Committee of Supply − Head V (Ministry of Trade and Industry)

12.30 pm

Strategy for Sustained Growth

Ms Jessica Tan Soon Neo: Sir, I beg to move,

That the total sum to be allocated for Head V of the Estimates be reduced by $100.

Sir, during the Budget debate, there were many discussions focused on the "spend" initiatives. However, the underlying assumption to be able to fund and to sustain the initiatives announced, is continued economic growth which is necessary to ensure that we have the means to pay for the initiatives that we have been discussing in the Budget.

In Budget 2012, although there was no specific discussion on the growth strategies, Deputy Prime Minister Tharman stressed when he summed up the Budget debate that for Singapore, being a high cost business environment, economic growth is key. Our economic and social strategies, therefore, are intrinsically bound. To help companies adapt to this environment, we have discussed the need to be productive and to have the relevant skills to grow. So, while we are focusing on restructuring the economy and to drive productivity improvements, we must have engines for growth.

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Given the uncertainties of the global markets as well as slower growth, can the Ministry of Trade and Industry provide an update on the progress made against the growth strategies set out in the ESC? What are the areas that MTI is focused on to drive growth as we continue to position for higher productivity and inclusive growth? What are the markets and sectors that companies should leverage on and invest in to grow? What measures are in place to help local companies and to support them in tapping the opportunities in the sectors or markets for growth?

Yesterday morning, I had the opportunity at an industry event to speak to an entrepreneur of a young start-up. He is part of a programme, so I asked him, I said, "You are doing well, you survive for about a year plus in a very new market in what you are doing. What is it that is helping you keep your head afloat?" And he shared with me that the ability for him to concentrate on what he and his partners are able to do best in terms of the knowledge they brought to their business area was critical, while the programme that they were in provided the ecosystem of support in terms of the right financing, which he said actually was not the most critical, although very important for start-ups. It was really the ability to address new markets, the ability to be able to tap those new markets. These were the factors as well as the ability to mingle and get to know people within that industry and pick on the brains and the best practices. And yesterday, the industry event I was at was actually a platform for these start-ups in the IT sector to be able to position and share their ideas, and therefore, allow them to have that platform.

When you look at that and you then look back at our growth strategy, really, there needs to be a coordinated effort across the relevant government agencies as well as the industry sectors in terms of being able to look at the right infrastructure, the right investments in those areas, the right skills building, the right support, the right policies, the right relationships, to be able to ensure that those growth strategies can be achieved.

Sir, I would like to ask the Ministry to share on the efforts to really drive this coordination, the development of the ecosystem, if I may call it, to support the growth strategies that have been adopted. And, most importantly, an area which I like to get a little bit more information on is really the coordination of ensuring that we have the right skills ready to be able to tap those opportunities and the sectors that we have identified.

Growth Strategy

Mr Ong Teng Koon: Sir, Singapore's successful economic growth was largely predicated on export-oriented focus. This has worked for us for many years. However, as of today, many of our overseas trading and export markets are struggling and in certain cases deeply mired in recession. The US is still struggling to recover from the 2008 global financial crisis despite the recent uptick in economic data. Europe is in the middle of a deep crisis with dismal projections for growth. Tensions in the Middle East are threatening a spike in oil prices and even China is showing signs of an economic slowdown. The OECD reported a bleak forecast for the global economy for the next three years. The International Monetary Fund is sticking to its forecast robust growth for Asia despite looming economic problems across the world, but has recently said that growth has tilted towards the downside. So, taking all these considerations on board, what is MTI's strategy for growth for Singapore going forward? And, in particular, what are the sectors and industries that MTI thinks will be our new engines for growth?

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Productivity and Inclusive Growth

Dr Chia Shi-Lu: Mr Chairman, much has been said about the imperative to raise productivity in all sectors of the economy. The Economic Strategies Committee has recommended annual productivity gains of 2% to 3%, if we are to achieve our economic and wage growth targets. I just want to ask how this is to be achieved given that Singapore has managed to grow productivity by only 1% per annum in the last 10 years, with some sectors actually undergoing negative productivity growth. I hope that MTI can provide an update on proposed strategies to achieve these productivity growth targets, and in particular, if there are new initiatives given the changing complexion of the global economy. And how will MTI continue to support companies in investing in productivity measures beyond the PIC scheme given the uncertain economic outlook?

More importantly, how can MTI ensure that productivity and economic growth is shared among Singaporeans, in terms of concrete benefits such as real wage growth? If we were to observe general trends worldwide, much of the gains from productivity growth and innovation are accrued to the owners and shareholders of companies. And the concern is this: If our local companies and SMEs should become more productive, how can we ensure that the increase in revenue and profits are distributed and shared with the workers?

An analysis by The Wall Street Journal found that as companies produced more with fewer workers or improved the output of existing workers, the lion's share of that gain in the form of record profits went to the CEOs, shareholders and highly paid professionals, rather than to workers in the lower rung in the form of pay raises. The global human resource consulting firm, Mercer, also found that companies are increasingly segmenting their workforce to concentrate rewards on key and top employees. They are less concerned about the lower level employees since it is far easier to hire their replacements.

Another concern is that if wages represent a significant portion of production costs, then the best way to improve productivity is simply to reduce the workforce. Studies at Wharton's Center for Human Resources have found that and I quote, "a generation ago, when a company laid people off, employees who remained saw little change in their work. Now that's not true. When there are layoffs, the people who survive find they have a lot more work to do. Pressures from shareholders and the owners can drive cutbacks even if the company is doing well and productivity is up." While the workers who remain employed may at least benefit from higher wages, what about the workers who have been made redundant? These I do admit are difficult questions to answer and I look forward to the Ministry's views and proposed strategies to deal with them.

Services Sector Productivity

Ms Jessica Tan Soon Neo: Mr Chairman, with the services sector playing an increasingly important role in our economy, business leaders have highlighted that this sector offers potential for Singapore's growth. However, we have been having challenges really looking at improving the productivity of the sector. Suggestions have been made to look for ways to accelerate the transformation of the services sector in Singapore.

To improve productivity, companies in this sector will need to look at re-designing their operations. Apart from improvement in operations, there will also be a need to review the pay structure to attract the right talent to this sector to increase value-add and improve productivity. To encourage a change in perception of service jobs in sectors like cleaning, retail, F&B, there will be a need to look beyond pay, to encourage a culture of respect for these jobs. There must be investments made to provide better work conditions as well as good career advancement opportunities for these jobs.

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Another area that we should also explore is the injection of fresh talent to the services sector. An idea – I would not say it is not a new idea – but it is an idea that I thought about is attracting students to take up these jobs on a part-time basis or as part of an internship. I remember during my younger days, which seems like a long time ago, it was common to see students take up these jobs during school holidays or on weekends. While it does help with the pocket money and the extra funds, what is important is it provides an injection of an understanding of what it takes to do the job and also a little bit of respect for the service culture. And I think we really need to look back and say why did that stop, because it has kind of stopped and when students do take up these jobs these days, it is just for extra funds.

The challenge with services productivity is that it is determined not by quantity but by quality. So, we must somehow look at how we can accelerate the transformation of the services sector to drive greater productivity and I think we need to get fresh perspectives. We need to get a new injection of talent in that space in order to rejuvenate it so I think we need to look for new avenues of especially local talent.

More Accurate Measure of Productivity

Ms Tan Su Shan: Thank you, Chairman. Given that productivity growth is a core focus for the Budget, for us to know that we are on the right track, we need accurate measures of our productivity and growth. However, getting the right method to measure productivity is not easy in Singapore. Most take a very rudimentary approach which is you divide your total output by total labour force. But output in Singapore is highly cyclical and susceptible to volatilities in business cycles. As a result, productivity growth in Singapore becomes very cyclical. If you look at the 2009 to 2011 numbers, they were very volatile and that was due to the cyclical impact of business cycles. These co-mingle our real productivity gains. So, the question is: would MTI agree that a better measure to reflect in improvement in productivity would be the average or even the median real income growth for Singaporeans? After all, productivity growth is really a means to an end and if the end gain is a real growth of 30% accumulative real income for Singaporeans in the next 10 years, then let us not forget that productivity growth is just one way of getting to our end goal.

And according to an MTI study, productivity gains do drive real wage growth. For such gains to translate fully into higher income, then one needs to limit inflation to help the economy restructure. My question is: what are the moves to limit inflation, particularly domestic inflation and are there any qualitative aspects that can help this productivity.

Sir, moves to limit inflation. In my speech yesterday, I stressed that whilst a strong Sing dollar policy does help mitigate imported inflation, one of the key issues is domestic inflation. Does MTI have a target to reduce this? And would the Government consider other kinds of monetary policy focuses like interest rates or supply side measures to temper these inflationary pressures that is wiping out real wage growth?

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Secondly, more qualitative ways of improving productivity. So far, the Government's focus is to improve and measure productivity and the focus has been very much on technology, innovation and skills training. Perhaps, we can also focus on more qualitative aspects. And this could be very simple things like better team work, better collaboration, better sharing of resources both in the public and the private sectors because this means we save time, we save money and if we save time and we save money, then the same amount of work can be done by fewer workers and this also raises productivity. But how does one measure this? It is probably a lot more difficult. So, does the Government have plans for a more distilled and accurate measure of productivity?

12.45 pm

Foreign Workers and the Economy

Mrs Lina Chiam (Non-Constituency Member): Sir, it will be hard to wean off over-reliance on cheap foreign labour due to outdated strategic decisions made on our economic model. Here, I would propose changes to specific policy items regarding foreign workers.

Firstly, Work Permit and S Pass holders have increased steadily over the last decade. There are easily over one million foreign workers in Singapore. More than 20% of the entire population are made up of foreign workers. Easily more than 40 to 50% of the workforce in Singapore will be made up of foreign workers. This is not healthy. This should also be seen in the context of the Government's apparent aim to have a population of 6.5 million some time between 2020 and 2030. Which other nations, or even city-states, depend so heavily on foreign workers?

We have created a monster of all sorts in the chemicals and marine industries in particular. According to figures obtained from the Ministry of Manpower through this House, these specific industries have had a dependency ratio of about one to five or one to seven over the last decade. This means that for every local employed, they are employing five to seven foreign workers. I understand the need for foreign workers in the construction industry, but if the Ministry's reply is that no Singaporeans want jobs in the chemicals and marine industries, then why does the Government continue to pursue these industries? Perhaps, it is time to conduct an economic review and introduce restructuring measures. The entire economic growth model should be recalibrated to creating jobs for Singaporeans, not just to creating jobs in Singapore. Secondly, I would like to revisit levies as a tool for controlling the foreign worker population. Levies push up the cost of business and the eventual victims are consumers in Singapore. As such, I propose the following mechanisms.

Progressive reduction of the construction and marine dependency ratio to one to three. By 2015, firms in these sectors should be completely compliant. Before 2015, firms in these sectors who comply with a one to three ratio can receive tax incentives. Remove levies: levies only increase the cost of doing businesses, and this cost is passed on to the end-consumer, means that we should rely on minimum dependency ratios to control the foreign worker population.

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In order to help SMEs overcome the difficulties in reducing foreign workers dependency, I propose the Government introduce a scheme to allow 25% extra foreign worker quota over the one to three ratio over an interim period. This will help SMEs and local businesses to adjust their productivity over time. MNCs have no excuse because of their mere size and financial capacity to make such changes. MTI should be mindful of what kind of projects to bring into Singapore.

I would also like to ask the Minister if all firms in Singapore, regardless of size, are subjected to equal treatment for the foreign worker dependency ratio regulations across all industries. For instance, are there any existing incentives that allow larger set-ups to have exclusive use of foreign workers beyond what is allowed? I urge the Government to execute measures to cut the foreign worker dependency as they have laid out to do. At the same time, we should extend interim measures to assist SMEs and local businesses through this restructuring exercise.

The Chairman: Mr Teo Siong Seng is not in the House. Mdm Foo Mee Har.

Escalating Business Costs

Mdm Foo Mee Har (West Coast): Sir, many Members of this House have spoken about escalating business costs in Singapore being a worrying trend. I, too, am concerned that this may impact our global competitiveness. The combination of a strong Singapore dollar, higher wages and levies, rising rent, as well as general inflation are pushing up the costs of doing business in Singapore. The issue of rising labour costs is repeatedly cited as the top challenge amidst a tight labour market. A survey of the financial returns of the top Singapore companies showed that profit margins are being "squeezed" and still have not returned to pre-crisis levels. We are now ranked one of the most expensive cities to live in the world − higher than New York, London and Hong Kong. This could make Singapore less attractive when compared to our regional peers. I would like to understand the impact of the strong Singapore dollar on our competitiveness, both in terms of export competitiveness as well as a location for business operations? How have our cost structures evolved over time? What could the Government do to help moderate rising costs? And at what point does the Government intervene with measures to stay competitive?

Affordable Rentals

Mr Yee Jenn Jong: Since the first REIT was formed here in 2002, REITs have grown to be a dominant force in the space leasing industry. The costs of rents remain a huge concern to SMEs. In an article in The Straits Times last month, industry players pointed to REITs as the main driver of increases in retail and industrial rents. We saw closures large and popular bookstores with rentals cited as a main cause. Last year, industrial rents jumped by their highest level in 14 years. I hope the Ministry can actively look at how rental rates can be brought down.

A good place to start is at JTC. Since 2008, JTC has divested 2 million square feet of industrial space to REITs. I urge JTC to stop all future divestment. I also hope JTC can resume its original role of building and leasing affordable industrial space again to SMEs, rather than relying only on land sales and market forces.

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Supporting SMEs

Mr Inderjit Singh: Sir, as I mentioned in my Budget debate speech, our SMEs are badly affected by the double whammy of rapid costs increases and a tight labour market due to the Government's restructuring efforts. The strategy to create a productivity-led growth, and simultaneously cut reliance on foreign labour, is not wrong but let us be realistic and not expect everyone to make progress overnight.

I fully support the need for us to restructure our economy. But, as in the past, the model for restructuring seems to be based on what works for multinationals and big companies and the Government is assuming that what works for big companies will also work for smaller companies and this is completely a wrong assumption. Unfortunately, many of our economic policies, along with it the incentives and support schemes, are based on this same principle and were designed with big companies in mind. The successes of these schemes are also measured by KPIs which favour helping bigger companies and do not motivate our civil servants to help smaller companies. So, we see many small companies not benefiting from them, including the productivity incentive schemes, thus the Government has had to retune the scheme yet again this year. I have said a few times in this House that the approach taken by the Government should be turned the other way round, upside down. Start with your economic re-modelling by looking at SMEs first and it will follow that bigger companies will also benefit and not the other way round. Design incentives schemes with SMEs in mind and the big companies will also have no problems benefiting from these. Sad to say, in all my years here, I have seen that the Government has not been whole-hearted when it comes to helping SMEs.

Sir, on cost of business, I am disappointed that the Government has ignored the cost issues faced by businesses, as many Members have brought up. This years' Budget assumes that cost is not a problem. Many of the incentives assume that companies will make profits and therefore will get something back from the Government. When costs are too high, there is no or little profit, so who gains from all these schemes? I feel that it is a grave mistake on the Government's part of still ignoring cost as a problem.

At the Budget debate, I spoke about the problems created by JTC as also many Members in this House have brought up, with the change of this policy some years ago. As a result, our SMEs are hurt by the escalating land costs and rental costs, which not only impede on their operational cost structure, but also deter them from expanding here in Singapore, and this is forcing them to expand overseas. This is a critical factor going forward and I would like to seek clarification from MTI if this policy would be reviewed. What needs to be done is to adopt, as I mentioned, a differentiated land policy. Do not let market prices drive the rent. Let us compare ourselves against other economies in the world of similar industries.

Sir, on the roles of IE and SPRING Singapore, I feel that the Government can do more to help start-ups in the later stages, particularly with overseas expansion. Currently, SPRING and IE Singapore are two agencies with a focus to assist locally-based enterprises, with the former emphasising capability development and the latter, internationalisation. Whilst the intent is to have specialised expertise to assist and support companies, this has also resulted in gaps to provide comprehensive and integrated assistance to foster globally competitive companies as a seamless approach to nurture them from young. Potential locally-based companies which have the wherewithal to become Globally Competitive Companies (GCCs) but have reached a certain size may also not be within the ambit of either agencies and, hence, are not well served. Other agencies with domain expertise, like A*STAR, IDA, MDA, and so on, may not have a clear enterprise development role, nor are their KPIs directed in this focus.

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And we should be realistic that not all of the 165,000 SMEs can internationalise. But the Government can do more to help new firms go overseas, especially with issues such as cross-border financing, credit guarantees and many other support structures. One way to do this is to give SPRING "an additional charter" of helping local companies and entrepreneurs link to overseas markets. There is a scope for IE and SPRING to merge – in fact, I mentioned this many times in this House before − to create a bigger and stronger agency supporting start-up and the growth of companies here in Singapore. This may perhaps also help the Government understand our SMEs better and devise better economic policies to support them. We have some distance to go still in this area. I have spoken about the need for an agency focused on developing more Singapore global companies before and I hope that we make this a reality soon. If we had provided for such an agency, we would have sent a clearer and stronger signal to our local enterprises that we are committed to focusing on their development.

Sir, on Return of Investments on R&D, while we have done a good job in input factors like the amount the Government has spent in R&D, the equivalent outcome of this R&D is far from desirable. The substantial investments in R&D in the recent past have failed to yield commensurate commercialisation and tangible start-up spin-offs. Singapore's diversification into higher value added economic activities now needs to become much more entrepreneurial and self-sustaining. We need to move away from providing incentives to attract foreign companies and foreign researchers because this distorts the playing field for local enterprises. In fact, many of the big names that we got here, by giving them research incentives and funding, have also left Singapore, after the funding was used up. I am not saying do away with attracting MNCs altogether, but we should also place an equal emphasis on encouraging local enterprises to do more in this area.

Sir, I want to give credit to Budget 2012 to help companies to improve the productivity of the workforce and move away from over-reliance on cheaper foreign workers. However, we need to signal to SMEs that we understand that this will take time and we will allow them space and time to make that transition. And I hope that we will not ignore the plight of our SMEs because they are really struggling, and I am afraid that if we do not take the concrete actions now, before long we will see many of them folding up and we will lose that big support base that we have that creates our job opportunities for Singaporeans.

Assistance for SMEs

Mr Vikram Nair: Mr Chairman, the restriction on foreign worker quotas, as everyone in this House acknowledges, is probably going to hit SMEs and micro-enterprises the hardest. And industries such as construction and manufacturing have been mentioned but also much smaller enterprises including hawkers and small-shop operators. There is also tension because in some industries such as construction, we expect a lot more construction work coming up in the pipeline. Some of these industries may need to hire more, going forward. And I understand the need to reduce the dependence on foreigners as well as to get more Singaporeans into these businesses. One of the things that will follow through from that is that the cost on wages is likely to go up as well because Singaporeans will expect to be paid more. The question I have is really a broad one, and echoes many of the sentiments that Mr Inderjit Singh raised earlier. Will there be any further measures to be implemented to help SMEs cushion the blows in this transition and is it also possible to provide targeted help to these local enterprises in transition to hire more Singaporeans and help them to manage their businesses in transition?

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Internationalisation Efforts

Mdm Foo Mee Har: Mr Chairman, with our small domestic market, the expansion of Singapore companies overseas has been a key pillar of our growth strategy. We saw local firms continue to expand strongly abroad with an investment reaching $31.7 billion last year with Total Direct Investment abroad hitting $393 billion as of end of 2010. To capture new opportunities for growth, it is critical for Singapore companies to be well-supported in their internationalisation efforts. How have the Government's schemes helped companies in their expansion abroad?

China has been a key destination for investments from Singapore. How attractive is this market, given the increasing competition and rising costs of doing business in China, and how quickly and effectively do Singapore companies enter new emerging markets such as Myanmar and Africa to gain a first mover advantage?

Declaring my interest as an employee of Standard Chartered Bank, Sir, I am pleased to hear the setting up of a specialised Project Finance Company to support the financing of large long-tenure projects abroad.

By making this financing available to Singapore companies, the Government will offer large companies a competitive edge when bidding for these projects. I would like to ask and understand if the Government will include in the scheme features that will specially support and benefit SMEs as part of the supply chain to these large projects.

1.00 pm

The Chairman: Mr Sam Tan is not in the House. Mr Lim Hng Kiang.

The Minister for Trade and Industry (Mr Lim Hng Kiang): Sir, I would like to thank Members for their comments and suggestions. Let me first outline Singapore's economic challenges and explain why we need to restructure for growth. Minister of State Lee Yi Shyan and Minister of State Teo Ser Luck will then elaborate on our programmes for increasing productivity, securing new markets and assisting our SMEs.

As Mr Ong Teng Koon has noted, we are facing a protracted slowdown in our traditional markets in the G3 economies. The rise of Asia, however, provides opportunities for growth, but that opportunities also mean more competition from major Asian cities. Beyond our traditional competitors like Hong Kong and Tokyo, as China and India grow rapidly, we will face new competitors from the major cities there. Going forward, therefore, Singapore competes not just with countries, but with cities as well, especially in the services sectors.

Beijing, for example, has a city GDP that is larger than ours; 75% of its GDP is in services; it is growing at more than 8% per year and it has been moving into higher value-added activities. Its Zhongguancun (中关村) is commonly referred to as "China's Silicon Valley". Beijing hosts many headquarters of Chinese companies as well as research centres of top MNCs like Microsoft and Intel. It is a formidable competitor for RHQs and OHQs as well as a city for conventions and meetings. So although Singapore is still ranked amongst the top five global cities in the 2011 Mori Global Power City Index, Beijing is quickly closing the gap, leaping 10 spots from 28th position to 18th position in a short span of four years. Beijing is not the only city. In January, Shanghai's municipal government unveiled a plan to develop the city into an international financial centre by 2020. And as you all know, Shanghai has already overtaken us as the number one container port. Other cities like Mumbai and Delhi will also have the potential to become credible competitors on the back of their fast-growing domestic markets.

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On our domestic front, we will face more resource constraints, especially with the slower foreign labour inflows. Our companies also need to manage rising business costs. Taking all these together, we are indeed facing a different phase in our growth and these factors underscore why we need to restructure our economy and rely on productivity in order to achieve sustained growth over the long term.

Ms Jessica Tan and Mr Ong Teng Koon asked about our growth strategy to address the tougher competition as well as domestic constraints that we are facing. To restructure our economy and raise productivity, we need to do so at four levels. First, for the economy as a whole, we need to expand promising clusters, and grow new ones that will take our economy to the next stage. Second, at the sectoral level, we must continue to move up the value chain to higher value-added activities. Third, at the firm level, companies must innovate and improve their work processes. And at the fourth level, finally, workers must also continually upgrade and undergo retraining so that they can take on the better jobs that our investments and that our companies create. This is very important because restructuring will inevitably involve phasing out activities that Singapore has become less competitive in.

We have a good pipeline of new investments to develop the new clusters as well as to upgrade existing clusters. In 2011, we had a record investment commitment of S$13.7 billion despite global uncertainties in the second half of the year. For 2012, EDB is optimistic that we can sustain such a strong level of investment.

To support these investments, as Ms Jessica Tan pointed out, we need the correct environment and the skills so that these promising sectors can grow. If we have the time to build this pipeline of people as we have done in the aerospace industry, we can train Singaporeans for the job. But, in some areas, we need to jumpstart the sector. Take, for example, our plan to grow data analytics. This is a promising new area that builds on our infocomm capabilities. We need to create the right environment and build up the talent. EDB has attracted global companies such as IBM and Deloitte to establish analytics research centres in Singapore. These centres are staffed with top talent that will drive Singapore's thought leadership in this area. EDB is also working with our local tertiary institutions such as SMU to prepare a pipeline of Singaporeans to take up these good jobs. But Singapore must remain open so that we continue to use foreign talent to complement the Singaporean core.

Sir, our sectoral strategies are also gaining traction. Each sector has its unique set of challenges. Therefore, the extent of restructuring will vary with each sector. Our manufacturing sectors, for example, are largely export-driven and have restructured continuously over the years, moving up the value chain and building new competencies to remain competitive. They must continue to do so. Take the example of the marine and offshore cluster. Mrs Lina Chiam mentioned that we have been allowing our marine and offshore centre a huge quota of foreign workers. But this is how they were able to build a strong competitive sector, reinforcing our Singaporean core with the foreign workers. And today, Singapore is a global leader in this sector – our home-grown champions Keppel Offshore and Marine as well as Sembcorp Marine have 70% of the global market share in offshore drilling rigs and production vessels. However, offshore activities are increasingly operating in deeper waters and harsher operating environments. This means we need more advanced solutions to satisfy the stringent operating requirements. We will therefore allocate $150 million to help companies in this cluster conduct R&D so as to develop capabilities in deep water offshore engineering and seize the opportunities in this new segment.

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As Ms Jessica Tan mentioned, our bigger challenge lies in the services sectors. We do have externally-oriented services activities that are globally competitive. For example, the financial services and business services sectors are globally competitive. The trading of commodities is also competitive. Due to our excellent connectivity and our trade links, Singapore has become Asia's oil trading hub and is home to many of the world's largest players in agri-commodities as well as in metals and minerals trading. Some of our local trading companies have also successfully upgraded from being merely local wholesalers to competing on the global arena. We need more models like these companies. We can do more to enhance our status as an international trading hub by anchoring new, high value-added trading clusters. For example, with the rise of Asia, there is now strong demand for investment-grade gold. IE Singapore will seize this window of opportunity and work with other agencies to grow a new precious metals trading cluster.

However, at the other end of the services spectrum, we have some domestically-oriented activities in logistics, in retail and food services that may not be as globally competitive. There is tremendous scope to raise productivity in these sectors and restructuring to improve this productivity is, therefore, very critical.

Dr Chia Shi-Lu asked for an update on our productivity efforts. As you know, we have been working closely with companies and business associations to develop detailed productivity roadmaps in each of the 16 priority sectors identified by the National Productivity and Continuing Education Council (NPCEC). The NPCEC has already endorsed roadmaps for 11 of these sectors. Many of these plans were just announced last year, and are in the process of being rolled out. This year, we will commit $42 million to drive productivity improvements in the logistics and transportation sector. Increasing productivity in the logistics sector will generate positive spillovers to other sectors because many companies depend on logistics to remain competitive. Minister of State Lee Yi Shyan, later, will elaborate on our productivity efforts across the economy as well as in the logistics sector.

Ms Tan Su Shan asked how we can measure productivity gains more accurately. The metric we use, as you know, is value-added per worker. This is used internationally; it allows us to make international comparisons but we recognise that it can be affected by cyclical swings of the economy.

We therefore complement the macro-level measurements with sector-specific indicators because we know that this is the best metric at the sectoral level to allow us to measure and detect the changes in each sector. For example, for the Retail and Food Services sectors, the suitable productivity indicators would include sales per employee and sales per square foot. These are more directed sector-specific indicators. They will then give us the relevant data to evaluate our progress in restructuring each sector and will allow the companies to benchmark themselves across other companies and also across international comparisons. But we all do recognise that structural changes in productivity will take time and therefore we will continue to monitor our productivity levels over a longer time horizon, especially over economic cycles and not take it just over individual years.

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Dr Chia Shi-Lu asked about how Singaporeans will benefit from our productivity efforts. As you know, we pursue economic growth in an inclusive manner, by generating a spectrum of jobs, not just top jobs, but also good jobs at all income levels. Broad-based wage increases can only be sustained if we are able to achieve productivity at all levels. Therefore our focus is on retraining and upskilling our workers so that they can take on these better jobs that the economy is creating.

Let me now turn to the issue of how we can support our companies in this productivity drive. Mdm Foo Mee Har asked how we can help our companies cope with rising business costs. I think Deputy Prime Minister Tharman answered that yesterday. Our main thrust is through economic growth and through productivity improvements. We recognise that Singapore cannot be a low-cost location and we have to accept pricing costs because of our limitation in space and, more importantly, our shortage of labour. Our best approach is really productivity. More specifically, Mr Inderjit Singh and Mr Yee Jenn Jong asked how we can help our SMEs manage rental increases and also how JTC can play a more appropriate role.

1.15 pm

Let me use this occasion to explain the role of JTC. The industrial property market comprises four main sectors – land, specialised facilities, standard factories, and generic multi-storey multiple-user factory space. In the first segment, JTC allocates industrial land to companies to build their special purpose facilities, provided these companies meet our criteria in terms of value-add, linkages to other sectors of our economy as well as jobs creation. In the second segment, JTC provides innovative industrial facilities such as the Jurong Rock Caverns, the Very Large Floating Structures (VLFS), Offshore Marine Centre, Seletar Aerospace Park, Clean Tech Park, Med Tech Hub, etc. This is to meet the specialised needs of these key clusters. The third segment is standard factories where the investors need a quick start-up and can fit their operations in JTC's standard factories. In all these three segments, JTC has a very important role to play and will continue to do so. For such premises, JTC will price the industrial land judiciously. We cannot price industrial land cheaply in Singapore because land is at a premium. But at the same time, we cannot price ourselves out of the competition. We do benchmark our industrial land price against regional alternatives. By and large, I think JTC's industrial land prices are set at a fair and competitive level for these three segments.

For the fourth segment, the generic multi-storey multiple-user factory space, or what is commonly known as flatted factories, the Government decided in 2005 that JTC should exit this segment. There is already a competitive market for flatted factory space in the private sector. JTC's market share was only 18% at that time. JTC's tenants were enjoying lower rentals than the others. This was inequitable. JTC should be concentrating on the first three segments which are more challenging rather than undercutting the flatted factory private sector players with JTC's lower rentals. That is why JTC divested their flatted factories in order to ensure a level playing field in this segment. It is also in line with the "Yellow Pages" rule where Government would exit from market segments where there are already active private sector players.

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I would also like to address Members' concerned, especially Mr Yee Jenn Jong's concern, about the impact of the Real Estate Investment Trusts (REITs) on rentals. Today, the seven industrial REITs compete with the other property developers and landlords. Like any other landlord, they have to compete in the rental market to attract tenants. REITs are part of the competitive rental market where no single player should have the market power to influence rentals significantly. I would like to assure Members that we will not hesitate to intervene if we see evidence of collusion or abuse of market dominance by the REITs.

While JTC may have exited from the flatted factory market segment, we continue to monitor it vigilantly. Rentals have indeed gone up, in tandem with our economic recovery in 2010. To keep industrial space affordable, we have increased the supply of industrial land to meet the demand. In 2010 and 2011, under the Industrial Government Land Sales (IGLS) programme, about 20 hectares of land was released for every half of the year. This is about 30% higher than in 2008 and 2009. To ensure a more timely supply of space, we have also shortened the project completion period for the IGLS sites from eight years to between five and seven years.

Mr Chairman, we recognise that restructuring is a difficult exercise, particularly for our SMEs, but we are serious about helping them to overcome these difficulties. The Minister for Finance has announced a slew of Budget measures: a one-off cash grant of up to $5,000 to offset higher business costs, enhancements to the Productivity and Innovation Credit, and so on. Beyond these short-term measures, SPRING and IE Singapore have a comprehensive suite of schemes to help our companies build capabilities, improve their competitiveness and expand abroad. We have distributed the brochure summarising the numerous schemes that are available to support our SMEs.

How do we reach out to the SMEs? First, we have the Enterprise Development Centre (EDC), a one-stop-centre for SMEs. An officer will be assigned to each company to understand their needs, and to give them customised advice on which of our schemes can best assist them. We are also working with 30 industry associations under the Local Enterprise and Association Development, or LEAD programme, to upgrade each sector. This programme reaches out to more than 20,000 SMEs. In addition, SPRING and IE Singapore have a range of programmes to help SMEs upgrade their capabilities as well as to internationalise. Last year, SPRING assisted some 3,900 companies, while IE Singapore supported some 5,500 SMEs, largely on a one-to-one basis. This shows that between SPRING and IE Singapore working together, they are reaching out to some 20% of our SMEs. This is not a small number and we will continue to do more. In addition, we will commit $200 million over the next three years to increase the support levels for the companies under the SPRING and IE Singapore's capability development schemes. On an annual basis, this is about 40% more than our expenditures in previous years.

Mr Chairman, Sir, in the years ahead, we face a slower global economy – more uncertainties and stiffer competition from Asian cities. We also face domestic resource constraints. So, in this context, we must urgently restructure our economy so that growth is anchored in productivity and innovation. We are serious about helping our companies to cope with rising business costs and to restructure for growth. The Government is not expecting instant results but we are restructuring for sustained growth over the long term. We will put in place the right measures and incentives to encourage our businesses to upgrade. We are working with our companies to adjust over this transition period, but it is important that our companies also do their part and restructure for a better future.

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There are reasons to be quietly confident. There are growth opportunities in Asia and we are well-placed to capture these opportunities. Foreign investors continue to see us as a Global-Asia hub to manage and drive pan-Asian business growth. If I may borrow a terminology used in the durian trade, the growth opportunities are there, but this is not " bao jiak ". We have to work hard, we have to restructure to seize these opportunities but we are confident that we can do so because we have the resources to help our companies and our workers to restructure and to upgrade. Our secret weapon, as Mr Lim Swee Say kept mentioning to us, is our tripartite cooperation. We are in this together, we have overcome previous challenges by working together and I am confident that we can do it again.

The Minister of State for Trade and Industry (Mr Lee Yi Shyan): Mr Chairman, allow me to elaborate on two key strategies essential for our economic restructuring. Several Members have spoken of the need for a nationwide productivity effort. We strongly agree. Mr Inderjit Singh, Government champion for SME, would appreciate the fact that most of our productivity programmes are targeted at SMEs. In fact, we work closely with business chambers and industry associations to design productivity programmes that address SMEs' needs.

From broad-based programmes like the Productivity and Innovation Credit (PIC), to the 16 sector initiatives spearheaded by the National Productivity and Continuing Education Council (NPCEC), to many individualised programmes, we reach out to SMEs in different industries, of different sizes and at different stages of growth. My colleague, Minister of State Mr Teo Ser Luck will elaborate on the various forms of support available to SMEs.

Ms Jessica Tan earlier made a number of excellent suggestions pertaining to boosting productivity in the services sectors. Out of the 16 sectors that the NPCEC is spearheading, 10 of them are services sectors. We recognise that there is no one-size-fits-all solution for all industries, so we develop sector-specific productivity roadmaps. We also benchmark them against the best-in-class in the world we can find and we want them to meet, or even exceed, the other standards.

Let us consider the Food Services and Retail sectors. One peculiar aspect of these sectors is that manpower demand is concentrated at meal times and over the weekends. Working with the industry, SPRING, WDA and NTUC are piloting a "Part-time Pool" programme to create a ready and trained pool of part-timers, including housewives and students that Ms Jessica Tan mentioned, for deployment during peak service hours. This programme will alleviate these industries' manpower shortage somewhat.

As Minister Lim shared, and as Members can see from the circulated brochure, there are many Government assistance programmes for productivity improvement. Ultimately, however, our enterprises will have to take the first step. Consider the example of the Timbre Group. It runs popular live-music bars such as Timbre@The Substation. With SPRING's support, the Group implemented an electronic system for song requests and dedicated messages to be sent via SMS. This saves the staff waiting time from shuttling between dining areas and the stage, but the larger benefit was the new capability of customer profiling and engagement. With their customers' contact information, the Timbre Group can now engage customers with even announcements of future events and loyalty programmes. There are greater prospects for customer feedback, raising customer satisfaction and increasing sales. Indeed, the Timbre Group has observed higher productivity of 20% and they were also able to increase wages for all their workers by 5%.

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As Minister Lim has announced earlier, we are investing $42 million to roll out the productivity roadmap for the Logistics and Transportation sector. This is a significant sector, for it accounts for 8% of the GDP and 6% of our workforce. The roadmap focuses on two areas. First, we will help the industry to deepen expertise and specialisation in the Supply Chain Management (SCM). By learning from global best practices, our SCM professionals will acquire the latest skills to run world-class SCM operations. Second, we will officially launch a Centre of Innovation for Supply Chain Management (COI-SCM) later this year to demonstrate to SMEs how others have embraced technology and knowledge tools. Located in Republic Polytechnic, the Centre will provide SMEs with tailored consultancy services and it aims to help 1,000 SMEs in the next three years. As logistics is a horizontal enabler for other industries, raising the productivity of this sector will also improve the competitiveness of other industries. Much has been said about the challenges we face in productivity across all sectors.

One key challenge is that, amongst our smaller companies, there is a lack of understanding about productivity. Companies may also not know how to apply this knowledge in their businesses.

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To overcome these, we assist them in three broad areas: First, they can visit the Productivity@Work website, this is a one-stop online portal to productivity information and resources. It includes an online Assessment Tool for SMEs to diagnose their productivity performance. This is the best place to start. Productivity@Work has attracted over 162,000 unique visitors since it was launched in 2010. Second, companies can train their own employees to drive innovation and productivity in-house. This is why SPRING, WDA and the industry have collaborated to develop a programme called Productivity Manager Programme for the Retail and Food Services sectors. Upon graduation, participants returning to their companies will be able to champion productivity efforts and drive changes from within. Third, companies can visit the six Centres of Innovation to see real examples of companies with improved productivity. Seeing is believing. We hope to convince SMEs that productivity improvement is not an abstract concept but an attainable reality.

Increasing productivity in-house is but one important aspect of productivity improvement. To overcome our small domestic market, many of our companies should consider venturing abroad. Mdm Foo Mee Har asked about our companies' internationalisation efforts.

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On a macro basis, our exports of goods and services grew annually by 9% to12% respectively over the past decade. By the end of 2010, our companies had invested nearly S$400 billion overseas. The DP Information Group has also found that having international operations was the key to fast growth for Singapore companies. The overseas exposure potentially catalysed development of their products and services too. Our proximity to, and familiarity with regional markets in Southeast Asia, China and India, remains a key advantage for Singaporean firms seeking growth in the region.

One company that has taken advantage of regional demands is Eu Yan Sang. Starting out as a Traditional Chinese Medicine retailer, the company today is an integrated global healthcare company. After the company's IPO in year 2000, it not only expanded overseas R&D capabilities, manufacturing and retail operations in the regional markets, but also increased its product distribution networks to 12 overseas markets. The group's revenue has since grown more than five-fold. While regional markets remain our hinterland for growth, some of our firms, inspiringly, have established themselves further away in emerging markets. Mr Chairman, I will like to now speak in Mandarin.

( In Mandarin ): [Please refer to Pg 1848 for Vernacular Speeches.] Markets further afield like Africa, Middle East and Latin America are beckoning as new frontiers for trade and investments. Some studies suggest 30% of growth opportunities the world will see in coming years would come from emerging countries other than China and India. For the bold and creative Singaporean firms, the less-served and less-competitive emerging markets might offer them niche growth opportunities.

Consider Kheng Keng Auto. Founded in 1980, Kheng Keng Auto traded in used car parts. For many years, it remained a small company with sales not exceeding $10 million. In 2004, the fortune of Kheng Keng Auto changed. Mr Cher then discovered that Africa actually had a strong need for used cars and used spare parts. But in the markets he studied, there were no reliable and efficient suppliers.

But easier said than done. For a small company with no track record of overseas operations, it was a huge risk both financially and psychologically for Mr Cher to start something in Africa. Still, Mr Cher was undaunted. After five years of hard work, Mr Cher finally established himself in Africa's used car industry. Today, Kheng Keng Auto has a presence in eight African countries, including flagship centres in South Africa, Kenya and Namibia. Kheng Keng Auto's sales increased ten-fold (+900%). It was an incredible story of adventure.

I visited Nairobi (Kenya) last November. Mr Cher came out to receive me in suit and tie at the Airport as a fellow Singaporean. Initially, I thought he looked like our Ambassador there. It is such Singaporean network that our SMEs will find precious when going to unfamiliar territory.

( In English ): Sir, to help more Singapore companies export and internationalise, IE Singapore has developed a comprehensive suite of programmes to assist SMEs. Through its 35 overseas offices and multipliers like the industry associations, IE helps companies export their products and participate in overseas exhibitions.

Mdm Foo Mee Har also asked how the Government supports our companies to internationalise. I would like to assure Mdm Foo that the Government is committed to supporting our companies under a 3Cs framework: the first is Capital for accessing finance; Connections for enhancing market access; and Competency for capability development.

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In 2011, IE assisted over 34,000 companies through its broad-based channels and provided 5,500 companies with financial support. IE will increase its level of funding for selected capability development programmes from 50% to 70% of qualifying costs. This means companies would pay only 30% share for the selected programmes in Design, Intellectual Property, Branding, Mergers and Acquisitions. This year, IE Singapore will also expand its suite of financing schemes to increase support for companies, especially SMEs that are exploring new or less familiar markets. We will improve their access to trade financing as well as political risk insurance for overseas investments and projects. For example, a Singapore company may find it risky to trade with overseas buyers that it does not have an established working relationship with. To mitigate such non-payment risks and help our companies better manage uncertainties when exploring new markets, IE will work with industry partners to develop a new trade finance scheme.

Mr Inderjit Singh has rightly highlighted the need for closer coordination across agencies in managing our companies' internationalisation efforts. IE and SPRING regularly share databases to better serve existing clients and to identify new ones. For example, SPRING assisted Prima Taste and Gold Kili, two food manufacturing companies to redesign their products. IE linked them with foreign partners to build their brand awareness and participate in overseas business fairs. Soon, hopefully French customers will be trying out Chicken Rice and Laksa made from Prima Taste sauce kits, and Mongolian consumers will be sipping coffee made from Gold Kili mixes. Together, they bring part of Singapore's flavour to these new markets.

On a broader scale, the Government is increasing market access through Free Trade Agreements. MTI is negotiating significant trade agreements with the European Union and the countries of the Trans-Pacific Partnership. These agreements, when concluded, will improve our companies' access to these markets.

Sir, Singapore businesses must restructure to stay ahead. The road to restructuring may be arduous and even painful. For many businesses, I am afraid it is. But we must not be daunted. The fact that many economies have succeeded in achieving higher productivity, shows that we can do the same if we apply ourselves to it. We need to think out of the box, innovate in-house and revamp our business models.

Past success is no guarantee for future performance. Our firms must build on what they have to seize opportunities, no matter which sector they are in. Ignoring new market trends can sometimes be fatal. Traditional book retailers like Barnes & Noble and Borders in the US are closing many outlets due to encroachment of digital media. Our businesses cannot ignore such trends, whether technological, market or social in origin. The earlier we detect and prepare for them, the better we can restructure for long-term economic growth, to achieve better wages for our workers and a vibrant, inclusive society.

The Minister of State for Trade and Industry (Mr Teo Ser Luck): Mr Chairman, our business sector is undergoing restructuring with a slower economic growth being forecasted and tightening of labour. As we know, from the speeches in this House, there is a need, and everyone is aware and agrees, for our SMEs to restructure for growth. And some have expressed concern about how our SMEs will cope with the constraints. Many raised the issues about labour and manpower. Members who raised those issues, including Mr Vikram Nair, asked if there are measures to help SMEs to cope with the recent changes in the DRCs and foreign worker levies, and whether the Government can help SMEs to hire more Singaporeans.

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The Ministry of Manpower is providing a two-year transition period to help companies to adjust to the tighter DRCs. The foreign worker levy increases are also being implemented gradually in stages from July 2010 till July 2013. In the long run, however, companies must find business models that will optimise limited manpower resources, and explore more innovative ways to attract Singaporeans. Minister of State Lee Yi Shyan shared how the "Part-Time Pool" Programme will help SMEs in the retail and food services sectors optimise their deployment of manpower. Let me add that the sectoral productivity roadmaps also include industry-level initiatives, such as job redesign, to make jobs more attractive.

Mrs Lina Chiam asked how foreign workers are linked to our economic strategy. Foreigners complement our local workforce. In our workforce, our Singaporeans remain the core. In the new and promising sectors like data analytics, foreign talent supplements our local talent and they can provide new skills, impart those capabilities and skills to us and that will help us grow new clusters and also move existing ones up the value chain. The objective is to develop our individual workers' skills, talents, and also help the businesses to move up the value chain.

Personally, I am a beneficiary of the system, having worked for US and European companies. I remember the times when I just entered the logistics market. That was more than 15 years ago. Those days, Singapore called it the warehouse industry, nobody knew about the supply chain management – those buzzwords. Nobody really knows. And I had the privilege to work with one of these people − well, we call him the foreign skilled labour or foreign skilled engineer. He was trained in industrial engineering. Industrial engineering was not very popular at that time nor was it widely offered at that time. He taught me about process flow within operations, within warehouses. That sort of skilled me up. I am an accountant by training and actually without his generosity or graciousness to impart those skills and knowledge, I would not know, I would not be able to develop a skill sets within the logistics industry and to be able to carve out a career and, finally, be able to manage a company like DHL.

So, Singapore must remain attractive not just for our home-grown talent, but also be able to be more appealing and attractive to talents from overseas. But, meanwhile, other foreign workers take up jobs which some Singaporeans may not be very keen on, but are necessary for the economy as a whole. They must complement in order to make sure our sectors grow, especially those emerging industries and new economy sectors.

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In the last decade, that has helped us to be nimble and responsive, growing faster in the years when conditions were favourable to make up for the years when there were downturns. And even as we restructure the economy and slow down our foreign labour inflow, we cannot afford to close our doors to all foreigners. Let me assure Mrs Chiam that we will continue to groom Singaporeans for all these industry positions, even in areas like the aerospace cluster.

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The immediate concerns of SMEs on manpower and other business costs are very real. But this cannot be their only concern. Short-term measures and assistance can help them today, tomorrow and maybe next month. But it cannot help them for longer into the future. Building new capabilities is a necessary step that SMEs must take. Only then can they sustain profitable businesses in the longer term. However, the Government understands that SMEs may be apprehensive to invest in the future, especially given the uncertain global economic outlook. Therefore, we have put in place assistance schemes to support SMEs in their journey of restructuring. They are not alone. We work together with the trade associations as well as the SME sectors to get them through this journey, providing various schemes and programmes for their needs.

In 2011 alone, SPRING assisted more than 3,900 SMEs in their upgrading projects under the Capability Development Scheme (CDS) and other programmes. Another 5,100 loans amounting to $1.4 billion under various Government loan schemes were also extended to SMEs to finance their business expansion. SMEs have used these schemes to upgrade, automate, cut costs, tap new markets, expand capacities and increase their revenues.

Let me give an example. Koufu is one of Singapore's largest food court operators with 53 outlets island-wide. It firmly believes in process improvement and has undertaken several capability development projects and the company recently integrated its supply chain management system and implemented an inventory management portal that helps its outlets to procure faster, reduce paper work and increase sales per man hour by 10%.

To encourage more SMEs to upgrade, SPRING will enhance its support for Capability Development Scheme (CDS) and Innovation Voucher Scheme (IVS) for the next three years. And support under the Capability Development Scheme will increase from 50% to 70% of qualifying costs. The scope of this scheme will also be expanded to include automation and business transformation projects. I also like to mention about the Innovation Voucher Scheme. Based on feedback from SMEs, they are also interested to strengthen capabilities in the areas of productivity, HR development and financial management. We have decided to extend the Innovation Voucher Scheme (IVS) to cover three areas – productivity, HR development and financial management. These enhancements will benefit the smaller SMEs in particular because these are the areas we have to focus on as they survive and are also very concerned about the cash flow issues of the day-to-day. They have to develop these functions to keep them sustainable and also for their ongoing concern.

To reflect its expanded scope and purpose of these schemes, it will be renamed as the Innovation & Capability Voucher (ICV). The ICV can be used for diagnostics, feasibility studies, process upgrading, customised training, product or services development, and the adoption of quality and standards. Many of our SMEs understand the benefits of upgrading, and have also tapped on the Government's support to lower their cost of upgrading. And we would like to create greater awareness for the SME sectors to understand that and to educate them, to know how to tap on those schemes to help themselves. Using the analogy provided by Mr Liang Eng Hwa who mentioned "paddling faster", encouraging the business sector to "paddle" faster like in a bicycle. Now, the road is a little bit rough. If we continue to paddle based on the same tyres, you might just have a deflation of tyres and have to pump in air every single time. As you paddle, you will not be able to keep the speed or go faster. Maybe it is time to think whether you need a new bicycle or even to change just the spare parts of the bicycles or new tyres for all-season weather in order to paddle faster, go through the rough roads and go faster. I think it is an important aspect for business sectors to consider; to relook at their business model, look at all the functions, look at the products and services, retention of talents, people and how they operate on a day-to-day basis. I urge our SMEs, even the micro-enterprises, to do the same to review all the schemes and see what they can do, so that we can help them.

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Apart from scheme enhancements, we will continue to reach out to SMEs through various channels, such as the Enterprise Development Centres, EnterpriseOne (E1) call centres, seminars and workshops. We work with Trade Associations and Chambers (TACs) very closely because they play a vital role in helping the industry and all the SMEs. First, they help the Government agencies to better understand the needs and aspirations of the industries and SME sectors, and they also help SMEs to understand the various upgrading programmes and schemes available, and how to tap on them. They are the "bridge".

I would like to quote one good example. The Singapore Business Federation, in working with the Government, set up the SME Committee (SMEC). This SME Committee actually provided, before the Budget Statement was announced, 17 recommendations of what Government could do, or through the Budget, to help the SME sector. Initiatives as such will encourage all other Chambers and Trade Associations also to be the bridge of the Government to the SME sector, to help us design schemes and draw up programmes to help the business sector.

Mr Chairman, many Members have also mentioned that seeding and nurturing start-ups is an important aspect and this is also one of the main objectives of the Government in developing our local economy and the business sector. Because we believe that would generate a pipeline of promising enterprises which can support our economy and create good jobs for Singaporeans. Besides co-funding programmes such as the SPRING Start-up Enterprise Development Scheme (SEEDS), SPRING also administers the Incubators Development Programme (IDP) to provide innovative start-ups with critical resources, such as mentorship and shared business services. SEEDS and IDP schemes support entrepreneurs of all ages.

Ms Jessica Tan has mentioned that it is important to build an eco-system for all entrepreneurs and start-ups, and that is exactly what we think. Today, we want to make sure that the start-ups, all entrepreneurs "wanna-bes", do not just come to Government to look at the grant. They have to think beyond the grant. And we believe that to build an eco-system to help them achieve the first order of business is a lot more important than just giving them seed funding. How do we help them achieve the first order of business? It is to build that eco-system, the network of contacts, opening paths, if possible, for them, but they have to bite it, carry the baton and go for it. And that is exactly why, under the Action Community for Entrepreneurship (ACE), we have set up an overseas chapter. Hopefully, this overseas chapter will be able to broaden the network, not just in Singapore but to link Singapore to the overseas market for entrepreneurs. So if you are an entrepreneur start-up and you would like to venture overseas and to know more, there is this network that you can tap on. And Singaporeans and successful overseas entrepreneurs will come together to help the start-up. This is very much like the Silicon Valley model. We want to be able to develop that, not just in Singapore but overseas, in the key markets as well. I believe that was what Mr Inderjit Singh has brought up − that we will continue to help the start-ups, not only in Singapore but cross-border, go beyond Singapore's shores and we will help to nurture them. This is at the beginning stage and we need to continue to develop this process to groom them. Time is needed but I am sure we will get there, to be able to develop this Silicon Valley model, both here and overseas.

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Mr Chairman, in conclusion, let me reiterate that it is vital to restructure our economy in order for Singapore to grow and remain competitive because it is a rising Asia now and the competitive landscape for businesses continues to be very intense and very dynamic. We need to do so urgently, so that we can effectively tap on all these opportunities in the growth of Asia. The Government is committed to support our SMEs to restructure for this growth and to bring them through the journey and the process. We hope that with our support, SMEs can better grasp opportunities for growth, and in turn create better jobs for Singaporeans.

Research and Development

Mr Liang Eng Hwa: Sir, total R&D expenditure has increased tenfold since 1991. For 2011 to 2015, the Government has set aside $16.1 billion to support research innovation and enterprise. Hence it is timely that we examine how our R&D strategy has translated into actual benefits for our economy. Have we been a leader in the area of innovation and research? And has R&D helped to diversify our economy and strengthen our competitiveness? How is the Government helping our SMEs to also benefit from the R&D drive in today's challenging environment of escalating business costs and tight labour resources? It is more important than ever that our SMEs can partake in the fruits of our R&D investment to stay ahead of the curve.

Our R&D efforts should not just benefit our economy and our companies but also our people. We have succeeded in attracting top international talent to jumpstart our R&D efforts. Twenty years into our drive, we need to put more thought into how we can nurture our local talents to take up the good jobs in R&D. And this is a win-win strategy, providing a pool of local R&D talents will also ensure that we can sustainably continue our transformation into a knowledge economy.

Dr Chia Shi-Lu: Mr Chairman, allow me to declare my interest as a researcher in the biomedical sector. Mr Chairman, I support most of the sentiments brought up by the hon Member Mr Liang just awhile ago. The Government has invested a lot of resources to support research and development, innovation and enterprise over the past few years and this trend looks set to continue. And I, for one, welcome this move as right and forward-looking. I would like to request that MTI provide an update of how R&D has benefited our economy to justify this expenditure? Much has been said about how biomedical sciences, as the fourth pillar of our manufacturing industry, alongside electronics, chemicals and engineering, have diversified our economy. So, I would also like to request that MTI perhaps share with this House the details of its contribution in recent years and its role in our recovery. In addition, as also mentioned by the Member Mr Liang, how have our local businesses and SMEs benefited from these R&D investments? What are the new investments in the pipeline that will have a major impact on our economy and businesses over the next few years? And what is the likelihood of these new investments proceeding in view of the global uncertainties?

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Furthermore, what is the Government doing to ensure that Singaporeans continue to find employment in the plum jobs generated in the R&D sector and so reduce our dependence on foreign R&D skilled manpower? According to reports, between 1990 and 2009, the number of people employed in the R&D sector, such as researchers, scientists and engineers, has doubled from close to 21,000 in 1999 to over 41,000 in 2009. I have met a number of Singaporeans who have taken up research-related scholarships or have taken up research-related courses of study but they have returned to find that there were no research jobs available for them, making them look for jobs in other areas. On the other hand, we do note that many of the researchers in our labs are foreigners. R&D has created a number of good quality jobs, but we have to continue to attract the best talents and at the same time, we should also have assurances that Singaporeans are given due priority for training and employment in this sector.

Tourism Development Fund

Mr Liang Eng Hwa: Sir, the tourism sector has been doing well. We have managed to ride on the growing appetite for travel from tourists such as those from China and India. The Finance Minister mentioned that the Government will inject $905 million to develop high quality tourism offerings and albeit attract higher tourism spending. And I would like to ask how MTI intends to achieve this. How does this support the economic restructuring we are currently pursuing? While F1 has been successful in adding to Singapore's tourism appeal, there have been concerns raised by the public on the inconvenience caused to motorists due to the road closures. This is a common concern amongst Singaporeans, especially those who work near the street circuit. Weighing the benefits and costs, has F1 benefited Singapore and, based on this assessment, do we intend to extend the F1 race in Singapore?

Mr Yee Jenn Jong: In January 2005, Minister for Trade and Industry Mr Lim Hng Kiang announced the $2 billion Tourism Development Fund to support the Tourism 2015 targets of doubling visitor arrivals to 17 million and tripling tourism receipts to $30 billion by 2015. This Budget has an injection of an additional $905 million into this fund. Can the Minister share: (i) how were the original funds used and why are additional funds needed, given that the $2 billion was to last until 2015; (ii) what projects will be funded by this additional amount and how are these projects different from those unveiled in 2005; (iii) is STB on track to achieve the 2015 targets? What new outcomes and targets can we expect from this funding beyond the original targets; (iv) lastly, how much of tourism receipts is contributed by gaming revenue, and should gaming revenue even count towards the target of $30 billion in tourism receipts, unless it is MTI and STB's role growing gaming revenue?

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Dependency Ratio Ceilings in Service Sector and Tourism Development Fund

Mr R Dhinakaran (Nominated Member): Mr Chairman, Sir, I wish to declare my interest at the outset. The Government has been making various changes to the manpower policies. They intend to improve employability of local workforce and reduce the dependency on foreign workers. Some of the recent effects include progressive and continued interest in the levy on foreign workers. The recent Budget also talks about reducing the DRC for all sectors by dropping another five persons from the existing levels.

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It has been suggested that the efforts and the investments in automation would lead to better productivity and reduce the dependence on cheaper foreign labour. I wish to point out that while the efforts and the intents seemed to be genuine, they completely ignore two main facts. We are today operating at near full employment levels, which leave limited choice for the employer to select from local talent. The policies have chosen to generalise all businesses alike without considering the labour dependency needs of different businesses. Services like hospitality, F&B, retail, etc, are dependent on labour at the front end with barely any scope of automation at point of service. Moreover, every business needs a certain aptitude and the attitude amongst its staff to make it successful. Today, jobs that require standing for long hours beyond normal working office hours, working on weekends and public holidays, are shunned by our local workers. It is just not retail, but services like healthcare as well, that there are simply not enough locals to choose from, given the demand being the nature of the work and the skills. I request a detailed understanding and review so that we have a more realistic approach on quotas and levies taken, keeping in view every type of business, talent requirements, scope for automation and productivity increases, besides the statistics of local talent available for each profession rather than painting all issues with one brush.

Another note: it is heartening to see tourism business growing in Singapore with more arrivals than before. The Government's efforts in enlisting $950 million to bring in high-spending visitors are laudable. I would like to highlight some of the facts which are relevant in boosting tourism. Tourists today see Singapore as a vibrant destination with several attractions that appeal to the tastes of different people. Among the things that make the stay comfortable and enjoyable for tourists are: entertainment, hospitality, retail, and F&B businesses. These industries form an integral part in enhancing the tourist experience while they are in Singapore. Today, these allied businesses, which can play a strong role to support tourism initiatives, have serious issues affecting their business operations. These include a very rapid rise in business costs and acute shortage of right talent locally. With significant assistance, these allied sectors will struggle and may be unable to live up to the raised demands of additional tourists, especially higher spending tourists who expect more personalised services. I request the Government to include these allied sectors for assistance in their endeavours to boost tourism. By leaving out these sectors, the quality of experience for tourists would suffer and may, ultimately, risk our status as one of the top tourist destinations.

Energy

Ms Jessica Tan Soon Neo: Mr Chairman, the rising cost of energy is becoming an increasing concern for households especially in the lower and middle-income families who have seen their utility bills increased with the increase in tariffs. Our lifestyles and industries in Singapore are very energy intensive. The way we live, work and play really drives our reliance on energy and the reliance is pretty high. I would like the Ministry to share with us what are the measures taken to diversify our energy sources and to meet the increasing demand for energy and to ensure resilience and a progressive energy landscape to support sustainable growth. What is our strategy to ensure that Singapore's energy supply is resilient and secure as well? Are we investing in innovations for alternative energy sources and sustainability? Both in the short term and longer term, what measures are being taken to address the cost of energy and the impact on households and companies that operate out of Singapore?

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High Oil Price and Electricity Import

Mr Liang Eng Hwa: Mr Chairman, Sir, tensions in the Middle East have caused oil prices to rise sharply. Brent crude prices hit US$125 per barrel. In addition, there is also increasing energy demand, especially from Asia, to support its rapid economic growth. Singapore does not have indigenous energy sources. Currently, about 80% of our electricity is generated using piped natural gas imported from Malaysia and Indonesia. We also do not have large tracts of lands for solar or for wind farms. As a country, we need to ensure our energy security. The Government recently announced plans such as electricity import, which could potentially be from our neighbours. How would this fit with our strategies to enhance energy security and resilience?

Energy Source and Electricity Tariff

Mr Low Thia Khiang (Aljunied): Mr Chairman, Sir, the monthly electricity bill is a financial burden for many households. Although this Budget has introduced a permanent component – U Save – under the GST Voucher, this is not enough to relieve them of this financial burden. The cost of electricity not only affects households but also industries, especially SMEs. A cheaper electricity tariff will enable our industries to stay competitive. It is, therefore, important that the Government continues to look for more efficient and sustainable energy sources that will translate to cheaper electricity tariff for consumers. I would like to know what is the status of the full retail contestability in the electricity market. Would domestic consumers be able to benefit from this?

We currently import about 80% of our energy needs from Malaysia and Indonesia through gas pipelines. This situation is not ideal as we are over-relying on these two countries for energy sources. It was reported that there is a plan under ASEAN power grid to allow member countries to trade fuel and expand power line connections between the countries. Has there been any progress on this? MTI has also formed a multi-agency team to evaluate the opportunities, challenges and risks involved in nuclear energy. I would like to know whether the study has been concluded and, if so, what are the findings.

Energy Issues and Economic Growth

Dr Chia Shi-Lu: Mr Chairman, I share many of the views expressed by the preceding three speakers. Energy supply and cost have a critical impact on economic growth and development. Rising energy prices have led to increased expenditure on oil imports and also to higher inflation, and put pressure on our foreign exchange reserves. In addition, there are downstream impacts on other commodity prices and this will have a lagged and coupling effect on our CPI inflation. As an international hub, our transportation sector is vulnerable to high energy prices, as is our manufacturing sector. We are certainly at the mercy of fluctuations in the global energy markets. The cost of renewable energy sources, although often touted, is also not insignificant. I have two questions. The first is: how do we ensure that energy issues do not become a constraint on our economic activities, competitiveness and growth? And, number two: what are MTI's plans for encouraging better energy management and promoting greater energy efficiency by businesses and industry?

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Consumer Matters

Mr Lim Biow Chuan (Mountbatten): Sir, allow me to declare my interest as the Vice President of Consumers Association of Singapore (CASE). For the past few years, CASE has been pushing for a timeshare legislation to protect consumers. The timeshare industry is still occupying the third place in CASE's complaints chart with 1,458 complaints last year. This means that there are many consumers who have lost thousands of dollars to glib sales persons who have persuaded them to sign for contracts which are not protected under the current Consumer Protection (Fair Trading) Act (CPFTA) regime. CASE is thus concerned about the lack of regulation in this industry.

Recently, CASE has received several complaints that rogue timeshare operators have modified their modus operandi . Instead of selling timeshare contracts, some companies are now calling themselves investment companies so that they are not caught under the definition of regulated contract under the CPFTA. Some are also collecting deposits via a third party such that the deposits need not be refunded. And some companies have also sold discounted travel and accommodation services and, hence, the five days cooling-off period required under the CPFTA does not apply.

Sir, I urge MTI to widen the definition of timeshare contracts in the Consumer Protection (Fair Trading) Act. We should include any contract that requires a sum to be paid upfront for a tour or travel-related rights which gives rise to more attractive prices on air fares, car hire charges and hotel room rates. There is also a need to impose mandatory disclosure requirements for such contracts. And any breach of the contractual terms should offer some form of contractual relief to the consumer, including the right to terminate the contract. I would also urge the Government to prohibit the collection of any monies during the cooling-off period, and introduce fines for any supplier who breaches such regulations.

EDB's Non-Compliance with Public Service Division's Directive

Mr Low Thia Khiang: Mr Chairman, Sir, the Report of the Auditor-General revealed that the Economic Development Board (EDB) made changes to its staff salary and other conditions of services without seeking the views of the Public Service Division (PSD) prior to making such changes. I would like to know the specific nature and the extent of changes in staff salary and conditions of services that were made without prior consultation with the Public Service Division. I would also like to know how this lapse arose.

The Auditor-General noted that the Permanent Secretary (PS) of MTI had delegated his authority to EDB to approve such matters with effect from February 2007 and recommended MTI to work with EDB for consultation with the Public Service Division. I would like to know from the Minister whether MTI had worked out the procedures requiring consultation with PSD on such matters to prevent future recurrence of non-compliance. It is in the public interest that statutory boards be accountable to their parent Ministries whilst supervising Ministries should exercise due diligence and proper governance over their statutory boards' activities.

Mr S Iswaran: Mr Chairman, may I, first, thank all the Members who have raised issues pertaining to R&D, tourism and energy, and I will respond to them in turn in the context of our efforts to restructure for growth.

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Mr Liang Eng Hwa and Dr Chia Shi-Lu have asked about R&D and how it has benefited our economy, our businesses and Singaporeans in general. We started investing heavily in R&D in 1991 as an integral part of our long-term strategy to restructure Singapore's economy for growth. For example, R&D in biomedical sciences has catalysed a new biologics cluster and played a critical role in attracting investments that will create about 1,500 new jobs. Biomedical manufacturing output quadrupled, from $6 billion to $22 billion, over a period of about 10 years, from 2001 to 2010, and it accounts for about a fifth of our manufacturing value-add.

R&D in electronics helped to introduce successive waves of innovation that transformed this sector from assembly activities to components, and later to advanced manufacturing equipment. This contributed to a more than five-fold increase in value-added per worker in 20 years. Recently, leading semiconductor equipment supplier, Applied Materials, set up a Centre of Excellence with A*STAR's Institute of Microelectronics to develop advanced wafer packaging to create smaller, faster and more energy-efficient chips.

Such R&D collaborations also provide good job opportunities for Singaporeans such as Ms Shalina Sudheeran, a Singaporean, who was able to relocate home from Applied Materials' R&D facility in California. She joins our thriving community of 28,000 research scientists and engineers (RSEs) who have good jobs in our R&D ecosystem, something that Dr Chia referred to. Currently, a quarter of these RSEs are foreign professionals. And to build a strong core of Singaporean RSEs, we launched the A*STAR Scholarship Scheme 10 years ago to identify and nurture young Singaporean scientists.

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To date more than a quarter of the 1,000 PhD scholarship recipients have already returned home to contribute. One of them is Dr Jonathan Loh, a Singapore Polytechnic graduate who now heads a laboratory at the Institute of Medical Biology. Another is Dr Farhana Binte Mohammed Anuar, who graduated from NUS, is now a Postdoctoral Fellow at the Institute of Cellular and Molecular Biology. Dr Lim Yiping, who served at the Bioprocessing Technology Institute, is now an Engineer at global biopharmaceutical manufacturer Lonza.

Whilst we have this nurturing of our local Singaporean talent, we must recognise the importance of international talent who add to the diversity and richness of Singapore's R&D ecosystem. This is a key characteristic of innovation hotspots all over the world. Our openness to top international talent is a distinctive advantage and it allows us to compete on the global stage, and secure growth opportunities for locals. So we must pursue this path with balance and a consideration of the overall competitiveness of Singapore in this space.

Mr Liang and Dr Chia have raised questions on how we have helped the small and medium-sized enterprises (SMEs) through R&D. Our key objective is to transfer technology to SMEs, to enhance their technological capabilities, competitiveness and productivity. A STAR and polytechnic research centres have numerous ongoing projects with SMEs, and have worked on over 700 projects so far in FY2011. For example, A STAR helped Dynaglass Pte Ltd to develop petrochemical storage tanks, a fibreglass floating roof that is corrosion-proof and maintenance free. It enabled the company to secure more customers world-wide, and contributed to over a quarter of its total profits. This is just one example and we can enumerate many more.

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To help our research centres and SMEs proactively identify opportunities for collaboration, we have set aside $1 billion under the RIE 2015 plan. These resources will help take more ideas from basic research to commercialisation. First, we will enhance our enterprise ecosystem in nascent sectors. For example, SPRING has embarked on a new Biomedical Sciences Accelerator Programme to invest in start-ups and facilitate access to knowledge capital, markets and networks. We are also expanding A STAR's GET-Up Scheme, the Growing Enterprises with Technology Upgrade Scheme, to help Biomedical Sciences SMEs develop new products and services. Second, we will devote more efforts to bridge the gap to market. The new IP Intermediary, or Intellectual Property Intermediary Singapore, will proactively reach out to SMEs to assess and source for IP to meet their technology and business needs. Lastly, we will develop platform technologies for key policy outcomes, such as productivity. One model is A STAR's Manufacturing Productivity Technology Centre (MPTC), which helped companies like Tru-Marine and Maha Chemicals to improve productivity and reduce costs. These are some examples of how we have gone about developing our R&D ecosystem and harnessing it to facilitate economic growth to our companies. I am confident that we can spawn more of such partnerships between SMEs and research centres that will pave the way for greater productivity and long-term growth.

Let me now turn to tourism − a sector which has grown well and has further potential. Mr Yee Jenn Jong asked how we spent the $2 billion in the Tourism Development Fund (TDF). The fund was launched in 2005 with a five-year funding commitment period. And the reason you have a five-year commitment period is because many of these projects have a gestation period. You invest early in order to let the infrastructure kick in, then contribute to your tourism spend. The long-term target is $30 billion of tourism receipts and visitor arrivals of 17 million by 2015. The fund has supported many major projects − Formula One, Gardens by the Bay as well as the International Cruise Terminal and River Safari, the latter two are scheduled to open later this year. It has also brought in numerous events and helped our tourism companies build capabilities. These, together with private sector investments such as the Integrated Resorts, have transformed our tourism sector and kept us on track to achieving our long-term targets. In 2011, Singapore had 13.2 million international visitors and tourism receipts of $22.2 billion. This is a 13% increase in visitor arrivals and 17% increase in the tourism receipts. To respond to Mr Yee, tourism receipts include spend on accommodation, spend on shopping, spend on entertainment, so it is a collection and not segmented into particular parts alone. STB's strategies cannot segment the spending activity of tourists in Singapore to the degree that he has asked.

This growth in tourism has also created more and diverse job opportunities for Singaporeans. Let me give Members a couple of examples. Catherine Ho is a former Warrant Officer with 26 years of service in the SAF. Now, she is a Theme Park Manager in charge of park operations in Universal Studios Singapore, assuming there are some relevant skills there. She is now helping to set up operations at the upcoming Marine Life Park. Another example is Gwern Khoo, a chef in the Celebrity Chef Restaurant Waku Ghin in Marina Bay Sands, who has been identified by Chef Tetsuya as a promising local talent with plans to send him to Sydney for further training. He has come a long way from his days at SHATEC and from helping out at his father's duck rice stall. And these are some examples of how the growth in our sector has created interesting and diverse opportunities for Singaporeans.

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The Formula One (F1) Race has also been good for our tourism sector. Besides generating economic benefits and creating a good platform for business networking, F1 has helped to brand Singapore as a global city with a vibrant lifestyle and this has other collateral benefits for us as an economy and as a country. In response to Mr Liang's question, I would say that on the whole, the benefits of F1, both tangible and intangible, have outweighed the costs. Yes, there are certain disruptions like the road closures, and this is something between the Government agencies and the race promoter. There has been significant effort to reduce that by more than half to about six days now, compared to where we were at the start, but we need to continue to work on this. Overall, the benefits have been significant and they outweigh the costs and any decision on an extension will have to be premised on the value that we can continue to derive from such an event. The Government will make this decision only after carefully weighing all factors.

We must build though on these significant tourism inroads that we have already made by seeding the sector's next stage of growth. We must especially focus on quality or yield-driven growth by attracting tourists to visit more often, to stay longer and to spend more. That means enhancing the tourism experience through creativity and innovation, higher capabilities and productivity, and superior service standards. For this, we are injecting $905 million over the next five years as the second tranche of the Tourism Development Fund.

Mr Yee and Mr Liang have asked what strategies this second tranche will support. First, we will invest $300 million to build on Singapore's positioning as an international Lifestyle and Business Events Hub through the Tourism Events Development Scheme (TEDS). It will seed and anchor best-in-class events, whilst bringing in international conferences and exhibitions as well as leisure and lifestyle events. Second, we will co-create new tourism products with the industry, and rejuvenate existing products, through the Tourism Product Development Scheme (TPDS). A sum of $340 million will be set aside to drive new concepts and ideas for tourism products. Third, we will invest $265 million to enhance capabilities in our tourism-related enterprises as a part of our key drive for higher tourism yield. Mr Dhinakaran raised the issues of manpower and the challenges faced by some of the companies in the sector. Substantively, the points on DRCs and levies have been dealt with in the Finance Minister's discussion earlier on the debate, and also earlier in the COS discussion. Let me complement that by talking about what we are doing specifically in one or two areas. STB drives a productivity roadmap for the sector, and what it seeks to do is increase the attractiveness of jobs through redesign and reengineering of business processes. This will attract more Singaporeans to come and work in this space. We are open to more ideas from the industry on how else we can increase local labour force participation rate.

We are expanding the types of tourism-related training we support under the Tourism Capability Development Scheme (TCDS) to include specialised skills that can further increase productivity and enhance service delivery. So, to address Mr Dhinakaran's concern about the lack of right talent, this scheme will also support local leadership and talent development in order to continue to build the pool of Singaporeans who can actively contribute in this space. We expect this range of initiatives and investments to sustain our yield-driven strategy for tourism as we work together with the companies in this space.

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Sir, let me now turn to energy. As we restructure our economy for sustained growth, we must also pay heed to the potential sources of external shock and cost pressures. One such area is energy, a point that many Members have made. Singapore relies heavily on imported energy. This exposes us to supply risks and price volatility. This is a reality, not just for us but many countries around the world. Furthermore, we lack the geographic and climatic conditions for large-scale adoption of alternative energy, a point raised by several Members. In other words, whilst we can try and promote alternative energy sources in Singapore, it cannot be, at least at this stage given the state of technology, the source of our baseload energy requirements. Therefore, as Mr Liang, Dr Chia and Mr Low Thia Khiang have highlighted, we need to strengthen our energy security to ensure that we have reliable and competitively priced energy supply. Hence, we are exploring new energy options from diverse sources and fuel types.

One example, we are building a liquefied natural gas (LNG) terminal. It will commence operations in the second quarter of next year, 2013. This terminal will give us access to the global gas market, in other words, going beyond the region to tap on opportunities around the world and the advantage of that, especially in the current environment when the world is discovering new vast quantities of gas from unconventional sources, such as the shale gas.

In the medium term, electricity imports could also allow us to tap on energy options which might not currently be available in Singapore. We are studying how it can be implemented without compromising the stability and the security of our system. And at the same time, we also want to see how some of the benefits of doing so can be passed on to our consumers, whether it is households or businesses alike. This will take some time in order for us to understand the possibilities and also scope out what the industry is able to do. This effort, if it bears fruit, can also be part of a regional or wider effort to develop an ASEAN Power Grid in the longer term. But that will take a lot longer because it requires different countries, different jurisdictions agreeing to interconnect their grids, so I think we will need a lot more time for that. Singapore can start looking at options for our own needs, which is what we are doing through this electricity import initiative.

Our nuclear energy, the feasibility study is ongoing. And I want to stress again that this has been said many times, even with the completion of the study, we will still be a long way from making a decision on nuclear energy. Our objective is to gain a better understanding of the technological developments in this space because there are significant movements, and understand better the issues such as the safety, security and economics of nuclear energy, especially in the context of a country like Singapore, given our constraints.

Ms Jessica Tan, Dr Chia and Mr Low have asked about managing rising energy prices. As we import almost all our energy, I think we are well aware we are price takers exposed to the global trends. One strategy we have adopted is to continue to promote competitive supply, in other words, competition in our energy market. Over the next few years, our net generation capacity will increase by more than 2,000 MW or about 20% of our installed capacity. And the chart shows the increase, but it also shows that we have significant increase. In fact, all the increase is going to come from the Combined Cycle Gas Turbines (CCGTs) plant, which is the most efficient power generating plant. So we will have more supply, and that supply is also going to be more efficient, and that should exert downward pressure on electricity prices.

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But we also must look at demand side measures as we can also manage energy costs better by using energy efficiently. In fact, many described energy efficiency as another source of energy. Therefore, we will introduce fresh initiatives and funding to help households and businesses in this area. First, we will allocate about $100 million for the Economic Development Board to extend the grant for Energy Efficient Technologies (GREET) and to work with private players to pilot repayable financing schemes. These initiatives will help more businesses overcome market barriers to energy efficiency, such as high upfront costs of putting in some of the energy efficiency measures.

Second, we will roll out the Intelligent Energy System trials to selected households in Punggol and selected businesses. This pertains to the point raised by Mr Low on full retail contestability. To have full retail contestability first, consumers must be able to get meaningful information, which is what we seek to do through devices such as smart meters, in-home display units, and related applications. With such applications, consumers can monitor electricity consumption in real-time to optimise usage and save costs. But that is not enough in and of itself. Beyond that, we also need the backward integration with payment systems which is a separate exercise altogether. So, this is a work in progress. We will be in the cutting edge of this because very few countries in the world have gone this far. There are some efforts in some parts of the world, but they are all learning through implementation.

Still, when we look at it in total, rising energy prices may pose difficulties for some households, a point that Mr Low Thia Khiang has highlighted and, indeed, I think all Members of this House will well appreciate. As a policy, we have not subsidised energy consumption, as we believe that this would lead to inefficient use of a scarce resource. And I think this is a point well hoisted in when we look at the experience around the world. Rather, we have chosen to provide targeted assistance to those in need through permanent Utility-Save rebates. On average, these rebates, for example, if you take a 3- or 4-room household, these rebates amount to about two to three months of their electricity bill. This is an important form of assistance, because it means up to a quarter of their electricity bill a year can be met through the Utility-Save rebates.

Having said that, households must also take charge. We need to look at more energy efficient ways of doing things in the home, and this is where the efforts through MEWR to educate our consumers on how they can go about buying more energy efficient equipment, eg, their household appliances. This is an important step that we should continue to follow through.

One impetus in the power sector is to ensure the continued availability of skilled technical personnel. Our power sector must be supported by experienced professionals like Deputy Manager, Mr Jamal Bin Jamali, who joined Tuas Power 15 years ago. Our challenge is that 15 years from now, many veterans like him will retire, and they will reduce the power sector technical workforce by about 40%. Scholarships have helped to attract and retain fresh talent like Ms Chu Xiao En, a Singaporean overseas graduate, who is now working in Sing Power, but we need to do more. And to this end, the Energy Market Authority has formed an industry-led Power Sector Manpower Taskforce. It will recommend strategies to attract, retain, and develop manpower, and identify the skills required for the longer term.

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Sir, in conclusion, I want to emphasise that we need to build on our strong foundation by restructuring our economy for the next phase of growth. Whether it is by harnessing R&D to help our SMEs, whether it is by boosting tourism, and also paying a close attention to the energy aspects of our economy and managing that challenge. If we do this right, then we will be able to continue to seize economic opportunities for Singapore and create good jobs for Singaporeans.

The Chairman: Mr Teo Ser Luck. You have slightly over three minutes. I hope there is enough time.

Mr Teo Ser Luck: Sir, let me now address Mr Lim Biow Chuan's question on consumer protection for timeshare. The main legislation protecting consumers against errant timeshare companies is the Consumer Protection (Fair Trading) Act (CPFTA).

In April 2009, based on feedback from CASE, MTI strengthened the timeshare-specific provisions in the CPFTA. We extended the mandatory cooling-off period from three to five days, introduced a 60-day refund period for contracts cancelled within the cooling-off period, and extended these provisions to timeshare resellers, in view of the rising complaints against resellers.

Complaints on timeshare operators filed with CASE have since fallen significantly from 571 in 2009 to 358 in 2011. But I do understand that it is still CASE's highest ranked complaints of all cases. MTI is looking into Mr Lim Biow Chuan's suggestions and we are studying if further enhancements are needed, and intend to consult the public later this year.

Let me also address the points raised by Mr Low Thia Khiang who asked about EDB's non-compliance with PSD's directive.

The approving authority for setting salaries and other conditions of service in statutory boards is the Permanent Secretary (PS) of the supervising Ministry. MTI delegated this authority to Chairman of EDB with effect from February 2007 because the Chairman plays an executive role in managing the organisation or EDB.

Changes to EDB's salary structure included making improvements to how EDB computed its annual corporate bonus quantum. This computation method was revised to better link EDB's corporate bonus to organisational performance, and is now based on EDB's performance in attracting investments, the performance of the industry sectors under its charge, and the organisation's ability to generate operating cost savings. And those are the KPIs for the statutory board as a whole.

EDB also integrated all salary grades into one holistic scheme to allow capable non-graduate officers to progress into graduate level salary grades. If not, they will have to be transferred from a non-graduate grade to a graduate grade in order to progress further up.

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While we recognise that these changes are steps taken in the right direction but we also recognise that the lapse was in not seeking the views of PSD. So this has now been rectified. A clear understanding on the specific areas that require MTI and EDB to seek the views of PSD has also been established between MTI and PSD. And yes, statutory board is accountable to MTI and MTI will continue to have oversight.

The Chairman: We have some time for clarification, Members. Mr Yee Jenn Jong.

Mr Yee Jenn Jong: Sir, I have two categories of questions relating to the two cuts that I have made. The first is regarding the strategy of using land sales to manage the cost of industrial space which the Minister for Finance and also the Minister for Trade and Industry mentioned today. I like to seek clarity on how the Government prices the land sales. Last year, there was this Paya Lebar industrial site that was not awarded because it went below the price. So there is some perception that during economic boom, developers would bid very high prices and we award to the highest bidder, but when the market is down then we will not award. So, will this be artificially keeping prices up so that it is quite impossible to have rent rates going down?

I am also concerned that there is the effect that REITs being a dominant force in the market now, they are actually price maker in the rental market. So, if we take the rent benchmark to price land, then we will have a cycle that it can only go up, it can hardly come down. So, I need clarity on this.

The second question that I have relates to the Tourism Development Fund. I am not sure if I missed out something, I just want to understand. On the committed amount to the Tourism Development Fund since 2005, is it $2 billion plus an additional $905 million? Is the KPI still being set unchanged to 17 million for tourist arrivals and $30 billion in tourism revenue?

I also just want to clarify the question that I made regarding gaming receipts. I notice, for example, that tourism receipts jumped 49.6% in 2010 and that coincided with the opening of the two IRs in January and April respectively. I also notice that gaming revenue is classified under "Sightseeing and Entertainment". So, my question – for the original $30 billion receipt target in 2005, did it actually factor in gaming as revenue?

Mr Lim Hng Kiang: Sir, let me take the first question and Mr Iswaran can take the second question.

The Government land sales procedure is very well documented. It is the same procedure whether it is industrial land sales, commercial land sales or residential land sales. Basically, land is protected. It is considered part of the old reserves. Therefore, the way we sell land in Singapore has to go through the same processes which are agreed to with the President. Essentially, we must sell land at a competitive market rate; otherwise, we are not preserving old reserves. To do so, we need evidence that there is competition. And if there is competition, then we go at the going market rate of the highest tender. If there is not enough competition, then of course we have to satisfy the Chief Valuer, who is.an appointment made by the Elected President, to make sure that we are selling land at the right price and not under pricing it. So, that is the procedure for the sales. So we can have sales that come in with very few tenderers and still being awarded, because the Chief Valuer certifies that this is reflective of the market price.

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Mr S Iswaran: Sir, I thank the Member for his question. Let me take the second point first. I am not sure why he is so fixated on this gaming revenue element but let me elaborate.

Firstly, when we do a tourism revenue forecast, we take into account all dollars spent by the tourists. I do not think we split them up, and whether expenditure on shopping should be under another body and so on. We look at the total amount tourists spend. This is how STB did its forecasting when it launched its programme for the Tourism Development Fund.

Importantly, and I think this is important to register, this is a purely private sector investment. There was no Government money used on the Tourism Development Fund or any other source to support this project. So, essentially, these are projects that were conceived in order to enhance the tourism environment as part of a larger ecosystem in Singapore. And it is difficult really to start splitting out what is the tourists' spending because of the IRs, what is the tourists' spending because of other new entertainment and other new products we have in Singapore. So, we look at it collectively as part of the overall wallet and the share of the wallet that we are able to draw into Singapore.

The second question, which is his first, on the Tourism Development Fund, yes, it means that there was $2 billion in the first instance as a first tranche, and there is now $905 in the second tranche. So, the question is: why are we having a second tranche? Let me explain again because I think it may not have been clear for the Member. We put in the first tranche in 2005 and we said that there was a commitment period of five years, because these investments would need to be incurred early in the period in order to generate the returns over the longer term, and that is what we are seeing now. Many of the investments we made in the first five years are now beginning to yield results for us, and some are still coming on-stream, such as the International Cruise Terminal and the River Safari. And secondly, this new tranche is not just about achieving these numbers that we talked about. It is to go beyond that and drive our yield driven tourism strategy and also to raise productivity and create more job opportunities in Singapore.

Mr Low Thia Khiang: Sir, my first clarification is on electricity tariff. I understand that there is a $100 million fund to help industry to use energy efficiently. Besides the new initiative in Punggol monitoring the use of electricity of households, would the Government also extend the same help or assistance to households to educate them how to use energy or electricity efficiently and thereby save some electricity costs?

Sir, my second clarification is on the EDB. I am not clear about the Minister of State's answer. I would like to know whether there is a need now for EDB to continue to seek consultation from PSD on the changes with regard to staff, as the Minister of State referred to having an Executive Chairman at EDB and all that. Secondly, if there is still a need to consult PSD, what procedure has the MTI or EDB worked out for this consultation process? And how did the lapse happen in the first place? Did they forget to consult or they did not know at all?

Mr S Iswaran: Sir, I thank the Member for his question. I am glad that he agrees with us. This is an important effort to educate our households, because whilst we are doing what we can to mitigate the impact of higher energy prices, much of which is because of global developments, through specific initiatives like U-Save and what we are doing in our industry.

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Our households have a lot that is within their control, in terms of how they go about undertaking more energy efficient ways of running a household. And that is why we have significant investments already being made through the Ministry of the Environment and Water Resources' efforts. If we look at the ticks that are on electrical appliances and also to educate household members by looking at their bills and seeing which are the parts which they can perhaps trim, maybe because there is an air-conditioner in the home that they can use more efficiently and so on. This is something we are totally committed to. An important part of that effort − and I want to stress this because sometimes this comes up and, in fact, some Members of Mr Low's Party have raised this − is indeed the pricing of electricity. Because if we subsidise electricity, then we are dulling the instincts of the average consumer in appreciating what is the true cost of this very scarce and precious resource. So, our pricing strategy is an important part of this whole mix of education, targeted subsidies and industry developments on the supply side and demand side, in order to try and manage our energy constraints and ensure we have sustainable and competitive energy supplies.

Mr Teo Ser Luck: Sir, just to clarify. The EDB will have to consult PSD before making the changes from now onwards. As to why it happened in the first place, there was a lapse which means that EDB did not consult PSD when it made the changes previously. That was the finding and it was published. The procedure is that whenever EDB is going to make changes, especially for the human resource aspects, they will have to consult and seek the views of PSD before making those changes.

Mrs Lina Chiam: Sir, I would like to clarify. I thank Minister of State Mr Teo Ser Luck for his answer to my speech just now. I would like to clarify that I am not against foreign workers coming to work in Singapore. I do agree with Finance Minister Mr Tharman Shanmugaratnam. We do need them but they must be for certain specific jobs when they come to work in Singapore, and they are really giving us good quality things to do in Singapore. I am sorry I do not know how to put it into words. They do give quality work to Singapore. I want to ask why there are so many foreign workers working in the marine, engineering and chemical sectors. That is the reason why I highlighted the point about foreign workers. The ratios are one to five and one to seven.

Mr Lim Hng Kiang: Sir, let me deal with that question first and maybe Mr Teo Ser Luck can follow up. As I mentioned in my reply, the marine sector as well as the processing sector are very important sectors of the economy. With the foreign workers participating in the marine sector, in fact, we are able to capture 70% market share of the oil rig and production vessel sector. Without the foreign workers, we cannot be in that very strong commanding position. And it is complementary. At the workers' level, the estimate is maybe 80% foreign workers and 20% Singaporeans. But for the engineering and the naval architecture design sector, it is 80% Singaporeans and maybe 20% foreigners. So, this is how the Singaporean core is complemented by the foreign workers to make our industry competitive. If we follow what she has suggested and cut it down to one third, then I think we are putting a lot of strain on the industry, and the industry will not be able to compete.

The Chairman: Mr Teo Ser Luck, would you like to add to that? No. Mr Liang Eng Hwa has a clarification.

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Mr Liang Eng Hwa: Sir, the tourism 2015 target for visitor arrivals is 17 million and currently we have about 13 million visitor arrivals. So, this is a four million increase in three years. This is obviously a laudable target. I would like to ask the Minister whether we have the space as well as the tourism related capacity to cope with this four million increase in three years. Whether it is the hotels, the airlines, the tour guides, the F&B service staff, etc. Perhaps the Minister can give us a magnitude of that?

Mr S Iswaran: Sir, I thank Mr Liang for his question. Allow me to respond to that in two ways. The first is the rate of increase that we have seen is contributed by different factors, not least of which is what has been happening in Singapore itself in terms of developments, but also the rising demand from Asia for leisure products and tourism travel.

From a supply side perspective for us, if we look at, for example, a key piece of infrastructure which is our hotel stock. And if we look at what has been happening in that space over the last three years, there have been significant additions. With the advent of the IRs alone, we have added something in the order of magnitude of about 6,000-8,000 rooms, if I remember correctly, in the last few years, and there are some more to come. And then we have other new hotels coming on stream, not just at the premium end, but also in some of the budget and mid-tier levels as well.

So, there is this development, and the Government continues to have land available, land sales programmes for this sort of projects. And we really leave it, to some extent, to the private sector to make the judgment call, and they will draw their inferences from hotel occupancy rates and the average room rates to get some measure of how things are going. Last year, we were averaging something around the high 80s, which suggests that we are not quite bursting at the seams, but we are operating at a fairly healthy level if we look at hotel utilisation rate.

The other part, I would say that, in general, we do want to manage our growth in this area in a clever way, because it is not just about quantity but it is also about the quality of the tourism growth that we have. And that is why I made the point about high yield tourism. In other words, it is not just about having more people come here, but it is also about looking at how we can get the right type of people to come here more often and to stay longer and to spend more. We need to look at that. It does not mean that we migrate to just one end of the tourism market, but we need to constantly work at the mix of tourists that arrive in Singapore.

Dr Chia Shi-Lu: Sir, I thank the Minister for the replies to my cut on R&D. One of the stated goals is for R&D spending to reach 3.5% of GDP by 2015, and this will include both public and private sector spending. I have two questions. One, is there a target ratio in terms of what the public and private R&D spending would be? And, two, given the uncertain economic outlook over the next few years, are there any measures in the pipeline to encourage the private sector to continue spending on R&D?

Mr S Iswaran: Sir, on the ratio between public and private spending, typically, what we have seen is about one is to two, or thereabouts. But I do not think we want to be terribly formulaic about it because it really depends on the contexts of the type of industry and what they are doing. But that seems to be the general pattern. We seek, of course, to ensure that every dollar of Government investment in R&D gets its bang for the buck from private sector investment of an equal level at least, but typically we look at higher multiples than that.

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On the broader question of whether economic uncertainty will affect R&D spending − the Government component clearly is a well-defined one, and that creates certainty in the market, not just for our research institutes and researchers, but also, in general, as a signal to the market that this is the commitment the Government has made over a five-year period. In fact, if we looked back, in the previous five-year cycle, even at the depths of the recession or the downturn, we maintained our R&D spending. This was noticed around the world as a clear commitment. We will continue to do that. Then businesses, of course, will have to make their calculations and adjust according to the circumstances.

Mr Low Thia Khiang: Sir, the Minister, in his reply, gave the reason why the marine industry is given such a high dependency ratio ceiling. He said that as a result, the industry becomes competitive and we will be able to generate growth and it is an important industry in Singapore. So, on the same wavelength, is he also saying that those industries which have been given a lower dependency ratio, they need not be so competitive internationally and that they are not important to Singapore?

Mr Lim Hng Kiang: We have taken a very pragmatic approach in developing the various sectors and providing access to foreign workers. For example, in the construction sector and the process sector, we recognise that Singaporeans shy away from these jobs and therefore the dependency ratio or the quotas for these sectors are set higher than the average for the manufacturing sector.

For the marine sector, this is historical. The Member will know the history of our marine sector. We grew from the conversion of our naval shipyards and the companies have done extremely well. But even so, the companies are on notice that they have to restructure. And what I have announced just now, the $150 million funding of R&D is to help them make this change, to restructure because they will also realise that they cannot have the same access to foreign workers in the long term compared to what they had previously.

Mr Nicholas Fang (Nominated Member): Sir, I would like to direct the question regarding what the Minister mentioned about the nuclear sector. It is heartening to note that the nuclear study has been completed but we are still a long way from making a decision. I am trying to understand. Given the fact that in the region, a few countries in South East Asia are going great guns with their nuclear programmes, are there any plans for us to at least begin developing some kind of knowledge capability, so that we can be part of the conversation as the rest of the region moves towards nuclear capability, working with our universities to start offering some courses, so that as a ramp up to our own plans, at least, we are a step ahead and that we can still bring something to the table as the rest of South East Asia, in particular, start looking at nuclear energy?

Mr S Iswaran: Sir, I need to restate because it should not be misconstrued. I said the nuclear pre-feasibility study is ongoing. But I said that even if it were completed, we would be a long way away from making a decision on nuclear energy for Singapore, because the technology is moving significantly and there are significant other considerations we will have to factor in.

The Member's point was whether the regional developments have a bearing on us. Clearly, they do. And the question then is, should we be developing our own capabilities in order to better understand? This study in and of itself will already give us some insight into what the scope of the sector is, and what are the kinds of issues that we should be thinking about. And beyond that and what we are hoping that this study will yield is also some clear ideas on how we should take this forward, perhaps specifically in areas such as if we want to understand some areas better, what are the capabilities that we would need in order to do so. And that would have to be a later consideration once the study is completed.

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The Chairman: Mr Yee Jenn Jong, last clarification.

Mr Yee Jenn Jong: Thank you, Mr Chairman. I just want to refer to my question and what the Second Minister said that why I am so fixated about this gaming revenue. Maybe I should rephrase it. I am not so fixated about it and I also understand that it is private investment. TDF will not spend on it. Maybe I will rephrase my question this way. When we set the $30 billion tourism receipt target revenue in 2005, did we envisage gaming revenue to be part of it, because gaming revenue is now a significant part of the tourism receipts by the statistics that we capture? Should we not look at the KPI of our tourism investment to be based on the $30 billion without the gaming revenue?

3.00 pm

Mr S Iswaran: Mr Chairman, I thank the Member for clarifying his fixation − sorry, lack of fixation − on the matter. When the target is set, we are talking about tourism spending as a whole. In other words, when a tourist comes to Singapore, what is he spending his dollar on? We do not preclude future innovations or new developments in the market which might encourage the tourists to spend more. Let me use an alternative example. We are now going to have an International Cruise terminal, which presumably will boost our cruise industry in Singapore and bring more tourists to Singapore who will buy cruises. Should that be excluded from tourism spending forecasting or calculations? So, the way I put it is at the time this target was drawn up and the Tourism Development Fund was set up, there was a clear goal that these are the resources, this the mission that the Government gave the STB. This is the goal, this is funding available, now go forth and seek ways to make it happen, and that is what they have done.

The Chairman: Ms Jessica Tan, would you care to withdraw your amendment?

Ms Jessica Tan Soon Neo: I would like to register our thanks to Minister Lim, Second Minister Iswaran and Minister of State Lee as well as Minister of State Teo for their patience in taking all our questions, sharing with us the strategies as well as strategies for growth and strategies to address and ensure that the constraints that we face do not hamper that growth and we can sustain the growth. And understanding the constraints, I do beg leave to withdraw my amendment.

The Chairman: Is the hon Member given leave to withdraw the amendment?

Amendment, by leave, withdrawn.

The sum of $871,720,700 for Head V ordered to stand part of the Main Estimates.

The sum of $5,491,448,800 for Head V ordered to stand part of the Development Estimates.

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