservation has been steady and continuous. Rather than to look solely at water pricing to promote conservation, the Government should look at new policies further tightening regulations on the sale of sanitary appliances such as mixers and shower heads which discharge excessive water, so as to nudge consumers to use more water-saving appliances.

Some experts have also proposed pricing strategies used elsewhere like in Spain which hosts a price structure that provides for a 10% rebate should a household's water consumption pattern show a 10% decrease compared to the year before.

What these creative pricing strategies suggest is the prospect of a different approach towards water conservation taxes to promote a more efficient usage of water. We already see PUB nudging Singaporeans in this direction by informing consumers of the consumption patterns of their neighbours and the national average in our monthly bills. What may truly push a renewed commitment to a water conservation drive is to significantly alter a consumer behaviour towards a tax regime that differentiates between efficient and inefficient usage of water by lowering taxes for consumers who use less water.

For example, a household of four which meets the national average consumption can have their water conservation tax remain at the current 30% of the tariff rate. Depending on additional usage, PUB could establish an ascending or descending scale relative to consumption. This has better prospects for water conservation as real savings would be given to individual households, building on the current two-tiered approach between households that consume more or less than 40 cubic meters of waters. This approach would also be more targeted and would cohere with the objective of saving water as opposed to the Budget announcement which bluntly increases the water conservation tax from 30% to 50%, and 35% to 65% for all households.

To conclude, Mr Deputy Speaker, a piece in The Straits Times last week argued that the water price only reflected the reality of increasing water stress worldwide and that bigger hikes were needed to curb wastage. The comments to that story were unexpectedly, rather animated. I believe a deeper explanation from the Government about how it prices water and its long-run cost imperatives would enable the public to better understand and rationalise this water hike in addition to improving public understanding on this issue.

This would be important as the water price hike occurred on the back of many other municipal prices increases which could arguably have been better phased to reduce the impact on the average Singaporean for whom cost of living concerns are an increasing issue. There remain concerns among Singaporeans who fear the knock-on effect of the water price hike on daily necessities and I hope the Government will address this point too. Thank you.