NATIONAL PRODUCTIVITY FUND BILL

Column: 1225

NATIONAL PRODUCTIVITY FUND BILL: Order for Second Reading read.

The Second Minister for Finance (Mrs Lim Hwee Hua): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

In his Budget Statement for FY 2010, the Minister for Finance announced the establishment of the National Productivity Fund to support nationwide initiatives for productivity. The Government targets to put $2 billion into the Fund to sustain our productivity effort over the next decade, starting with an injection of $1 billion this financial year.

This Bill provides for the establishment of the Fund, and the establishment of the

Column: 1226

Productivity Fund Administration Board to administer the Fund.

Main provisions in the Bill

Sir, I shall now highlight the main features of the Bill.

Part II of the Bill sets out the purposes for which moneys in the National Productivity Fund may be used. The Fund is intended to fund a range of initiatives related to productivity enhancement and continuing education. These include supporting productivity improvements for specific sectors and industries, as well as developing infrastructure and tools to raise productivity across the economy.

Part III of the Bill provides for the setting up of a new statutory body, called the Productivity Fund Administration Board, to administer the Fund. The primary function of the Board, as stated in clause 10, shall be "to evaluate and review proposals for usage of the Fund and to approve the payment of money from the Fund" in accordance with approved purposes of the Fund.

Clause 12(1) empowers the Board, in undertaking its functions, to appoint a committee or a council to advise the Board. The National Productivity and Continuing Education Council chaired by Deputy Prime Minister Teo Chee Hean will establish the priorities and programmes of the Fund and provide inputs to the Board in the evaluation of proposals for funding.

Part IV of the Bill provides for the appointment of an Executive Secretary by the Board to be responsible for the proper administration and management of the functions of the Board, and for the presentation of annual financial statements and reports to Parliament.

Part V of the Bill contains several general provisions ranging from regulation-

*Cols. 1279-1288.

Column: 1227

making to the proper conduct of officers exercising functions under the Bill.

Sir, the establishment of the National Productivity Fund, to be administered by the Productivity Fund Administration Board, underscores the Government’s strong commitment to productivity enhancements over the long term, irrespective of the state of the economy. With the National Productivity and Continuing Education Council overseeing the priorities and programmes of the Fund, we hope to catalyse major productivity improvements at the worker, enterprise and national level.

Sir, I beg to move.

Question proposed.

3.04 pm

Mdm Ho Geok Choo (West Coast): Mr Speaker, Sir, I declare that I am associated with Human Capital Singapore, a CET centre. I welcome the proposed Bill but I do have a few clarifications and one proposal to make. I would also like to focus on the injection of funds into selected industries as well as the power of the Board to invest and, most importantly, the parameters of the Board.

Sir, Singapore overcame the recession in double-quick time and the economy is going strong at the moment, hitting record growth figures. But is it sustainable? To achieve a high growth through high productivity, a new mindset is needed by all – employers, employees and the Government. How do we change the mindset of employers and employees?

By making it a point to set aside funds, the Ministry makes it clear that the Government is committed to providing long-term support for productivity improvements, irrespective of the state of

Column: 1228

the economy. We applaud the Government for taking the step towards this mindset change.

Sir, during the 2010 Budget debate, it was stated that $2 billion will be injected into the Fund – with the first billion being given this year. Two hundred and fifty million dollars from the first $1 billion will be used for raising productivity in the construction industry which the Finance Minister described as a sector which needs to improve.

Sir, may I clarify with the Ministry as to how it would determine the industries, which are deserving of the funds, the quantum and duration for which the funds would be disbursed to? How diverse would the disbursement be and how setting aside $250 million or one-eighth of the fund to one industry, namely, the construction industry, be a step in the right direction? How would the Government encourage industry players to be more proactively involved in the productivity drive and in what ways? And, most importantly, how would the Board track and measure the productivity growth of organisations that have benefited from the funds?

Sir, not only must individuals work towards raising productivity. SMEs have to play a part as well, and are under pressure to become more efficient and productive so as to survive in a changing economy. They are often encouraged to abandon old-fashioned ways of operation and to adopt new technologies. The Government is providing grants to adopt technology and improve service levels and human resource practices as well as organising overseas study trips. However, many SMEs do not know how to access these grants and lament the complexity of form filling. How could the application process for grants be simplified and made more user-friendly and productive? After all, these grants are meant to help SMEs and not to add extra burden through a

Column: 1229

complicated and complex application process.

Sir, on a separate note, Part lV, clause 20 of the Bill provides that the Board may invest the Fund in "such manner as it thinks fit". I have my reservations regarding this "blank check" to the Board. I have full faith and trust in the Government that it would have chosen only men of exceptional integrity to sit on the National Productivity Fund (NPF) Administration Board. But $2 billion of taxpayers’ money is no small change and I am sure the Government will prudently manage its funds, given the recent minibonds episode. However, I am for a more prescriptive approach towards enforcing the guidelines relating to investment of the Fund. Could I ask for more details and guidelines on the types of investments to be included? After all, the purpose of the Fund is to raise Singapore’s productivity. It would not bode us well to be caught in a compromising situation, where productivity takes a back seat and gains come to the fore.

Sir, I also note that the Bill will involve the Government in extra financial expenditure. May I ask the Ministry whether a rough estimate could be provided?

Sir, I see the National Productivity Fund Administration Board as an enabler and supervisor to strengthen the CET system, and growing possibilities for enhancing our productivity. With the set up of the Board, I would like to propose for the need of CET centres to be subject to the GeBiz procurement rules to be waived, as CET centres have already been subject to a stringent set of criteria that satisfies best sourcing practices. After all, best sourcing is not just about pricing alone.

Sir, the principle of procurement subjects vendors to tender for work

Column: 1230

belonging to the Government and its related agencies. But to subject CET centres to similar tendering process is not only not meaningful but could also be very unproductive. The GeBiz formula stipulates that for any training that works out to $3,000 at any one time, a tender is necessary.

Ministries, statutory boards and their agencies embarking on company-wide training in order to achieve a common mindset change, find themselves in a fix when pursuing courseware provided by CET centres. Their training budget will definitely bust the $3,000 ceiling. Once they go through the GeBiz, the following ensues:

(i) Call for tender, which works out to a minimum of four weeks; and

(ii) Process and award, which is easily another four weeks, since internally the tender committee has to seek Management or Board's approval.

In the words of one agency: "… by which time we would not only have lost the momentum but also the productivity of everyone." Yes, there can be a waiver for tender or a close tender exercise replacing the normal process, but, again, the time savings is maybe two weeks at most, which does not enhance the spirit and essence of productivity.

This is most starkly felt by CET centres and, in the case of courseware provided by national CET centres, it would appear strange when the very criteria governing the CET centres are even more stringent than the GeBiz tendering process. Some of these criteria include:

(i) Courseware to be developed as per standards specified by the Workforce Development Agency (WDA), another agency of the Government;

Column: 1231

(ii) Courseware to be reviewed and rubber stamped as approved by WDA before being rolled out;

(iii) Courseware to be provided by approved CETs appointed by WDA; and

(iv) CET centre being subject to stringent internal audit on a regular basis to ascertain its suitability to remain as a CET centre.

Here we ask, what is the purpose of appointing CET centres? Its original purpose is really to aggregate supply under appointed training providers who meet with the stringent criteria stipulated by WDA, including the fee structure. If that were the case, why is there a need for such CET centres to be subject to such procurement rules when the fee structure is already in place? Is it not timely that we review all this red tape?

We should instead stipulate a high standard of governance in the courseware provided by the CET centre, where its role to the Board would be to ensure that high standard prevails in the CET centres. The high standard will include quality courseware, quality courseware providers, quality training materials, quality training environment, visibility of learning support and continuous courseware enhancement.

Is it not a waste of resources and being very unproductive to repeat screenings for the same criteria? We should be more pragmatic and look at other ways of strengthening the CET system.

I propose therefore that this governance role be included as an extended proviso under the Second Schedule, clause 1, to read as, "To ensure that high standard prevails in the CET centres through the provision of quality courseware, quality trainers, quality

Column: 1232

courseware authors, quality training materials, quality training environment, visibility of learning support and continuous courseware enhancement."

Sir, the Board can carry out this role by reviewing evidence pertaining to the above stipulations in the CET centres on a regular basis.

Sir, it is also wise that the Board allows itself a linkage with the industry through a double loop feedback channel that will allow it to focus on growing productivity possibilities. After all, if we examine carefully, the Second Schedule, clauses 9, 12 and 13, the Board is operating almost like an enterprise. For an enterprise to thrive, it needs to gather feedback. It is therefore useful to reflect such a mechanism in the Constitution.

Sir, there may be concern that such powers, as stipulated in clauses 8, 10 and 12 may position the Board on an unequal playing field. It is therefore important to define clearly what the Board will and will not do in its consultancy and training businesses and how it differentiates itself from other training providers in these common areas? In fact, should the Board be involved in the consultancy and training business if it were to play a governance role?

Sir, during the Budget debate on this, it was not clearly spelt out but now that it has been defined, I would like to ask what is the Board’s role vis-a-vis CET centres and, more importantly, WDA? Will there be duplication and are we creating another one-stop Government business centre but this time one that specialises in productivity growth?

On this, I support the Bill.

3.13 pm

Mdm Halimah Yacob: Mr Speaker, Sir, I rise in support of this Bill.

Column: 1233

The objects for which the Fund may be expended are stated in clause 4 of the Bill and further enumerated under the Second Schedule of the Bill. It is primarily aimed at achieving the objectives announced during this year’s Budget debate which is to increase Singapore’s productivity level and to promote continuing education.

These are two very important objectives and the fact that we now have a Fund and a statutory board solely dedicated to our efforts to boost productivity is meaningful, as one of the common complaints in the past is that it is not clear which agency is providing the policy direction or coordinating productivity efforts in Singapore. The sense is that this has led to a situation where productivity has fallen through the cracks and is partly responsible for the current low productivity challenge that we are facing. With the establishment of the Fund and a statutory board, our efforts at increasing productivity will be a lot more focused, co-ordinated and policy-driven.

However, Sir, I wish to seek a number of clarifications. First, increasing productivity is undoubtedly our goal but different sectors and industries face different challenges and are at different levels of growth. As a whole, the manufacturing sector or, more specifically, the electronics sector, which faces fierce international competition is doing better compared to the services sector. It has progressed from labour-intensive, low-value added manufacturing activities to capital-intensive, complex manufacturing activities. More companies are also setting up research and development centres, headquarters and regional/global control towers. The electronics manufacturing sector value added per worker in 2008 is $155,000 and labour productivity grew 6% from 1998 to 2008. However, compared to Germany, Japan and US, even our electronics manufacturing sector has some catching up to do. The situation

Column: 1234

is far worse in the services sector or the construction sector where productivity growth is much lower and very challenging. Hence, the Productivity Fund Administration Board’s task will not be an easy one. Could I seek a clarification from the Minister on how the Board proposes to allocate its resources to cover all the sectors and achieve these varied goals? Also, we are all aware that the SMEs need more help in order to boost their productivity because they lack not only the funds but also the capabilities to move forward. How will the Fund assist the SMEs? Will there be special provisions for them as they collectively employ a significant number of employees?

Other than ensuring that different sectors with different needs get an adequate allocation of resources, it is also important that the Fund takes into account the different needs of workers as well. Specifically, the Fund has to apply to all workers, including professionals, managers and executives (PMEs) and the professional services which have hitherto not been given much attention in our efforts to upgrade the skills of our workforce. Today, at least 50% of the workforce is in PME type jobs and the figure will continue to increase with better education and upgrading of capabilities. We also know based on the statistics that older PMEs find it a lot more difficult to find jobs after they are retrenched. At the other end of the spectrum are our low wage workers and there are several hundred thousands of them. They really need the special attention and support of the Fund to climb up the income ladder through skills training and upgrading. Training for low wage workers can be particularly challenging as they usually hold more than one job and depend a great deal on overtime to boost their monthly income. So, for any training programme to succeed, there will have to be an income subsidy to incentivise them to train and compensate for the loss of income. I would like to ask the Minister,

Column: 1235

how would the Fund allocate its resources and support all workers and their different needs?

My last point, Sir, is on the issue of accountability. The Government has announced a big budget to achieve our productivity growth of 3% over the next decade. In some sectors, it is easy to measure productivity but not so in others. We have to ensure that the huge amount allocated to the Fund is really well spent. Could the Minister clarify how would the effectiveness of this Fund be evaluated? What are the measurements and KPIs of this Fund and the Board? Also, the budget allocated thus far is for a five-year time frame. Could the Minister also clarify what are the long-term plans and initiatives of this Fund and the Board as our goal is spread over a 10-year period?

In conclusion, Sir, I support this Bill. I see the establishment of the Fund and the Board as an important move to upgrade our economy and improve our productivity. I see it also as a way of ensuring a more inclusive growth where low wage unskilled workers could upgrade themselves, enjoy a more productive and meaningful working life and enjoy better wages.

3.19 pm

Mr Sin Boon Ann (Tampines): Sir, Paul Krugman in an article published in Foreign Affairs in 1994, had argued that Singapore’s steep economic growth model in the early years since independence was largely input driven by increasing capital and labour contribution rather than by total factor productivity. He believes that our growth was driven largely by perspiration than by inspiration; and like the Soviet Union of the 1950s and 1960s, Singapore maintained the expansion of its economic outputs by a massive growth of inputs, such as steep rise in employment,

Column: 1236

increases in educational levels and massive investment in physical capital. Krugman’s thesis contends that there are limits to growth that are focused on expansion of inputs rather than focusing on growth in output per unit of input. In other words, focusing on inputs alone will at some point result in the law of diminishing return applying to the economy. There is, in essence, a limit on the number of workers, level of training and the development of physical capital that a nation can utilise to raise the level of a country’s output. Growth beyond a certain point must be focused on increasing the output per unit of input if we are to sustain economic growth at levels witnessed by advanced economies over the last 150 years.

Krugman, in essence, is arguing that the true measure of performance of the economy is not just on pure expansion of outputs, but rather the efficiency with which the factors of production such as labour and capital has been deployed to generate that growth. If we apply that principle, a different picture emerges in the case of Singapore in the last decade.

For the past 10 years, Singapore's productivity growth has averaged 1% per annum. Its productivity in manufacturing is only 55% to 65% compared to that of the United States. In construction, our productivity is only 34% of Japan. One key reason for this is that construction companies in Singapore tend to employ low wage workers to do the job while firms in other countries may employ fewer such workers but employ higher skilled workers or employ more machinery or automation. Education, or possibly the lack of, it may yet be another reason for the relatively lower level of productivity. According to a Straits Times report published in February this year, up to 60% of the workers in Singapore never made it past secondary education.

Krugman's analysis of our economy is not without controversy, particularly

Column: 1237

when he compared our achievement with that of the Soviet Union. Sir, for now, I do not wish to go into the intricacies of the argument. Suffice it to say that while I do not agree entirely with Mr Krugman, I do agree that it is imperative for the Government to focus more on total factor productivity if Singapore is to continue to grow its economy and to produce the good life for its people. Indeed, I am heartened to note that the Government, together with the Economic Steering Committee, is equally committed to the proposition that priority should be given to the task of nationally raising our level of productivity.

Against this broad canvas, Sir, I give my full support for this Bill. We need to put our money where our mouth is by firmly committing ourselves to promoting productivity in this country. This Bill is timely as the nation is set to bring its economy to the next level. There is no choice. We need to be clearly focused on the efficiency of our factors of production if we are to stay ahead of competition in the global economy. By setting aside money to support productivity initiatives in the form of a Fund to be managed by a statutory board, the Government is clearly putting the issue at the forefront of our nation's consciousness.

Sir, in setting aside money to focus on productivity, I think we should have some public articulation of how and where such money should be channelled. Without a doubt, productivity is an issue that cuts across all sectors of our economy – whether it is organisations or the people involved in running these organisations, or the technologies or innovations associated with it. Unfortunately, our resources and funds are limited. How such funds are channelled, Sir, may have a bearing on the issue of national unity.

Why national unity, one might ask. There is a growing sense of unhappiness on the ground over the significant influx

Column: 1238

of foreign labour in recent years into Singapore, making inroads into various aspects of our society. We see foreign labour participation at two levels; first at the PMET level where there is a gap, in or a lack thereof, of appropriately qualified local staff with the necessary skill sets to handle the demands of a knowledge-based manufacturing and services economy. So huge numbers of such employees coming to Singapore whose presence we see in our housing estates or condominiums. Yet, as with many countries elsewhere, the presence of foreigners in our society living cheek by jowl with the locals and working in appointments that many Singaporeans see are their rightful inheritance has fed a growing sense of xenophobia within our society. It is not uncommon to hear Singaporeans complaining loudly of how foreigners have taken their jobs in the offices they worked for.

Truth be told, these foreign PMETs have no doubt contributed significantly to our economy. For without them, Singapore’s economic performance would not have powered so strongly over much of the last 10 years. However, having PMETs performing a role in the development of our economy is not in itself a sufficient reason for not improving the productivity of our own PMETs. We need to get our people to be better qualified and more productive than the foreigners so that they can justifiably command higher salaries and, in time, reduce the need to rely on foreign talents to fill these posts.

Secondly, we have over the years had to rely on foreign labour to take on jobs that Singaporeans generally are not keen on and which typically involve work requiring manual labour. There are two significant consequences arising from this. First, the presence of these foreign workers who command relatively low wages suppresses both the desire of employers to want to hire Singaporeans as well as discourages Singaporeans from

Column: 1239

working in these sectors. This has resulted in a significant number of Singaporeans remaining unemployed. Sir, we all know that if we send these foreign workers on work permits home tomorrow, there will be more than enough jobs to absorb the present number of Singaporeans who are unemployed. The question is: are Singaporeans prepared to take up such jobs at existing wage levels? Secondly, the continued use of low-wage foreign workers in our industries will continue to affect our record on total factor productivity. Unless policies are changed to align Singaporeans who provide manual labour with the desire to improve productivity, our employers will continue to be inclined towards hiring cheap labour where possible to bring down the cost of production.

Foreign manual labour imposes on our resources, which include land for accommodation, and extracts a social cost from us. It breeds deep prejudices among Singaporeans. More importantly, for the Singaporeans who are prepared to work in this sector, there is a rising difference in gap between the top income earners and them in recent years. Economists refer to this income difference as the Gini coefficient. In our case, we have relied on foreign labour to boost our economic growth over the years. The result is rather obvious. Over the last decade, the Gini coefficient has widened significantly. Recent studies have indicated that our Gini coefficient has moved from 0.44 in 2000 to 0.48 in 2009. The Gini coefficient in Singapore measures higher; in other words, there is greater income inequality when compared to, for instance, countries like the United Kingdom, which has an index of 0.34, and Japan with an index of 0.38 in recent years. Most analysts agree that the widening income gap arose from our policy of allowing foreign contract workers to work in our industries under

Column: 1240

low-wage conditions. Equally, the same may be said that the relatively wide gap in our income distribution will narrow once we get more Singaporeans with better training to work in these sectors at higher wages because of the level of output. We need to narrow the widening income gap if we are truly committed to social equity in our country. After all, we cannot lay claim to want to have the living standards of the Nordic countries and yet have a third world income distribution. Our Productivity Fund must therefore be clearly chartered to address this concern.

Apart from looking at the issue of productivity for workers, the other issue relates to whether a sharper differentiation ought to be made between foreign-owned companies and our local companies, including the small and medium enterprises. The issue of productivity cuts across all enterprises; whether these are locally or foreign owned. However, there is a common perception, and quite rightly so, that foreign companies are better endowed with resources to handle issues of competitiveness and productivity. They do not need as much help as local companies do. For the most part, local companies, particularly those in the SMEs, require Government assistance, apart from labour-related issues, in the area of technology transfer, particularly those that relate to improving processes for the manufacture and commercialisation of goods and services. Many of these companies just do not have the wherewithal to embark on initiatives that will help them become more efficient and to compete better. The question really is whether public resources from the Fund should be focused principally on providing assistance to the SMEs to help these companies compete better. The assistance, apart from being employee associated, may relate to assisting these enterprises to build a better eco-system that will help them improve their productivity. This may include harnessing new technologies or, for that matter, getting relevant qualified

Column: 1241

consultants to advise them on improvements to the way they organise themselves so that they can compete better. Through the Fund, we hope that new local companies will be spawned that are world-beaters and carry brand names that would sit next to Coca-Cola or Nestle.

Sir, in a recent study in March this year led by Dr Wilson Chew, CEO and principal consultant at StrategiCom, a branding specialist, it was discovered that nine out of 10 companies surveyed knew what innovation was but only two out of 10 companies went on to do something about it and, more importantly, went on to commercialise their innovation. The innovation had resulted in higher revenues for these companies and, by implication, higher productivity. Quite clearly, a Fund of this nature that is dedicated to productivity through innovation would clearly bring great benefits to our businesses.

Sir, productivity must be based on a certain set of principles. It must not be efficiency at all cost. Over the years, we have learnt to have regard for the environment in the way in which we produce our goods and services. Going Green is not an option but a necessity if we are going to leave something of value for future generations. With the need to protect our environment weighing heavily in our minds, being green in our endeavour to be productive is, I believe, increasingly a standard by which we will be measured by the international community. Against these rising expectations, I hope, Sir, that the new statutory board will, likewise, lean heavily on the side of protecting our environment and the sustainability of our resources when promoting productivity. Improvements in productivity may be celebrated only if it does not come at a cost to the environment, and better still if improvements in productivity help in our efforts to preserve the environment.

Column: 1242

When the new statutory board and the Fund are established, it would do well to pay heed to these expectations.

With that, Sir, I support the Bill standing in the name of the Minister for Finance.

3.30 pm

Assoc. Prof. Fatimah Lateef (Marine Parade): Mr Speaker, I stand in support of the National Productivity Fund Bill 2010.

It is indeed timely to introduce this Bill as we set targets to enhance our national productivity levels up to 2%-3% per year. Currently, our productivity levels in the larger sectors are measuring up to only about 50%-60% of the global leaders.

With reference to clause 4, Sir, in the provision of financing and incentives, whether in Singapore or elsewhere, how will these overseas courses and programmes be assessed and evaluated to ensure only recognised and respectable ones are incorporated under the scheme? There will most certainly be a very wide variety and range of such programmes and courses in all the 12 priority sectors which have been earmarked. As I see it, there will need to be clearly defined guidelines, with some flexibility for case-by-case consideration as they will arise. Whatever guidelines are decided upon, I feel it is crucial we do not steer away from the primary objective related to enhancing productivity and continuing education, which must be customised to the relevant sectors.

With reference to this Bill, Sir, there will be a need to define productivity in the 12 priority sectors as there will most obviously be differences. There is a great need to enhance the awareness amongst the public as well as companies and businesses in order to drive home the message effectively.

Column: 1243

Can I also clarify with the Minister, Sir, pertaining to the workgroups to be set up for each sector, when will these take place and be functional? This is crucial, I feel, as the Members will have to brainstorm the best and most effective ways to create awareness, high rates of compliance and motivation in the proposals, applications and, of course, most importantly, execution.

Can we also look at some of the best practices from other countries, as there are good lessons we can learn from, and where our workers can relate to them? This is especially useful when we reach out to our workers to sell the message on productivity. At the end of the day, no matter how good our policy is, at the workers’ level, there should be enough understanding and conviction so that everyone can work together to make the drive a successful one.

( In Malay ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, with the passing of this Act, we must ensure a deep understanding and confidence from all sectors, including the public. How can we disseminate the message and understanding on this policy to the public so that when they apply for jobs they will understand that they have to compete with other applicants, not only from Singapore but also with other workers of similar abilities and qualifications, for example, from India, China or Malaysia?

This is the reality. We now have to compete globally. Therefore, when our skills are better and more specialised, there will be a higher demand for our workforce. Our people must undergo a major change in mindset.

One clarification that I wish to seek is that within the 12 priority sectors identified, who will decide on the type of

Column: 1244

training and programmes that should be included? Will it be proposed by the new board or by the workgroups? Can it be suggested by the companies, sectors, or can it be that the National Productivity and Continuing Education Council have the final say?

Sir, I support this Bill and hope that it can be implemented smoothly and fully reach out to all workers and people from the various sectors.

3.34 pm

Mr Teo Siong Seng: ( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, good afternoon! First, I would like to declare my interest as the President of the Singapore Chinese Chamber of Commerce and Industry (SCCCI). Today, I would like to talk about improving productivity from the businesses' point of view.

This year's Budget focuses on restructuring the economy and raising productivity to further Singapore's economic growth. In his recent National Day Rally speech in August, Prime Minister Lee emphasised again the importance of raising productivity. Businesses respond positively to this call.

Today, I would like to express my views in the following three areas:

First, response from SMEs. The Government is actively pushing the productivity drive, but are our companies taking any actions? SCCCI did a survey. Among the 1,051 companies surveyed, 62% are actively responding to the call to improve productivity and only 8.6% have not taken any actions. Industry-wise, the manufacturing sector is the best with 72% of companies adopting at least three initiatives to boost productivity. This is a very good phenomenon, demonstrating that most companies agree with the

*Cols. 1293-1294; 1295-1298.

Column: 1245

Government and are taking proactive steps.

However, the business models of various industries are different. Therefore, it is difficult to come to a unified standard to measure productivity. For example, a famous local bak kwa shop always sees long queues during Chinese New Year. People need to queue two to three hours. In comparison, other stores are not patronised by so many people. I think, besides branding, the major draw of this shop is that its products are handmade and not mass-produced by machines. This is very common in the food and beverage sector. If they try to use automation to replace manual work, consumers may not like it. Our survey also proved this. In the service sector, only 58% of companies are actively boosting productivity, lower than that of the manufacturing sector. The main reason is that it is easier to gauge efficiency in manufacturing, whereas in the service sector, not only cost and efficiency, but also service quality and the consumers' needs are taken into consideration. This makes things more complicated.

Since the Government and businesses have come to a consensus, the next step is to adopt effective measures based on each industry's specific needs and characteristics. For example, the Workfare Training Scheme is more popular in the service sector than in manufacturing, which shows that, compared to other industries, the service sector pays more attention to improving the quality of their staff. I suggest that in the future, the Government could consult the views of the tripartite partners before launching any business assistance schemes or grants. This will increase the effectiveness of the policy, avoid the "one size fits all" approach, and benefit more companies.

As for the Productivity and Innovation Credit Scheme, many companies are adopting the wait-and-see attitude. Some

Column: 1246

say that if they invest in innovation first and apply for tax rebate later, what will happen when the innovation fails and they cannot even get tax rebate? What is more, the investment cannot get tax rebate until the next financial year. "Water afar cannot relieve current thirst". Hence, I suggest that the relevant agency review this Scheme to deliver more effective grants and encourage SMEs to take bold steps to innovate. We need to deliver "coal when it is snowing" and help SMEs solve their pressing issues.

Two, encourage professionalism and call for cooperation from consumers. Usually, the way to increase productivity is to simplify the working process, improve product, service and staff quality, and develop value-added services. In this process, we cannot under-estimate the spirit of professionalism. We must reward those staff who love their job and demonstrate a good working attitude.

However, to increase productivity, the Government and businesses cannot do it alone. We need everybody to join in. For example, when we eat at hawker centres, and if we put our dishes away ourselves, we can reduce the workload of the cleaners. This also solves the problem of labour shortage. We need to change our mindset. If we can do this at the fast food chains, surely we can do this at the hawker centres. The key is: do Singaporeans want to do it or not?

Third, spread the productivity message to everyone in the society, including secondary and primary students. Increasing productivity has been a national campaign since the 1980s. This year, the Government is again focusing on productivity to prepare Singapore for sustainable economic growth. I feel that the productivity education should involve all levels of society, including students; by inculcating the notion of productivity from a young age, students would cultivate the right mindset and form an efficient team in the future.

Column: 1247

Increasing productivity is a long journey. I believe that, under the leadership of the Government and with the joint effort of the tripartite partners, Singapore's productivity is bound to improve.

In conclusion, I support the Bill.

Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 4.00 pm.

Sitting accordingly suspended

at 3.40 pm until 4.00 pm

Sitting resumed at 4.00 pm

Column: 1247

[Mr Speaker in the Chair]:

NATIONAL PRODUCTIVITY FUND BILL: Debate resumed.

Assoc. Prof. Paulin Tay Straughan: Thank you, Mr Speaker. I stand in support of this Bill, for it demonstrates the Government's commitment to investing in human capital and raising productivity among Singapore employees.

Given our demographic trends of sustained ultra-low fertility, it is unlikely that our local resident population will increase in the near future. Thus far, we have relied on immigration to augment our population strength and maintain our labour force at an optimum level. However, it is not sustainable to depend solely on surplus foreign labour to sustain our labour needs. As it is now, we have already seen the tensions in the social fabric when the proportion of non-resident population hit a high of 25%. Therefore, the focus of Budget 2010 on improving productivity is both timely and significant for the future of Singapore.

This Bill details the set-up of the National Productivity Fund and how the

Column: 1248

Fund will be administered. On these administrative details, I have two questions. First, on the composition of the Board. Given the power of this Board and its central role in disbursement of the Fund, may I ask the Minister to share with us how the members will be selected? Productivity is a complex concept that we have yet to manage to grasp. Certainly, the composition of the Board will be critical as it will play a significant role in shaping our understanding of this concept. In addition to representation from the Government and management-level professionals, I hope we can also include the inputs of mid-level employees who are in direct contact with sentiments from the base-level workforce.

Secondly, I note that decisions taken by the Board will be decided by a simple majority of the members present. However, in the case of a tie, the Chair will have the casting vote in addition to his original vote. To minimise the likelihood that the Chair should have such disproportionate power, may I suggest that the composition of the Board be set at an odd number so that when all members are present – which I expect would happen as we should only appoint to this important Board members who are totally committed to service – there will always be a definitive outcome. As the Board will have tremendous discretionary power to administer public funds, may I ask if there are avenues for feedback and for the public to query the decisions of the Board?

Finally, while I understand that this Bill focuses on the administration of the National Productivity Fund and this Bill is not intended to discuss policy issues, I think it is important at this stage to reiterate the importance of a holistic approach to understanding productivity and how it can be measured. In this endeavour to enhance productivity, we must embrace labour as value and with

Column: 1249

respect, and not just a commodity to be maximised. Particularly in the service sector where there must be a sensible balance between output and quality of service, and especially in the careful consideration of good work-life balance where family time and personal space continue to be factored as important variables in the equation that measures output. For issues on policy, I look forward to learning more about the important work of Deputy Prime Minister Teo and his Council.

The Second Minister for Finance (Mrs Lim Hwee Hua): Mr Speaker, Sir, I wish to thank hon. Members Ho Geok Choo, Halimah Yacob, Sin Boon Ann, Fatimah Lateef and NMPs Teo Siong Seng and Paulin Tay Straughan for their support of the Bill.

Sir, there have been many detailed discussions on the topic of productivity in this House, especially during the Budget debate. So I would not go over old material. As Members' queries and comments revolve around the roles and responsibilities of the Productivity Fund Administration Board, which I will refer to as PFAB, to be established by this Bill, allow me to reply by clarifying the roles of this PFAB, vis-a-vis firstly, the National Productivity and Continuing Education Council, which I shall refer to as the Council in my elaboration and, secondly, the Government agencies and organisations involved in raising productivity.

Sir, this Bill is not intended to establish the typical statutory body with policy-making powers and the matching execution capability. It also does not seek to determine upfront the policies regarding how productivity is to be raised. Instead, the purposes for which the National Productivity Fund (NPF) may be used as set out in Part II of the Bill, are defined broadly to enable it to fund productivity initiatives that cover any industry and any employee segment. These are consistent

Column: 1250

with the sentiments expressed by the Members that programmes funded under the NPF must be sufficiently broad to provide for the diverse needs of the various sectors of the economy whilst ensuring that they meet the primary objective of enhancing productivity. This NPF can therefore be applied towards providing more assistance to the SMEs and to support workers, especially low-income workers in the efforts to upgrade their skills.

The use of the National Productivity Fund will be guided by the advice of the Council, which is chaired by Deputy Prime Minister Teo Chee Hean. The Council will prioritise and champion national productivity initiatives at the sectoral and enterprise levels, developing a comprehensive, first-class national Continuing Education and Training (CET) System and foster a culture of productivity and continuous learning and upgrading in Singapore. The Council will discuss, review and endorse productivity plans and initiatives, including proposals, which may tap on the NPF as the funding source. The NPFs monies will be used to sustain our productivity efforts over the next decade, with special emphasis initially on sectors where there is potential for large gains in productivity. The 12 sectors identified by the Council so far which span construction, manufacturing, hospitality and business services, have the greatest potential for productivity enhancements, contribute a significant share to the GDP as well as employ a significant number of workers. And many local SMEs are in these sectors.

I wish to inform Members that beyond the identified 12 sectors, other sectors can also present their productivity plans and initiatives to the Council for funding consideration. To support the overall productivity drive, the NPF would also help fund part of the inclusive growth programme led by NTUC and this

Column: 1251

programme will focus on low-wage workers across the different sectors by upgrading their skills, redesigning their jobs and improving the processes within the companies.

Sir, Mr Sin Boon Ann has suggested that the NPF be used to help local SMEs and to level up low-wage workers. While many of the schemes funded by the NPF will benefit these groups, the main objective for the NPF remains that of raising productivity wherever there is significant scope to do so, be it for small or large firms, local or foreign firms, low-wage workers or PMETs. The NPF is more likely to succeed by focusing on the one clear objective of raising productivity. Sir, there are already many other programmes and schemes to cater to other policy objectives, such as to develop the SMEs or to help the low-wage workers. While the NPF will contribute to these objectives, it should not be lumbered with them.

Sir, let me now go on to the role of the PFAB in ensuring accountability for the Fund. Assoc. Prof. Paulin Tay Straughan and Mr Teo Siong Seng asked about the composition of the Members of the PFAB and whether inputs from those who are directly in contact with sentiments from the ground would be included in the decision-making process on productivity initiatives. The PFAB will comprise of Ministers within the Council that will approve the funding proposals that tap on the National Productivity Fund. Precisely for the purpose of achieving broad coverage and wide representation, the Council comprises members from the unions who understand the sentiments of workers well, industry representatives who can take the enterprise and employer perspective and from the public sector for a holistic policy perspective.

Column: 1252

Members have also asked how the outcomes of the programmes funded by the NPF would be assessed. In assessing the programme outcomes, the PFAB and the Council will look at broad indicators such as value-added per worker for international benchmarking of productivity levels. But, at the same time, sector-specific targets would also be set to measure productivity in daily operations. This recognises the need, as Mdm Halimah has raised, for a differentiated approach due to the diversity of the sectors. Once funding from the NPF is approved, the programmes will be administered by the respective lead agencies, which will be responsible for promoting and implementing them. For example, WDA will be in charge of the CET courses funded by the National Productivity Fund while BCA will be responsible for the implementation of construction productivity schemes. Members' specific comments on CET and SMEs would be noted by the relevant agencies. The respective sectoral lead agencies will oversee the communications and publicity efforts for each of the 12 sectors to promote awareness about the productivity initiatives so that more companies can apply for and benefit from them. The Council will also look into creating awareness of productivity at the national level. So Assoc. Prof. Lateef and Mr Teo's suggestions will be conveyed to the Council. The lead agencies will have to account to the Council and the PFAB on the utilisation of the funds and the outcomes achieved.

Mdm Ho Geok Choo has raised the specific question about how the monies in NPF will be invested. Sir, the NPF monies will be managed by the Ministry of Finance and a fixed return will be paid by Government to the Fund annually. So there will be no separate team to do just that. The purpose of allowing the NPF monies to be invested is to merely ensure that monies that have yet to be drawn down from the NPF will earn a reasonable

Column: 1253

return. The PFAB will ensure proper accountability and governance of the use of funds from the NPF and, here, I would like to refer Members to the clauses 22 and 23 of the Bill which require the PFAB to prepare the annual audited financial statements and annual reports and present them to Parliament.

In conclusion, Mr Speaker, Sir, as Members have rightly emphasised, productivity must be sustained as a long-term and wide-ranging effort as the basis for, in turn, sustaining Singapore's economic growth and a broad-based increase in our incomes. The establishment of the NPF and the PFAB through this Bill is in line with the Government's intent to catalyse and sustain productivity growth over the longer term. Once again, I thank Members for their thoughtful comments and for the support of the Bill.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mrs Lim Hwee Hua]

Bill considered in Committee; reported without amendment; read a Third time and passed.