HEAD V - MINISTRY OF TRADE AND INDUSTRY

Head V (cont.) –

Entrepreneurship

Mr Low Thia Khiang (Hougang): Mr Chairman, Sir, the ESC and the Budget seem to focus heavily on helping companies which are already successful to become globally competitive companies.

In its drive to identify and assist these promising medium-sized companies, has the Government forgotten about local small businesses like sundry shops and car workshops? Would such small enterprises have a place in the new economic landscape, or will they be crowded out or gobbled up by bigger fish? What is the Government doing to help local small businesses, especially those in sunset industries, to become more competitive and viable in the new economy?

Secondly, is the Government providing the right environment and support for entrepreneurship to flourish in Singapore? We must not lose the spirit of enterprise in Singapore, keeping in mind that many global companies today started from very humble beginnings. Last year, a survey of 2,300 students from local universities and polytechnics found that less than two in 10 of them considered starting their own businesses after graduating, compared to almost seven in 10 who planned to take up salaried jobs. Is the Minister concerned that so few of our brightest students aspire to be entrepreneurs? Are our schools helping their students to develop more of the traits necessary to be successful entrepreneurs? For example, risk-taking, initiative and agility.

I understand that SPRING Singapore has a number of schemes that provide funding to start-ups. Can the Minister provide an update on how effective these schemes have been in nurturing successful entrepreneurs? While financing is important, access to good mentors is equally key to help these entrepreneurs succeed. Are there sufficient experienced mentors available to advise our entrepreneurs? If not, are there plans to invite successful business founders or venture capitalists from places like the Silicon Valley to provide sound advice to these start-ups and evaluate their business plans?

Shared resources

Dr Ahmad Mohd Magad (Pasir Ris-Punggol): Mr Chairman, Sir, for SMEs in the manufacturing industry, increasing productivity rates may involve a need for better, faster and more sophisticated machinery. However, these machines often involve high cost and may be under-utilised due to the SMEs' lower volume of output. These factors have discouraged some SMEs from upgrading to more sophisticated and higher quality machines.

One way to overcome this is to encourage SMEs to pool their resources and invest in more sophisticated and higher quality machines altogether. A joint venture company can be formed between SMEs to co-own these assets. These machines can produce components or even sub-assemblies. With a few companies running the machines at different times, the owners can swop the assets by having 24/7 production and, in doing so, maximise their return on investment in the machines.

Similarly, for common infrastructure needs such as IT systems, warehousing and services such as HR, payroll, finance, IT, inventory and quality control, SMEs should be encouraged to form clusters so that they can reap the benefits of shared infrastructure and services wherever possible. These initiatives will lead to cost savings for SMEs and they can, in turn, focus on becoming more efficient and productive.

With all these benefits, Sir, I would like to ask if the Government can incentivise SMEs to enter into such arrangements by co-financing the initial cost for the sharing of machines and services.

Building an inclusive economy

Miss Penny Low: Sir, building an inclusive economy is a key thrust in Budget 2010. If so, while widening and deepening the capabilities of SMEs, would MTI also do the same with non-profit organisations (NPOs), especially social enterprises that intend to do good and do well?

Sir, a few of the SME schemes under SPRING and IE Singapore claim to be open to social enterprises (SEs). However, upon closer examination, the fundamentally different value propositions, organisational and cost structures of SEs immediately disqualify themselves from those schemes. If indeed we want an inclusive society, can MTI tweak the qualifying criteria and make it more friendly towards the NPOs?

Sir, Singapore is an old hand at inter-Ministry priority sector nurturing. For instance, in the ICT sector - with iN2015 plans, IDA works with SPRING to support the Technology Enterprise Commercialisation Scheme (TECS) and provides SMEs with early-stage funding for R&D projects. A Proof-of-Concept grant attracts up to $250,000, while a Proof-of-Value grant 85% co-funding of up to $500,000. In addition, there are also generous opportunities like the Overseas Development Programme and the infocomm Local Industry Upgrading Programme that are created for infocomm local enterprise (ILEs) to collaborate with the infocomm MNCs. Through these initiatives, the local SMEs also get access to the global marketing and distribution networks of their MNC partners, build new capabilities in emerging technologies.

My question therefore is: can we do the same for SEs? Imagine if MTI can work with MCYS to formulate a systematic approach to groom local SEs, treat them like any other priority sector SMEs, not only would we have a more robust and inclusive economy, SEs can also become a strategic partner and a competitive edge in the second budget thrust which is growing global companies.

Let me explain that briefly. With IE Singapore, I understand Budget 2010 will encourage "cluster hunting" and collaborations between SEs when going overseas. We will then compete with hard-nosed Taiwanese conglomerates, Japanese and Korean chaebols to offer foreign investment, mostly based on price points and competencies, often driving down marginal revenue. My suggestion is: why not strategically include the SEs in the conglomerate, and position ourselves not just as a Singapore Inc, but as Singapore Syinc? In other words, while the pure-for-profit businesses offer their investments and trade, SEs complement it by offering social goods and services which find solutions from within the community to break poverty cycles and help communities to help themselves. In the longer term, these empowered communities will also become our clients to ensure the success of our SMEs. On the other hand, especially in the developing nations, our local counterparts can also look good and gain popularity for partnering investors with a heart.

Sir, Singapore will be known as the Singapore brand where every citizen will be proud of and feel welcome wherever we go to.

Helping SMEs internationlise

Mdm Ho Geok Choo: Sir, in the next 10 years, how will Singapore overcome the intense competition presented by rising Asia? India and China have their own home-grown multinationals. How many local MNCs do we have and are they capable of harnessing the might of these two countries?

We have more than 110,000 enterprises here, of which 99% are SMEs. How many are involved in trading activities? How many have been venturing out into the region and have made inroads there? How does IE Singapore deploy its manpower resources to facilitate and support SMEs who are making inroad into Asia?

Sir, the Local Industry Upgrading Programme will soon be subsumed under PACT. How much has been spent on this programme and what is the present status of these companies? How many companies have been transformed into our very own local MNCs? And how will PACT help in greater collaboration between MNCs and local firms?

Sir, a common grouse amongst SMEs is the lack of financing. Banks shun new markets and favour established players. The ESC report recommended the setting up of an EXIM bank to provide risk insurance for trade and overseas investments. When will such an institution be set up and what are the parameters under which it will operate?

Tapping on China's growth

Mr Teo Ser Luck: China is the world's third largest economy targeting at 8% GDP growth this year. They are trying to ensure that the quality of economic growth is for the long term so they are focusing on transformation of economic growth pattern and also to adjust their economic structure. But there are challenges. These challenges are both short- and long-term policies conflict as well as external and internal influences.

In the words of the Prime Minister Wen Jiabao, he said in Chinese, "短期问题和长期矛盾相互交织，国内因素和国际因素相互影响。经济社会发展中，两难问题增多 ( duan qi wen ti he chang qi mao dun xiang hu jiao zhi, guo nei yin su he guo wai yin su xiang hu ying xiang. Jing ji she hui fa zhan zhong, liang nan wen ti zen duo )".

Despite these challenges, I still think China is the largest market with lots of opportunities. Business people will tell you that over there, it is " shi ban gong bei ", and not " shi bei gong ban ". So what is the Government's strategy in tapping on China's growth and how can it help our local enterprises tap on this growth?

3.30 pm

Consumer protection

Mr Yeo Guat Kwang (Aljunied): Sir, let me first declare my interest as President of the Consumer Association of Singapore (CASE). CASE has been actively educating the public and protecting their consumer rights. However, certain groups of consumers are not reached by our regular information channels. There is an urgent need for us to put in place programmes and activities so as to reach out to a specific audience like the young consumers and the illiterate, particularly the elderly and the housewives. To meet the need to enhance their awareness, we require additional resources to put in place a comprehensive plan and a more focused programme to deliver the message in a way and in a medium that would best suit this group of people.

Sir, CASE studies show that the elderly and the housewives often fall victim to direct sellers, door-to-door sales as well as being persuaded to use their retired savings to buy structured financial products and investment-linked insurance policies. We should help them to better understand financial products and their risks as well as protection against door-to-door sales and their rights under the Consumer Protection (Fair Trading) Act.

The young consumers and the students form another group. It is important to educate this group of consumers as they do spend a lot of money purchasing items like mobile phones, services and lifestyle products. We aim to provide such consumers with some tips and also raise their awareness on legal protection for the purchase of services or products in the area of beauty and electrical and electronic devices as well as mobile phone and related mobile and broadband services.

I would like to request MTI to consider providing additional funding support for such initiatives. In addition, I would also like to request MTI to step up enforcement against errant retailers and strengthen its administration of the Consumer Protection, Trade Description and Safety Requirements Act, particularly to enforce this Act against retailers who run afoul of the law such as those who labelled jewellery pieces as of a certain gold fineness standard when they are not and those who imported toys that do not meet the safety requirements. I think these are very dangerous and irresponsible acts. These errant retailers have to be taken to task so the consumer, both locals and foreigners alike, can shop with confidence and ease in Singapore. My recent dialogue session with a group of local jewellers showed that many of the retailers actually are not aware of their legal duties and obligations under this Act.

Timeshare and lemon law

Mr Lim Biow Chuan: Sir, let me declare my interest as the Vice-President of Consumers Association of Singapore (CASE). Despite the passing of the Consumer Protection (Fair Trading) Act (CPFTA) in 2003, timeshare and its related complaints have topped the complaints chart at the Consumers Association for the sixth consecutive year.

In 2004, there were some 100 complaints relating to the sale of time share products. From 2005 to 2009, every year, the complaint figures have hovered above the 200 mark.

The general complaints are related to breaches of CPFTA in areas such as misleading and/or false claims, undue pressure and failing to inform about or honour the cooling-off period.

CASE had already taken injunction proceedings against three timeshare-related companies. However, under the Act, such proceedings take a while to be concluded and companies have taken advantage of this time lag to wind down their operations and to start new outfits to operate as before with exactly the same management. This is a brazen move to skirt the laws.

We believe timeshare legislation is both timely and necessary to address this issue and to offer more comprehensive protection for consumers. We need to make it unlawful for individuals who have engaged in such unfair trade practices to close their operations and then reopen the businesses to perpetuate the same activities. May I urge MTI to reconsider its decision and to introduce legislation to protect consumers in this area?

Sir, MTI had earlier accepted the proposal of CASE for the introduction of lemon laws in Singapore. I would like to ask for an update. Has the legislation been drafted? And if so, when can we expect the first reading?

The Senior Minister of State for Trade and Industry (Mr S Iswaran): Mr Chairman, first, I would like to thank Members for the wide range of issues that they have raised. My Minister has set out MTI’s overall strategy to take advantage of growth opportunities as our economy recovers. I will supplement his response by addressing specific questions that Members have raised by relating to three broad areas – tourism, energy, and research and development.

The first, tourism. Last year was a difficult year for Singapore’s tourism industry. Visitor arrivals to Singapore declined by about 4% from 2008 to reach 9.7 million, though this exceeded the Singapore Tourism Board’s (STB) projection of 9 million to 9.5 million.

We start 2010 with clear signs of recovery. Visitor arrivals registered overall positive growth from the fourth quarter of last year and surpassed 900,000 in January this year. This is the highest ever recorded for the month of January. The World Tourism Organization (UNWTO) forecasts international tourist arrivals to grow between 3% to 4% in 2010, with Asia leading this rebound. STB projects our visitor arrivals in 2010 to increase by more than 20% to between 11.5 million and 12.5 million. Tourism receipts are expected to be $17.5 to $18.5 billion, which is about 40% above 2009 levels.

Dr Muhammad Faishal has asked how we will tap on the growth of Asian markets. Our destination appeal to Asian visitors is strong. In 2009, more than 70% of our visitors came from Asia. Indonesia, China, India and Malaysia were four of Singapore's top five source markets by visitor arrivals and tourism receipts – in other words, both quantity and value. Vietnam is another promising market registering double digit growth of 11% last year. The Pacific Asia Travel Association (PATA) forecasts that Singapore will be India's top outbound destination in the next two years. PATA also expects Singapore to be among the top four destinations to be visited by Chinese travellers, excluding Hong Kong and Macau.

To further strengthen our destination awareness in the major Asian markets, STB has undertaken several key branding and marketing initiatives. Our participation at the World Expo in Shanghai, from May to October this year, is one example. The Singapore Pavilion will showcase our city as a place to live, work and play to the 70 million Chinese and international visitors. Last year, STB entered a three-year marketing partnership with VISA that will not only attract more visitors to Singapore but also to help stimulate their spending here. With Internet penetration increasing worldwide, STB is also focusing on digital media marketing to seek out the growing pool of IT-savvy travellers.

This marketing effort is complemented by a suite of key projects which are coming to fruition. Mr Chairman, these projects will transform our tourism landscape and further differentiate Singapore from other tourist destinations – a point that Dr Muhammad Faishal raised. Combined with our strong air connectivity, we are in a strong position to capitalise on the economic recovery and to tap on the Asia’s growing markets.

The advent of the two Integrated Resorts (IRs) will contribute significantly to our tourism landscape on two counts. First, with internationally acclaimed shows, events, restaurants, and Southeast Asia’s largest theme park, the IRs will enhance the quality and variety of our tourism offerings. Second, these changes ushered in by the Integrated Resorts will enable us to achieve longer stays and higher yields from our visitors, which is our objective.

STB is also collaborating with the IRs to maximise the benefit from their facilities and resources. One example is the support STB has given the Integrated Resorts to secure new BTMICE events for Singapore. Through this partnership, Marina Bay Sands and Resorts World at Sentosa will host a range of BTMICE events which are projected to draw in more than 11,000 visitors to Singapore this year. With the IRs opening in phases, the full benefits of these new tourism products will only be realised over the next few years.

There has also been a quantum leap in our events landscape. Flagship events like the Formula One (F1) night race and the F1 Rocks concert have elevated Singapore’s international standing as a global city with a vibrant lifestyle. The F1 races in 2008 and 2009 collectively brought in over 70,000 overseas visitors and generated about $260 million in incremental tourism receipts. Each race also profiles us to a "live" television audience around the world of about 100 million. We will continue to refresh the F1 and enrich the entertainment content, to ensure that Singapore remains a must-see event on the F1 calendar.

Our tourism precincts are also constantly being refreshed. Last year, the opening of three new retail malls, ION Orchard, Orchard Central and 313@Somerset, complemented our makeover of Orchard Road.

Other key projects in the pipeline include Gardens by the Bay, River Safari which is a project by the Wildlife Reserves Singapore, and the International Cruise Terminal, all of which will open over the next two to three years. STB will also develop more signature events, such as the Asia Fashion Exchange, to position Singapore on the international stage.

With this array of initiatives, Singapore is well positioned to ride the growth in the global and Asian tourism market.

Mr Chairman, I will now move on to address Members’ questions related to our energy policy. We are currently in a healthy position to meet our energy needs. Our total generation capacity is in excess of 10 gigawatts, which is more than sufficient to meet our peak electricity demand of six gigawatts. However, given that we import almost all our energy, Singapore remains exposed to the vicissitudes of global energy markets and faces several challenges. Firstly, notwithstanding the brief respite during the recession, global energy prices are on a long-term upward trend, driven by energy demand in Asia. There will also be intermittent bouts of energy price volatility due to the business cycle and other episodes.

Secondly, and consequently, there is a global race to secure adequate and reliable energy supplies from diverse sources.

Thirdly, our energy plans must accommodate the possibility of a carbon constrained future. Singapore has committed to reduce carbon emissions substantially as part of a global deal on climate change.

Our goal is to make Singapore a Smart Energy Economy with an energy ecosystem that is secure, sustainable and competitive. Our strategy to meet the global energy challenges rests on two key thrusts: diversification and competitive energy markets.

The Government agrees with the Economic Strategies Committee’s (ESC) recommendation to adopt a portfolio approach towards energy – in other words, no one energy option will be adequate to meet our varied energy objectives.

Our liquefied natural gas (LNG) terminal is one important step towards a more diversified energy portfolio. It will enhance the resilience and competitiveness of our energy supply by providing access to an integrated global LNG market that draws from gas sources from around the world. The project is on track for completion in the year 2013.

Beyond the advent of our LNG terminal, we must consider a range of energy options, based on emerging technologies and new sources, to meet our long-term needs. We will adopt a pragmatic approach by evaluating the alternatives on the basis of energy security, economic viability and environmental sustainability.

Mr Chairman, allow me to elaborate on solar energy, nuclear energy and other energy options, in response to Members’ questions.

Among the renewable energy sources currently available, solar is one of the more promising in our context for electricity generation. While still relatively expensive today, solar energy prices could achieve grid parity in the medium term.

But as pointed out by Dr Fatimah Lateef, in order to harness solar energy effectively, we need to develop the infrastructure. We must upgrade our building infrastructure for efficient installation and integration of solar panels.

The Government has put in place incentive schemes to develop capabilities in these areas and to test-bed new technologies. The $20 million Solar Capability Scheme (SCS) encourages innovations in the design and integration of solar panels in private sector buildings. For example, this scheme supported the 500-kilowatt peak solar photo-voltaic (PV) system at Resorts World Sentosa, the largest single system in Singapore to date.

Public buildings like Changi Airport’s Budget Terminal, the Khoo Teck Puat Hospital and Ngee Ann Polytechnic are also active participants in our solar test-bedding and industry development initiatives.

For those who wish to install solar PV (photo-voltaic) systems, Dr Fatimah Lateef raised this point, the Energy Market Authority (EMA) and the Building and Construction Authority (BCA) recently published a comprehensive Handbook for Solar Photovoltaic (PV) Systems . EMA also provides information on Licensed Electrical Workers (LEWs) who have the skills to install, maintain and test solar installations.

3.45 pm

Mr Chairman, given the limited potential for renewable sources to meet our base load electricity requirements, it is imperative that we explore other options as well. In that regard, MTI agrees with the ESC recommendation that we should study the feasibility of nuclear energy and develop expertise in nuclear energy technologies.

Mr Chairman, Members have listed a range of pros and cons and asked why are we prepared to study nuclear energy as an option now. There are several reasons for this. Firstly, it can potentially enhance energy security, reduce carbon emissions, and mitigate the impact of volatile oil and gas prices – thus it could meet potentially all our objectives embedded in the national energy policy.

Second, several developed countries have been using nuclear energy for a long time and many others are now considering nuclear energy seriously. France has been using nuclear energy since the 1960s and currently generates 80% of its electricity from this source. Small countries like Switzerland and island-nations like Japan have also made significant strides in the use of nuclear energy over the last four decades. These are developed nations with high standards of living and exacting safety regulations.

The nuclear energy option is also being revived and explored in many countries. According to the International Atomic Energy Agency (IAEA), China is expected to build 25 new nuclear power plants by 2020, a rate of two new plants a year. In the US, loan guarantees totaling US$8 billion have recently been approved for two new nuclear power plants. Closer to home, in ASEAN, Vietnam, Thailand, Malaysia and Indonesia have all begun exploring nuclear energy as an option with different timelines.

Mr Liang Eng Hwa asked whether there is an ASEAN stand on the issue. I think each country has evolved its own strategy and policy towards this. But at the ASEAN level, there is an effort to try and develop a common understanding on what would constitute a nuclear energy safety regime in this part of the world. Thirdly, science and technology have evolved much since nuclear power plants were first built 50 years ago. Dr Lam Pin Min has noted the challenges associated with nuclear energy given Singapore's location, size and urban density. Indeed, these were some of the reasons for not considering the option before.

But new technologies are being developed to address some of the key concerns associated with nuclear energy, and to make nuclear reactors smaller and safer, at a lower cost and with less high-level waste. Some of these technologies are in early stages of commercialisation and we need to study if they could be feasible in our context.

Finally, there is merit in building up our knowledge and expertise in nuclear science which has applications in diagnostic medicine and cancer treatment. Research and development in this field is promising and could potentially yield therapeutic and economic benefits.

Dr Muhammad Faishal has raised the issue of public concern over the potential use of nuclear energy in Singapore. Dr Lam Pin Min and Mr Liang Eng Hwa have asked if the risks associated with nuclear energy are acceptable. It is precisely to address these and other valid questions and concerns that we need to embark on a feasibility study of nuclear energy.

MTI will, therefore, lead a multi-agency effort to undertake this feasibility study. The aim is to ensure that we fully understand, and objectively evaluate from all perspectives the opportunities, challenges and risks involved with nuclear energy. The study will commence later this year. It will entail a careful, deliberate and rigorous examination of the technical, economic and safety aspects of nuclear energy. It is premature at this stage to talk about details such as what form, and so on, which Dr Muhammad Faishal raised. What we should acknowledge is that this is an important first step in assessing a possible long-term energy option for Singapore.

Mr Chairman, for the medium term, we also need to keep our options open for other sources of conventional energy to further diversify our energy portfolio. These options will have to be considered on a market basis, after our LNG demand has stabilised.

Ms Sylvia Lim has asked about the implications of using coal and electricity imports in Singapore. Clean coal could be a component of our energy diversification strategy. Currently, coal makes up more than 40% of global power generation. And, it is expected to remain at this level until at least 2030 given the relative abundance of coal sources in the world. Coal also has a cost advantage though this may be eroded by any future global carbon pricing regime. However, combustion technology is evolving, making coal cleaner than before and we must, therefore, keep this option open.

Precisely because the technology is evolving, I do not think it is necessarily a step back to consider this as a possible option for ourselves, a point that Ms Sylvia Lim raised. Electricity imports could also help us gain access to alternative sources of energy such as hydropower from the region and also free up valuable land in Singapore. Ms Lim asked what are the risks of importing electricity. In a sense, it is a very similar risk to importing the fuel in order to generate the electricity locally. The key additional risk factors would really be a reliance on the infrastructure that conveys the electricity to Singapore. So, we will study the safeguards necessary to mitigate any risk from being exposed to a disruption in imported electricity supply and how it could feature potentially as part of our overall energy system.

The second plank of our energy strategy is to keep our energy markets competitive. Ms Sylvia Lim has asked about energy pricing and let me just set out the broad framework.

We are price-takers in the global energy market because we are small and import almost all our energy requirements. We therefore must allow the full cost of energy to be reflected in prices. Subsidising energy would be encouraging wasteful consumption and it will also be a drain on public finances. Many countries which subsidise energy, including oil and gas producers, have found to their detriment that they impose an unsustainable fiscal burden over time. Instead, our approach is to provide targeted assistance through the Utilities-Save (U-Save) and other schemes.

In addition, we promote competition in our energy markets to keep prices competitive. As evidenced since liberalisation in 2001, fuel oil prices have gone up by about 160% and our tariffs have risen by about 15%. That is not a bad track record. This is an ongoing process and in the last year, we have also taken a number of additional steps.

At last year's COS, I informed the House that EMA was studying ways to inject more competition into the household electricity market. EMA has since completed the tender of 10% of household electricity demand. The tendered price will be incorporated into the electricity tariff starting from April 2010. Going forward, EMA will put out more tranches for tender and the savings will be passed on to households.

Mr Chairman, Sir, in the long term, EMA is working towards opening up the household electricity market for competition so that consumers will be able to purchase electricity direct from different suppliers through a range of retail packages that they offer. Ms Lim asked whether the Government will allow such retail electricity sellers to use a tiered system. Once such a market is established, then we should leave it to the market to work out what are the different ways they can meet customer needs. But it is quite a different question which is a point that Ms Sylvia Lim also alluded to, whether Government should in fact be introducing a tiered structure at this stage. We have had this discussion before and I want to just re-emphasise the key point. If we were to introduce a tiered system today, it means Government is deciding what is an acceptable level of electricity consumption and establish that as the threshold, as Ms Sylvia Lim puts it, and the Government then has to decide at what level of additional manageable threshold should be. This is quite a problematic process in terms of determining the key levels of thresholds. So it would be far superior to allow the market to work, for us to give targeted subsidies to those who need it and when the market is fully liberalised, the players can then work out the schemes as we see in other sectors like telecoms.

Sir, let me now move on to research and development (R&D). R&D cannot be viewed in isolation from the broader innovation ecosystem that we seek to create. The ESC has recommended that we make innovation pervasive and strengthen the commercialisation of R&D. Indeed, these are MTI's priorities too. Ms Sylvia Lim has asked how the outcomes and output of our R&D sector compare with other advanced economies. As she has acknowledged, it is a difficult matter to measure and there is no single measure for this, so let me just highlight just three aspects: the generation of intellectual property, the degree to which public R&D helps to catalyse private R&D, and the extent to which R&D leads to economic activity or commercialisation.

In of the area of IP creation, our R&D sector is broadly comparable to other advanced countries. The World Economic Forum Global Competitiveness Report ranks Singapore 11th globally, in terms of patents per 1,000 population, ahead of countries like the Netherlands and Denmark. In terms of published Science and Engineering papers per 1,000 population, we are ahead of OECD countries like Japan and South Korea. However, we still have some way to go before we can close the gap with countries like Sweden and Switzerland.

In terms of the ratio of public sector to private sector spending on R&D, we are on par with countries like the Netherlands and Denmark. Our private R&D investments are twice that of our public sector – a significant improvement from 20 years ago when public and private investments were equal. It also has resulted in ventures such as the strategic alliance between Roche and our medical and scientific institutions. This partnership which will expand the knowledge of disease biology to develop new personalised treatment approaches has brought in private R&D investment of close to $100 million.

Finally, with regard to economic spin-offs and commercialisation, we have made good progress. A _STAR's spin-off, A-Bio, for example, has been catalysing the growth of a new biologics segment within our biomedical sector. In the past three years, Singapore has secured six major biologics manufacturing investments totaling more than $2 billion. SMEs have also benefited from our public sector R &D capabilities. One example, is CEI Contract Manufacturing Ltd, which with the help of a scientist from A_STAR, will be able to qualify its product for High Level Assembly and Testing to meet a US customer's standard.

So, we are not lagging or underperforming like Ms Sylvia Lim asked, but we can do more in the commercialisation of R&D – which is also a key recommendation of the ESC. To that end, in the next phase of our R&D development, we aim to facilitate greater collaboration between private sector and public sector R&D, creating the infrastructure for test-bedding innovative solutions, and establishing platforms for industry practitioners and researchers in academia and institutes to work together on research projects that can potentially lead to commercial application and value.

A key success factor for our R&D drive is the availability of a deep pool of scientific talent. Ms Sylvia Lim has asked about the extent to which locals are part of this talent pool.

Singapore citizens and Permanent Residents take up the majority of R&D jobs, and this share has been increasing over time. Based on the _2008 National R &D survey _ , there were more than 25,000 research scientists and engineers in Singapore, of which about 21,000 were Singapore citizens and Permanent Residents. Between 2001 and 2008, the number of Singapore citizen and Permanent Resident research scientists and engineers has grown at 8% per annum, compared to 5% per annum for non-locals. Amongst the population of PhD students, the proportion of SCs and PRs have grown from 22% to 26% in the same period, that is, 2001 and 2008, and this number of PhDs will increase further as many of the PhD scholars under A*STAR scheme return to work in Singapore under various institutions.

Mr Chairman, I want to conclude on this point by making one key observation. We have been able to grow our local R&D talent not because we have protected them or kept out foreign talent. Rather, they have done well because we have created a vibrant R&D community that attracts and develops the best and brightest, both local and international, and that will continue to shape the way we go forward with our R&D strategy and the development of our manpower pool.

Mr Chairman, to conclude: MTI's policies on tourism, energy and R&D have served us well and will continue to evolve as we adapt to seize the opportunities in the years ahead.

4.00 pm

The Minister of State for Trade and Industry (Mr Lee Yi Shyan): Mr Chairman, let me start by thanking Members who spoke enthusiatically about supporting our SMEs in raising productivity and competitiveness.

SMEs, as a group, contribute half of Singapore's GDP and they account for six out of every 10 persons employed. And, yet, they are only half as productive as the average firm in Singapore. There is much room for improvement, and SMEs play a critical role in determining the success of our productivity drive. MTI is committed to supporting SMEs to build up capabilities to raise productivity and increase competitiveness.

I will set out MTI's strategy for supporting businesses to raise productivity at three levels. At the national level, we must ensure that our overall business environment remains favourable to large and small businesses alike. At the sectoral level, we will support our industries in working together to address productivity gaps. At the firm level, we will help SMEs build capabilities and create value.

At the macro level, we need to ensure that our business environment remains conducive to all businesses. Entrepreneurs must be able to start and grow businesses easily. We have been quite successful in this area. For four years in a row, the World Bank has ranked Singapore as the easiest place to do business, out of 183 economies. And, yet, we must continue to improve.

Through the Pro-Enterprise Panel, we have received close to 1,800 suggestions from businesses to cut red tape. We have adopted half of them. We will continue to find ways to reduce, simplify, or to do away with bureaucratic complexities.

Mr Liang Eng Hwa asked whether an entrepreneurial culture has taken root in Singapore. I would like to take the opportunity to thank the Action Community for Entrepreneurship (ACE) for their work in promoting an entrepreneurial culture in Singapore. Successive batches of entrepreneurs have contributed to this movement. Today, we celebrate entrepreneurship. We have many more successful role models. There is also a greater social acceptance of entrepreneurship as a career choice among our young and educated. A survey shows that more than 60% of our start-up founders are below 40 years old, and about three-quarters of them have at least tertiary-level education. NUS, NTU and SMU house 120 promising start-ups in their incubators. ITEs and polytechnics run business plan competitions. Even our primary schools have children educated on entrepreneurship programme today.

Mr Inderjit Singh, who is a passionate advocate for entrepreneurship, asked if the Government can do more in this area. The answer is: Yes, we can and we will. We clearly must build up our entrepreneurship ecosystem to anchor a critical mass of start-ups, angel investors, VCs and deal-flow network.

In an effort to render Singapore as a meeting place amongst business angels from Asia, SPRING Singapore, ACE and the Singapore-based Business Angel Network of Southeast Asia (BANSEA) are organising an inaugural Asian Business Angels Forum today and tomorrow. The forum brings together 150 business angels, entrepreneurs and their respective networks from 14 different countries. In line with this, the newly announced Tax Deduction for Angel Investors Scheme will catalyse more of such investments in our start-ups.

A vibrant business environment is not only one where new firms form readily. It is also one where there is a continuous advancement towards higher value activities in a virtuous cycle of renewal. Economists would call this "creative destruction" – the basis for "disruptive innovation".

Mr Low Thia Khiang has asked what the ESC recommendations will mean for low-value activity in Singapore. I think he cited the sundry shop and car repair shop as examples. Well, economical speaking, in any free market competition, the fittest survive. Companies engaged in low-value activities cannot hope to do things the same way as they have been in the past 10 or 20 years. They must upgrade, innovate and focus on value creation, or they will lose their customers to competition.

And this is exactly how the furniture industry in Singapore has transformed itself over the years. In 1993, as an EDB Centre Director based in Washington DC, I received an incoming delegation from the Singapore Furniture Industries Council (SFIC). After meeting up, we went on to call on the leading furniture distributors in the east coast of the US, hoping to convince them to "buy Singapore". When SFIC showed their brochures to a leading US furniture retailer, the Vice President receiving us said, "Let's be frank, for furniture of this standard, I can make it in my own garage!" Imagine the shock on our faces then. What a blunt rejection! It was a wake-up call. SFIC came home to Singapore. They went back to the drawing board.

The furniture scene in Singapore is completely different today. We have "graduated" out of the space of low-cost manufacturing. Our furniture companies are now moving towards "Original Design Manufacturers". Many market their products under their own brands.

Mr Low Thia Khiang, in his speech, asked what is the Government doing for the sunset industry. In this case, what was once a sunset industry in Singapore has been completely rejuvenated and given a new lease of life. I think, you are sunset when you think you are sunset. This was possible because SFIC members innovated and transformed. SFIC even created a strategic blueprint describing where they want to be in the next five years.

The success of our companies and industries ultimately rests on their own drive, innovation and entreprenuerial effort. Entrepreneurs such as Ron Sim of OSIM and Olivia Lum of Hyflux, established their successful businesses with very little in the beginning and with sheer resourcefulness throughout. The furniture industry in Singapore made the bold decision to renew itself and we have supported them in doing so. For all who are willing to upgrade and innovate, the Government is always ready to support.

There are often productivity gains to be found by looking across companies to identify scope for collaboration. One example, raised by Dr Ahmad Magad, would be the sharing of resources such as infrastructure and services among SMEs. Indeed, this is a great way for SMEs to aggregate demand and leverage on economies of scale.

Mdm Ho Geok Choo suggested that one such initiative could be the setting up of a HR service outsourcing hub, and to give more focused support to SMEs in this important area. It is a good suggestion which SPRING will look into.

Consider the example of hotels and restaurants sector, as highlighted by Mr Heng Chee How. It may be amongst the productivity laggards today. But there is no reason why our hotels and restaurants cannot aspire to become the most innovative, most service-oriented and most technology-savvy in the world. To make this happen, it is crucial that the industry work closer together to pursue common productivity improvements.

Years ago, I was told that Raffles Holdings Group realised that they were paying high prices for daily consumables such as tissue papers, soaps, combs and other toiletries. So they came up with an idea – to build a web-based purchasing system open to other hotels in Singapore, so that by aggregating demand, they can secure the best pricing from suppliers. One participant recalled that he experienced 10% to 15% savings from using the system. In this case, the leadership of one company in the industry led to the cost savings for all the players.

Industry associations can play an important role in rallying their members to secure sectoral productivity gains. Consider, for instance, the Textile and Fashion Federation (TaFf). Many of their members wanted to re-engineer their systems and processes for greater production efficiency. But none were in the position to employ full-time engineers. So what TaFf did, was to train up a pool of engineers and deploy them across their members. As a result, members were able to tap on much-needed expertise in a cost-efficient manner. This is a good initiative on the part of TaFf.

We have good mechanisms to support industry associations which aspire to improve. Since 2005, SPRING and IE Singapore have committed $50 million under the Local Enterprise and Association Development (LEAD) programme, to help 22 associations run projects just like the one I have described. The additional $100 million that the Minister for Finance has announced will further scale up the support for business associations. I strongly encourage our associations to work closely with SPRING and IE Singapore to help member companies raise productivity and expand their presence overseas.

Mr Heng Chee How asked about the development of a centre for research on productivity and innovation. I would like to highlight that SMEs can already access five Centres of Innovation (COIs) set up by SPRING with polytechnics and research institutes. The five centres cover food manufacturing, marine and offshore engineering, environment and water technology, precision engineering and electronics. This sectoral infrastructure, each capital-intensive in nature, allows SMEs to tap on scientific expertise and resources in the form of manpower training, technology consultancy, prototyping and testing to become better in their processes and products.

We will study how to strengthen further the existing network of Centres of Innovation or to create new ones if need be. We are studying the modalities and appropriate models for doing so. These centres will do applied research on sector-specific productivity, identify international best practices, and develop productivity benchmarks that benefit the entire industry sector.

As many Members have emphasised today and during the Budget debate, boosting productivity does not mean working harder and longer. As Mdm Ho Geok Choo stresses, employers must take the lead, including training their workers to be more skilled and more effective at what they do.

Mr Zaqy Mohamad has raised concerns about high costs running counter to our productivity efforts. Given Singapore's size and circumstances, it is inevitable that we will face resource constraints. But this does not mean we cannot create business models that will help us overcome these constraints and prosper. Growing revenue top line and profitability through innovative products and services becomes an imperative.

This is why we should shift our focus to value creation. Much has been said about the "hows" – that is, the efficiency of doing things, or doing things right. But I think it is important to take a step back and ask about "what" – meaning what should we do, or doing the Right Thing. Are we competing based on value creation or on cost efficiency?

Let me illustrate with some examples of innovative companies that have done exactly this.

Many of us cannot do without our daily staple of kopi-o and soft-boiled eggs for breakfast. But Tippling Club at Dempsey has taken it one step further. They have come up with a fancy cocktail drink based on kopi-o which is served with eggs. To create its menu of unique "food-cocktails", they invested substantially in food science technology and introduced the concept of "molecular gastronomy" to their concoctions. In fact, it was through much research and experimentation that the mixologist discovered that the optimal temperature for the eggs has to be at 62 degrees Celsius – not higher, not lower, to taste its best. With food science as their edge, the Tippling Club creates not just cocktails, but an experience its customers have never had before.

Another innovative company is Azimuth. When we think of luxury watches, we think of Swiss brands like Rolex and Patek Philippe. But Azimuth is Singapore's home-grown luxury watch company that designs in Singapore and manufactures in Switzerland. It takes an unconventional route to design. It created the world's first single-hand watch that moves anti-clockwise. So it is not an optical illusion when you look at the watch face. It has another watch that is modelled after a robot. There is even one that has a functioning roulette wheel as a watch dial to commemorate the opening of IRs here. By making watches that do not look like a traditional three-hand watch, Azimuth defines a niche for itself. Azimuth's watches retail at between $5,000 and $120,000 a piece. Only five years old, Azimuth has a steady following among watch lovers in Singapore and over 20 countries.

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One study shows that the profit from selling a Swiss-made watch is more than selling four cars combined. Of course, if you measure this last year, it may be infinity because most of the car-makers were losing money. If you were a start-up thinking of new areas to venture into, or a precision-engineering firm seeking new markets to specialise, which path would you take? Azimuth's approach is instructive.

Several Members – Mr Inderjit Singh, Mdm Ho Geok Choo, Mr Heng Chee How and Mr Zaqy Mohamad – have asked about how we will help SMEs in raising productivity.

Well, let me say that the drive for productivity must come from the SMEs themselves. For the willing and determined, SPRING offers a comprehensive range of capability development programmes to assist them. In fact, Mr Liang Eng Hwa earlier has mentioned that 154 schemes can be found on the website. The programmes range from IT upgrading, HR and process innovation, to design, product development, branding and business management systems. In 2009, SPRING helped more than 3,000 companies in the many areas mentioned. We will ramp up our capacities to help at both the firm and sectoral levels.

Mdm Ho Geok Choo and Mr Wee Siew Kim asked what we are doing to enable SMEs to internationlise.

Going forward, IE Singapore's new SME Market Access Programme will complement its existing suite of schemes to help internationalising SMEs. The programme will help SMEs defray the developmental cost of entering new markets, such as fees incurred for engaging distributors, professional services and certification.

Mr Wee Siew Kim and Mr Zaqy Mohamad have correctly pointed out the importance of "hunting as a pack" in entering overseas markets. By doing so, companies can complement their product offerings and achieve economies of scale, and hence strengthen their overall competitiveness and maximise their chances of success. I encourage companies to tap on IE's iPartners programme to form and develop such business alliances.

Finally, Mr Inderjit Singh has asked if an agency called "Enterprise Singapore" is required to help Singapore companies grow into globally competitive companies. While there may be many benefits to combine several agencies into one, as proposed by Mr Singh, there would also be operating trade-offs too. I think the most important point about his suggestion is that there should be seamless and integrated support provided to growing SMEs, whether in the area of capacity building, internationalisation or productivity enhancement.

In fact, in recent years, our economic agencies have been working towards a more seamless service model for SMEs. At the board level, EBD, SPRING and IE Singapore are represented on each other's boards. At the operational level, SPRING and IE Singapore share information on account management of key accounts in key sectors. Certain capacity building programmes, such as branding capability and SME financing, are jointly administered by the two or more agencies.

In enterprise development, SPRING serves 3,000 SMEs in 2009. In the same period, IE Singapore provided support to 4,700 companies in internationalisation-related services. Enterprise development requires active cooperation amongst agencies with complementary expertise. SPRING and IE Singapore will continue to work closely together to support SMEs in raising their productivity in a seamless fashion.

I would now turn to Miss Penny Low's query on the role that we can play in supporting the development of social enterprises.

MTI's mission is to maximise economic benefits for Singapore. As long as enterprises, including social enterprises, are able to create jobs and contribute to Singapore's economy, upgrading support for productivity improvements will be available to them. In fact, social enterprises can also tap on other assistance schemes provided by MCYS, such as the Comcare Enterprise Fund (CEF).

City College Holdings Limited is one example. It is a social enterprise which provides effective and affordable education to private candidates taking GCE 'O' level examinations. Under SPRING's LETAS grant, City College implemented an Academic Information Management System to improve the efficiency of its administrative process.

Sir, in conclusion, let me reiterate that the new productivity drive is a national effort that requires everyone to play his part. At the broad level, what the Government can do and will do, is to ensure that we have a conducive environment for all businesses, large and small, to conduct their businesses with ease. Industries and enterprises must take their lead in drawing up their own roadmap towards higher productivity. For those who are ready to rise up to the challenge, the Government stands ready to provide our maximum support.

The Parliamentary Secretary to the Minister for Trade and Industry (Mr Sam Tan Chin Siong): Mr Chairman, Sir, I would like to certainly thank the Members for their views and their contributions on important issues such as internationalisation of our companies riding on the Asian waves as well as consumer protection. My Minister and Minister of State (MOS) had earlier talked about Singapore's internationalisation efforts. So on this subject, Mr Teo Ser Luck, Mdm Ho Geok Choo and Mr Wee Siew Kim asked how Singapore is tapping on both China and India's growth.

In the foreseeable future, G3 countries will remain the key drivers for Singapore's external demand. But emerging markets in Asia, particularly in China and India, also present exciting opportunities for us. Already, the share of trade with Asia has been increasing. Ten years ago, China and India accounted for 5.7% of our total trade. Today, this has risen to 13%. The potential for further growth is therefore very strong.

In order to realise this potential, Singapore needs to capitalise on two key trends which will underpin the rise of Asia. First, Asia will experience a surge in its middle-class. In China alone, this strata, which is often defined as people enjoying an income of at least RMB 25,000 a year, currently accounts for 12% of China's population and this is expected to grow to 75% by the 2030. Similarly, India's middle-class will also grow from around 5% to 10% today to about 90% by the 2030. This trend is also seen in varying degrees across most of Asia. What this means is a rise in the spending power, which will drive demand for quality products and services that will go beyond healthcare and education, into other lifestyle services.

The Parliamentary Secretary to the Minister for Trade and Industry (Mr Sam Tan Chin Siong): 4.23 pm

Second, most Asians will live, work and play in rapidly urbanising city centres. In China, we are seeing strong signs of this, with large migrant populations moving into cities. By 2025, there will be eight mega cities in China with populations of more than 10 million each. In India, the three mega cities in Mumbai, Delhi and Kolkata will also have some of the largest and fastest growing cities in the world. This rapid urbanisation will add to the demand for infrastructure development and new services.

Against this backdrop, Singapore is well-positioned to leverage on strengths that we have built up over the years, such as systems integration and modern services provision. For example, our ST Electronics was a key player in setting up Beijing metro's state-of-the-art command and control system. Many Singapore companies can provide high quality and high value products and services that have the potential to meet the rising demands in Asia. For example, Etonhouse provides quality pre-school and international school education in Indonesia, Malaysia, India and China. BreadTalk Group and Charles & Keith have also established a strong retail presence within Asia, in countries such as Malaysia, Thailand and China. They can scale up their operations in emerging new cities with the rise of China, and also other parts of Asia.

Going forward, our economic agencies will step up efforts to help companies expand overseas. We will continue to strengthen our bilateral ties, improve existing trade and investment facilitative agreements, help companies understand the evolving markets better, enhance our outreach and also our ground presence.

In many ways, we are reaping the benefits of our pro-active engagements of key markets, having recognised the value of growing our external wing early. In China, we undertook the Suzhou Industrial Park (SIP) project 15 years ago, with the intent of transferring our developmental experience to China. In the process, we established strong bilateral economic ties and also built up the Singapore brand name in China. This has contributed to Singapore and our companies' familiarity with the Chinese business environment. It also further deepens our partnership with China. We have embarked on the Tianjin Eco-city and this is our second G-to-G flagship project.

Bilateral ties were further enhanced via the China-Singapore Free Trade Agreement (CSFTA) and the ASEAN-China Free Trade Area agreement (ACFTA), which came into force recently. These FTAs have lower trade barriers and also created new opportunities for Singapore-based companies.

To make deeper inroads into China, we established seven provincial-level business councils, with the latest two being in Jiangsu and Guangdong. These councils are set up in regions where Singapore businesses have a strong interest. Co-chaired by Ministers or Ministers of State, these councils promote economic cooperation and facilitate networking between the business communities of both countries.

We have had considerable success with the councils. For example, under the auspicies of the Singapore-Jiangsu Cooperation Council, a consortium of Singapore companies comprises Yanlord, Surbana and SembCorp secured a choice site from the Jiangsu province for the Nanjing Eco High-Tech Island project. Through the council, IE Singapore was able to uncover downstream opportunities for other Singapore players. IE Singapore has helped the consortium to link up with over 25 companies, including SMEs, on this project. In 2009 alone, IE Singapore has organised more than 170 outgoing missions for close to 700 Singapore-based companies to help them internationalise their business.

We have also gained an early foothold in India. In 1992, Ascendas opened its IT park in Bangalore, right after India embarked on economic reforms in 1991. Since then, Singapore developers have established more IT parks in various parts of India. Progressively, we strengthened our G-to-G engagements, cemented by the India-Singapore Comprehensive Economic Cooperation Agreement (CECA). This has received a boost through the Trade-in-Goods Agreement under the ASEAN-India Free Trade Area (AIFTA) that came into force this year. Reflecting a mutual desire to strengthen and also to deepen our bilateral economic ties, a second review of CECA will be launched later this year.

Within ASEAN, my Minister earlier pointed to the benefits of increased integration. Bilaterally, we have also made steady progress in our economic engagement efforts. In Vietnam, for example, we embarked on a joint Vietnam-Singapore Industrial Park (VSIP) in 1996. Today, we are already into our fourth VSIP project. More importantly, we have moved up the value chain, from developing industrial parks to integrated township developments. These projects have also facilitated our companies' ventures. For example, coffee processor Gold Roast leverages on its premises in the second VSIP to now process and also export Vietnamese coffee beans to the world.

As the Asian economic landscape evolves, we need to deepen our knowledge on the emerging opportunities. IE Singapore and EDB will continue to support Singapore companies, and engage Asian businesses to promote greater bilateral trade and investments. To this end, IE Singapore and EDB will also consider expanding their ground presence in key emerging regions, such as cities in central China.

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More global companies will seek to penetrate emerging markets in Asia. At the same time, Asian enterprises' ambitions to expand their international reach will also grow. So with our established hub status, efficient and business-friendly environment, strong financial sector and comprehensive FTAs with key markets, Singapore offers a compelling value proposition as a dual-purpose gateway for companies "seeking Asia" and for companies "going global".

As an indicator, we have managed to attract nearly 3,000 Chinese companies here. One of them, AAC Acoustic Technologies Holdings Inc., a China-based global leader in miniature acoustic components, set up its regional headquarters and R&D centre in Singapore in 2009. This regional headquarters is to coordinate its global expansion and also to enhance product development capabilities.

Beyond Asia, our economic agencies will also help companies explore opportunities in other fast growing or emerging markets such as the Middle East and Latin America. Developments in these countries create demand in various sectors such as infrastructure projects, transportation and logistics services, urban solutions, lifestyle and consumer products, which can benefit many of our local companies and SMEs.

Finally, Sir, I would like to touch on an issue closer to home. I would like to thank Mr Lim Biow Chuan and Mr Yeo Guat Kwang for their active roles in championing consumer protection, and for their feedback and concerns. CASE's active role in consumer education forms the basic level of our consumer protection framework, and we are supportive of CASE's work and efforts. In fact, we have significantly increased our funding by about 30% to CASE since 2008, and we continue to be open to providing more resources for new educational programmes for the vulnerable, which has been highlighted by Mr Yeo Guat Kwang, which cannot be reached by CASE's current efforts. Secondly, the Consumer Protection (Fair Trading) Act has provisions for civil remedies, with appropriate and practical channels for redress and compensation. This will apply to sub-standard gold jewellery and timeshare sales raised by both MPs. In addition, the mandatory cooling-off period for timeshare sales has been extended from three to five days to address pressure selling, while a 60-day refund period was also added.

Finally, the Consumer Protection (Trade Descriptions and Safety Requirements) Act is a criminal law carrying a fine and imprisonment term. This Act is reserved for false trade descriptions with clear criminal intent and harm, and for unsafe products. While it is not practical to screen all the products upfront, this Act nonetheless empowers SPRING to screen higher-risk products such as electrical and gas appliances prior to sale. Our product safety framework will also be enhanced to make it easier and faster for SPRING to recall unsafe products. For the incident of toy safety issue mentioned by Mr Yeo Guat Kwang, SPRING has identified the distributor of the toys. This distributor has recalled the toys from the market. SPRING has also visited island-wide 109 shops, push carts, stalls in 16 major shopping areas and found that four of them are selling those toys. These four shops have been asked to stop selling the toys.

Mr Lim Biow Chuan asked for the status of the Lemon Law so MTI has been working on this matter. As the Lemon Law is quite a complex issue cutting across many sectors, careful steps must be taken to ensure a balance and effective legislation is put in place to safeguard the interests of consumers and businesses. So MTI is currently studying the necessary legislative changes and will complete the public consultations on these proposed changes by this year.

The Chairman: We have some time for clarifications.

Ms Jessica Tan Soon Neo: Sir, may I ask the Minister to clarify. He mentioned that there will be an increase in cost and it is going to be inevitable. How does the Minister then see Singapore staying competitive and differentiating for companies both here as well as attracting new companies to base their businesses out of Singapore, and to continue to be able to value-add beyond cost?

Mr Lim Hng Kiang: Sir, in my response, I mentioned that cost is likely to go up this year compared to last year because this year we are in a recovery process; last year we were in the depth of a recession. But having taken all the various cost pressures in mind, the MAS and MTI estimate that inflation this year will be between 2% and 3%. So it is still something that we can cope with.

Mr Liang Eng Hwa: Sir, we have a number of economic agencies that go all out to help our businesses and companies, like IE Singapore, EDB, SPRING, A*STAR, and so on. In addition to that, we have many trade associations and the business chambers all out there to help the businesses as well. So clearly there are some areas of overlaps. I want to ask the Minister whether there is a need to consolidate or streamline many of these agencies that are helping the businesses, including maybe even sharing of database.

MCYS promotes the philosophy of Many Helping Hands. I do not know whether MTI subscribes to this philosophy, but certainly if there are too many cooks it may spoil the food. Maybe the Minister may want to give a response on how we would want to streamline these, in the light of the ESC report that more schemes will be announced.

Mr Lim Hng Kiang: I thank Mr Liang Eng Hwa for his very well researched comments. Obviously, it is a very complicated landscape out there. Our approach is to try and generally approach it sectorally. As Mr Lee Yi Shyan mentioned just now, we have already specific programmes working with 22 trade associations on each specific sector and therefore all the help is directed through this sectoral approach. At the same time, there are horizontal things that we have to do, whether it is technology, capability, training or human resource. These are horizontal programmes that we also have to do across the economy. So it is having to manage these vertical and horizontal approaches that sometimes it looks very complicated. Mr Lee Yi Shyan also explained, within our agencies we have tried to streamline our approaches so that companies do not have too many touchpoints dealing with different agencies. So far, I think the situation has improved. But if there is any area in any specific sector that faces too many overlaps or examples of people having to run from pillar to post, we will be happy to take this feedback in and review our processes.

Ms Sylvia Lim: Sir, this is regarding the Energy Policy cut which I spoke on earlier and the Senior Minister of State's response. First, I would like to clarify that under the tiered system which I was talking about, the cross subsidy for the lowest tier will actually come from the higher users. So it is not a proposal to beat the State budget as such.

A clarification for the Senior Minister of State. The first is I do not think he has answered my question about which countries we were expecting to import electricity from. My query is whether that would expose us to another set of, not just risk in terms of reliability of the cables but also, perhaps, another set of political risk, depending on the countries that we are referring to.

Secondly, regarding the cost of imported electricity, could the Minister of State clarify whether we are expecting that cost to be higher or lower than the electricity which we generate locally?

Thirdly, could the Minister confirm that in the new pricing mechanism that ESC talks about, we are expecting electricity prices to take a higher share of household income than it is now. And fourthly, he mentioned that targeted assistance to those who need it would be the way to go to assist those who need help. My clarification is whether this is just during the transition phase when we move into this new pricing system or is this going to be a permanent feature of the Government Budget.

Mr Iswaran: Sir, on the point of the tiered system, I understand what the Member is saying. I think the issue is not just about cross subsiding from one higher end user group to another. The most fundamental question we got to ask ourselves is: if a government were minded to establish tiered levies for electricity consumption, how does a government go about determining what are justifiable, reasonable tiers, given that no two households are alike. And even if you take a HDB-type household in a 3-room flat, the consumption can vary quite a bit. So, this is why the problem is inherently egregious and it is superior to have a clean system but with targeted subsidies.

I take the last point on this issue of targeted assistance, which is really a question for the Minister of Finance because any assistance is really driven by the fiscal position. But I think, in general, the Government's position has always been that help will be made available to those who need it in a targeted manner; and that is a policy that cuts through many agencies and many Ministries. So, energy would be no exception in this regard.

Which countries do we expect to import the electricity from and would imported electricity price be higher or lower? Mr Chairman, I think when the ESC Sub-Committee made the recommendation, it is not with a view to any particular country being a source. But, clearly, to some extent, the limits of technology and infrastructure would suggest that the most obvious sources would be in our neighbourhood. Today, we import our natural gas from our immediate neighbours. Any sourcing of electricity that can go beyond that would help us in terms of our diversification objective. But, at the same time, I want to make the point that if we were not importing gas but importing electricity from a neighbour, the overall risk to us as a system, in my view, remains the same, with the exception of the connectivity issues. But beyond that, I think the key point is really that there is no fixed idea of where we can import the electricity from but, in principle, it is an idea which we should consider. Therefore, naturally the corollary is that we cannot really say for sure which way the price would go, whether it would be higher or lower. But, clearly, if it were to add value to our system, then it would only make sense if a proposal were to be put forward by a private operator or an entity, that it should be able to price electricity competitively in the context of our system; otherwise it would not make sense.

And finally, pricing policy and whether this augurs a higher share of energy in a household budget. Mr Chairman, I think it is hard to predict this. If you had asked me the question last year, I would say, well, it is actually going to be a lower percentage because fuel and oil prices went down. And that is precisely the point: there is a lot of volatility; we cannot tell for sure which way it will go in the short term. But the long-term trend, in terms of energy vis-à-vis other product groups, tends to be relatively higher. And that is something that we should accept. The sooner we recognise it and undertake fundamental measures to mitigate through competition and other efforts and, where necessary, intervene in a targeted way to help, the sooner we have a system that is clear and unambiguous in its intent, I think the better we will be, whether it is households or as an economy.

Miss Penny Low: Mr Chairman, Sir, three clarifications.

For the Minister of State on Social Enterprise (SE). I think he mentioned that City College was successful in getting the LETA Scheme, and I am very happy about that. But may I ask whether City College is the only SE that qualified because as far as I know, they took at least between one-and-a-half to two years before they managed to get the paperworks through and qualify for the LETA Scheme. And I suspect that part of it is because of the inherent differences in the organisation's core structure of SEs that makes it very difficult to qualify for it. So would the MOS look into the intricacies of the grants and the schemes available to make them more friendly and more suitable to MPOs like SEs?

Second clarification: MOS has not really replied to my query on whether we could have a strategy of putting SEs and SMEs together in the cluster hunting overseas because they can add to the competitive edge, as I mentioned in the speech itself.

And the third clarification: EDB has a special International Organisation (IO) team that was set up to attract IOs to Singapore quite successfully. As the Minister has mentioned, in the past two years or so, it attracted some 80 IOs to Singapore.

Can we set up the same under SPRING to groom and have a priority sector development for the SEs in Singapore?

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Mr Lee Yi Shyan: Sir, the short answer to Ms Penny Low's first question is yes, we can look into it. I am surprised that it took one-and-a-half years, as she said, but LETAS is really a very simple programme offering technical assistance and co-funding for SMEs to undertake upgrading consultancy work. The short answer is yes, we will look into it and encourage other qualifying SEs to apply.

On the issue of SMEs and SEs going overseas, the concept is good. I do not see how this cannot be doable. But, in practice, it is hard for Singapore companies with complementary strengths to come together and address overseas market opportunities. What IE has been doing is to create the iPartners programme under which about 50 consortiums were formed – encouraging companies of different sizes, following a lead company, to address a specific opportunity. Like the CSR, I think we can encourage but I do not think we can mandate such a relationship to happen.

On the third point about whether SPRING can follow EDB's model in the developing the SE sector here, SPRING and MTI's primary objective is still to create jobs through economic activities. To that extent, if SEs qualify, we will support it. If we change this focus, I think it will be wrong for MTI. Having said that, it does not mean that SEs are not worth supporting. So, between MTI, SPRING and MCYS, I think we have got to find a way to support the SEs to the best of our ability.

Mr Inderjit Singh: Sir, the Minister mentioned about plans to attract medium enterprises to Singapore. Can the Minister elaborate a bit on the plans and also which economic agency will handle this task of bringing these companies to Singapore?

Mr Lim Hng Kiang: This will largely be done by EDB. The EDB has begun this effort beyond targeting the bigger multi-national companies. They are also looking at companies that are of some size which will be classified as SMEs by their home country, but fairly large by our standards. And these will be promising companies, looking at the Asian growth story as the way to grow. So, if we can bring them to Singapore, anchor them here, then as they grow, they can use Singapore as a home base for their Asian growth.

Mr Zaqy Mohamad: Sir, I thank Lee Yi Shyan for touching on my point about business costs. A large part of many of the costs to our businesses is rental cost and utilities cost. I am not sure whether the Ministry has looked into how big this is today. I do agree that while the approach is really to look at business models that go beyond just these high costs. Having said that, is MTI just resigned to the fact that our costs will always remain high and therefore we do not have to look at our own business models to see whether we can bring such costs down? Is there a competition among the landlords to see whether there is enough supply, so that we can bring the costs down for the businesses, especially for the small companies? The challenge for small businesses is that there is still space for them. Not everyone can globalise at the same time. I think we talk about very big plans. We talk about some successes. But I also notice that among the office holders, they are constantly meeting the same few $100 million companies. I think we need to probably relook at this in terms of how we support the smaller businesses and, at the same time, to keep them sustainable in the long term as well.

The other point I want to raise is on the question of tourism. I think we have done well with F1 and the IRs. My question is that beyond the F1 and the IRs, what more can we do to promote tourism to Singapore? Right now, what I am seeing is that we are doing quite a bit in terms of getting MICE and the events companies moving in terms of to make it more vibrant. But having said that, beyond these two, are there other concept plans that we can look forward to?

Mr Lee Yi Shyan: Sir, Mr Zaqy Mohamad asked about rental and utility costs as part of SMEs' operating costs. In our survey, we observed that for companies in different industries, obviously they have different sensitivity to these two factors of production or cost factors. If we look at utility cost, for some companies in the chemical industry, it is about 40% of their operating costs. But if we look at very light manufacturing, maybe it is just 5%.

Likewise, for rental cost, for some companies it is 5%. For some of the retailers in the prime area, it is about 28%. So, obviously, our focus in MTI is to ensure, as the Member said, that there should be enough competition and enough supply – enough alternatives for our small businesses to choose. So, whether it is in utility or rental space, we monitor, and if we think that it is not competitive, then we would work on the supply side.

Mr Iswaran: Sir, when we measure tourism outcomes, we are really looking at a few things – visitor arrivals, how long they stay, and how much they spend. So it is quite critical that what we should be able to do is to have good products, new products in the pipeline and constant refreshing of the products, which is an important of it.

As the Member observed quite correctly, we have got some very good products at the moment which are making an impact, not just regionally but globally. At the same time, we have others in the pipeline. As I mentioned in my speech, one area is cruise tourism – the international cruise terminal which will come onstream in about two to three years. I think that will create a whole new segment for us. Apart from that, we have the Gardens by the Bay product which is going to be quite exciting in its own right. Our wild life reserve is going to have a third gate – River Safari – and the pandas will be there. So I think all these will add to the buzz and attraction over the next few years. There is a steady pipeline.

The other key thing is marketing – how we reach out to our target markets, a point that many Members raised and I responded to earlier. The important thing is that Asian markets are growing – a potential source of additional demand for us. China and India in particular, I think in the next few years are going to have tremendous possibilities for us. So, STB's marketing strategy really is how we can reach these target groups through conventional channels and new channels like digital media, and make them aware of our new products, not just engender visitor arrivals but repeat visitors.

Mr Teo Ser Luck: Sir, it was mentioned that Suzhou Industrial Park (SIP), Tianjin Eco-city and all the projects undertaken by the Government could actually help to spin off other opportunities for our local business people or enterprises. One suspects that all the businesses flock to the coastal cities and coastal areas. I think, more or less, they are saturated. The cost of operations has also gone up and escalated. I think these are the cities that I think opportunities are there but then the competitive landscape is hotting up. Are there any other cities – second tier or even third tier cities – that the Government could be looking at, and where our local enterprises can also look at to target. I hope the Ministry can elaborate on this.

Mr Sam Tan Chin Siong: Sir, I would like to thank the Member for raising the clarification.

Just now, my Minister talked about the Asian growth story. I think when we talk about the story, it is important to talk about China. Mr Wee Siew Kim also talked about the closing of the window of opportunity in China as China modernises and develops. It may have its own capabilities to take over some of the jobs that Singapore companies have been doing. I am more sanguine about this sentiment. I think it is true, as what Mr Teo Ser Luck has mentioned, that the coastal cities in China, as they are more developed, have also moved up the value chain. The cost of doing business there and also the type of investment and the technological requirements that they ask for may be beyond some of the reach of our companies. But there are also plenty of opportunities in central and western China, not forgetting north eastern China.

I know that China has a plan to develop about 200 cities in China, each housing at least one, two or three million people. So, with the opening up of central and western China, there are plenty of opportunities for Singapore companies to go there and leverage on. I would suggest that our SMEs and companies to make a first port of call to IE Singapore to try and understand what are the growth opportunities and the potential in China. And also to review and re-evaluate their own capability to see whether they have the strength and the capability to leverage on these opportunities. Then I think when China really opens up and with the building of 200-300 cities in the next 20-30 years, the opportunity for long-term growth for Singapore will be very positive and optimistic.

Mdm Ho Geok Choo: Sir, I would just like to ask the Minister whether he could elaborate on the EXIM Bank. I had asked earlier with regard to the parameters under which it would operate and whether Minister could give some insights on the EXIM Bank.

Mr Lim Hng Kiang: Sir, as explained in the ESC's report and also in Minister Tharman's response, both MOF and MTI are looking at this together. We are looking at the entity that can do this on a commercial basis. There is a range of approaches. We have studied how other countries have done so. So we are still in the study stage and we will be able to see how we can approach this in a very sensible and pragmatic manner.

The Chairman: Are there any other clarifications? If not, I have one to make, which is that whoever takes the Chair during the Committee of Supply is "Mr Chairman", unless it is Deputy Speaker Indranee Rajah, in which case Members have to address her as "Madam". Ms Jessica Tan.

Ms Jessica Tan Soon Neo: Mr Chairman, Sir, I wish to take the opportunity, on behalf of the GPC and Members to thank the Minister for sharing and elaborating on the growth strategies, for the Senior Minister of State, Minister of State and Parliamentary Secretary for taking the wide range of issues and clarifications.

With that, Sir, may I seek leave to withdraw my amendment?

Amendment, by leave, withdrawn.

The sum of $653,620,500 for Head V ordered to stand part of the Main Estimates.

The sum of $10,936,914,700 for Head V ordered to stand part of the Development Estimates.