Committee of Supply – Head M (Ministry of Finance)

Value-for-Money in Government Spending

Mr Liang Eng Hwa (Holland-Bukit Timah): Mr Chairman, I beg to move, "That the total sum to be allocated for Head M of the Estimates be reduced by $100".

Mr Chairman, one of the key thrusts of this year's Budget is about ensuring fiscal prudence and sustainability: how do we manage rising expenditures and how do we find the revenue to fund this spending in the years ahead. It is a full plate for the Ministry of Finance (MOF).

The Finance Minister announced that growth of Ministries' block budgets will be reduced from 0.4 times of gross domestic product (GDP) to 0.3 times next year. Last year, he also announced a permanent 2% downward adjustment to Budget caps and that the agencies are on the lookout for ways to be efficient and effective. These across-the-board measures are necessary to instill prudence and discipline in spending. It would internalise cost consciousness among the Government agencies and would have an overall financial impact when aggregated across the scale of the Government.

The natural follow-up question to ask is whether, with these measures in place, would the agencies go overzealous in cost management and, as a result, impact service delivery or to look to increase fees? Would these downward adjustments to Budget caps have an impact on planned investments by Ministries and agencies which have wanted to enhance and upgrade their systems to improve efficiency and effectiveness but would now have to shelve their plans due to Budget caps?

While we should be extremely prudent in our spending, we know that there can be no goodness achieved by just mindlessly cutting costs. Rather, we should look to more work-smart initiatives, processes and workflow improvements and, importantly, cutting unnecessary red tape as among the areas of focus to manage costs and improve service delivery.

So, I like this mantra "value-for-money" often propagated by MOF. It needs no explanation and this is a better attitude to take when we review projects rather than to just say no to all spending increases.

As I said during the Budget Debate, between not spending on needed essential items or cutting spending, I rather the Government spend prudently but look for more revenue sources so that we continue to provide more to improve the quality of life of our people. Mr Chairman, beyond managing efficiency within the Government, we can and should also encourage and empower ground agencies to seek local innovative solutions to local problems where we can and it can also achieve the value-for-money principle.

Allow me to relate a real-life example of how an enlightened decision by a secondary school principal in my constituency can achieve a "value-for-no money" outcome for the Government and yet is a win-win situation for all.

In my constituency's Senja Estate, the Housing and Development Board (HDB) is now constructing a cluster of Build-To-Order (BTO) flats known as Senja Ridges. The site of the BTO is immediately adjacent to West Spring Secondary School and, as Members can imagine, the construction noises will cause tremendous noise nuisance to the students studying there. Hence, as part of the contractual arrangements, the contractor is required to build a high wall in the narrow spaces between the school and the BTO site to block off some of the noises and minimise the impact.

Of course, this may well be an intuitive solution to the problem which may partially reduce the construction noise, but it would also mean that the overall ambience of school will be affected. Imagine students looking out of their classroom windows, only to be greeted by the high walls, the boring walls, staring at them. Moreover, the wall will also not come cheap for the contractor as it needs to be strong enough to withstand the vibrations of the construction site.

So, the school and the contractor met up to discuss the project. Thanks to the good wisdom of the principal and the contractor, they agreed on not building the wall. Instead, the contractor will use the money saved to install air-conditioning for all the classrooms adjacent to the construction site and the school can get to keep the air-condition machines even after the completion of the projects.

As a result, students now can study in the comfort of an air-conditioned environment which is an even more effective way to block out the construction noises than compared to the wall. To top it off, all these improvements to the school environment comes at no additional cost to MOE or the Government.

From the contractor's standpoint, they do not need to build a high wall and would not need to have to demolish the wall when the BTO project is completed, which I presume, the total costs will be more than the installation of the air-conditioning. So, here we have an "out-of-the-box" solution which is a win-win for everyone.

We should encourage more of such creative and smart ideas to solve local problems and tap on the power of ground-up ingenuity to get the solution out to solve local problems. The last thing we want is to have a stifling environment within the whole-of-Government system such that good ideas and solutions do not get to see the light of day.

Question proposed.

Fiscal Prudence

Ms Foo Mee Har (West Coast): Chairman, Sir, my apology for the hoarseness in my voice. For Budget 2018, total spending by the Government is estimated to be $80 billion, representing an increase of 8.3% year-on-year, mainly on the back of increased spending in transport, trade and industry and home security. Even though Government spending at 19% of GDP is considered lean when compared to other developed countries, the expenditure growth has been on the rise and cost management discipline is more important now than ever. It is critical that we consider our expenditure growth very carefully and take every step to ensure we get the best value for the money we spend.

In the private sector, it is a common strategy to consider cost cutting in other areas to fund new investments and increases in expenditures. I call on the Government to take a bottom-up analysis of each Ministry's expenditure needs and scrutinise and prioritise cost items. The Finance Minister has introduced the discipline of moderating the pace of the Ministries' Budget growth in the last two Budgets. What more can the Government do to work smarter and more efficiently?

First, I would like to ask the Minister if the operations of Ministries and Statutory Boards are subject to productivity reviews to establish their operational efficiency and goals for improvement. Given the vast number of agencies in operation, Ministries can leverage off such reviews to establish best practices and improve their processes to become leaner.

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Second, with significant infrastructure spending and Government programmes yet to come, I would like to ask the Minister what mechanisms are in place to evaluate and monitor spending to ensure value-for-money and accountability on outcomes and spending. How will public officers be rewarded for cost savings they manage to secure against the allocated Budget for projects? There should be incentives to recognise public officers' efforts and cost savings. We do hear of stories of public sector officers rushing to spend allocated funds toward the end of the financial year, about this time, often on programmes they could have done without. The understanding is that they fear being penalised in future Budgets if they under-utilise the current Budget.

Third, with increasingly complex challenges facing the Government, it is critical that the public sector agencies adopt a coordinated whole-of-Government response and work collaboratively to avoid duplication of efforts and costs. I am pleased that the recent Public Sector (Governance) Bill sends a strong signal on the importance of cross-agency coordination. With the new Bill in place, Chief Executives of Statutory Boards will be obliged by law to cooperate and collaborate with other public sector agencies to deliver value to the public. I believe that much cost synergies may be realised from cross-agency collaboration and interagency sharing of data.

Temasek Holdings as Shareholder

Ms Sylvia Lim (Aljunied): Chairman, Sir, back in 2008, the Government Investment Corporation (GIC) was part of the pioneering effort to develop the Santiago Principles, a common global set of 24 voluntary guidelines that assign best practices for the operations of Sovereign Wealth Funds (SWFs). These principles address concerns about visibility, accountability and the governing structure of SWFs, and include ethics and professionalism in the ability to follow foreign rules.

Though Temasek does not direct business decisions or operations in its portfolio companies, it pitches itself as an active promoter of sound corporate governance in them. As a sole shareholder of Temasek, the Government should naturally be concerned that the entities in Temasek invest and adhere to the spirit of the Santiago Principles in order to safeguard Singapore's Reserves and international reputation.

To this end, it was reported yesterday that Temasek has now taken some steps in tackling corruption within its portfolio companies with Chairman Lim Boon Heng announcing a roundtable "in the next few months" focusing on questions of governance and ethics.

Turning to what other countries have done, the Norwegian Government Pension Fund Global has led the way. Through an ethics council established in 2004, companies that are unethical are excluded from its investment portfolio. It appointed a corporate governance advisory board in 2013 to be a more engaged and more responsible investor. The Oil Fund has tackled issues, such as high executive pay, by voting against pay proposals at Alphabet JP Morgan and Volkswagen in 2017.

While the Santiago Principles require that SWFs like Temasek be operationally independent from their owners, that is, MOF, how has MOF worked with Temasek on areas, such as its investment policies or otherwise, to maintain ethics? Will MOF add further accountability for Temasek on the ethics front? I am of the view that reputational challenges to Singapore’s integrity as a country should not be left to be steered by what is legally just a commercial entity.

Role of Temasek Holdings and GIC

Mr Leon Perera (Non-Constituency Member): Mr Chairman, Sir, during the debate on bribery probe at Keppel Offshore and Marine, Senior Minister of State Indranee Rajah said "likewise, Temasek does not interfere in the business decisions or operations of its portfolio companies".

Do Temasek and GIC not seek to share ideas and experience with their investee companies in ways that may enhance long-term shareholder value? Or are Temasek and GIC totally hands off, as it were? Are they not interfering in investment business decisions or operations at all? Not even offering insights, information or suggestions of any kind on any matter, be it commercial or corporate governance-related?

If Temasek and GIC are totally hands off in this sense, would this not be a lost opportunity since they have the opportunity to share learnings where permissible across their portfolio companies and from their past experience as investors, not to mention connecting investees to agencies like the Economic Development Board (EDB) which can generate win-win opportunities for investees and Singapore?

Playing such a role, if kept within the boundaries of permissible information and idea dissemination, could be consistent with the Santiago Principle No 16 on operational independence while advancing Principle No 19 on commercial orientation.

The Chairman: Mr Azmoon Ahmad, you can take the two cuts together

Distribution of Surplus 2017

Mr Azmoon Ahmad (Nominated Member): Chairman, Sir, Finance Minister Heng Swee Keat's announcement on the $9.6 billion Budget surplus out of fiscal year 2017 is definitely a pleasant surprise. It is more than five times the initial surplus forecast of $1.9 billion. It is news every Singaporean welcomes.

While there is no hard and fast rule on how a surplus is to be distributed or what and where it should be allocated to, I would like to mention that the proportion is highly skewed towards savings for the future. If my calculations are correct, about 72% of the total surplus is being saved which means $5 billion plus $1.9 billion over the $9.6 billion.

Sir, I am not against saving. I do support saving but I thought this matter is worth mentioning. I think that the distribution is highly lopsided on the savings side. So, what would be the right distribution? What model should we adopt when there are surpluses? How can we arrive at a distribution model which serves the interests of the now, the near future and the future? Should we not derive a baseline where the distribution and allocation models are acceptable, just like our Net Investment Returns (NIR)?

Sir, I would like to share my views and suggestions. These suggestions or views should not be the only ones considered. They are also not necessarily the best. They can serve as an exercise to get a discussion going to arrive at a baseline for future use.

Taking a corporate approach, it is quite normal that companies distribute dividends to shareholders after having posted positive results. We can frame our surplus distribution model vis-à-vis the dividend payout policy of a company. It is quite normal that a company makes a dividend payout to its shareholders amounting to 15% to 20% of net income.

Similarly, I think we can adopt the same approach in allocating the SG Bonus to our fellow Singaporeans. Taking a conservative approach of 15% and still keeping a reasonable high savings of 65%, I suggest we adopt a 65:20:15 ratio for our savings, our subsidies and our SG Bonus allocation. I believe this will serve the future, near term and now with the amounts of $6 billion, $2 billion and $1.6 billion from the total surplus of $9.6 billion.

If this baseline model is reasonable, could this become a precedent to future surpluses as long as it is financially prudent to do so? If yes, this will be in line with the Government's long-time commitment for sharing the fruits of the nation's development with fellow Singaporeans. Sir, I would be happy to hear from the Finance Ministry on how they arrived at their model if it is available.

Progressive Tax Deduction for Donors

Sir, while we move up the ladder to become a gracious and caring society, we should not and must not be over dependent on the Government to fork out grants and subsidies. Instead, we need to build an ecosystem where the substantial part of giving is to be generated from the society itself. We need to find a way and establish a system which is sustainable, where giving has become a pleasure and giving is highly motivated. A system of recognition and reward should be explored in trying to encourage more giving.

In a report in January 2017 made by SPD, formally known as the Society for the Physically Disabled, on the World Giving Index 2016, 140 countries across the globe were surveyed in 2015. In most countries surveyed, 1,000 questionnaires were completed by a representative sample of individuals living across the country. Respondents were asked if they had done the following in the past month: first, helped a stranger or someone they did not know who needed help; second, donated money to charity; third, volunteered their time to their organisation. In terms of donating money, Singapore was the 19th most generous country in 2016. Although the ranking has dropped for the past two years, the percentage of Singaporeans who donated money has increased from 55% in 2013 to 58% in 2016.

It is heartening to hear from the Minister that 250% tax deduction for qualifying donations will be extended for another three more years until 2021. I am certain this gesture is very much welcome by charities and organisations alike that depend on donations to fund their operations. They rely on these tax deductions as a way to encourage donors to donate to their organisations. I believe it is a significant quantum to donors which could make a difference between giving more or remaining as it is.

The 250% tax deduction promotes the spirit of giving among Singaporeans and encourages them to play a part in contributing back to the society to help others in need. This can be seen by the increase in donations by $0.7 billion dollars between 2011 and 2015. While this increase is good and encouraging, is it enough?

My time with the non-profit organisations has shown me that a large injection of funds is sometimes needed, especially when initiatives and programmes need to be rolled out. The large cash outlay goes towards recruiting new staff, setting up new infrastructure, training existing staff and other expenses needed to kickstart a new programme.

This need for a large amount of funds often cannot be solely supported by donations received from the public. Rather, Government grants and large donations from foundations, philanthropies make the difference on whether a new programme can be launched and implemented effectively. As such, while a 250% tax deduction is appreciated by all, I am of the opinion that more can be done to make it more attractive, especially donors from the upper-income band.

To encourage more Singaporeans to donate, I would like to suggest a model for progressive tax deduction for donors which will take on a similar approach to the progressive tax imputation on our income received. This proposal will mean that instead of a flat rate of 250% for all donations, the tax deduction rate increases with a quantum of donation given. Much like how incomes are broken down to bands to compute income tax rates, the same can be done for donations. Tax deductions can begin at 200% and increase in quantum of 50% reaching a maximum rate of 500%.

The suggested model will make donating large amounts more attractive. As such, the objective is not only to encourage more donors to donate, it will encourage high net worth donors in our midst to donate even more which will benefit our charities and organisations. This, in turn, will mean that the organisations will have to develop new and better programmes to extend their reach to others who may be in need but have yet to be served.

All in all, such a progressive deduction tax model will have a far-reaching effect that will benefit Singaporeans as a whole. I truly hope that the Government can consider the suggested progressive tax deduction for donors and study on its feasibility for implementation.

Tax Deductibles for Private Hire Drivers

Mr Ang Hin Kee (Ang Mo Kio): Chairman, let me first declare my interest as the advisor for the National Private Hire Vehicles Association. Currently, taxi hirers can use rental of vehicles and fuel as tax deductibles. Can a similar approach be adopted for full-time private hire vehicle (PHV) hirers?

Unlike previously, these drivers are now required to obtain a Land Transport Authority (LTA) Private Hire Car Driver’s Vocational Licence (PDVL) to provide point-to-point ride services. PHV drivers can only serve commuters who book their trips through the apps. All trips completed are also recorded, making it possible to identify the time spent providing hire-for-reward services from other usage.

A full-time taxi hirer, in comparison, will have to achieve about 20 revenue trips per day to cover his costs and some take-home income for the day. A private hire driver may do fewer revenue trips as their consumer base is limited due to the fact that they only take trips based on what is assigned by the system.

Prior to LTA requiring all PHV drivers to obtain a licence, they were required to register a transport company, and this took care of the tax. With the licence, they now no longer have to register a company but are affected by the tax deductible. I urge the Ministry to allow full-time PHV hirers to submit their vehicle rental and fuel expenses for tax deduction purposes.

Tax Deductible for Private Hire Car Driver

Mr Muhamad Faisal Bin Abdul Manap (Aljunied): Sir, I have received queries from residents who are full-time PHV drivers who are not allowed to claim tax deductions for the amount they spend on motor car expenses, in particular, car rental fee.

A search of the Inland Revenue Authority of Singapore (IRAS) website's frequently asked questions (FAQ) segment provides answer to this query: "the expenses incurred on a private car by private hire car drivers are not tax deductible because of the national policy to restrict the car population".

In my view, the answer provided does not seem to clarify the circumstance well. How does not allowing PHV drivers claim tax deduction correlate to restriction of car population? Is the Certificate of Entitlement (COE) scheme not already there to regulate the car population?

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The service provided by private hire cars complements our public transport services and, anecdotally, I can say, to a certain extent, this service contributes to reducing the number of car ownership rather than increasing it.

I say so because I have friends who did not extend or buy new cars after their cars' COEs expired. Reasons are that it is more convenient and cheaper to travel by private hire car as compared to owning one.

I would like to urge MOF to work closely with the various stakeholders to come up with a framework that would ensure that the full-time PHV drivers are taxed in a fair and just manner.

Water – Harmonisation of Accounts

Mr Pritam Singh (Aljunied): Mr Chairman, public communication on the way water is priced can be significantly improved. At last year's Budget Debate, the Minister in charge of the Ministry of the Environment and Water Resources (MEWR) shared that the numbers in the books of the Public Utilities Board (PUB) do not lend themselves to a straightforward understanding of what they mean. The Minister observed that while PUB's books are in accruals, the Ministry's Budget is in cash. The Minister also said that he would ask the Minister of Finance to look at a whole-of-Government approach to funding Singapore's water infrastructure because things do not add up if one looks at the books separately. In light of these remarks, can I clarify what progress has been made on this?

Many Singaporeans note that PUB's books record significant surpluses after Government grants and that any increase in water prices should take into account the size of such surpluses. More fundamentally, there is a greater desire to understand the variables and assumptions that go into calculating Long Run Marginal Cost (LRMC), which forms the basis of determining water prices. The Government should attempt to explain this in a simple manner so that the public can appreciate the basis of raising water prices by 15% in 2017, with another hike scheduled for 2018.

Budget Spending

Mr Cedric Foo Chee Keng (Pioneer): Chairman, I have two points to share. Firstly, the Government adopts cash accounting as opposed to accrual accounting in the private sector. Under such a cash accounting convention, capital and operating budgets are lumped together, even though there is a great difference between capital investments and recurrent operating expenses.

The recurrent operating expenses include items like administrative expenses, facility rentals and operations. This group of expenses tends to be sticky and, if not well-controlled, could be difficult to dial back. Capital investments, on the other hand, is forward-looking and, if invested wisely, can yield significant returns in the future. In fact, under investments, Capital Expenditure may also be bad, as opportunities to reap future benefits may be missed out. Therefore, I would like to ask the Minister if he could share with us the split between capital and recurrent expenses, and how has this ratio shifted over the years.

Chairman, my second point is about balance. In crafting the Budget, which is a strategic fiscal tool as the Minister pointed out, really is not just simple arithmetic. I think the Minister has to carefully balance many, many dimensions, sometimes, conflicting objectives. I can think of several: growing an economy through an expansionary Budget so as to grow the base but be careful not to overheat the economy for cost inflation; meeting the demands for funding all meritorious causes that can be sustained; meeting the needs of this generation and future generations; helping those who are in need without eroding our work ethos; and creating a fairer income distribution system yet having a competitive tax rate so that talents and enterprises do not flee this country. These are very difficult and complex issues requiring a lot of judgement, adroitness and so forth.

May I ask the Minister to share with us how he had struck the right balance and what were his key considerations?

Building in Prudence by Design

Dr Tan Wu Meng (Jurong): Chairman, value is not just about what we spend today, especially when it comes to fixed assets like construction projects and infrastructure. Value is also about the cost of upkeep over the lifetime of the project. We also have to look at how to keep maintenance costs down and that means making maintenance easy to do.

When we construct new Mass Rapid Transit (MRT) tunnels, the tender analysis should look at the designs and ask if it is easy to organise track access for maintenance. Every minute counts when it comes to track access, as we have learnt over the years and recently.

Likewise, when we design and build a new HDB block, we should also ask whether it is easy to maintain the exterior facade. This includes little details, like whether horizontal struts are needed because such high-rise horizontal beams can be difficult to clean.

This also means understanding human nature when buildings are designed. For example, high-rise littering still happens in many housing estates. In Clementi where I serve, some of the newer HDB blocks were reported to have so-called "award-winning designs". These designs look very nice from afar, but some of these designs also very easily accumulate high-rise litter. The litter lands on horizontal beams, difficult to clear.

I asked the National Environment Agency (NEA) if there was something that could be done, NEA has been studying this for some time and they have found that the layout of the columns, the layout of the struts, make it very difficult if not impossible to put closed-circuit television (CCTV) cameras to catch high-rise littering.

Chairman, when the building design makes it harder to maintain the exterior, when it becomes harder to keep the building clean, the costs do not go away. In the case of HDB blocks, the costs are passed on to the Town Council and, indirectly, passed on from there to the residents.

As part of prudent spending, we must look at the lifetime cost of maintenance and cleaning and upkeep of buildings and infrastructure. And as part of keeping lifetime maintenance costs down for infrastructure, ease of maintenance has to be part of the design criteria early on at the tender stage.

We can also require space in public buildings to be adaptable, so that as land needs change, a building can be repurposed without having to demolish or rebuild. We can call it "building in prudence", "prudence by design".

Remaining Fiscally Prudent

Mr Kwek Hian Chuan Henry (Nee Soon): Chairman, I understand our need to have more spending in the years ahead. However, before we ask for more tax dollars from our people, we have a responsibility to them to ensure that we have done our best to remain prudent and ensure value-for-money in Government expenses.

Can the Government share on what internal systems and controls will help us achieve this? Can the Government also share concrete examples of how savings have been achieved?

Having said that, it is important that in our drive for economy, we do not automatically go for the lowest bid in public tender, at the sacrifice of quality and long-term cost control, as per what fellow Member Dr Tan Wu Meng has just shared. It is also important that we do not pass the cost unnecessarily to the private sector and our people through unnecessary or over-complex regulations.

Can the Government also share how we can best manage this important balance between economy and quality?

Efficiency in Government Spending

Ms Sun Xueling (Pasir Ris-Punggol): Chairman, with Government expenditure set to rise due to infrastructure renewal and building up of healthcare facilities, I hope that apart from having gateways to review the costing and design of large projects, that the Ministry can look into the processes that guide day-to-day Government procurement or assets.

For instance, can we use centralised procurement to a larger extent to leverage economies of scale and get a better deal from suppliers? Can the Ministries actively push for product standardisation and demand aggregation to ensure that we do not get creamed off by suppliers? We could end up being charged different prices across different institutions for similar products if we are not careful. Also, how do we ensure that purchase contracts best take care of our interests?

Lastly, where assets have a long lifecycle, say 25 to 30 years, are the Ministries adopting a lifecycle cost-approach to take into account the cost of maintenance and replacements of spare parts? Are there specialised teams with technical knowledge of these assets to make a reasoned assessment of the costs?

Support for Local Construction Companies

Mr Yee Chia Hsing (Chua Chu Kang): Chairman, our local construction companies are struggling. In the past, I have brought up the issue of high foreign worker levy for the sector. I also filed a Parliamentary Question (PQ) on compliance costs for construction companies to implement various workplace safety requirements.

Today, I would like to highlight a feedback that local construction companies have been facing increasing competition from foreign-owned construction companies and have found it increasingly difficult to win tenders for Government contracts. Er Dr Lee Bee Wah also raised this issue during the Committee of Supply (COS) for the Ministry of Trade and Industry (MTI) last Friday.

The Chief Executive Officer (CEO) of a local construction company told me that the foreign-owned construction companies are winning tenders at a level which is near breakeven or maybe even at a slight loss based on their cost estimates. I asked him why would the foreign companies tender at a price that they do not make any profits? He gave several reasons. First, some of these firms have ambitions to be global construction players so they want to build up their track record, and winning a Government tender in Singapore will be seen as a feather in the cap. Another reason is that, at the working level, the management team of such foreign-owned companies, and possibly their family members as well, may be comfortable staying in Singapore, and if they do not win the tender for major projects, they may be sent home.

Sir, it has thus become a very tough business environment for our local construction companies. Without winning the contracts in Singapore, they also find it difficult to build up a track record to compete overseas. Chairman, for our national security reasons, I think it is important that we maintain a certain number of local construction companies. We may need them for the construction of high-security facilities for which a foreign-owned construction company may not be suitable.

Sir, I understand that under World Trade Organization (WTO) rules, we cannot favour local companies over foreign companies in the award of Government contracts. But surely, there must be a way to require that foreign construction companies must tender for a project under a joint venture with a local player so that our local construction companies have the chance to build up their track record.

As such, I hope MOF can take the above feedback into consideration in the award of Government tenders.

Opportunities for Businesses

Miss Cheryl Chan Wei Ling (Fengshan): Chairman, Sir, in Budget 2016, the National Trade Platform (NTP) was announced and subsequently implemented in 2017. NTP was designed as an open innovation platform which businesses and service providers can tap on to develop new applications to support evolving business needs. During that Budget, NTP was also presented as an example of an "industry-level transformation". It was then mentioned that the initiative will cost an estimated S$100 million, while it could bring about man-hour savings of about S$600 million to Singapore firms. Can the Minister provide an update on the implementation and whether it has benefited our economy and businesses with higher efficiency since its inception?

As digitalisation continues to be a driver in our economy, NTP can become a showcase of how we can enable productivity improvements through streamlining digital information exchange. With the many ideas provided by industry stakeholders during this development, what are some further collaborations that MOF is undertaking with the private sector to co-create solutions for our businesses?

Conceptually, NTP is an attractive one-stop trade portal for Business-to-Government and Business-to-Business services. On the back of a thriving e-commerce landscape and Singapore being a key trading hub, are there any plans to expand this platform for other trade opportunities beyond customs and logistics? How can the platform developers or sector players continue to provide inputs for future frameworks?

Enhancing Citizen Experience with Technology

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mr Chairman, Sir, we are moving very swiftly on the use of information technology (IT) in our service delivery. From across all sectors, be it transport, retail, healthcare and finance, time and again, we see new apps being introduced, new online services and so forth to make services more hassle-free and it means cutting down waiting time and so on. This is a massive effort that the Civil Service has embarked on and will impact across the whole spectrum of our society.

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The landing page of a Ministry's website or Statutory Board, for example, becomes the first line of contact with the public more so than the officers who sit behind the frontline counter. All these are part of our move towards a Smart Nation and moving to technology, and in how we can enhance citizen experience with technology.

Can the Minister for Finance give an update on how the Ministry and the Statutory Boards under its wings, such as IRAS and the Accounting and Corporate Regulatory Authority (ACRA), for example, are improving their service delivery to citizens and businesses through digitalisation? How is the Government making better use of technology and improving processes to make timely payments to the individuals and businesses, which is an important part as it may help the cash flow to the recipients or businesses?

Can the Minister give an overview of MOF's digitalisation efforts as part of the Smart Nation drive? How is the Public Service becoming more future-ready and tapping on technology to better serve the needs of our people and businesses?

The Chairman: Second Minister Lawrence Wong.

The Second Minister for Finance (Mr Lawrence Wong): Mr Chairman, I thank the Members for their comments and questions for MOF.

Members’ questions covered four areas: first, our fiscal position, and our financing and surplus-sharing approach; second, the Government’s efforts in ensuring value-for-money in our spending and procurement; third, our plans to create opportunities for businesses and enhance citizen experience with technology; and fourth, the role of shareholders and some tax-related matters.

So, I will address the cuts on the first two topics, and the Senior Minister of State Ms Indranee Rajah will take the other cuts.

On our fiscal position, Mr Cedric Foo asked about the proportion of capital investment compared to recurrent spending or operating expenditure. Let me start by elaborating on our overall funding approach. In fact, this is what the Minister for Finance had explained in his Budget Statement that we fund recurrent needs through taxation and we will consider borrowing for major infrastructure projects.

But even as we look at borrowing, we will only do so prudently and on a selective basis. We should borrow for the right projects ‒ those that are bankable and generate adequate future revenue streams to repay the borrowing. One example that we are looking at is Changi Airport Terminal 5. If we do not do this, if we are not careful and selective in borrowing, we may end up over-burdening ourselves with rising interest costs. And that is not what we intend to do. So, therefore, even as we borrow, there will still be capital projects that we continue to fund through development expenditure from the annual Budget.

For financial year (FY) 2018, the share of development expenditure of the total Budget is around 28%. It is slightly higher than what it used to be, but it is in the ballpark. Looking ahead, we expect development expenditures to rise as we continue to invest in more capital projects. But at the same time, operating expenditures are also going to increase, especially in areas that were highlighted in the Budget, like healthcare, security and other social spending. So, overall, both will go up, but we expect the share of development spending to continue to rise slightly in the coming years.

We will continue to monitor this share between operating and development spending. It is an important balance. Because if we spend too much on recurrent, then we are not investing enough for the future, not building capabilities for the future. If we spend too much on capital, then we may end up with a long tail of future spending for maintenance and replacement. So, it is critical to get the balance right, and that is what we are doing.

Many of the capital projects in the Government are undertaken by our Statutory Boards. Mr Pritam Singh asked about the harmonisation of accounts because our Statutory Boards use the accrual basis for their accounts and the Ministries use cash. This is the approach we have taken because we believe that cash accounting allows for better control of spending, and it is a more prudent way of fiscal management. That is not just us. Many governments also do cash accounting for their Ministries. But for statutory boards, they use accrual for their accounts because statutory boards are set up as separate legal entities with their own financial accounts. Some statutory boards even go to the markets to borrow. So, we want our Statutory Boards to be subject to the same discipline as the private sector, and that is why they use accrual accounts, like what private sector companies do.

The important thing is this. Regardless of whether the work is carried out by a Ministry or a Statutory Board, we take a whole-of-Government approach on how we finance our infrastructure. The water network is a case in point.

Briefly put, PUB collects revenue and pays for the investment and operations and maintenance of the water supply system. That includes our reservoirs, treatment plants and pipelines and also the water reclamation plants for the treatment of used water. If there are any surpluses in its accounts, PUB will plough them back into investments in infrastructural works, such as the upgrading of waterworks, water reclamation plant expansions and investment in water treatment processes, as well as in research and development (R&D).

For FY2012 to FY2016, PUB has transferred $1.3 billion of surpluses into its capital reserves. However, this is still not sufficient to fully cover the $4 billion that PUB will be investing in additional water infrastructure between FY2017 and FY2021. And because there is this gap in its financing cash flows, PUB borrows for its capital investments. So, this is what happens within the PUB accounts.

On top of this, the Government funds the drainage system that helps to manage flooding risks, the sewerage network system that helps to safeguard public health, and projects to help strengthen the resilience of our water supply. These assets are part of our total water loop, but they also provide benefits to all citizens. So, the Government pays for these assets and we do not recover the cost directly from consumers.

Indeed, from FY2012 to FY2016, Government investments in drainage and sewerage totalled $2.1 billion, far in excess of the Water Conservation Tax revenue. In the next decade, we are also building Phase 2 of the Deep Tunnel Sewerage System, which costs more than $4 billion. These are costly but important investments that we need to make.

Sir, expenditure in our water system is thus recorded in both PUB’s accounts and in the Government’s Budget because of how we structure the payments between the consumer and the taxpayer. While they use different bases for accounting, as I have explained, each is appropriate for its use. What remains important is sound fiscal and financial management to ensure timely and adequate investments in our public infrastructure and assets. We do this for water; we do this for all other public infrastructure as well.

Several Members ‒ Mr Liang Eng Hwa, Ms Foo Mee Har, Dr Tan Wu Meng, Mr Henry Kwek and Ms Sun Xueling ‒ spoke about the need to be prudent, efficient and effective in our spending. I fully agree with them. This is, indeed, an area of continuing emphasis for MOF.

I was a budget officer in MOF way back in 2000. So, I have seen first-hand how our budgeting system has evolved over the years. MOF officers scrutinise every project. Even back then, we had robust processes in place for budgeting. We checked against cost norms, we made the necessary cuts in the budget of Ministries and agencies. It is not work that endears ourselves to colleagues in other Ministries, I assure you. They see MOF as blocking or delaying their projects. But we take these in our stride and we do the work.

Now, almost 20 years later, I can say that our processes for budgeting and ensuring value-for-money have developed further and become even more rigorous. We have put in place various systems and controls to ensure that our monies are spent effectively.

First, the Block Budget Framework sets a spending limit for Ministries. Within the budget given to them, each agency optimises its spending and channels resources to worthwhile programmes. The 2% reduction to the budget cap announced at the last Budget, and the reduction to the annual growth of the block budgets announced recently by the Minister for Finance will further encourage fiscal discipline among Government agencies. We have the Budget Utilisation Framework which encourages Ministries to budget as closely as possible to their expenditure needs. This is to ensure that they do not set aside more than they require and, as a result, deprive other meritorious needs of funding. But I would assure Ms Foo Mee Har that Ministries do not spend for the sake of spending or meeting the budget, especially during the end of the year. If there is under-utilisation of the budget due to reasons which are beyond the Ministries' control, there will not be reductions to their future budgets.

We also have mechanisms to give Ministries budgeting flexibility so they can roll over part of the savings from the operating budget to the next financial year. On top of all these, we conduct regular reviews of Ministries' budgets to make sure that they continue to be right-sized and ensure that every Ministry uses its allocated resources effectively and efficiently.

Second, for large infrastructure projects, we have the Gateway Process. This is something that we have shared in this House. It is a rigorous multi-stage process that scrutinises the requirements, scope and design of the projects at key milestones before funding approval is given. This process includes reviews not just by senior public officers, but by academics and industry practitioners where necessary, especially practitioners with deep technical expertise.

Third, MOF works with agencies to conduct Value-for-Money reviews to assess if our programmes are achieving their intended outcomes in a cost-effective manner. These best practices, guidelines and case studies from the reviews are shared across the Public Service.

Fourth, the performance of key programmes are published by the Ministries for their respective areas. These performance indicators are also consolidated and reported in the Annual Revenue and Expenditure Estimates and in the Singapore Public Sector Outcomes Review, which is published once every two years.

Ms Foo Mee Har asked if agencies conduct productivity reviews to ensure their operating efficiency. Indeed, that is done. Ministries have processes in place to more effectively allocate resources within their budgets, and to extract productivity dividends from their departments and Statutory Boards. We also have a Manpower Management Framework to keep public sector manpower growth at a sustainable rate, in line with the resident labour force growth. This framework allows for manpower to be redeployed to implement new programmes or deliver enhanced services, while preventing the over-expansion of public sector manpower over time.

Mr Liang Eng Hwa and some Members were concerned that the economy drive will impact on public services. I would like to assure them that Ministries will be more resource-effective without compromising service delivery. Even with the announced measures to constrain expenditure growth, overall Ministry budgets in dollar terms are still expected to grow, albeit at a slower rate. Agencies are given time to adjust to the budget changes and will have the resources to fulfil their missions and maintain service levels.

Of course, achieving value-for-money goes beyond cutting costs. It is also about creating greater value while we carefully manage the costs. Government agencies have sought to achieve value-for-money while improving service delivery and outcomes in various ways.

For infrastructure, in particular, something that Ms Foo Mee Har, Dr Tan Wu Meng and several others spoke about, we have stepped up efforts to manage our infrastructure spending. Let me elaborate on some of these measures.

First, we adopt a systems approach when we plan and design projects. We do not look at each project in isolation, but we consider how they affect one another, and the potential synergies of multiple projects collectively. We look for opportunities for infrastructure integration, which allows us to achieve better outcomes or reap savings. The Ministers for Finance and Transport have shared one example, which is the LTA's innovative 4-in-1 depot that saved the Government $2 billion. Another example is the integration of PUB’s Tuas Water Reclamation Plant with NEA's Integrated Waste Management Facility which brings about a number of synergies while optimising land use. Within this integrated facility, the co-digestion of food waste from NEA's facility with the used water sludge from PUB’s facility generates more biogas and enhances energy production. This allows both facilities to be self-sufficient in energy. The two plants will also enjoy other synergies, like the sharing of common administrative facilities. So, adopting a systems approach is useful. It creates more value, maximises synergies and that is what we are doing.

It also allows us to take a lifecycle perspective when planning and designing our infrastructure, which several Members spoke about as well. Dr Tan Wu Meng and Ms Sun Xueling highlighted the need to ensure value-for-money over the lifecycle of our infrastructure. This is, indeed, an area we are placing greater emphasis on.

Dr Tan Wu Meng talked about design. We typically associate architects and designers with aesthetics and they do produce very beautiful buildings. But I think the architectural profession, too, is very conscious that they cannot just design for aesthetics. Structure alone is not enough. They also have to design for functionality and maintainability, and that shift is happening.

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The Building and Construction Authority (BCA) issues guides to help architects and designers better understand how they can design public buildings to achieve safer, more labour-efficient and more cost-effective maintenance downstream. BCA is also helping the industry and the architectural profession to make this shift towards better designs for functionality and maintainability.

Public sector agencies, like HDB and JTC, have incorporated these guidelines into their checklist when they do procurement and projects. So, Members will see a lot more consciousness in lifecycle considerations and in good design when these projects are being done.

With a lifecycle approach, we do not just look at the upfront price of a project but we look at the overall lifecycle cost. One example is when we do a building project to achieve the Green Mark Platinum standard, we, in fact, incur a cost premium of 3% to 5%. But the additional upfront costs are more than offset by downstream savings from reduced energy and water consumption. So, it makes sense from a lifecycle cost perspective.

Apart from such efforts, we are building up core engineering capabilities within the Government, as highlighted by Ms Sun Xueling, to achieve value-for-money for public projects from a lifecycle perspective. The Centre of Excellence for Building and Infrastructure was set up in 2016 under JTC. This is a shared service centre to help build and sustain inhouse engineering capabilities across the Public Service, from planning, design, project management to facilities management.

One example is JTC's efforts to roll out smart facilities management solutions for its industrial properties. By monitoring and analysing real-time data from its buildings centrally, JTC is able to better optimise building performance and respond to faults quickly. After piloting this approach on three of its properties, JTC estimates it can achieve a 15% improvement in productivity and energy savings. JTC is sharing its experiences and lessons learnt with the rest of the public sector.

To maximise value from limited resources, Government agencies also look for new and innovative ways to "do more with less". We continue to challenge the status quo and make use of technology to enhance work effectiveness while achieving manpower savings. One example is the Parking.sg app. I am sure many Members would have heard about this or are already using it today. We have been trying to do away with parking coupons for some time. The original thinking was that this could be achieved through Electronic Road Pricing (ERP) 2.0, but this would have taken some time and it would have been a very complex system.

Last year, a team of the Government Technology Agency (GovTech), HDB and Urban Renewal Authority (URA) officers came together to develop the Parking.sg app. We now have a quick and convenient way to pay for short-term parking. Drivers are only charged on a per-minute basis and they can extend their parking sessions remotely, instead of having to return to their vehicles to add more coupons. Since the app was launched in October last year, about 250,000 vehicles have used it on more than two million parking sessions.

Delivering value for every dollar spent is the responsibility of each and every Public Service officer. But it should not be limited to Government agencies alone. Through greater partnership with businesses and the community, we have worked hand in hand to deliver better outcomes for Singapore and Singaporeans.

One example is IRAS' hackathon to crowdsource solutions to make it an easier experience for companies and individuals to file their taxes. Filing taxes is never a pleasant experience. But we can make the process streamlined and convenient for everyone. A group of individuals, who called themselves TinkerTax was one of the winners in the hackathon. It is an online application that helps small and medium enterprises (SMEs) prepare for the submission of their corporate income tax returns. With TinkerTax, companies can convert accounting income to taxable income for their income tax returns in three easy steps. This innovative solution helps small companies as it allows them to complete their tax return filing more easily.

Our libraries are also a good example of partnering the community to encourage everyone to contribute towards a shared journey of lifelong learning. Volunteer-run spaces in libraries have increased by over 300% in the past three years. For example, an entire floor of the Tampines Regional Library is run by volunteers. There is also a dedicated library space for volunteers to gather and plan activities to promote reading to other library users.

Together with the re-engineering of its library spaces and services to introduce more automation and self-service, the National Library Board (NLB) has been able to increase its staff productivity. The library space managed per library staff has more than doubled from 88 square metres (sqm) per staff to 183 sqm today.

Next, let me talk about procurement. Ms Sun Xueling and Mr Henry Kwek raised important points about ensuring value-for-money in our procurement, and I will explain our approach to achieving this.

Firstly, the Public Service operates on a common procurement policy framework. Every agency procures through a central procurement portal, the Government Electronic Business (GeBIZ), and most suppliers submit invoices electronically through a platform called Vendors@Gov. This allows Government agencies and suppliers to reap efficiency gains.

Secondly, we consider both price and quality factors when we do procurement. There is a perception out there that Government purchases only on price alone. But that is not the case. About half of all Government procurements today are not awarded to the lowest-priced bidder because they are put out on a price and quality methodology. Quality factors would include reliability, innovativeness, expertise of the vendor, track record and much more.

For construction-related tenders, which make up more than half of our annual procurement value, BCA has enhanced the frameworks to place even greater emphasis on quality from this year onwards. For example, consultancy tenderers are now required to provide a breakdown of the manpower deployment and rates, so that agencies can better assess whether the proposed resources commensurate with the quoted fees.

For building projects, the weightage of quality has increased from a maximum of 40% to a maximum of 50%. BCA has also introduced consultants' and contractors' past performance as a mandatory criterion for tender evaluation. This provides a quality feedback loop to recognise firms that have performed well in previous projects.

Thirdly, the public sector seeks to centralise our procurement wherever appropriate. One way is by aggregating demand for common purchases across agencies. One agency calls a bulk tender on behalf of others. This minimises administration costs and enables quantity discounts.

Today, there are over 70 types of bulk contracts, accounting for about one-third of Government spend in goods and services. The commonly-purchased categories include office equipment, graphic design, travel-related services, and infocomm-related products and services ‒ all on bulk tender.

There is, however, a limit to how much centralisation or standardisation is optimal. Overdoing this can create other problems. For example, we risk vendor capture if many agencies buy from a single supplier and we are locked in to the same supplier for subsequent maintenance and replacements.

We also need to be mindful of providing sufficient opportunities for SMEs. Indeed, many Members often ask about giving more opportunities for small firms to bid for Government projects. If we have too large a contract, it is more likely to be taken up by the big suppliers only. Too much centralisation or standardising also limits flexibilities or variations to meet the unique needs of agencies or situations. So, we need to strike a judicious balance.

Finally, we continue to strengthen procurement capabilities to enable our officers to obtain value-for-money and innovative solutions from the market. We are stepping up procurement training for our officers. Members are aware of this. We have partnered the Singapore University of Social Sciences (SUSS) and the Defence Science and Technology Agency (DSTA) for this purpose.

Lead agencies with deep procurement capabilities are providing advice and solutions to the rest of the public sector. We are also building up capabilities to enable negotiations to be carried out in a fair way that achieves value-for-money and win-win outcomes for both buyers and suppliers.

Mr Yee Chia Hsing asked about the support for the local construction sector. Actually, this cut may be better filed under the Ministry of National Development (MND). I am not sure if I am taking this as MOF or MND. We can discuss further in the MND COS coming up later. Mr Yee asked if we can require foreign companies to form a joint venture with local firms to bid for our construction contracts. This is not permitted under WTO rules. He talked about price-diving by foreign firms. We are aware that this happens, but it is not limited to foreign firms. The fact is that the construction industry is in a downturn. Many companies are bidding for projects and there is price-diving. But, as I have highlighted earlier, price is not the only factor used in evaluating Government tenders. We are placing greater emphasis on the quality factors.

We have also introduced measures to deter "price-diving" because we want to avoid the situation where a company, local or foreign, tries too hard to secure a contract, dives the prices and then ends up not being able to deliver, or worse, compromise on quality just to get the project done within that price. So, for construction tenders, various agencies have adopted practices to identify abnormally low bids and scrutinise the contractors' ability to deliver the projects at such prices.

We also continue to ensure our construction contracts remain accessible to local companies that may be smaller in size. About four-fifths of all our construction contracts are below $650,000 in value, which smaller local firms without a track record can participate in. Where suitable, we have broken up some of our bigger projects into smaller contracts, to give local companies a better opportunity to participate.

Encouragingly, some local companies are also partnering foreign companies to undertake bigger projects, not by mandating it, but they are voluntarily doing so, like Woh Hup, which has been partnering Shanghai Tunnel Engineering to construct an MRT line and station. These are positive examples. There will be technology transfer in future so that our local firms can bid for these projects on their own.

Our approach is not to restrict competition but help our companies level up their capabilities so that they are competitive on their own merits. And we have a whole series of programmes and schemes in place to do this, including the Industry Transformation Map (ITM) for the Built Environment sector, which we will discuss more in MND's COS.

Finally, let me address Mr Azmoon Ahmad's suggestion to share more of FY2017’s Budget surplus with Singaporeans. I should say we should not look at the SG Bonus in isolation. In fact, the entire surplus is given back to all Singaporeans in different ways, not just through the SG Bonus. The $5 billion we set aside for the Rail Infrastructure Fund to build future MRT lines, this will benefit all MRT commuters. Another $2 billion is for subsidies on ElderShield premiums and other related support when the ElderShield review is complete, and that will be happening soon. These premium subsidies for lower- and middle-income Singaporeans will ensure that the enhanced ElderShield scheme remains affordable, and the premium subsidies will directly benefit individuals and families.

So, you have to look at the surplus in totality. We do not save surpluses. We give them all back to Singaporeans, but we give back in different forms. Some will be for spending for future needs, some will be for spending for current needs like the ElderShield Premiums, and some will be through a direct transfer like the SG Bonus. And if we look at the direct transfers, we should also recognise that, besides the SG Bonus itself, there are other social transfers in the Budget, like the Goods and Services Tax (GST) Voucher, the Utilities (U)-Save rebates and the service and conservancy charges (S&CC) rebates. In fact, the support we provide to Singaporeans who need help goes beyond the SG Bonus and these direct transfer schemes. In various areas, like housing, healthcare, education and childcare, we have enhanced the support provided by our permanent schemes over the years with more assistance targeted at the lower-income.

Mr Chairman, against the backdrop of rising needs, the Government will continue to fund our expenditure wisely and manage our spending prudently. We will ensure that our policies and processes for budgeting, procurement and evaluation, help us to optimise resources and achieve value-for-money. We will partner the private sector and the community to create a better future for Singapore.

The Chairman: Senior Minister of State Indranee Rajah.

The Senior Minister of State for Finance (Ms Indranee Rajah): Mr Chairman, let me address Members' questions on creating opportunities for businesses, enhancing citizen experience with technology and the Government's position on corporate governance and tax-related matters.

Miss Cheryl Chan asked how MOF is collaborating with the private sector to co-create solutions for businesses. In line with this Budget's thrust to build a vibrant and innovative economy, Government agencies, including MOF, continue to partner businesses, trade associations, unions and overseas government regulators to deepen international connectivity and strengthen enterprise capabilities. Let me share three such initiatives.

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First, is NTP, which Miss Cheryl Chan asked about. This is a one-stop platform spearheaded by Singapore Customs, with support from MTI, GovTech and the Monetary Authority of Singapore (MAS), among others. It incorporates existing TradeNet and TradeXchange systems, synergising business-to-government (B2G) and business-to-business (B2B) processes, while introducing new services.

The NTP enables trade and logistics businesses to share and reuse data and documents faster and more securely between partners and the Government. This end-to-end digitisation of trade documents and processes will increase business productivity, improve process efficiency, and strengthen mutual trust across the trade value chain.

The B2B tier of NTP went live in December 2017. This first phase involves working with commercial providers to offer value-added services that go beyond customs and logistics. These include service solutions in supply chain financing and trade news. One such example is Nufin Data's New Efficiencies More Options (NEMO), a cloud-based supply chain financing solution which helps traders boost their cash flows by connecting buyers, suppliers and funders to turn trade receivables and payables faster into free cash flow.

More services will be rolled out in the coming months. We welcome collaboration and will continue to engage the various stakeholders to innovate and keep the services offered vibrant. Together with design thinking consultants and DesignSingapore, we have engaged companies to identify areas where new services could be created to support their trade digitisation journey. We also have a developer sandbox which will release specific Application Programming Interfaces (APIs) and data to interested developers to tinker and come up with innovative service offerings.

Collaboration does not stop at our borders. We are also working with overseas partners to make cross-border trade cheaper, safer and more efficient. These tie-ups will give businesses access to their regional and global partners. An example is the Global Trade Connectivity Network that will use distributed ledger technology, which is the technology behind block chains, to build an information highway between NTP and the Hong Kong Trade Finance Platform.

Second, the Association of Small and Medium Enterprises (ASME), with support from the Standards, Productivity and Innovation Board (SPRING) Singapore, ACRA and IRAS, has developed the SME Cloud Exchange Network software. This partnership aims to increase SMEs’ productivity by offering them accounting and human resource (HR) solutions to help them file returns to ACRA, IRAS and Central Provident Fund (CPF) Board. By adopting such solutions, SMEs can now prepare their financial statements and tax submissions in one day, as compared to an average of four days previously. The association targets to benefit 300 SMEs by September 2018, and over 1,500 SMEs in the subsequent 12 months. The Government will continue to work closely with trade associations to accelerate the pace of digital adoption and raise productivity of our SMEs.

Third, IRAS’ API marketplace allows anyone to develop applications that interface seamlessly with IRAS' systems. This is a significant move taken by IRAS to open up its interfaces to facilitate business and productivity solutions. JustLogin and Sage Software Asia are two local enterprises that have incorporated IRAS’ Auto-Inclusion Scheme API into their payroll software. This allows employers to submit their employees' income data directly to IRAS via the vendors' payroll software. Sixty employers have benefited from this seamless tax filing in 2017. For 2018, IRAS has worked with 45 other payroll software vendors to benefit many more employers. This will raise efficiency and effectiveness across the industry.

Such collaboration allows innovative solutions to be developed by the private sector or the community. We encourage more of such efforts to co-create business solutions with the Government. The Government will continue to harness technology to help save citizens' time and effort, as well as provide faster responses and payments to them.

Mr Saktiandi Supaat asked for an update and an overview of how MOF is enhancing citizen experience with technology under the Smart Nation Drive. I would like to announce two initiatives that will be launched in the coming year to help companies meet their regulatory obligations.

To ensure greater convenience for companies, ACRA will be simplifying the filing of annual returns for exempt private companies and private dormant relevant companies in 2018. This will potentially benefit 150,000 companies. Under the simplified process, some of the information will be pre-filled and the companies will just need to go through six simple steps to file the annual return, down from the current 24 steps. ACRA will also be providing the simplified filing service on its "ACRA On The Go" mobile app, so that filing by these companies can now be done anytime and anywhere. To make it even more convenient when it is time to file, companies will be prompted by a short message service (SMS) with a link to the mobile app.

With over 30,000 companies incorporated each year, some new companies may not be familiar with their corporate tax obligations. To help them get it right from the start, IRAS is introducing a new company startup kit. This interactive kit provides tailored information, such as tax-filing timeline and follow-up actions, and automatically sends email notifications with reminders on filing due dates. IRAS will pilot this with around 3,700 startups that are due to file their first tax return this year.

Mr Saktiandi Supaat also asked how the Government is making better use of technology and improving processes to make timely payments to businesses and individuals. Let me share three areas where MOF has leveraged technology to improve the experience of our citizens, public officers and vendors.

First, we have moved towards SMS notifications for the GST Voucher (GSTV). Since 2017, about 790,000 GSTV recipients with mobile numbers registered with SingPass have benefited from timely and accessible updates. We have cut down physical letters, saving $300,000 and 160 trees annually.

Second, the Accountant-General’s Department (AGD), together with the Public Service Division (PSD), the Ministry of Home Affairs (MHA) and MOE, introduced the PaC@Gov mobile app for public officers in 2017. This enables common staff transactions, such as leave and claims to be carried out anytime, anywhere. Since the launch, more than 50% of our officers using PaC@Gov have downloaded the mobile app and more than 400,000 transactions have been carried out through the app in the past year.

Third, we understand the importance of cash flow to businesses. The Government processes an average of two million payments to more than 23,000 companies annually. The late payment rate for the public sector, comprising both Ministries and Statutory Boards, has been reduced by more than half over the past three years and is currently at an average of 6.5%. We target to bring down the late payment rate below 5%, in other words, to achieve at least 95% of timely payment to businesses.

We are working to automate the procurement-to-payment process, which will enable faster payments to businesses. We encourage businesses to issue electronic invoices when providing goods and services to the Government. A paperless and more efficient processing will result in faster payments to vendors.

From 2018, all businesses that transact with the Government only need to submit their payment details once. Businesses do not have to submit their payment details every time they transact with a different Government agency. This helps to increase convenience to businesses. They can also use the Vendors@Gov mobile app to track their payment status anytime, anywhere.

I move now to the issue of Governance. Mr Leon Perera and Ms Sylvia Lim asked about the roles played by Temasek and GIC in relation to their investee companies. Ms Sylvia Lim also asked what role Temasek can play in promoting ethical behaviour in the entities that Temasek invests in. Both made a reference to the Santiago Principles. I should mention that GIC was one of the founding participants of the International Forum of Sovereign Wealth Funds that came up with the Santiago Principles.

Before I address what GIC and Temasek do, I think it will be helpful if I just restate, once again, the legal position with respect to shareholders and companies, so that we all know the framework that we are talking about. Under company law, the shareholders of a company have certain powers, which is to appoint and remove boards, and to have a statutory right to the audited financial statements of the company. However, shareholders do not interfere in the business decisions or operations of its portfolio companies. These are the responsibilities of the respective companies’ boards and management. Temasek and GIC are shareholders of their investee companies. So, they hold the boards of their investee companies responsible for conducting their affairs properly and delivering sustainable returns over the long term.

Mr Leon Perera then asked – he understands, of course, that I said that Temasek and GIC do not interfere with the management of the companies – does that mean that they are truly hands-off? Well, it depends on what he means by "hands-off". If by "hands-off", he is asking do they interfere or get involved in/with the day-to-day management and operation decisions of the companies, then of course, no, because that goes against the general principle of how companies are set up. Shareholders should not really be jumping into the day-to-day management; that is left to the Boards.

But if Mr Perera's question is: do they engage with investee companies, share ideas, talk to them generally about broad topics and investment things, then the answer is yes. GICs' investment teams engage the management teams of their portfolio companies to encourage policies and business practices that support sustainable long-term financial performance. For Temasek as shareholder, it plays the role of an advocate for good corporate practices. Let me share three areas that Temasek is developing such practices.

First, Temasek fosters an ethos of integrity, good governance and sustainability. It does not condone improper conduct and malfeasance. Temasek expects companies in its portfolio to abide by sound corporate governance and robust codes of conduct and ethics and to comply with all laws and regulations of jurisdictions in which they have investments or operations.

So, just last week, Mr Lim Boon Heng, the Chairman of Temasek, reiterated his expectation of governance to the Chairs of major Temasek portfolio companies at the annual Temasek Chinese New Year lunch. Mr Lim said, and I quote: "In markets where practices are questionable and compromising integrity is required to win business or contracts, we have to be very clear – there is a bright red line our companies should not cross…. We are also entrusted with the responsibility of being the owners and guardians of the company’s reputation, and we must always live up to that trust".

Second, Temasek regularly monitors the strategy and performance of its portfolio companies and keeps abreast of industry developments that impact them. This informs how Temasek exchanges and shares views and perspectives with the boards and management of its portfolio companies, so as to better understand their strategies and operating environments.

Third, Temasek conducts regular roundtables or forums on topics of interest to the portfolio companies. Temasek organises or sponsors forums on topical issues. These include topics, such as cybersecurity, insider trading and corporate contributions to community. Some of these forums are also open to other companies in Singapore outside of Temasek's portfolio, as part of Temasek’s contributions to support good governance and sound stewardship.

Changes or new legislation against corruption, such the Bribery Act in the United Kingdom (UK) and the laws on corrupt practices in the United States (US) and Singapore are covered. Other topics include corporate and functional aspects, such as legal, finance, HR or IT. These would be roundtables or forums for the practitioners. For example, Temasek is organising a roundtable on governance and ethics with its portfolio companies in the coming months, on norms and practices on ethical business operations and expectations. Through these forums, Temasek actively encourages certain key practices, such as long-term incentives contingent on performance, or the institutionalisation of formal code of conduct or code of ethics.

I move on now to the topic of tax deductions. Several Members asked about tax deduction matters. Let me thank Mr Ang Hin Kee, Executive Advisor to the National Private Hire Vehicles Association, and Mr Muhamad Faisal Abdul Manap for their feedback on tax deductions for private hire car drivers. Two other Members of Parliament (MPs) have spoken on this issue in recent months. Mr Ang Hin Kee has also made representations to IRAS on behalf of the Association.

Currently, private hire ride-hailing car drivers are not allowed to claim tax deduction on any car-related expenses. This is in line with our long-standing national car-lite policy, as tax deduction of expenses incurred for a private car is not allowed. Private hire car drivers can, however, claim tax deduction on non-car related expenses, such as commission paid to third-party operators, administrative charges imposed by third-party operators, and the proportion of expenses for mobile phones used in the course of providing their services. That said, we note the feedback. We will continue to monitor changes in business models and consumer habits in this area and will review our policies to ensure they remain relevant and effective.

Mr Azmoon Ahmad spoke about tax deductions for donations. Extending the 250% tax deduction for donations is one of our efforts to encourage the spirit of giving in our people. Total donations by individuals and companies have increased by 52%, from $1.8 billion in 2009 to $2.7 billion in 2015. Internationally, our 250% tax deduction for qualifying donations is one of the most generous tax deduction schemes today. Tax deduction for both corporate and individual donations in Hong Kong, the US and Australia are at 100%. At 250% tax deduction rate, the Government co-funds 42.5 cents for every dollar donated by companies. In addition, the Government co-funds up to 55 cents for every $1 donated by individuals.

A flat tax deduction rate, rather than a tiered tax deduction system suggested by Mr Azmoon Ahmad, ensures that donors who have the ability to donate more are not accorded exceptional tax treatment. Many donors contribute out of passion and heart for the community, and not just for tax incentives.

Mr Chairman, allow me to conclude. The Government continues to ensure fiscal prudence, create opportunities for our businesses and enhance citizen experience with technology.

We have made good progress in these areas, and we will continue to improve. We are committed to work in partnership with our businesses, the community and citizens in this journey.

The Chairman: Mr Ang Hin Kee.

Mr Ang Hin Kee: I would like to seek clarification from the Senior Minister of State on the tax deductible part. Surely, now that LTA recognises that vocation drivers for the private hire cars are fairly similar to taxi drivers, I think our tax deductible for car rental and fuel can be in keeping with the approach we do for taxi drivers for the Year of Assessment in this coming tax period.

Ms Indranee Rajah: I note Mr Ang's very passionate advocacy in this area. As I said, we will review our policies to ensure that they remain relevant and effective.

The Chairman: Mr Liang Eng Hwa.

Mr Liang Eng Hwa: I just want to echo what Dr Tan Wu Meng and Mr Henry Kwek have said about designs, how important design is when we look at building design, to make sure that it does not cost more to maintain thereafter. We have many examples on that. So, perhaps, can I ask the Minister whether, in the whole process, we should also seek inputs from Town Councils and NEA who will be there to maintain the building thereafter, to give inputs whether these designs are, indeed, practical? They may look very nice from afar, but is it practical to maintain on an ongoing basis?

The second point is on the issue of leverage, like what I have said in my speech, to leverage the private sector to achieve better value-for-money. There are many examples. For example, in my constituency, we have an Integrated Transport Hub (ITH), and next to it is a commercial shopping centre. If we could have in the planning requirements that require the developer to also build better connectivity to the ITH, for example, that would have saved us some money to build subsequent features to enhance walkability and connectivity. So, maybe this question is best directed at the Second Minister for Finance who is also the Minister for National Development.

Mr Lawrence Wong: Mr Chairman, I am happy to take both questions in both capacities, too. Seeking inputs for design is an ongoing process. We already do that and we want to continue to do that to improve design, not just for aesthetics, like I have said, but for functionality and maintainability. It is an ongoing process. There will always be areas for improvement, I am sure, and we will continue to get feedback from all stakeholders, different agencies, Town Councils, different building users, so that we can continually improve. And this improvement is not, as I have said earlier, specific only to Government projects. There are many other buildings that are being developed by the private sector. So, we really have to get the whole architectural profession to start paying greater attention to designing for these purposes.

On leveraging the private sector, we are in some ways already doing that. The Member would realise we have made some adjustments to some of the requirements. URA has required private developers now, for new buildings, to put in place more connectivity, linking up buildings to another, and then enabling some of the last-mile connectivity within the building development. That is already being done. It was not done previously, but we have stepped up our efforts to do this. Again, it is an area which we will continue to improve.

The Chairman: Ms Sylvia Lim.

Ms Sylvia Lim: Chairman, I have got three clarifications for the Senior Minister of State on the role of Temasek and also MOF. Earlier on, in her reply, the Senior Minister of State mentioned that Temasek was very active in promoting good governance, for example, by conducting seminars, training and so on. I think that is more on a general level. But she did not touch on whether Temasek had been active in, for example, querying suspicious practices in the companies that they invest in. So, I would like to ask her whether she is aware whether Temasek has been playing that role, specifically to query what has been going on in some of its portfolio companies. That is the first clarification.

The second clarification is, in my speech as well as in her response, the Senior Minister of State did mention the Chinese New Year lunch sharing that the Chairman of Temasek had recently, where it was quite clear from his speech that corruption is an out of bound (OB) marker now specifically expressed as something that Temasek would not want to tolerate. Is she aware of any other unethical practices that are OBs for Temasek? For example, do they avoid investing in companies that promote unclean energy or promote tobacco, for example? Is she aware of any other OB markers for Temasek to invest in?

And, finally, the third clarification is: on the role of the Ministry itself, as the sole shareholder of Temasek, I think at least Mr Lim Boon Heng accepts that Temasek is flying Singapore's flag and, if anything were to happen that affects the reputation of its portfolio companies, our country's reputation would be affected as well. So, I would like to ask the Senior Minister of State whether MOF actually has any specific parameters for Temasek as to certain things that should or would not be condoned as investments. I understand, by comparison, the Norwegian Government has got certain excluded investments. I would like to ask whether MOF also has something similar with its investment companies.

Ms Indranee Rajah: Mr Chairman, if I may just take the last question first. Essentially, as the shareholder of Temasek, we do not get involved in their commercial decisions. But MOF's expectation of Temasek is that it must uphold the highest standards of integrity, highest standards of governance, do not get involved in anything illegal, and make sure that they adhere to the highest standards of corporate governance. That is our expectation of them. They are a professional team and we expect them to live up to that expectation. So, in terms of the specific question whether we get involved in what they should invest in, what they should not invest in, the Government does not step into that. But our expectation is that Temasek must act properly and have good compliance with governance and the highest standards of integrity. And they, in turn, I think expect that, too, of their investee companies, as Members would have seen from the discussion that the Chairman had with its investee companies.

Ms Sylvia Lim's second question was where she said that corruption is now an OB marker. Actually, corruption has always been an OB marker, not just now. It has been that case for a long time. But the Member asked whether I was aware of specific investment principles. I will come back to what I said earlier, which is that, obviously, Temasek will not condone anything that is illegal, anything that is in breach of international regulations, basically anything that constitutes bad conduct or improper governance. I think if one reads the speech given by Mr Lim Boon Heng to the investee companies, it really sets out or outlines what his expectation is. I would not go through the whole thing but let me just give some excerpts where he said:

"During my lunch remarks just now, I emphasised how important it is for our companies to guard and uphold the principles of good governance and integrity in business dealings. This is especially so for our Singapore-based Temasek portfolio companies.

Singapore has a reputation as a clean place for both business and Government. We take this reputation very seriously. It is a hallmark of our nation and the fundamental value on which we have built our economy."

He also went on to say: "We are stewards, responsible not just for short-term profits, but really the long-term future of our companies." And he called for their support to bring together all their board members, along with their CEOs and key executives, for their next Roundtable. I mean, in short, he is setting the guidance and direction for the portfolio companies.

And the third question was whether I was aware if Temasek is querying suspicious things. I think it really depends on what the scenario is. I do not have information on what Temasek's information on specific portfolio companies is. But I think I can say this much with confidence. As shareholders, when you have your shareholders' meetings, obviously the audited accounts are placed before the shareholders. I would certainly expect Temasek, as a shareholder, if it sees anything in the accounts that look suspicious, to query it. Do I know or have any personal knowledge what their representatives do at their shareholders' meetings? I do not, but does MOF expect Temasek, when it sees something suspicious in audited accounts, to raise it at shareholders' meetings? The answer is yes.

The Chairman: Mr Pritam Singh.

Mr Pritam Singh: Chairman, I just have one question for the Second Minister. This is with regard to the $4 billion that the Minister mentioned PUB was investing in for development purposes from the years 2017 to 2021 and that some of these requirements would actually be secured through borrowing which would, in the course of his explanation, explain the fact that Statutory Boards do actually borrow from the markets and they have a different approach vis-à-vis the Ministry. Can I just confirm how much will PUB be borrowing for this purpose, for this $4 billion that it needs to upgrade a number of transmission networks and so on?

Mr Lawrence Wong: Mr Chairman, I would not have the specific figure of how much they would want to borrow. But all I would reiterate is that, as I have mentioned, they have transferred $1.3 billion into capital reserves. The capital reserves are set aside and used for future investments. And, indeed, when you look at future investment plans, PUB is committed to setting aside or investing $4 billion in additional water infrastructure. So, obviously, some of this, besides coming out from its capital reserves, will need to be financed through borrowing. Exactly how much and when, I think that is something that PUB will have the information and they will reveal it in due course when they need to go to the markets.

The Chairman: Would the mover wish to withdraw the amendment?

Mr Liang Eng Hwa: I thank the Minister for Finance Mr Heng Swee Keat, Second Minister Lawrence Wong, Senior Minister of State Indranee Rajah and the hardworking MOF team for, among other things, a very responsible Budget − a Budget that secured the means for our better well-being into the future. So, with that, I beg leave to withdraw my amendment.

The Chairman: Is the hon Member given leave to withdraw the amendment? I think leave of the majority is given, amendment is withdrawn.

Amendment, by leave, withdrawn.

The sum of $796,415,600 for Head M ordered to stand part of the Main Estimates.

The sum of $181,365,800 for Head M ordered to stand part of the Development Estimates.