HEAD V - MINISTRY OF TRADE AND INDUSTRY

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Head V – Ministry of Trade and Industry

Capitalising on recovery

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.

Mr Chairman, 2009 was a challenging year for most economies including Singapore. The recovery seems to be underway and what we now see with the recovery is fundamental shifts in markets, opportunities and competition. Against this backdrop, the Economics Strategies Committee (ESC) drove its recommendations for sustainable and inclusive growth to Singapore.

In line with Budget 2010, which is forward-looking in the recommendations of the ESC, the emphasis is for Singapore to push for longer term strategic and sustainable growth. To achieve this, businesses will be required to restructure and change. This will create opportunities, but also uncertainties and adjustments for businesses operating in Singapore. The question is that as we push for longer term strategic and sustainable growth, how can we ensure that we can provide the environment and impetus for businesses in Singapore to capture the opportunities with the recovery in the shorter term? Singapore's economic performance still correlates with the global economic recovery, as Singapore's economy is heavily dependent on external demand.

Can the Minister share what strategies are we driving to differentiate and promote Singapore's growth and to ensure that Singapore is ready to take full advantage of growth in the short term to capitalise on the recovery? With all of these, what will the impact be on business costs and its impact on Singapore's competitiveness? Does the Minister see Singapore companies and companies operating in Singapore as being able to capitalise on the recovery? In the shorter term, what are the potential markets and industries that the Minister sees as opportunities for Singapore to take advantage of the recovery? And how does the Minister see the balance of SMEs and MNCs and the local and foreign companies in the recovery.

Opportunities

Mr Teo Ser Luck: Mr Chairman, with the help of several economic stimulus packages around the world, although each is customised to its own environment, we are expecting a recovery earlier than usual. In 2009, roughly about 0.8% contraction happened globally and, this year, IMF forecasted 3.9% growth and next year 2011, IMF forecasted 4.3% growth. With two consecutive years of growth globally, we should expect a higher growth regionally in Asia. I expect Asia to be leading the charge and emerging economies to reap the maximum benefit. As such, this is very critical for us to identify potential opportunities. The emerging markets could grow three times faster or better than most of the world's advanced economies. And what is exactly in store in terms of opportunities for our local businesses, especially the SMEs? I am glad that this year, the Government is focusing on the SMEs and coming up with several measures, especially in the areas of innovation for the SMEs to tap on the various grants to help them to innovate and grow their businesses.

I would like the Government to provide some guidance as to what other areas of opportunities these SMEs can actually tap on, in order to grow their businesses and expand their horizon.

Growth opportunities

Mr Wee Siew Kim (Ang Mo Kio): Mr Chairman, for many of our companies, the growth opportunities lie outside Singapore. Can the Ministry provide the House with an update on our efforts to help local businesses internationalise? The ESC report mentioned that with the rise of Asia and emerging markets, economic opportunities abound. What is the Ministry doing to guide local companies to take advantage of these opportunities, especially tapping on the growth of economic giants like China and India, and highlighting the opportunities for Singapore in the current global recovery?

Much has been done in the past years to give Singapore companies an advantage like the FTAs, positioning us as an active player in international economic cooperation. To date, what benefits has this strategy yielded for Singapore?

I have no doubt that these efforts are very well appreciated. However, more could be done as we are participating in an uneven playing field, especially amongst players from developed countries and even from the less developed countries. We are squeezed.

Let me give a couple of examples. Singapore stands for delivering value and straightforward ethical dealings – our hallmarks. Many of our entrepreneurs play by such rules as we go overseas. But others do not. Moreover, some of the ground rules and mindsets overseas are also different. For example, one of my Indian friends once told me – in India, to get on the bus is not to stand in line at the bus stop. Either you get on the bus before the bus stops or run after it and jump on it after it has left the bus stop. Imagine how uncomfortable that will be for our people in our interchanges. You can also imagine the mental dexterity and swiftness in action of people who have grown up in such an environment. Some countries like China are already flushed with capital, such that some aspects of our earlier value proposition is no longer that attractive. In short, our window of opportunity is closing and we should try to leverage our strengths and make as much headway as possible. Many from the developed countries have their government pitching for them. I am very enthused by the recent pronouncements that give hope that our Government is pulling out all stops to assist businesses in their forays overseas. However, many times in the past, I feel that while the intention is there, we are constrained into paralysis by our elaborate considerations of all angles. I guess, if you think hard enough you can always find a problem. This brings me back to my suggestion in the budget debate that advocates for businesses be planted in Government agencies to pitch on behalf of businesses. If we depend on the same group of civil servants with the ingrained mindset, I fear that we may be disappointed. Let us not further compound our lack of size. An all-Government approach is important. Let us pay heed to the several speakers at the Budget debate who still detect silos in our Government.

Growth strategies

Assoc. Prof. Dr Muhammad Faishal Ibrahim (Marine Parade): Sir, many economies are reporting different pace of economic recovery following the downturn which we just experienced. I have met many Singaporeans who are hopeful that Singapore will rise again, particularly due to the potential of the Asian economies. I would like to ask the Minister, besides the rise of Asia, what other growth opportunities are available in the current upturn? And what are our growth strategies to capitalise on these opportunities?

Singapore – hub strategy

Miss Penny Low (Pasir Ris-Punggol): Sir, the story of Singapore has been that of a hardworking clever strategist, who was able to take advantage of its strategic geographical location to develop itself into a bustling city. Over the years, we have also leveraged on our competitive advantage to develop multiple hubs that continue to add fuel to our economy. Hence, can the Minister first update us on the status of our hub strategies and, in particular, whether we have also strategies to interlink these hubs, so that each hub can leverage on one another to multiply the returns.

Two, with the changing trade routes from the Atlantic to Asia, it presents unprecedented opportunity for Singapore to reposition itself. We can be a convenient gateway to the new emerging mega economies of China and India. Given our familiarity with the global business lingua franca, transparency, low tax regime, rule of law and political stability, how are we leveraging on this window of opportunity to develop Singapore as a global business hub as well as a global gateway to Asia? What are the measures and support available to both local and foreign businesses?

Finally, given the threats of climate change and pandemics, we spoke about the possibility of setting up Singapore as a disaster and relief co-ordination hub. Could the Minister give an update on this? Also, would the Minister agree that this hub is even more effective if we also invest in building a Humanitarian or International Organisational Hub that can complement the hard products with humanitarian software and services – whether in training or hot housing such organisations?

The Chairman: Mr Liang Eng Hwa, take both of your cuts together.

Growing globally competitive companies

Mr Liang Eng Hwa: Sir, the key buzzword for this year's Budget is productivity. Given the significant gap between our productivity levels and that of our global leaders, it is clearly something we need to work on. In several of our large sectors, we are about 60% of the global leaders. Even if we are able to achieve the 2%-3% productivity growth for a whole decade, it will at best only get us near the leaders and put us in the game. Our competitors who are behind us will catch up and narrow the productivity gap as well.

My point here is that a competitive, skilled and productive workforce, while essential and necessary, is only a prerequisite and a tentative first step. It does not guarantee us long-term livelihood in the brave new world. At the end of the day, we need viable and successful businesses and companies in Singapore to create and sustain quality jobs for our workforce. Of course, without a first class workforce in Singapore, we will also not have a viable and successful business here. So, only with labour and capital working seamlessly together, can we multiply our economy value and grow.

Given our small and export-dependent economy, we must get our local enterprises to be more outward looking and to have their business strategies geared towards the wider world. Many of these firms may be doing well locally but we need them to think big, expand the operation beyond our shores and develop our external economy.

However, as the ESC pointed out, we do not have a healthy spread of local companies of different sizes. We have a dire shortage of large firms, especially those that have annual sales turnover of beyond $100 million or above. There is a clear need to expand this $100 million club and spur some of its members to grow into industry champions in their own right.

In this case, I am glad that the ESC has recommended an ambitious target to double the number of local enterprises with revenue of over $100 million from 500 to 1,000 within the next 10 years.

There are generous schemes announced in the Budget that would certainly help. Some examples include the $1.5 billion growth capital for co-investments in local companies, tax deductions for angel investors and Government assistance in cross-border financing.

This is all great news for local companies seeking internationalisation. My only concern is whether there are now just too many measures being offered by the various economic agencies. This buffet spread of schemes may be getting too much for the companies and even for the staff of these agencies to digest. I read that between the various agencies, like IE Singapore, SPRING, EDB, Customs, and so on, there are about 157 schemes. I am sure the bright officers at these agencies would be able to come up with more schemes each time the businesses or the MPs present a strong and deserving case or request.

However, following ESC report, I believe it would also be timely to take stock of the various schemes across agencies and see how we could harmonise and further streamline the various programmes and also minimise the administrative paper work. The challenge is to make these schemes even simpler, yet retain their effectiveness.

Besides assistance schemes to help companies grow, I am glad that the Budget also enhanced the future business leaders scheme. Without entrepreneurial skills, there would not be business and ventures. We need a new generation of self-starting businessmen to emerge, stand tall and be prepared to take risk on their capital. Hence, I would like to ask the Minister if an entrepreneur culture has indeed taken root in Singapore, something we had debated at length in the past.

Besides growing companies to beyond the $100 million sales revenue, we should push for the growth of new industry champions and develop our local brand names, global in outlook, yet anchored to the local economy. Having a strong base of such companies gives us a bigger handle of our own economic destiny and hence greater economic resilience. These companies will employ our skilled and productive local workforce, utilise our infrastructures and real estate, pay returns to our capital and, most importantly, call Singapore their home. We need more of these queen bees, as I have said in my Budget speech.

We could leverage on our strengths and advantages. We have the capital, the talents, the infrastructures and system know-how for new industry champions to emerge. So let us aim to nurture and develop between three and five global brands, similar to the likes of SIA in the next 10 to 15 years.

Business cost

Sir, the economy is recovering with little spare capacity. Unemployment remains at a very low level of about 2% and bottlenecks remain in many parts of the economy. Externally, commodity prices are on the uptrend again and oil prices today are above $80 per barrel. Coupled with the impending increase in foreign worker levy which will have a spiral effect on the economy, there is a real risk that business cost will rise sharply again in the next one to two years.

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The investments in productivity growth, which would take some time to bear fruits, would not help improve the situation in the short term.

Here, I hope that the Government will keep tab of the costs of doing business and our cost competitiveness even as the economy recovers. In this transformational phase of the economy, many of the businesses may be incurring short-term adjustment costs as well as managing the rising input costs as the economy grows.

Are we expected to see inflationary pressures in the economy, especially in areas where bottlenecks existed even during the crisis, such as the construction and hotel sectors?

Our own history provides us with some learning lessons. In the 1980s, Singapore was enjoying strong economic growth and then the economy undergone a major shift towards higher value adding activities. However, rising business costs, including higher wages, took away our competitive edge as some businesses struggled with high overheads and low profit margins.

We had to respond then, and it was a painful time for all. I remember we had to introduce sharp reductions to CPF contributions and forced to lower business costs sharply again.

I would like ask the Minister for his take on the business cost and inflation outlook in the next one to two years.

Credit liquidity and Special Risk-Sharing Initiative

Mr Zaqy Mohamad (Hong Kah): Mr Chairman, the 2008 and 2009 downturn as well as concerns about ensuring sufficient liquidity for enterprises prompted the establishment of the Special Risk-Sharing Initiative (SRI) scheme. The scheme was well-received by the industry, following a period in which many local companies face a credit crunch in the market. Can the Ministry update us on the scheme's effectiveness during the recent downturn? Were there segments of the industry that the SRI scheme as well as other schemes of the MTI not found to be as effective? Does the MTI see any potential risk for businesses with the phasing out of the SRI scheme within a year? Based on MTI's assessment, has the scheme resulted in any change in the sensitivity of the banks in evaluating credit risk for corporate lending, given that the Government has been subsidising a substantial portion of lending risk for the past few months? What is the assessment of commercial lending by the banks for SMEs over the next six to 12 months?

The Minister for Trade and Industry (Mr Lim Hng Kiang): Mr Chairman, first, let me thank Members for their comments and suggestions.

Indeed, 2009 was a turbulent year for our economy. We went through a deep recession in the first half, but rebounded strongly towards the end of the year. GDP contracted by 2% over the year but employment increased by 38,800 jobs.

In 2010, our focus will be on recovery and setting the stage for the next phase of growth. I will briefly talk about the outlook for 2010 and our strategy for consolidating the on-going recovery. For the medium term, we have to count on productivity to fuel our growth. As Deputy Prime Minister Teo Chee Hean said, productivity also means increasing the top line. I will therefore spend sometime discussing the economic opportunities and growth strategies for the medium term. In other words, how to grow the "top line".

The Singapore economy should do well in the first half of this year. But uncertainties remain in the second half. We expect the fiscal stimulus in the G3 economies will fade and inventory adjustment will taper off in the second half. The underlying sluggish demand in private consumption and investment in the G3 economies, combined with fragile financial markets and tight credit conditions, may slow the pace of recovery. There are also new downside risks for us to monitor, such as the sovereign debt risk in Europe and asset inflation risks in Asia.

But, overall, our economy should grow by between 4.5% and 6.5% this year. This is slower than previous recoveries, but a decent performance nonetheless given the strains the global economy is undergoing.

Ms Jessica Tan and Mr Liang Eng Hwa have asked how we intend to manage our recovery and whether business costs will start to go up again as assistance measures are withdrawn and demand picks up.

As the economy recovers, we must expect costs to go up compared to last year when we were in a recession. But there is still some slack in our economy. As of the fourth quarter 2009, the economy was around 4%, below its recent peak level of output. Office rents and industrial rents were 17% and 29% below their peaks respectively. Nominal wages last year were 2.6% below 2008 levels. So we do have some buffer. Our forecast for inflation this year is between 2% and 3%.

Mr Zaqy Mohamad asked for an update of the Special Risk-Sharing Initiative (SRI) scheme. In the 14 months, from December 2008 to January 2010, more than 16,000 loans worth about $8.9 billion have been catalysed under the SRI and other enhanced business and trade financing schemes. More than 90% of these loans went to our SMEs.

We have extended these schemes for another year, with some scaling back on lending terms in view of the improving credit conditions. We expect the impact of this revision to be minimal as there had already been a decrease in the demand for Government-backed loans prior to this scaling back. After the discontinuation of the SRI in 2011, SMEs will still be able to tap on the mainstay Government financing schemes, which were in place before the recession.

Let me now turn to the economic opportunities and the growth strategies for Singapore. Ms Jessica Tan, Mr Teo Ser Luck, Mr Wee Siew Kim and Dr Muhammad Faishal Ibrahim have all raised pertinent questions on this subject. The Economic Strategies Committee has set out the broad directions for the economy for the next 10 years, and the Government has responded with a slew of measures and programmes in our Budget. Let me focus on the five key growth strategies that my Ministry will pursue in order to raise the top line over the medium term.

First, we will facilitate existing industries to move up the value chain by helping them to deepen and expand their capabilities. Second, we will take advantage of global trends, such as new growth areas at the intersection of the manufacturing and service sectors. Third, we will build a more diverse and vibrant corporate landscape. Last year, I explained that the value-added of our economy is contributed by the four groups: foreign MNCs contributing one-quarter of our value-add; foreign SMEs, another one-quarter; local large companies, one-quarter; and local SMEs, one-quarter. Going forward, we want to strengthen our corporate landscape by adding new players, for example, global mid-sized companies and Asian MNCs. Our fourth strategy, we will strengthen our integration with our ASEAN neighbours to sharpen our competitive age. And fifth, we will support the internationalisation of our companies by leveraging on our existing Free Trade Agreements (FTAs) as well as pursuing new FTAs. Let me elaborate on each of these strategies in turn.

Singapore has adopted a cluster approach in our industrial development strategy by promoting the growth of the wider ecosystem that supports each industry. Miss Penny Low asked how some of these cluster strategies were progressing, particularly, our hub strategies for each of these clusters. Overall, we have done reasonably well. Let me give a quick update on a few major clusters and how we are deepening and expanding their capabilities, which is our first strategy.

Let me start with the biomedical sciences (BMS). We started developing the BMS sector in 2000. Today, we are a highly competitive and trusted site for manufacturing pharmaceuticals. Our recent investment in building capabilities for biologics manufacturing has paid off. Despite the difficult conditions in 2009, we attracted new BMS projects resulting in 1,200 new jobs and over $1 billion in fixed investments. For example, GlaxoSmithKline opened a plant that will produce compounds used to manufacture its innovative vaccines such as a new vaccine that protects against meningitis.

The logistics sector is also another key sector. Over the years, we have built upon our natural attributes and strengthen our position. Singapore was ranked by the World Bank in 2009 as the number two logistics hub in the world. Today, 17 of the world's top 25 leading logistics companies have a significant presence in Singapore. DHL, the world's largest logistics player, has expanded the responsibility of the Singapore office to manage operations as far away as the Middle East.

Miss Penny Low has asked whether we can become a humanitarian or an international organisation hub. We are making good progress. We are home to more than 80 international non-profit organisations, a number that has more than doubled since 2005. EDB has, in fact, set up a dedicated International Organisations Programme Office to assist international organisations interested in Singapore. We agree with Miss Penny Low that our strategic location in Asia and our excellent logistics connectivity lend ourselves naturally to play the role of a disaster rescue and relief coordination hub. This is, in fact, what is happening.

Let me turn to the electronics sector. This sector has been with us since the 1960s. It is a good example of how we have moved up the value chain. We started with semiconductor packaging, then moved up to the hard disk drive assembly in the 1980s, and then semiconductor wafer fabrication. Today, nearly half of the world's hard disk media are made in Singapore. Electronics is a key demand driver for our logistics, chemicals and precision engineering industries. It is also an important capability enabler for new clusters such as avionics and medical technology. But electronics is a sector that changes rapidly. So, we must also continuously adapt, and change in order to seize the opportunities in this very exciting sector.

Looking at the future of electronics, we have identified four new growth areas. First, concerns about climate change have raised awareness and need for green electronics products, such as energy-efficient computing solutions, green automative and green lighting solutions. Second, demand for bioelectronics products, such as ingestible pill-cameras and bio-sensors, will increase as the developed world ages. The final two areas are security technologies such as biometric access systems and plastic electronics such as flexible e-book displays. These four areas are very high-tech and build upon the competencies that we have already established. They illustrate that our electronic sector has the potential to continue to grow.

Mr Chairman, Sir, time does not permit me to go into all our sectors but suffice to say we have similar strategies to deepen and broaden our capabilities in each of our key sectors.

Let me turn to our second growth strategy, which is riding on the convergence of manufacturing and services in new growth areas. The key to this strategy lies in understanding that the line between manufacturing and services is blurring. Some commentators have questioned why Singapore is still holding on to its manufacturing base. They are missing the point. It is not a choice between manufacturing or services, but whether we can successfully seize the new opportunities emerging in the space that spans manufacturing and services. Many manufacturing firms no longer simply transform raw materials into finished products. Rather, they now see themselves as entities that turn ideas into products and services that provide integrated solutions for the end-consumer.

Let me illustrate with an example. Teo Garments is one of our largest local textile and garment manufacturing SMEs. They started off manufacturing apparel to meet the specifications of their customers. Today, they complement their manufacturing activities with a full range of services, from product development and design, to merchandising, to logistics management. Their customers, who include well-known Western brands such as Osh Kosh B'Gosh, benefit because it conveniently develops both the products and the services that they require. And, of course, Teo Garments benefits through the additional revenue and market opportunities that they can now reap.

Economists call this the "servitisation of manufacturing". We expect this development to gain momentum and see this being replicated in many other sectors, blurring the once clear distinction between manufacturing and services.

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Leading manufacturers are, therefore, moving beyond production to develop a full suite of services such as R&D, design, supply-chain management and after-sales support. These are activities that Singapore is well placed to capture. We already have well developed professional and business services that complement our manufacturing activities but to capitalise on these new opportunities, we need our manufacturing base. By being a home to companies' entire suite of solutions, we entrench them further in Singapore. We are, therefore, not just deepening our capabilities in each cluster or sector but also capturing the value between the sectors.

Miss Penny Low and Ms Jessica Tan asked for the prospects of our global business hub strategy. Our third strategy is to build on this business hub position by attracting new players, as I mentioned just now. We intend to attract global mid-sized companies as well as Asian companies looking to internationalise and facilitating the growth of our own globally competitive companies. Mid-sized companies from the G3 economies who wish to tap into the opportunities in a rising Asia want to base their regional operations in a modern business friendly environment that is able to manage both India and China from one location. This is because some of these mid-sized companies do not want to set up one base in China, one base in India and another one in Southeast Asia. Singapore is well-positioned to be their pan-Asia headquarters. We have already done relatively well in attracting MNCs from the G3 economies to invest in Singapore. We are now attracting mid-sized companies who are responding to the Asian growth story and may grow into the MNCs of tomorrow. For example, Pall Corporation is an American clean-tech company specialising in fluid management technologies. They are keen to expand into Asia and have chosen to set up their Asia-Pacific headquarters in Singapore. At the same time, companies from India and China have started expanding their presence overseas. Singapore's excellent connectivity to G3 companies and markets offers them the option to take a small calibrated step out of their borders but which immediately connects them to the developed world. We have already had some initial success. For example, Tata Communications from India has set up an international headquarters and data centre here.

Our locally-based companies have grown quickly in the past decades. Some of them have managed to achieve regional and even international success. As Mr Liang Eng Hwa pointed out, our economy benefits when some of our local companies become industry champions in their own right and become queen bees. We definitely like to see more home-grown industry champions. We will take a multi-pronged approach to achieve this. Schemes such as the Partnerships for Capability Transformation (PACT) have already been announced by MOF and we will announce the details in May. We have many other schemes in place. Mr Liang counted there are over 150 schemes to help our local companies grow and succeed. I will leave it to Minister of State Lee Yi Shyan to elaborate on these schemes in his response later on.

But this is the idea that we have to ride on the Asia growth story. We think we can strive to be a leading consumer business centre in Asia where consumer insights are developed and consumer-centric businesses managed and grown. In this way, we can build up a cluster of companies in the consumer-related fields of marketing, branding, consumer research and market intelligence. We will, therefore, establish an Institute of Asia Consumer Insights in Singapore to conduct such research and analytics that will draw insights from consumer data to create value for companies that are established here.

Mr Chairman, our fourth growth strategy is to strengthen our integration with our Asian neighbours and, thereby, sharpen our competitive edge. ASEAN provides two key advantages for our businesses. First, with a middle-class of more than 75 million people, the ASEAN nations provide a growing market that serves as a very natural first step out of our borders. In fact, many of our successful companies such as Raoul, Crystal Jade and AceCom first started serving the ASEAN market before they expanded more widely onto the global stage.

In addition, our companies have also leveraged on ASEAN as a competitive production base, conducting entire value chains of activities within ASEAN. For instance, STMicroelectronics conducts R&D, IC design, application support and wafer fabrication in Singapore while the packaging of chips is carried out in Malaysia and the final testing of the chips is conducted in Malaysia or Philippines or in fact outsourced to other players in Southeast Asia.

ASEAN aims to achieve deeper economic integration through the ASEAN Economic Community or the AEC by 2015. The ACE will accelerate ASEAN's journey towards a single market and a synergistic production base with enhanced transport and business connectivity. ASEAN-based businesses, including Singapore-based businesses, will then be able to produce, operate and export more seamlessly across the region. We must take full advantage of this new development occurring in our neighbourhood.

Our fifth growth strategy is to support our companies as they internationalise by leveraging on our existing FTAs and by pursuing new FTAs. Mr Wee Siew Kim asked about the benefits from our existing FTAs. Our FTAs have helped us to reduce costs, to lower our risks and open new markets for our companies. Let me elaborate. Today, Singapore has a network of 18 FTAs in force. As an export-oriented economy, Singapore thrives on the free flow of trade and better linkages to major economies and new markets. Last year, companies based in Singapore enjoy more than $700 million in tariff savings as a result of our FTAs. Our service suppliers and investors in key sectors enjoy more predictable and better access to the markets of our FTA partners. Furthermore, overseas investments by our companies have enjoyed increased protection, both through our FTAs and our investment guarantee agreements. Trade facilitation measures under our FTAs help to lower the business costs of our companies. For example, mutual recognition agreements eliminate duplicate testing and certification, yielding cost and time savings. In the case of consumer electronics, such mutual recognition agreements saved our exporters between $3,000 to $8,000 on testing costs for each type of product.

Mr Wee Siew Kim has also asked about the areas where additional effort is needed. We already have FTAs with nearly all our top trading partners covering 66% of our exports. This year, we have embarked on two deeply significant FTAs. The first is with the European Union, our largest trading partner in 2009. We look forward to substantial tariff savings and improved market access there. The second is the Trans-Pacific Partnership FTA, together with seven other APEC economies, including the United States. This FTA can be the building block for eventually achieving an FTA for the Asia-Pacific region. The closer economic cooperation agreement with Egypt is also another important FTA this year. This would give us access to the Egyptian market. When done, this will be our first FTA with an African country which gives us access to both north and east Africa.

Mr Chairman, let me conclude. We are small and open and will always be vulnerable to the fluctuations of the global economy. There are still some uncertainties in the near future but we must chart the course for long-term growth and resilience during this period of our recovery. The first three strategies that I outlined – strengthening our existing clusters – capturing new growth areas and building a more vibrant corporate landscape – will expand the scope and capabilities of our companies as they compete in the new landscape. Our fourth and fifth strategies of deepening integration with our ASEAN neighbours and leveraging on our trade agreements will expand the market space for our companies. Together, these five strategies will put us on a path of a broad-based growth for our economy and create better jobs for all Singaporeans.

Tourism

Assoc. Prof. Dr Muhammad Faishal Ibrahim: Sir, in the last three years, we witnessed two F1 races and the developments of the two IRs which will operate in full scale in the coming months. They involve large amount of capital and infrastructure investment.

I would like to ask the Minister what are the Ministry’s plans to get the most out of these investments. In addition, in view of the rising travel among Asians, what are we doing to reap maximum benefits from this opportunity? Finally, in view of the proposed plans of similar theme parks and casinos in our neighbouring countries, what are the Ministry’s plan to make Singapore a preferred tourist destination and extend our visitors’ stay here?

Nuclear energy

Sir, the ESC report recommended that we should study the feasibility of nuclear energy amongst other options. The announcement created a buzz on the ground.

There are those who strongly favour this. They mentioned that nuclear energy is clean, reliable and contrary to popular belief, a safe source of energy. The generation of electricity using nuclear energy is relatively cheaper and nuclear power plants are able to generate more electricity compared to other methods. Furthermore, the fuel used is inexpensive and easily transportable.

However, another group is concerned about the safe storage and the disposal of nuclear waste. Nuclear plants usually have a highly complex infrastructure and the slightest malfunction might cause devastating results. They are also concerned about it being a target of terrorist attacks.

Nevertheless, both groups would like the Government to consider this proposal carefully as it has both positive and negative implications. Besides the tangible and intangible costs and benefits, they would like the Government to look at the social costs and benefits of nuclear energy.

I would like to ask the Minister about the status of our current knowledge and research capabilities with regard to nuclear energy. Would the Government consider having a private firm running the nuclear plant instead of it being State run?

Finally, as nuclear plant can develop vast amount of energy, in any case that the production is more than the usage, would the Government consider having neighbouring countries as our partners?

Dr Lam Pin Min (Ang Mo Kio): There are more than 400 nuclear plants worldwide generating 16% of the world's electricity. While many governments are highly ambivalent about this energy source, especially its safety concerns, technological advances and stringent requirements since the Chernobyl accident have made nuclear energy a much safer option. In addition, it is friendlier to the environment as it produces very little carbon dioxide emission.

Fossil fuels like coal account for half of electricity production costs while for nuclear energy, only about 3% to 4% of total production costs is due to the raw uranium. Volatile and rising oil prices have meanwhile made the relatively lower costs of nuclear energy more appealing but I understand there are challenges to making it a reality in Singapore.

The Economic Strategies Committee (ESC) has recommended that Singapore should look into tapping on nuclear energy for this long-term energy requirements. I would, therefore, like to ask the Minister what is the feasibility of Singapore achieving this, considering the potential problems associated with nuclear energy generation and the geographical location and size of Singapore.

Mr Liang Eng Hwa: Sir, one of the recommendations of ESC that caught the public's attention was the possibility of nuclear energy being a possible option to meet our long-term electricity needs. We know that nuclear energy has been around for some time and has been a strategic source of energy for many countries for many years. Technically, it is a rich source of energy at competitive economic cost. However, like many Singaporeans, it comes as a surprise to me that the nuclear energy would ever be a possible option in an island state with a size of about 710 square kilometers and a residing dense population of five million people. It may take a while for some to overcome that psychological barrier, given the perception of the radioactive hazards and safety concerns.

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There are strong strategic and economic appeals for the nuclear option. It would certainly enhance our energy resilience and, unlike many countries, we have the patient capital for such high capital intensive investments.

Like the decision we made on the casinos some years ago, we know the compelling economic benefits but the question is whether the other costs can be mitigated and reduced to an acceptable level. Not much has been said by the Government or MTI since the release of this far-reaching recommendation by ESC. So, I hope that the Minister can shed more light on the Government's thinking and its position; pending, of course, the feasibility study.

A decision like the adoption nuclear energy would have a significant bearing on future generations. I also hope that with more information from the Government, it would trigger a healthy and informed public debate on this issue much like what had happened to the IR debate. It would also be a good gauge of the risk profile of Singaporeans on the susceptibility of the nuclear risk.

Our neighbouring countries are also looking at the nuclear energy option. Given the close proximity, can the Minister give an update on the developments at our neighbouring countries and how it could impact us? Do we have an ASEAN stand on nuclear energy, for example? I would also like to ask the Minister on the progress and developments of the other alternatives. How would nuclear energy feature when compare to these other alternatives like solar, wind, and so on.

Solar energy

Dr Fatimah Lateef: Sir, as we make the move towards becoming a more green nation, there will eventually be lower usage of electric power generated from fossil fuels, thus, less greenhouse gases and acid rain emissions. One of the options of the alternative sources of energy is that of solar energy and this seems appropriate with our climate and our position close the Equator. What steps is the Ministry taking to encourage the development of infrastructure to harness solar energy and its usage? Can the Ministry come up with a listing of appropriate companies, contractors and gadgets in the market for easier consumer identification and choice? Starting with a small list, I feel this can be expanded and also publicised. Other plans to work or collaborate with other agencies to encourage the use of solar, which I feel is certainly less controversial than that of nuclear energy.

Mr Chairman: Ms Sylvia Lim, take your two cuts together.

Energy policy

Ms Sylvia Lim (Non-Constituency Member): Sir, the ECS has put forth recommendations on Singapore being a smart energy economy. As electricity is a modern necessity, it is of paramount importance that it is reliable, pollution-free and affordable. As regards reliability, the ESC recommended that, in the medium term, Singapore considers importing coal and electricity to diversify our energy sources so as to free up land in Singapore. I would like clarification on the pros and cons of relying on imports and, thus, becoming less self-reliant for our energy needs. Which are the countries we are likely to import electricity from? Will there be additional risks to our energy security? What are the infrastructure investments we need to put in place to enable this? Will these investments lead to higher electricity prices? Are we expecting imported electricity to be more or less expensive than what is generated in Singapore? As regards to coal, are we taking a step backwards on the environment when other countries are moving away from it due to such concerns?

As for pricing, the ESC notes that economic fundamentals will mean that electricity prices will trend upwards, it further recommends pricing energy to reflect real cost and constraints, with suggestions of a carbon pricing scheme. From the point of view of the consumers, such a scheme sounds ominous, even with the offsets to help buffer the transition for the low-income. Sir, while offsets to low-income households will be useful while they last, an additional idea is to have a tiered system of pricing electricity in favour of small consumers. The fundamental idea is for the threshold level of power consumption by households to be determined. Households consuming less than the threshold level will enjoy a lower tariff charge. With increasing consumption levels, the tariff will escalate. The higher tariff collected in the upper tiers can be used for two purposes – one to cross subsidise the first tier tariff and, second, to encourage all households not to over-consumer electricity.

Many countries, including New Zealand, Canada, Hong Kong and the US, implement variations of this idea to protect small consumers. Some governments require electricity retailers, by law, to provide a low-tariff charge for small consumers. I hope that MTI's plan to open up the market for electricity supply among households to several retailers can incorporate such a requirement for the retailers to provide a low-tariff charge for small consumers.

Research and development

Sir, since the year 2000, Singapore has spent about $33 billion on R&D, also referred as gross domestic expenditure on research and development (GERD). Of this, about $12 billion was funded by taxpayers. I agree that it is necessary for Singapore to invest heavily in R&D for our nation's future, however, it is critically important to measure the output and impact of our R&D investments to ensure it is money well spent. This is, admittedly, not an easy task. The results from research may take years to materialise and some R&D may be undertaken for strategic reasons, the benefits of which may not be easy to quantify. Nevertheless, any spending from the public needs to be accounted for.

First, how are we currently measuring the output and impact of our R&D investments? I note that A*STAR puts out annual R&D surveys, covering input factors such as GERD in various fields of R&D and overall GERD as a percentage of GDP. There is also mention of certain outputs like sales revenue from commercialised products and processes, licensing revenues from patents and technologies produced here and the number of patent applications. However, the Singapore competitiveness report 2009 by the Lee Kuan Yew School of Public Policy observed that Government funded research institutes did not seem to be translating the scientific research into new products and services at a significant skill. Does MTI agree with the author's allusion to some under-performance? What other output and outcome indicators are tracked by the Government? How are we doing in terms of R&D output and outcomes vis-a-vis other countries at a comparable stage of R&D?

Sir, next – R&D manpower. The number of full-time post-graduate research students, who are citizens or PRs, was only 26% in 2008 with 75% being non-PRs foreign citizens. The ESC has acknowledged that we need to boost the numbers of local students pursuing PhDs in R&D fields. What are the Government's plans in relation to boosting the numbers of local students pursuing PhDs in R&D?

Supporting local enterprises

Mr Inderjit Singh (Ang Mo Kio): Sir, I would like to speak about how we can better support local enterprises and elaborate on what I mentioned during the Budget debate.

Sir, the Action Community for Entrepreneurship (ACE), submitted several recommendations to the ESC. Firstly, ACE feels that there needs to be a clearer focus from the Government on local enterprise development. Currently, since resources are accorded by the Government to enterprises based on incremental economic activities – which is a value-added method that we have been using right now to evaluate the potential of companies – this disadvantages SMEs compared to foreign SMEs as the former build from a higher baseline. Singapore should support enterprises based on absolute total return rather than incremental economic activities to create a more level playing field for all.

To aid in this objective, ACE proposed the establishment of a new local enterprise development agency or "Enterprise Singapore", which will be a single agency to develop globally competitive locally-based enterprises. Whilst the intent of SPRING and IE Singapore is to have specialised expertise to assist and support companies, this has also resulted in gaps to provide a seamless, comprehensive and integrated assistance to companies. Potential SMEs which could become Globally Competitive Companies (GCCs) but have reached a certain size, may not also be able to get the support from either agencies and, therefore, they are not well served under the current system. Other agencies with domain expertise like A*STAR, IDA, MDA and other agencies within the Government may not have a clear enterprise development role, nor are their KPIs directed in this focus.

"Enterprise Singapore" can, therefore, adopt a more targeted and "account management" approach than the other agencies in growing GCCs and involving the Whole-of-Singapore approach to provide the entire value-chain support to grow them from start-up to become world-class brands. An additional role of "Enterprise Singapore" could be to help in attracting, anchoring and nurturing promising world-class foreign start-ups and SMEs to locate in Singapore as EDB has successfully done for large MNCs in the past. These SMEs could one day become our GCCs and it does not matter where they originated from as long as they finally have home bases here in Singapore. I am glad that the Minister mentioned this is one of the strategies.

Sir, Singapore has seen the start-up, growth and internationalisation of Government-linked companies (GLCs) due to the support from Temasek and Ministries' funding and also the Development Bank of Singapore of those days. Many successful Singapore GLCs may not have been around without such support and we need to create more of such companies to add to the wealth and the growth of the nation.

"Enterprise Singapore" should, therefore, be complemented with a new Investment Agency or Temasek II, as ACE has called it, which will play a developmental role in investing and grooming promising locally-based private companies to be the GCCs of the future as the Government did for the GLCs in the past. Besides growing local companies, Temasek II should also bring potential foreign GCCs into Singapore by investing in such foreign SMEs. As governments around the world withdraw the massive economic rescue packages, there is a window of opportunity for Singapore to aggressively attract some foreign SMEs here.

I am also glad that the ESC's recommendation of a fund to invest in growth companies has been announced. I am glad that this is finally being recognised as a need. Sir, in 2003, a committee which I headed called the SME Financing Panel made this similar recommendation and we produced a report in 2003. Seven years later, the ESC has seen the same need and the Government has responded by setting aside $1.5 billion for this. Sir, the effectiveness of this fund depends on how it is managed and we must remember that the US$1 billion Technology Innovation Program (TIP) fund used to create Venture Capitalists (VCs) here did not succeed in getting many of our local start-ups funded as the VCs chose to invest outside of Singapore after the VCs received Government funds and tax incentives. A growth fund is needed because of market failure and therefore it is unlikely that many private funds will invest in targeted companies that may not yield the type of returns that they may desire. The Government may need to become more proactive in investment decisions rather than to leave it to third party investors. But it is also not optimal for the Government to make investment decisions. I think the best way to go about doing this is for the Government to set up a panel of established business leaders who are given the flexibility to identify suitable businesses to invest in, very much like the SPRING SEEDS programme where we have a panel of private sector experts making investment decisions on behalf of the Government and this has worked well for many years.

Sir, we will need to re-orientate our approach to turning Singapore into an entrepreneurial hub and to calibrate the playing field, Government-support mechanisms and focus should be on economic activities and spin-offs and move away from local ownership as a qualifying criteria. We should remove the 30% Singaporean ownership criteria for Government grants, loans and incentives so as to support enterprises based on economic activities and not the type of ownership. In this way, we can successfully bring in many entrepreneurs from outside Singapore to be based here.

Sir, on R&D, the ESC has repeated the need for innovation and R&D, and this is something all past committees have also highlighted and I believe we have not fully achieved the desired results. While we have done very well in the input factors for example, the amount the Government has spent on R&D, like the $12 billion that Ms Sylvia Lim mentioned, the equivalent outcome of this R&D is far from desirable. The substantial investment in R&D in this recent past has yet to yield the results that we want, especially in commercialisation and tangible start-up spin-offs. The lack of appropriate businesses as receptacles to translate R&D to commercialisation is one reason. The selection of research projects without inputs and guidance from innovative businesses creates another gap. Therefore, without an active involvement of innovative business ecosystem, expenditure on research may not yield the returns that we expect. In this aspect, "Enterprise Singapore" could play the role of creating that eco-system. A distributed approach of commercialising R&D residing in respective agencies has so far failed to yield the results that we so desire.

Sir, in conclusion, I will give credit to Budget 2010 that it has attempted to help companies through the adoption of innovation and technology and to improve the productivity of the workforce. However, we should not waste this opportunity to signal to SMEs that we would like to help them grow and that we have a clear and precise policy to create a level playing field for all of them. I think our SMEs will very much appreciate this gesture from the Government. If we want to grow globally competitive and world-class companies here in Singapore, we will need to take bolder and more definitive steps. I think if we miss this boat this time, it may take us a longer time to catch up and this will be costly for the long-term economic growth of Singapore.

Mr Chairman: Mr Heng, take both cuts together, please.

2.45 pm

Centre for research on productivity

Mr Heng Chee How: Sir, the Economic Strategies Committee (ESC) recommended the setting up of a centre to research on productivity and innovation. I think this is an important move to help ensure that knowledge about productivity methods and practice can be obtained and shared quickly to the benefit of companies and workers.

We cannot assume that companies will naturally know what to do or how best to improve productivity in the context, especially for the smaller companies. And a lack of know-how can be a real impediment, aside from money. And this may also be a especially relevant in the case of the SMEs.

Deputy Prime Minister Teo Chee Hean said in his speech during the Budget Debate that in recognising the different circumstances of different industries, specialist centres may be established for the different industries. I am firmly in support of the view that such centres should not only do research and then make the findings available to companies on a pull basis, ie when the companies come and draw the information from the centres, but that the centres should also be open knowledge and leaving hubs that actively engages and distributes knowledge from the applied research to industry through close collaboration with industries' stakeholders; and that is a 'push' approach. And I believe that both 'pull' and 'push' methods are needed concurrently. I would like to ask if this is the correct reading of the intent of Government, and if so, whether there is a preliminary thinking on how many such centres and in which industries would be set up, when they would be set up and what resources would be deployed to back them up.

Hotel productivity

According to figures from the MTI and the MOM, labour-productivity growth in the hotels and restaurant sector was 4% in 2005 and dropped to 0.4% in 2006 to -6% in 2007 and -9% in 2008. One factor was the seeming difficulty of hotels in Singapore to raise the room rates compared to the situation in major cities in the west and with Asian cities like Hong Kong and Tokyo. A second factor may be the propensity on the part of the many hoteliers to equate service standards with headcount although with a keen eye on cost. The combination of these factors created a gravitation towards lower-fixed pay and smaller core workforce, and the relatively high dependence on part time, temporary, trainee and foreign manpower to provide flexibility and cost effectiveness.

The high turnover and quality or lack of quality of such workforce is not conducive to training and development and this is in turn bad for industry productivity. Over time, the image and attractiveness of the industry as an employer is also eroded. Growth prospects in the hotel sector remains strong in the medium term with MICE facilities such as the Fullerton Bay Hotel, the Marina Bay Sands and the Resorts World at Sentosa, coming on stream. In this time, it is all the more crucial for companies, workers, unions, Government, to work together to ensure that growth in the sector is sustained by productivity.

This is the only way to uplift profitability, wages, standards and image sustainably and substantially. I would like to know what plans do the MTI and the STB have to uplift productivity and spur innovation in hotel and F&B sector? Would efforts and resources be put into benchmarking, service excellence and people development? How do MTI and STB intend to enlist the partnership of the industry representative bodies and unions in these efforts?

Employers and productivity

Mdm Ho Geok Choo (West Coast): Sir, employers will be the prime movers of our renewed productivity drive. There are, in our midst, corporate leaders who still do not see the bigger picture. The importance of investing, in employee training is to drive productivity and employability. These leaders have voiced various concerns in the words of one, "I do not want to train them and make them marketable. They have no time for training." These employers question whether the broad-based training and the diagonal exposure and vertical path progression to value add to employees. Development tracks, as mentioned by Deputy Prime Minister Teo Chee Hean, is indeed the employers’ responsibility.

These concerns will be stumbling blocks for our Nation's productivity drive. I fear that such leaders fail to understand that Singapore's future growth agenda must stem from a positive mindset of magnanimity, sincerity and an understanding that we are training our employees for a bigger goal and our competition is really not amongst Singaporean companies but the neighbours around us. We must impress upon our corporate leaders the need to think Singapore first. In this productivity journey, we must be able to align every employer to the National Productivity goals. What is the Government's plan on this?

Strengthening SME capabilities

Sir, capability development is important in achieving higher productivity, in particular, human capital management and human capital processes and system, the underpinning foundation is both critical and pivotal to the SMEs' growth and productivity journey. SMEs are well supported in the areas of automation for work processes and market exposure but more attention should be paid to Human Capital Management and development capabilities. Their bigger stumbling block is that, most of the time, they are too small to have a specialised HR function. They gloss over the most strategic aspect of capability development. I urge SPRING Singapore to explore the possibility of setting up an HR service outsourcing hub to give more focus support to SMEs in their HR processes and systems.

SPRING Singapore has the HR tool kit, a DIY for SMEs. I understand that the ones who are benefiting from it are the MNCs, who are happily downloading the tools free of charge (FOC). And they can Do-It-Yourself (DIY) because they have specialist HR function to leverage on these tools. As for SMEs, they do not have specialist HR resources to do-it-yourself, instead, they are saying, do-it-for-me. Sir, to strengthen the human capability management function of the SME, I urge that the WSQ national framework on HR competency qualifications and the HR toolkit induction be taken seriously by agencies as eligibility criteria for companies vying for the respective SQA, ASME or Asian Human Capital Awards. Afterall, these national programmes were mounted to level up the capabilities of companies and their people managers.

Strengthening SMEs and corporate ecosystem

Mr Wee Siew Kim: Mr Chairman, global and regional competition is growing. At the same time, our businesses face resource constraints, particularly in foreign labour. What are we doing to ensure that our SMEs are equipped to meet this challenge, raise their productivity and expand internationally? As we restructure our overall economy towards higher-value activities and exit from less efficient ones, it is inevitable that many companies, particularly our local SMEs, will have to change their core businesses or move their operations to other countries where costs are lower.

During the 2006 Budget Debate, I spoke about how our local companies should work together so that we can stake out a bigger slice of the global pie. Co-operation, collaboration and mutual help are key traits best exemplified by Japanese and Taiwanese companies. Not very much has changed in the last four years. There are still only a handful of Singapore companies which have the competence and talent base to compete on a global or regional basis. The Minister of Finance, Mr Tharman, had mentioned in his speech about Singapore Mozaic's success in promoting our local furniture makers collectively. We should have more of such collaborations. We should hunt as a pack.

The Minister has mentioned using our business associations as growth champions. I agree that our trade associations and Chambers of Commerce can play a greater role in strengthening our capabilities as we go global. They are the most suitable agents to change the mindsets of our business leaders to think collectively as Team Singapore. I would like to suggest that big local companies, especially those which are government-linked, proactively take the lead when going overseas to capture contracts. The Government may wish to consider providing such companies with incentives to do so. This is pack hunting with a lead. I am heartened to note that the Government will commit $100 million over five years to facilitate international market access for members of our business associations.

All entrepreneurs have to start somewhere and often fail at the beginning before they can succeed. Hyflux, Creative and many other local enterprises started as SMEs. We need many more Singapore companies like them. Their eventual success translates into more jobs and greater tax revenue for Singapore. Only then, will our economic growth be truly sustainable.

The Government has agreed with the ESC recommendation to raise our Gross Expenditure on R&D to 3.5% of GDP over the next five years. In the past, I appealed to the Government to give our local companies extra consideration when procuring services and goods for itself. Such support is vital to grow our own global companies. If we do not give them a chance – a break – who else would?

Hence, I applaud the Government's decision, as a sizeable consumer of products and services, to play a larger role to help innovation-driven companies turn their R&D into marketable solutions on a more proactive and systematic basis.

As the Government help innovation-driven companies turn R&D into marketable solutions through Public-Private Co-innovation Partnership, we must bear in mind that innovation is not only R&D. For beyond technological innovations, there are also innovations in business models, process, branding that would set our SMEs apart, and they should be given the same level of support.

Many times, and even in this Debate, it has been mentioned that the Government can play an enabling role, not a deciding role. I do not agree. I certainly understand the Government's concern that policymakers may not be able to pick winners. I suggest that we can adopt the ideology of making it "market based" and aligning interests through co-investing. This is because I do not believe that we have the scale and scope for a "let a thousand flowers bloom" approach. For Singapore, the risk of picking the wrong seedlings is less than not picking at all.

I suggest the key aspects of selection criteria should include; substantially Singapore-based companies; equity capital is required to compete overseas; the "ticket size" is perceived as too big for the current shareholders and they must have proven success domestically.

The idea of Government co-investment, with businesses taking the lead, is not new. In its earlier form, it had propelled our industrialisation in the 60s. In just the recent past the SRI is based on such a concept. For example, an agency like EDB Investments can co-invest directly in exchange for an equity-like stake. There is certainly a need for growth/patient capital. M&A is a crucial and under-used approach for Singapore companies to grow both domestically and overseas. The GPC had discussed using a new development agency (such as a Temasek II) to support acquisitions where there is a "ticket size" issue, especially when it is an overseas acquisition. In so doing, we can quickly build bulk and scope that in many sectors is a key differentiating element. I hope that the Ministry would give serious consideration to this GPC suggestion.

Strengthening the SME sector

Mr Zaqy Mohamad: Mr Chairman, the Budget has certainly brought upon a rejuvenated focus on productivity to get companies and the workforce better prepared to adapt to an increasingly comparative world economy. The unfortunate reality is that the business world is brutal. And our competitive companies and workers who are not willing to adapt may find themselves left behind.

I believe the incentives approach given on this Budget is a right approach for those who are willing to adapt and transform. I would like the Minister what are the additional resources given to SPRING and IE Singapore to focus on transforming local companies into globally competitive ones and help them build strong management teams? Some measures certainly favour medium and larger sized companies that are able to transform, invest in R&D and commercialise innovation. However, smaller firms may not have sufficient cash flow to transform and invest in HR due to tight resources. How does MTI plan to help the smaller firms below $10 million in revenue, achieve critical mass so that they can scale to $200 million?

What more can be done for them?

With limited Government resources for industry development, are there key sectors that MTI is counting on to deliver, improve productivity and promote Mergers and Acquisitions (M&A) to grow globally competitive companies?

Would the MTI consider partnership incentives for MNCs and successful global Singapore firms to help our SMEs enter new overseas market and sub-contractors or business partners? This can be a potential channel to help IE Singapore scale its operations through the use of partner enterprises. One challenge for local businesses here is the high cost of rental and utilities. Can the Ministry share if it has performed a study on what percentage of revenue earned by SMEs goes into rental? The challenge with land scarce in Singapore is that high rentals of businesses are controlled by a small pool of landlords and this form the basis of business costs as everything else comes on top. Anecdotally, many business feedback that for every dollar earned, a high proportion goes into rent and utilities. I fear that this may counter our productivity efforts because in the long run, it might may make it tough for employers to pay workers better, even with higher productivity.

The Chairman: We will take a break now.

Thereupon Mr Speaker left the Chair of the Committee and took the Chair of the House.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.20 pm.

Sitting accordingly suspended

at 3.00 pm until 3.20 pm.

Sitting resumed at 3.20 pm

[Mr Speaker in the Chair]:

[Mr Speaker in the Chair]: Debate in Committee of Supply resumed.

[Mr Speaker in the Chair]

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