HEAD V - MINISTRY OF TRADE AND INDUSTRY

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ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL, 2008 TO 31ST MARCH, 2009:

(Paper Cmd. 2 of 2008): **** Order read for consideration in Committee of Supply [4th Allotted Day].

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[Mr Speaker in the Chair]: **** Head V – Ministry of Trade and Industry

The Chairman: Head V – Ministry of Trade and Industry. Mr Inderjit Singh.

Mr Inderjit Singh: Sir, I beg to move,

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

The Economy and Cost Competitiveness

Sir, while 2007 was a good year for the economy but towards the end of the year, the global economy began to be uncertain due to the global sub-prime crisis. In making a forecast for 2008, what assumptions did the Ministry of Trade and Industry make with respect to the sub-prime crisis on the state of the US economy? Can we expect another strong

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growth year in Singapore if the US goes into a recession? In other words, is our economy already decoupled from the US economy?

We are a world leader in pushing the free trade agenda and negotiating FTAs. In promoting FTAs, MTI has raisedexpectations among our local companies that FTAs would provide increased opportunities in markets overseas. But in reality, our companies have not seen this increase. Can the Minister explain the reason for this slow penetration, and what initiatives have been put in place to facilitate our companies taking advantage of the FTAs that we have signed? I think that opportunities are tremendous, and we should help our companies to benefit from them after having done all the hard work in securing the FTAs.

Another major issue that the Minister must address this year is the one on cost competitiveness of businesses. As I mentioned in the debate on the Budget speech, costs are rising rapidly, and this is an urgent problem but the Minister for Finance failed to address this in this year's Budget. We need to help these companies to tide over this cost crunch over the short term. Can I ask the Minister what has all these cost increases done to Singapore's cost competitiveness, and whether any multi-national companies have raised concerns with the Ministry on the issue, and whether he has seen any companies wanting to relocate outside Singapore as a result?

Unfortunately, business costs have been going up in all areas and quite steeply too. The policy of strengthening the Singapore dollar has helped us, but we know that there is only so much that we can do. But the Government can do quite a lot for our businesses in two other important areas. First of all, in the area of manpower.

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In respect to manpower, the problem is severe and affects businesses across all sectors. The overheated economy left us unprepared for the tight market that came about. While the Government has helped in relaxing quotas for some industries, we cannot bring in foreign skilled and semi-skilled workers fast enough to ease this crunch. The Government needs to quickly review its policies to allow labour from non-traditional sources to be brought in. For example, for the Integrated Resorts (IRs), we have huge staffing needs. Our current regulations, for example, do not classify workers from the Philippines as ordinarily eligible for such jobs. There is also a similar problem in many other sectors. MTI needs to address this issue with MOM. Surely the fact that a suitable worker can be deployed is more important than where he comes from, and therefore greater flexibility is needed.

Sir, to alleviate the problem of rising rentals, I think we have done rightly to release transitionary space. I hope MTI could coordinate with the various Ministries to remove any impediments which may exist in companies trying to retrofit such spaces to allow them to move in quickly.

In the past, in addressing cost competitiveness, we gave rental and property tax rebates to reduce costs for companies. These rebates benefited SMEs the most. We should consider doing the same this year, and I would like to urge the Minister to help companies by persuading the Minister for Finance to work out some off-Budget measures for this purpose.

Finally, on rentals and land pricing. I like to question the role of JTC. Lately, we have seen JTC moving more towards ploughing its properties into REITs. Ascendas was formed and, as a result, we have seen cost of rentals going up for properties that are managed by Ascendas.

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Recently, JTC is also trying to plough some of its properties to Mapletree to form REITs. And I question whether the Government has shifted from the policy of providing affordable industrial and commercial space for our companies.

The second policy level issue concerns how industrial land is priced. It appears that the Government has also shifted its policy on industrial land pricing from the earlier policy to match prices in competing economies. If we allow market forces to determine our industrial land prices, then businesses engaged in certain strategic sectors may no longer be able to compete with companies in competing economies, which may not necessarily be at our stage of development and may offer companies more attractive land costs. For example, the semi-conductor industry. China is already competing with Singapore in this area, and they offer, of course, much cheaper land than Singapore can. And unless we have a differential strategy for pricing of industrial land, we may end up not being able to compete with many of these economies.

Sir, in conclusion, I worry about the erosion of our cost competitiveness due to the reasons that I stated above. While I think we could have avoided some of these issues, that is not important right now. What we really need is for someone in Government to look at what can be done to keep Singapore's costs manageable for all businesses. And I think the Minister for Trade and Industry is the best champion for this.

Top Quality Economy and Local Research Talent

Mr Low Thia Khiang (Hougang): Sir, one of the key features of Budget 2008 is to create a top quality economy with innovation playing a pervasive role. One of the ways to achieve that, according to

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the Finance Minister, is to increase the investment in world-class manpower and new R&D capabilities. The recent A _STAR Annual Report discloses that $5.4 billion has been allocated to engage in R &D from 2006-2010. Budget 2008 would probably move this figure even higher. It is reported that the Agency has a team of 3,200, comprising 2,000 researchers, of whom about 1,200 hold PhD qualifications, and a third of them are Singaporeans. The Report also states that commercialisation of technology is a key priority for A_STAR. It has, to date, licensed out 100 technologies and spun off 19 active companies. My questions are:

(1) How many Singaporean researchers with PhD qualifications have been nurtured by A*STAR, since the agency was established in 2002? While it is important to attract whales, we must understand that these mammals are migratory in nature. Singapore needs guppies, and local guppies to be precise, to stay and grow the R&D capabilities. Further, we should not have guppies' mindset, or we will always be overwhelmed by whales. Can we become sharks instead of just guppies?

(2) Does the Government believe that this number is a good achievement in relation to the billions A*STAR spent on R&D and human capital so far?

(3) How much, in money value, has the commercialisation of technology in the 19 spin-off companies contributed to A*STAR or the Singapore economy to date?

(4) As Singapore progressively increases its investments in world-class R&D capabilities, what are MTI's strategy and target for A*STAR to help Singapore achieve its top quality economy?

The Chairman: Mr Chiam See Tong is not here. Ms Jessica Tan.

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Rising Business Costs

Ms Jessica Tan Soon Neo (East Coast): Mr Chairman, much has been discussed in the Budget debate on rising costs of doing business. This is not only a phenomenon facing Singapore businesses and businesses based in Singapore. However, based on the feedback received from small businesses through our dialogues, eg, a recent survey by the Singapore Chinese Chamber of Commerce and Industry, many are feeling the pressures of rising business costs and are concerned about the impact on their growth. Clearly, businesses understand the need for upgrading, longer-term development and innovation. What many fear is the sharp rise in costs and the erosion of the cost competitiveness in the global market. Many of our SMEs have plans or are diversifying their businesses overseas. Rising business costs, however, will impact the competitiveness of our SMEs and their ability to grow. Just a week ago, one of the industrial park manufacturers shared with me that he had just had a customer cancel an order with his company. The reason given was that Singapore products were getting too expensive due to our high cost and the weakening US dollar.

This year's Budget encourages companies to invest and innovate and upgrade through the various training schemes for start-ups. It is important for our businesses to continue to innovate and upgrade. But beyond this, we need to also ensure that we enable our businesses to continue to grow and not lose hope in the light of strong competition and rising costs.

For small businesses, investments in innovation for long term growth are the right pillars for success. However, they must still manage their short-term costs to stay in business. Many small businesses may be driving strong business growth, but sharp rises in business costs will impact their cash flow.

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In a report in 2007, online credit checking firm, EBCM, noted that small businesses in the UK are indeed faced with rising costs and increasing red tape which prevent them from focusing on what really matters for their business, meaning the efficient running of their businesses and customer service.

As we drive our major initiatives locally, many companies are calling for pro-enterprise measures so that smaller companies can gain greater access to public projects. I would like to ask the Minister for Trade and Industry to share with us what pro-enterprise measures are in place to enable our local enterprises to seize the opportunity and grow locally while still striving in the global economy. What is being done to provide opportunities for SMEs to develop their businesses that will boost their competitiveness in the long run?

The Chairman: Dr Loo Choon Yong is not here. Mr Teo Ser Luck.

New Emerging Economies

The Parliamentary Secretary to the Minister for Community Development, Youth and Sports (Mr Teo Ser Luck): Sir, the US economy's performance has caused many concerns about the impact on our domestic economy. I will agree that the impact might be less compared to, say, 10 years ago due to higher volume of intra-Asia and Asia-Europe trade, but I believe that there will still be some impact. Does the Ministry have any plans to diversify or spread our risks and focus on new areas for development while enhancing existing trade with new emerging economies? If so, which are these countries, and what are the plans ahead to spread our portfolio wide? I would also like to know what are our key strategies for China, as I understand we have been spending substantial amount of time and resources, and there are several cities with potential within China, from

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coastal to inner cities. We have to be selective. So, what is our approach to China as well?

Developing and Internationalising Growth Businesses

Mr Zaqy Mohamad (Hong Kah): Sir, I spoke about the need for SMEs to play a more important role to produce high value growth and jobs to make the ecosystem more attractive, going internationally to tap on the big Asian giants and developing markets to enable them to develop, particularly in the growth business segment. In terms of enabling our SMEs to compete effectively in the global market, I would like to know MTI's success rate in our current efforts to enable our SMEs to do business overseas.

I am also aware that the success rates vary between established SMEs and growth SMEs. The established SMEs or home-grown businesses are typically more successful when brought overseas with trade missions and are often able to benefit from politically-driven deals overseas. However, the growth SMEs and those trying to establish themselves often complain that they find it difficult to get orders from trips and trade fairs that are being facilitated. These are often expensive and entrepreneurs find it difficult to get returns on investments. What is our current success rate with established SMEs and with growth SMEs, and those just trying to establish themselves overseas? What are MTI's strategies to improve our success rates to grow our SMEs and generate demand for them overseas? And how can we improve the investments made to grow our SMEs, and what are MTI's strategies to help them internationalise and generate demand?

With regard to MTI's internationalisation efforts, are there alternative strategies that MTI has or is considering

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to better the success rate for internationalising our growth and budding SMEs? For example, how successful are we in partnering SME and MNC with the global network? An MNC with a global network of 100 countries is certainly a more efficient channel to help an SME extend its reach and create market demand if it has a good product that can be incorporated as part of the MNC's sales offerings. I think we have a multi-pronged approach and various networks that we can tap on. However, SMEs, especially growth companies, need a lot of guidance to be able to exploit Government funding and internationalisation programmes. Those not familiar to new markets will certainly need more guidance and resources.

The issue I see is that many of our local businesses also lack the understanding and capability to exploit MTI's internationalisation efforts, tax schemes and programmes to capitalise on R&D and innovation. I think the Government tries hard within the MTI family. However, they are only able, given their limited resources, to focus on growth companies to enable them to become strong regional and global companies. In reality, the majority of our businesses are not even there yet. It takes hard work and resources. Otherwise, the amount of money spent on grants and growth programmes will not yield the ROIs. It will take a lot of hard work on the ground – manpower, funding programmes – but I think the Government needs to do it nonetheless by providing sufficient manpower and resources to hand hold these businesses to make this work.

Buy Singapore Products and Services

12.15 pm

Er Lee Bee Wah (Ang Mo Kio): Mr Chairman, Sir, as a globalised nation, we have opened up our market to foreign

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products and services. On the surface, this looks good for Singaporeans as they have more choice.

To compete, our local businessmen find that they have to cut costs, such as wages. Guess who suffers? Our own local workers. I therefore would like to ask the Ministry to take steps to promote the culture of buying

Singapore products and services in our domestic market and the Ministry should lead by example. Also, the Ministry should vigorously promote the "Made in Singapore" brand overseas so that local companies can expand their reach to a broader market. Can the Ministry share with the House what the Ministry has done in this regard and what are the plans to promote our brand name abroad, apart from tourism?

_R &D Incentive for Start-Up Enterprises (RISE) _

Mr Teo Ser Luck: Sir, this Budget is about looking at the future. So I am glad to read of RISE as an incentive to encourage innovation amongst the high-tech start-up enterprises. But for small and medium-sized companies, our small companies in particular, they may find it challenging to embark on such R&D with $150,000 expenditure. So how could they benefit from this scheme? And how can service companies tap on this scheme?

Fixtures and fittings incentives for service companies do help enhance some of the businesses and it could be useful for F&B businesses. What about other service companies? What if they design an automated process that can help provide better services? Would they qualify? Many service businesses have long been involved in development in IT to improve their services, such as businesses in the supply chain or logistics industry – would they qualify?

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_Innovation R &D _

Miss Penny Low (Pasir Ris-Punggol): Sir, innovation is value creation and the way forward for sustainable development of both economy and society. Over the years, we have set aside billions of dollars in innovation R&D. Could the Minister update us on how many Singapore-origin patents have been filed so far and what are some of the KPIs that we have set?

Sir, the concept of R&D innovation remains fuzzy and narrowly defined, so much so that the buzz of innovation extends barely beyond people in white coats working in the labs. In most liveable cities in the world, the buzzword is, in fact, "social innovation" – the process by which innovative ideas, products and services are generated and executed for the direct benefit of society. Economic innovation, on the other hand, is driven by capitalistic rents and social benefits as a derivative. Could the Minister clarify the types of innovation R&D that it would be pushing and whether it includes the non-profit sector, and, if so, how?

Traditionally, R&D tends to be done behind close doors with fierce IP protection. Today, collaborative innovation inspired by the open software movement is taking centre stage, eg, Wikipedia. By 2005, Wikipedia has about two million articles in more than one hundred languages and 1.4 billion page views a month. But it employs only a grand total of one staff and has a monthly overhead of about US$5,000; the rest are volunteers. Bell Lab, one of the most innovative institutions in the world, has 25,000 researchers in the 1950's but by 2003, as part of France's Alcatel-Lucent, has only 1,000 researchers. In view of the rise of collaborative innovation, could the Minister define the strategy and the eco-system it intends to put in place for

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innovation initiative to succeed? And how do we encourage R&D innovation amongst SMEs so that they can rise to the top of the value chain rather than downwards into the margin competition that is unsustainable for a high-cost Singapore?

The Minister for Trade and Industry (Mr Lim Hng Kiang): Sir, first, let me thank Members for their comments and suggestions. As pointed out by Members, 2008 will be a challenging year. The global environment is more uncertain and we face increasing cost pressures. How do we remain competitive, grow the economy, and create jobs? These are the key issues raised by Members.

We had a good run in the last four years. Our economy has enjoyed 18 consecutive quarters of positive growth. Real GDP grew by a cumulative 36.3% from 2003 till 2007. We have created nearly 600,000 jobs. Not just more jobs, but high quality jobs. From 2004 to 2007, about two-thirds of new jobs taken up by Singapore citizens were in the professional, managerial, executive, and technician or the PMET category. Wages have grown by a total of 17.4% during this period. Consumer prices, on the other hand, have increased by 5.3%, though the main increase took place in the second half of 2007.

Our strong position today did not come about by accident.

Previously, Mr Inderjit Singh, during the Budget debate, described our approach as "growth at all costs" and therefore one of the primary causes for the increase in the cost pressures. I think Mr Inderjit Singh exaggerates for impact. I am sure he is not advocating that we plan to just grow at a comfortable rate and forego opportunities if they do not fit our plan.

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I prefer to describe our approach as growing strategically, not tactically, by developing the clusters that we are competitive in and tapping the opportunities that arise within these clusters and across the clusters. Through this approach, we are also better able to address the resource needs and the cost pressures arising within each cluster, a concern raised by Ms Jessica Tan. I hope that from a better understanding of our strategic clusters, Members will appreciate that our economy is now more resilient than ever. Mr Low Thia Khiang, Mr Teo Ser Luck and Mr Zaqy Mohamad will also be convinced that we are building a top quality economy – one that is well diversified across sectors and markets, with a strong external wing that allows us to seize new opportunities overseas, and an innovative economy powered by R&D, enterprise, and entrepreneurship. Growing our market share in these strategic clusters, exploring new growth opportunities, building more economic linkages, and entrenching the spirit of innovation throughout the economy will give us the competitive edge we need in order to thrive and succeed.

Sir, we operate in a fast-paced and rapidly changing world where there is intense competition. To build up our economic clusters, we need clear strategic directions for each of the clusters. We need to plan ahead, anticipate needs, seize the opportunities when they arise, and work hard to resolve any resource constraints.

Let me illustrate by going through the key clusters that we are concentrating on.

First, on chemicals cluster. Jurong Island today has developed into one of the world's top three oil refining centres and a leading chemicals hub. It is home to more than 90 companies with investments in excess of $30 billion. But even as we speak, the Middle Eastern countries are diversifying from oil and gas production to

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building petrochemical hubs of their own. China and India are also building up their own capabilities to meet their own needs. For us to remain a top petrochemical hub, we need to anchor a critical mass of refining and cracking capabilities in Singapore, which can in turn catalyse other developments in the chemicals cluster.

The petrochemical cycle peaks approximately every seven to eight years. In other words, we do not land a chemical cracker project at a time of our choosing. In fact, we have to catch the cycle. When we found out that ExxonMobil was planning to invest in the new world-scale cracker, we went the extra mile to secure the project. We knew that one critical consideration for ExxonMobil was sufficient space to integrate the new project with its existing facilities in Singapore. As a result, the Government proactively diverted and realigned a stretch of Jurong Island Highway, together with 17 live pipelines and four core fibre optic cables.

The Shell cracker project is also illustrative. The industrial land was prepared well in advance so that Shell could break ground and start work within a month of their final decision. Such advance planning is one of the reasons why we are attractive to investors. The Shell investment led in turn to the recent announcement by Lanxess AG that they will invest €400 million or over $800 million in a state-of-the-art butyl rubber plant. Lanxess AG came in because they knew that they can rely on the feedstock from the Shell cracker by the time their plant is up and running.

These two multi-billion dollar projects are expected to double our current ethylene production to about four million tonnes per year. They open up a whole range of investment possibilities in downstream petrochemicals and in specialty chemicals.

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The electronics cluster provides another example of competitive pressures that we have to strategically seize the opportunities in order to move up the value chain. From our roots in assembling simple transistor parts, we moved into hard disk drives, and now we have moved into semiconductor wafers. Wafer fabrication produces high value-add jobs, anchors capital and knowledge, and also attracts other innovation-intensive activities to Singapore.

The competition for wafer fabs is intense, coming from both developing and developed economies. Moreover, industry players tend to invest their wafer fabs in one single location over time, so as to achieve economies of scale. If we miss out on a single window of opportunity, we, in fact, miss out on a whole slate of future investment opportunities, and hand the advantage over to our competitors. Today, we have successfully landed 14 wafer fab plants. As global demand grows, we would need more than 20 wafer fabs in Singapore to consolidate our position and to establish critical mass.

The strategy for the transport engineering sector is to push the envelope. For the marine sector, we have successfully gone beyond ship repair and ship building to specialised oil and gas platforms. Now we set our sights on the air transport sector.

Singapore is located in the fastest growing air travel market in the world, accounting for 36% of new aircraft orders by value. We have therefore moved to take advantage of this. The aerospace industry is one of the fastest growing industries in Singapore. It registered a 10% growth last year, reaching a record $6.9 billion, and employs 19,000 people, the majority of whom are Singaporeans. Today, Singapore has a leadership position in the Asian aerospace industry, capturing one quarter of the Asian

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maintenance, repair and overhaul (MRO) sector.

Two weeks ago, Rolls Royce broke ground for their Singapore plant. It is the first in Asia to assemble and test large commercial aircraft engines. We faced keen competition when we tried to secure this project. Having this plant here is significant, because it moves us up the value chain, from maintenance and repair, into a whole new area of testing and assembly of aircraft engines.

The growth of the aerospace industry will create good jobs. I was pleased to learn that an aerospace career programme organised by the Association of Aerospace Industries Singapore (AAIS) and its partners during the Singapore Airshow gathered overwhelming response, with 1,100 students participating. Since its launch in 2005, NTU's aeronautical engineering programme has been oversubscribed several times. According to NTU, the eventual entry cut-off points were similar to those for Medicine. Obviously, many students see aerospace engineering as an exciting course leading to an even more exciting career.

Sir, we have gone after wafer fab plants and aerospace engineering not just because they provide good economic benefits, but also because they drive the growth of supporting industries where many of our SMEs are. Precision Engineering (PE) is one cluster that has benefited from other strategic clusters. In the early years, PE grew predominantly from supporting our electronics sector. As other low cost locations became more attractive to low-end electronics manufacturing, we developed PE to support other sectors, such as the growing aerospace industry. This allowed us to reduce the pain of restructuring away from lower-end electronics.

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About 90% of the companies in the PE sector are SMEs, contributing to 42% of the sector's output. PE SMEs have been constantly upgrading themselves to move up the value chain and create higher skilled jobs. Our SMEs have reinvented themselves from manufacturers of ordinary commodity parts to producers of higher-value products and systems. As a result, we now have a large pool of suppliers in the PE cluster, who provide services to both local and foreign companies across diverse industries, ranging from the semiconductor equipment and aerospace and oil and gas equipment, to medical devices and automotive components.

Our economic strategy is also to diversify across sectors. That was the driving force for developing the Biomedical Sciences or the BMS cluster.

BMS makes sense for us. It fits in with our strength and capabilities. Its manufacturing is not easily uprooted, and the heavy investment required in science and technology cannot be easily replicated by our competitors. It is high value-added in nature and is resilient to economic downturns.

12.30 pm

In the six years since we embarked on developing the BMS sector, BMS manufacturing output has almost quadrupled in size. Today, BMS manufacturing alone accounts for 5.5% of Singapore's GDP, creating over 11,500 jobs. Singapore has established itself as a highly competitive and trusted site for pharmaceutical bulk actives and secondary manufacturing. But we face very stiff competition with other developed centres such as Boston, the Bay Area, Ireland and Puerto Rico. We need to continue investing in scientific, industrial and physical infrastructure, such as the Biopolis and the Tuas Biomedical Park. We also need to train our talent pool through our educational institutions, reskill our employees

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through conversion programmes, and support company-level training in order to meet future demands for manpower in the BMS sector.

As we develop our strategic clusters, we also ensure that the General Manufacturing cluster, which has many SMEs, can tap on the many opportunities made available. The Government's approach is to help these companies to upgrade through the Local Enterprise and Association Development, or LEAD, programme. So far, SPRING has tied up with 16 industry associations to develop their sectors. Each industry association accounts for between 0.1%-0.3% of our GDP. So, collectively, the 16 industry associations contribute some 3% of our GDP. The Government and the associations have pumped in some $78 million to the SMEs' projects. When realised, these projects are expected to contribute $1.4 billion in value added and $3.4 billion in revenue as well as create 10,000 new jobs.

One example is the furniture sector, which has evolved from mostly small family-run businesses to become a global player. Its output grew 15% annually in the past five years to more than $2.4 billion today. Many Singapore furniture companies maintain their higher value-adding activities – like R&D, design, marketing and IT – in Singapore, while leveraging on innovative design to compete successfully overseas. HTL, Koda and Design Studio are listed among the top 200 furniture manufacturers in the world, and they are able to keep their most valuable activities in Singapore.

Sir, I have spoken extensively on our strategic manufacturing clusters. We also have a robust strategy for developing our services. Tourism is one example. I will leave to MOS Iswaran to speak on this later on.

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Beyond developing our strategic clusters, we need to expand our economic space, as suggested by Mr Teo Ser Luck. We grow our external wing in three ways. First, we deepen our presence in existing markets. In the West, we want to deepen our links with top export destinations like the US and the EU. In Asia, we tap on the rapid growth of China and India through our strong trade and investment links. For example, since the Comprehensive Economic Cooperation Agreement, or CECA, came into force in August 2005, our total bilateral trade with India has increased by more than 40%. India has moved up two notches to become Singapore's 11th largest trading partner in 2007. Closer to home, we are committed to ASEAN. The Blueprint of the ASEAN Economic Community, which we signed last year, aims for a single market and production base in ASEAN by 2015. There are many prospects for Singapore companies when we achieve such an environment.

The second approach is to seek opportunities in emerging markets. We have new platforms for economic and business cooperation with the Middle East, where some of our companies have clinched significant deals. The Gulf Cooperation Council-Singapore Free Trade Agreement was substantially concluded in end January this year. For Latin America, the Singapore-Peru FTA and the Singapore-Mercosur MOU, concluded last year, will enhance our market access in Latin America. Russia has also huge economic potential for our companies. In April, we will host the 3rd Russia-Singapore Business Forum to showcase the business opportunities in Asia, Russia and CIS countries.

The third approach is to continually seek to expand our network of 13 Free Trade Agreements, or FTAs. The value of our exports which benefited from preferential FTA tariff concessions increased

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by more than 120% between 2004 and 2006. This is to address Mr Inderjit Singh's concern. We are indeed making full use of the FTAs that we have signed. IE Singapore, for example, introduced new outreach mechanisms such as an FTA Symposium and created an FTA Panel of Advisors. We have also conducted a series of outreach workshops last year. As a result, our companies enjoyed $380 million in tariff savings in the first three quarters of 2007, an increase of $60 million from the equivalent period in 2006.

Looking ahead, we need to continue to move up the value chain, and this calls for an innovation driven and knowledge-based economy. To drive innovation, we have invested heavily in mission-oriented R&D. R&D, as you know, is a long process. But I am glad to report that we are making good progress, as Mr Low Thia Khiang noted in A STAR's Annual Report. I think we all know that the key is talent, and we must keep investing heavily to build a pipeline of our local talent. Presently, we have a pool of more than 700 A STAR's scholars. Our goal is to train 1,000 local PhDs by 2015.

Our investment in R&D brings real benefits to the manufacturing sector. Let me illustrate from the Biomedical Sciences. Because Singapore is able to support cutting-edge drug discovery research, several large pharmaceutical companies – like Lilly, GlaxoSmithKline, Norvatis and Takeda – have all set up drug discovery and development centres in Singapore. The base of our local and international biotechnology companies such as S Bio, Merlion and CombinatorX is growing. They were seeded by EDB's Bio One Capital, which has supported 30 innovative growth companies. There are also MedTech players undertaking R&D in Singapore. So as we continue to invest in

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our R&D, we can expect more of such cross-sector benefits to accrue to us.

Exploit Technologies Pte Ltd, or Exploit, which is A*STAR's commercialisation arm, has successfully spun-off many new technologies that have been developed. But this is just the beginning. We would continue to encourage the commercialisation of new technologies and the results of our R&D efforts.

Sir, in the increasingly competitive global environment, what keep investors coming to Singapore? Let me quote an example from a recent project that we landed – Renewable Energy Cooperation from Norway. They recently chose Singapore to invest a multi-billion project in solar panel manufacturing. The President and CEO, Eric Thorsen, said, and I quote, "Singapore does not have the cheapest land, labour or electricity, but it offers the best combination of such factors, along with things like access to technology centres and research programmes, market access, stability and security."

So a key part of our growth strategy is to create the total package of conditions to keep Singapore competitive. I recognise Members' concerns about our rising costs and how these would impact on our competitiveness. But, really, the final factor of competitiveness is value creation. So my Ministry continues to monitor our competitiveness closely. We advanced one notch to 7th place on the Global Competitiveness Index in 2007. On the softer side, Monocle ranks Singapore as the 17th most liveable city in the world. In fact, MTI monitors a whole host of rankings to make sure that we continue to remain competitive.

With our fundamentals and growth strategy in place, what is our outlook going forward? Mr Inderjit Singh has pointed to tough global conditions. He is right. But despite these challenges, the outlook for Singapore is for slower but still healthy growth in 2008. MTI's

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forecast for the Singapore economy for 2008 is 4%-6%; 6% if the US slowdown is short and shallow, and 4% if the US economy goes into a deeper and longer recession.

More importantly, thanks to the restructuring and reform efforts since 2001, Singapore is in a strong position to weather these storms. We have a very strong investment pipeline. We have built up strong market positions in our strategic clusters. Our global footprint is spreading. R&D and innovation will take us further up the value chain.

We will therefore use this period to consolidate our gains, strengthen our fundamentals and position ourselves for the upturn. In a slower growth period like this, we must pay more attention to training and upgrading our workers to be ready for the new jobs that are coming their way. We will continue to address our growth constraints, restructure ourselves, identify new areas of growth and add further ballast to our economy.

My Ministry intends to make growth work for Singapore. We should not stop growing or take grow-slow approach when the going starts tough. I have set out how we can stay in the race, and in the lead. Besides remaining competitive, we should also look to set the pace, break new ground and set fresh benchmarks. While doing so, we keep enabling our businesses to make the most of the opportunities available. I believe we are on the right track, and that we have the right growth strategy for Singapore.

Sir, let me now address a couple of the issues raised by the Members. Mr Inderjit Singh asked about JTC's role. JTC's role remains the same. You must look at JTC's role in two key areas – land and prepared industrial space like flatted factory space. For the flatted factory space, JTC in fact is a small player in the market. JTC's market share is around

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20%. So we take our cue from the market and it is this sector that we are divesting because we believe that industrial space in Singapore is a fairly competitive market. So JTC need not stay in this space. JTC will concentrate on land. For the pricing of JTC's industrial factory space, this is set by the market. But for the pricing of land, we benchmark ourselves against our competitive locations and we are very careful to make sure we do not price ourselves out of the market.

Ms Lee Bee Wah asked about our efforts to promote a culture of buying Singapore products. We cannot force or make it mandatory for Singaporeans or Singapore agencies to buy Singapore products. What we do is to promote the quality, the value, the price competitiveness, the brand, and reputation of Singapore products so that Singaporeans will buy Singapore products because Singapore products give better value. And this is also the same approach for encouraging the exports of Singapore products and services overseas. So it is the same strategy, both domestic and overseas.

12.45 pm

Miss Penny Low asked about social innovation. I think innovation and R&D

cut across the entire economy, not just in the manufacturing sector but also in the services sector. But, as I said, this is a very long process. The Ministry of Finance has announced schemes to help encourage innovation and R&D also in our SMEs, and I am sure we will adapt and improve these schemes as we gain more experience.

Formula One

The Parliamentary Secretary to the Minister for Community Development, Youth and Sports (Mr Teo Ser Luck): Sir, I am looking forward to the first F1 night

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race that will come in September. I think this excitement and anticipation can be seen with the different activities, like the F1 car zooming through the Chingay Parade, the Go-kart zooming through the heartlands, and also the unexpected huge number of orders zooming through the ticketing system on the first day when the F1 race tickets were opened for sale. Luckily, it was also the last day of the voting for the Youth Olympic Games!

This is all good, because of supply over demand. The cost outlay for the event, I understand, was to be about $150 million. I am confident that the economic returns will be way above that. But by how much? How many foreign tourists and economic benefits do we expect from this sector and what is the domestic demand expected as well? And what is the economic gain as a total from the whole F1 event?

Tourism and Hospitality Issues

Miss Penny Low: Sir, the tourism, MICE and hospitality sector promises jobs for everyone – from the informative senior citizen tour guides to top bankers who leverage on events like F1 and Volvo Ocean Race to entertain and anchor their clients. There is also a whole spectrum of jobs to suit all skills sets. The good news is, in January 2008, we hit a record of 883,000 visitors, representing a year-on-year growth of 6.9%. Congratulations to MTI! There are, however, many challenges.

First, this is a manpower-heavy or manpower-intensive industry, and I wonder how MTI would meet the manpower needs in this industry. I understand that the Government has committed S$360 million over three years to train 74,000 tourism industry workers. However, up until January, only 4,300 tourism workforce-related enrolments are

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under WDA’s Singapore Workforce Skills Qualifications education and training. The shortage is quite acute.

Second, how do we ensure that this growth will substantially benefit the SMEs and social enterprise?

Third, how do we ensure that there would not be imported inflation in the form of conference delegates and tourists pushing up domestic prices?

Finally, I would be grateful if MTI could provide an update on the development of this sector, its projected growth and challenges over the next five years.

Renewable Energy Promotion Policies

Er Edwin Khew Teck Fook (Nominated Member): Sir, I applaud the MTI for setting up the Clean Energy Programme Office (CEPO) very promptly in 2007 after Singapore decided to elevate clean energy as a key growth area and, since then, the EDB and CEPO have been very active and successful in attracting many major players, like REC from Norway, as mentioned by the Minister, and Oerlikon Solar from Switzerland, into Singapore from the solar PV sector and setting up the Solar Energy Research Institute at NUS.

Sir, much still needs to be done to attract other renewable energy players in other sectors, besides the solar sector, to come to Singapore if our strategy is to develop Singapore into a centre for renewable or clean energy technologies and solutions. Globally and regionally, solutions are required for other areas of renewable and clean energy as well as energy efficiency. So I do not think we should just focus on one sector at a time and build up deep proficiency in one area before we focus on another area.

May I suggest that MTI and its agencies consider a broader-based

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strategy in attracting renewable energy (RE) companies into Singapore, as the whole region is looking for a suite of RE technologies, ranging from biomass, biogas, biofuel, wind, wave, hydro, geothermal to solar. Not all RE technologies have ready applications in Singapore. For example, Vestas, which is the largest manufacturer of wind turbines in the world, is setting up their Asia Pacific HQ and R&D centre in Singapore. This company has no market here in Singapore but it is important for them to be here so that Singapore can provide a holistic solution and cater to all the RE and EE needs. I think the strategy to have all RE and EE solutions readily available in Singapore is clear, as this will attract countries wanting these solutions to think of Singapore straightaway and not wonder whether it is available or not. Yes, Singapore should be the hypermarket for RE and EE solutions. With these solutions, we can then package project financing, project management, engineering, carbon management, carbon trading, etc, ie, the whole value chain for this business which I shared in last year’s Budget debate.

Sir, to attract these RE and EE technology companies to come to Singapore, I would suggest the following:

(1) Provide attractive incentives for them to bring their technologies to Singapore, especially if they are prepared to set up a manufacturing facility here.

(2) Test-bedding and R&D incentives. This is basically in place but can be expanded.

(3) Feed-in-tariffs (FIT) to allow all the RE companies which set up here and can test-bed their technologies to also feed into the grid at preferential rates. Many countries, eg Germany, South Korea, Japan, Spain, California, including China, have very viable FIT models that we can learn from which have helped them grow

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their RE sector. I am sure we can learn from them.

(4) Net metering. This allows for RE generators, both small, eg, private homes and condominiums, and large, eg, test-bedding systems to industrial plants, to feed in the net energy produced into the grid and offset directly against retail electricity cost. Current EMA rules stipulate that distributed electricity fed into the grid has to pay grid charges which are 25% of total electricity cost. This is hefty, making, for example, solar energy generated from PV not attractive and therefore a disincentive for solar systems to be pervasive in Singapore.

Sir, I would like to ask the Minister to clarify whether the proposals set out above are being considered by the MTI and, if not, why not.

Impact of High Energy Prices

Mr Liang Eng Hwa (Holland-Bukit Timah): Sir, the oil price has gone above US$100 per barrel and looks likely to stay high or even go higher. There is growing concern that the recent high oil price is a structural shift rather than a cyclical upswing. The oil price has more than tripled since 2003, and it has already eroded the purchasing power of consumers, as we have seen the likes of petrol, utility prices and transport costs raised significantly. On the business and industry front, high fuel cost will add on to the overall business costs, and perhaps dampen business sentiment. Airlines have also added higher fuel surcharges, pegging the price of air tickets to the price of jet fuel.

What is MTI's assessment on the impact of sustained high oil prices on our industries and our economy at large? How could we prepare ourselves for a scenario where the oil price stays above the US$100 per barrel level?

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Singapore currently depends on gas as our main source of fuel to generate electricity. About three quarters of our electricity supply are generated from natural gas. Besides piped natural gas from our neighbouring countries, we have also diversified into liquefied natural gas with the construction of our LNG terminal.

Is our current dependence on gas able to fulfill the level of energy security desired? What are the forward-looking threats we could face, and are we able to turn that into opportunities? Can the Minister give an update on our plans and progress to explore alternative sources of fuel, eg, the non-fossil fuel types?

Energy Industry

Ms Eunice Elizabeth Olsen (Nominated Member): Sir, Singapore will be home to a $6 billion solar manufacturing complex, we are committing funds for R&D and clean energy and, two weeks ago, we saw the launch of the Solar Energy Research Institute of Singapore. These make for a good start to a solar future for our sunny island. But since we are never ones to rest on our laurels, and also because Singapore is a Johnny-come-lately among developed countries when it comes to solar solutions, my question for MTI is: what next, and can we do more?

I have read about the Ministry's stand on market distortion and subsidies to incentivise the use of renewable energy in Singapore and I wonder if we are being too conservative. Can we claim to be a leader in the field of solar energy if we are content to let market forces dictate how we deploy its use? We know that the main obstacle to photovoltaic adoption is cost. It will take years for research to lower these costs. Meanwhile, it is clear from examples elsewhere that the growth of grid connected markets depends on incentive programmes. Why do we

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condone minor distortions and cross-subsidies in an existing retail electricity market but baulk at doing the same for renewables – the best long-term solution to reduce global warming? For example, by paying a flat rate for electricity, instead of a tariff that varies according to supply and demand, as is the case in Singapore, night-time electricity purchasers are cross-subsidising day-time consumption. Likewise, grid charges should reflect the cost of transmission and distribution infrastructure. These are currently allocated as a flat surcharge according to kilowatt hour consumed. But that unfairly penalises consumers located close to the power plants who end up sharing costs for all the transmission lines installed for faraway consumers. These cross-subsidies are small and have no significant impact.

Are we not creative enough to come up with similar solutions for PV adoption to augment measures such as the Green Mark programme? For example, why not go for feed-in-tariffs? And here I quote the sentiment of hon. Member Mr Edwin Khew, especially since it will take several years before PV contributes more than a few percent of Singapore's total electricity production, which means, for all practical purposes, the main electricity market would face no distortions at all. If MTI says that FITs will result in higher electricity prices, it should say how much. Otherwise, talk of higher prices is a smoke screen.

According to solar energy experts I spoke to, a typical four-room HDB flat would face a surcharge of less than 60 cents per month, which is a small price to contribute to greenhouse gas reductions. Cost and market distortions are clearly not major barriers. On the other hand, by making it attractive enough for PV system contractors, competition among them will drive down costs and improve practical solutions. So what if it was sparked artificially by subsidies? More jobs will be

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created and the accumulated know-how would give Singapore an edge. Our experience could be an example for the region. Our priorities will show in what we choose to do or not to do.

Sir, should we not do more?

Mr Iswaran: Sir, Minister Lim has elaborated on our overall strategy for growing the Singapore economy. While we have done well in recent years, we must continue to pursue new growth areas and opportunities. As several Members have pointed out, we must ascend the value chain into higher value-added activities in all sectors, including the energy, tourism and R&D. Indeed, this is the most robust strategy to ensure sustained growth, create good quality jobs for Singaporeans, and help us face the many challenges that lie ahead for our economy.

Energy is a critical resource for any economy, including ours. Our aim is to ensure that we have secure energy supplies at competitive prices whilst we stay true and sensitive to our environment. The simple truth is that we may have now entered, perhaps quite irreversibly, an era of higher global energy prices, a structural shift, as Mr Liang Eng Hwa puts it. Global demand for energy will continue to increase, and the supply constraints are self-evident.

At last year's COS, I spoke on the formation of an inter-agency Energy Policy Group chaired by the Ministry of Trade and Industry. Since then, we have launched our first National Energy Policy Report. The title of this report – “Energy For Growth” – succinctly articulates the Government's thinking on the subject and highlights the triangle of tensions that we face between economic competitiveness, environmental sustainability and energy security. There will be challenges and trade-offs, and the solutions are by no means simple.

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Given the uncertain global energy outlook, economic growth is our best response. Why? Because this will ensure that we continue to have the resources to secure our energy supply and, at the same time, keep our environment clean, and undertake R&D to develop new and more innovative solutions.

1.00 pm

As a small and open economy that depends fully

on imports for our energy needs, Singapore is a price taker. Ms Eunice Olsen has heard this argument before but I think it bears repeating. Our basic policy tenet is that energy cost should be borne in full by end users. Individuals and industries should adjust their consumption of energy according to its true cost as reflected in its price. We do not subsidise the cost of energy because it will dampen price signals, and create the incentive to over-consume. There are many examples around us that bear that point out. Moreover, as all of us know subsidies are not sustainable in the long run, our best course of action is to encourage competition and ensure that markets work. Competition will assert downward pressure on prices and serve to benefit consumers. This approach is not conservative, as Ms Eunice Olsen characterises it, but I think prudent, because we want to make sure as a small economy we put in place systems that are able to withstand these kinds of global pressures and subsidies cannot withstand such pressures.

To illustrate the benefits of competition, let me give you an example. In 2001, EMA introduced competition in the electricity market. Both businesses and households have benefited. Over the past seven years, as we all know, the price of fuel oil has doubled, in fact, more than doubled. But electricity tariffs for low tension users, which are mainly our households, has increased by only 14%, and this is despite the fact that fuel cost

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accounts for 55% of the cost of electricity generation. We are currently in the final stages of liberalising the gas market and that will further enhance competition in our energy sector.

Energy security has re-emerged as a growing concern for many countries and not just Singapore. Mr Liang has asked about the threats other than high prices. Amidst intensifying global competition for resources, the global energy supply chain is vulnerable to political risk and other unforeseen circumstances.

Our response has to be on two fronts. On the supply side, we need to diversify our sources of energy and continuously explore new fuel and energy technologies, the point that several Members have spoken out. The second is on the demand side, we need to be more efficient and innovative in our use of energy. The Minister for the Environment and Water Resources has outlined our efforts to promote energy efficiency last Friday and I like to elaborate on our efforts to diversify our sources of energy.

Today, about three quarters of our electricity are generated using piped natural gas. We have decided to import liquefied natural gas to diversify our supplies of fuel rendering us less prone to possible disruptions of supply. And I am pleased to inform Members that Singapore's efforts to import energy are on track. In September last year, we designated Power Gas as the LNG terminal operator. It is a natural extension of PowerGas' role as the owner and operator of the gas pipeline network in Singapore and it will ensure integration of the existing gas infrastructure and the energy terminal. EMA is also in the final stages of an RFP process to select the LNG "aggregator". The "aggregator" will consolidate demand from end users and import liquefied natural gas into

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Singapore. We will announce the outcome of this RFP in the second quarter of this year.

In diversifying our sources of energy we have also taken steps to encourage the adoption of renewables, such as solar energy. These include reducing cost and facilitating grid connection, the point that Mr Edwin Khew was talking about. In June 2007, the Energy Market Company removed the registration fee of $5,000 for market participation that was previously imposed on solar installations that export to the grid. The wholesale licence fee by EMA has also been reduced from $1,000 to $100. Among other outreach and educational efforts, EMA has also published a handbook to provide information on the installation and connection of photovoltaic systems to the power grid. So we are doing our part in terms of reducing Government charges, those sorts of overheads, but we are eschewing subsidies that might distort.

In addition, I am pleased to announce that the Government will be setting aside a further $20 million for the Solar Capability Scheme. This is a grant-based incentive to spur more innovative approaches and capability development, in the architecture, design and system integration of solar panels as part of green buildings. The fund will go towards offsetting part of the installation cost of solar panels for new buildings which have attained a certain level of Green Mark standard. EDB will be releasing more information on the scheme in due course.

Apart from providing a key resource, the energy sector also presents significant economic opportunities. The energy sector is already important to our economy. In 2006, the oil industry contributed 4.5% to Singapore's GDP. We will continue to build on our lead in this field and further develop a comprehensive energy cluster in Singapore.

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In recent years, international concerns over climate change and environmental sustainability have spurred a greater worldwide impetus for the development and adoption of clean energy technologies. Clean Edge, a leading report on the industry, projects that the global market for clean energy technologies will quadruple to over US$226 billion in 2016 compared to US$55 billion in 2006. This is a significant opportunity.

As it stands, renewable energies such as solar are still, as the Member has noted, much more expensive than traditional fossil fuel-based energy. If we are to be consistent with our basic principles, we should not adopt measures which subsidise specific renewable energy types. And one example is the Feed-in-Tariffs that both Mr Edwin Khew and Ms Eunice Olsen have talked about.

For the benefit of other Members, just to elaborate, what does the Feed-in-Tariffs entail? It means the renewable energy plants are given a guaranteed contract, an off-take for the energy they produced over a substantial period of time, over 15 to 20 years, and the price, if it is to be meaningful, has to be above the market price because today, the cost of producing such energy is significantly above market price. The relativities, if you talk to different people, vary and because the price of oil is moving and changing, something of the order of magnitude today, compared to our pool price of, say, about 22 cents per kilowatt, and if you are using solar energy, you are looking at about two to three times the cost, perhaps a bit lower because oil price has gone up now. But that is the order of magnitude. So what we are effectively saying is we have to subsidise the producer of this renewable energy, say, solar, and that subsidy will then be smeared and passed on to all consumers of energy so that we can have solar power generation. That is not an optimal

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strategy because what we are effectively doing is encouraging solar and the question can be asked: why solar? It can be bio-energy, bio-diesel, and so on. It can be many sources. It does not have to be just one. Then the question is: why just in the energy industry? Why do we not subsidise others as well?

So, we have to be very clear about this, and keep to our principles. Where are we allocating our resources? It is in R&D and test-bedding, and this scenario, I think, will resonate with the Members because this is key to developing technologies that will bring down the cost of generating alternative energies. We also believe that this approach will give better returns in the long run. If solar energy is at grid parity or very close to grid parity, there is no need to talk about Feed-in-Tariffs anymore. Our efforts in R&D will provide an unprecedented set of opportunities for us to develop our capabilities and talent and allow us to develop technologies that can be marketed to the world. Our unique advantage is our compactness which provides an ideal platform for early test-bedding of such ideas in an integrated manner that larger countries cannot. Our consumers will also benefit as we will be able to pioneer the use of many of such solutions.

Our strong support for R&D and test-bedding is evident in our recent initiatives. The Research, Innovation and Enterprise Council has allocated $170 million over the next five years for solar R&D. In the area of test-bedding, EDB has also launched a $17 million Clean Energy Research and Test-bedding platform (CERT) for solar photovoltaic technologies. A*STAR has set up the Singapore Initiative in New Energy Technologies (SINERGY) Centre to develop alternative energy technologies. Just a few weeks ago, the Solar Energy Research Institute of Singapore (SERIS), which Members have observed, was also

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launched. Clearly the energy sector is quite energetic in coming out with acronyms as well. With an expected investment of $130 million over five years, SERIS is slated to be one of the most comprehensive solar research centres in Asia and it will enable NUS and Singapore to be a world leader in solar R&D.

Our recent efforts to grow the clean energy industry have yielded good results. We have heard about the success with Renewable Energy Corporation and also Nestle Oil in its second generation bio-diesel plant. Several other clean energy companies have also chosen to set up their regional headquarters here, including Solarworld, Conergy and Solar-Fabrik. Several companies have also chosen to set up R&D centres including Bosch and Oerlikon Solar. And we will continue with our efforts to attract such companies across the entire spectrum of clean energy solutions.

Notwithstanding the progress on several fronts, I fully agree with Mr Edwin Khew, Ms Eunice Olsen and Mr Liang that we can do more to grow the clean energy sector, to develop more innovative solutions on energy, as well as to mitigate the risks of high oil prices and to ensure Singapore’s energy security. I thank Members for their comments and suggestions in this regard.

Going forward, we need to keep an eye on the horizon in view of the ever changing international landscape. And given the global nature of energy issues, we have decided to set up an International Advisory Panel on Energy which I will chair. This panel will comprise a group of thought-leaders, eminent persons and energy experts from around the world, and will meet for the first time in November this year.

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The meeting of this International Advisory Panel will be held in conjunction with our first ever International Energy Week. The week will include a Singapore Energy Conference and other events that will allow policy makers, academics and industry players to come together to network, and spearhead new initiatives. In doing so, we will develop Singapore as a thought-leader in the region on energy issues. And through this process, we will constantly re-examine our policies, develop innovative approaches, and identify new opportunities for Singapore, as Members have suggested.

Let me now turn to tourism, which is another key economic driver. The sector has seen strong growth. 2007 was a sterling year, visitor arrivals hit a record 10.3 million which is up 5.4% from the previous year and $13.8 billion in tourism receipts were generated in 2007, exceeding our target as well. For 2008, STB has set a target of $15.5 billion in tourism receipts, that is about a 12% year-on-year increase and 10.8 million in visitor arrivals, 5% year-on-year increase. We are on track to realising our Tourism 2015 targets of 17 million visitor arrivals and $30 billion in tourism receipts. And it is particularly encouraging that the international media has also noticed the transformation that is taking place in Singapore. In its October 2007 issue, the F1 Racing Magazine called Singapore the “Monaco of the East”. More recently, the New York Times published a feature article on what a visitor could do in Singapore around the clock. And Time Magazine in May last year described it as “Singapore’s New Look”.

Miss Penny Low has asked for an update on our plans going forward. Well, the agenda is quite full and we will continue with our efforts to position Singapore as a compelling leisure and business destination, and several major projects have been launched or announced that will enhance our tourism

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landscape. These include the development of the International Cruise Terminal at Marina South, which should receive its guests by 2010, and the Gardens by the Bay, which will open in 2011. We will also develop Mandai into a nature based theme destination, and this is expected to be completed some time after 2010.

In addition, we will persevere with our development efforts to ensure that our tourism industry is able to serve the increasing number of visitors. As many Members have observed, manpower development, and Ms Penny Low stressed this, is key. The TOurism TALent (TOTAL) Plan was launched in October last year, where $360 million was committed to train 74,000 tourism industry workers. And, yes, to date, we have about 4,300 enrolments. So, can we do better? The answer is, yes. I would urge all Members to pass the word around and help promote this. It is a growing sector with a lot of opportunities for many of our Singaporeans to take advantage of.

In addition, STB has committed $30 million to the Training Industry Professionals in Tourism (TIP-iT) scheme, to help industry partners invest more in training and build capabilities. As part of the tourism careers campaign, STB launched the tourism careers portal (www.tourismcareers.sg), a key one-stop information gateway for potential job seekers. STB will intensify outreach efforts through roadshows and career fairs. MTI and STB are working very closely with the industry players to get their feedback on how the industry, in particular, from an HR perspective, is preparing itself for the challenges for the next two years and we will be responsive to the market.

1.15 pm

Our event calendar for the next few years will see many top-tier international

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events, the F1, and the super yachts competing in the Volvo Ocean Race will stop over in January next year. Singapore will also be hosting happily the inaugural Youth Olympic Games in August 2010. All these events will add buzz and activity to Singapore, and attract tens of thousands of visitors who will add significant value to the whole economy, particularly the high-yield tourists. This, we expect, will create something of the order of 50,000-60,000 new jobs.

Miss Penny Low would be pleased to note that we expect our SMEs to benefit significantly from these developments. The benefits are across the entire value chain of the life cycle of these projects. From the development phase, whether it is Marina Bay Sands or Resorts World, engaging many of our local companies for the development of the infrastructure to when they move into the operational phase, many would be suppliers or outsource service providers or working closely with these operators providing certain services. Beyond that, the surge in visitor arrivals itself will benefit not only operators of local attractions, like DuckTours, Mint Museum of Toys and Singapore River Cruises, but also smaller scale boutique hotels. F&B enclaves, like Emerald Hill and Tanglin Village, are increasingly attracting tourists as much as locals.

The increase in MICE events also gives home-grown companies, like East West Travellers and Pico Art International, a chance to garner greater exposure on the international stage in the MICE industry. Social enterprises, a pet project of Ms Low, too have benefited. I will just give one example. It is The Singapore Shawl, a social enterprise that provides employment for retrenched women, especially those who were hit by the 2003 economic downturn. The shawls have hand-made motifs that reflect life in the Garden City, from the flora and fauna

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to our local cultures. These shawls are regularly presented to foreign dignitaries and visitors to Singapore. So there are spin-offs in all sectors for the SMEs as well as the social sector.

Mr Teo Ser Luck has asked about the anticipated visitorship for the F1 race and what kind of participation we can expect from the locals. F1 ticket sales have been brisk across all tiers of pricing. The bulk of these tickets have already been sold. It is quite remarkable considering the race is still six to seven months away. The race organisers are also planning to make more tickets available, and they will be in the pipeline soon. All in all, we are expecting well over 80,000 spectators for the event. Overseas demand for the event has been very strong, and we expect tourists to make up at least 30-40% of all ticket holders.

Mr Teo has also asked about the overall economic value of this project. When we embarked on this, we expect tourism receipts conservatively to be boosted by about $100 million a year. That is the quantifiable component. But as we have stressed many times, first, on the quantifiable aspects of this project itself, because it is the first of its kind for Singapore, we really need to have the experience of year one before we can pin down the numbers in a more definitive manner. But we share his optimism that the numbers are likely to be positive. At the same time, there are many intangible spin-offs and benefits that will percolate across the entire economy – whether it is benefit to our SMEs and other companies that we have already talked about, or in terms of the branding and positioning for Singapore and also for our wealth management industry, eg, the opportunity to create new entertainment and networking events built around the Formula 1 for their high network clients. So there is a wide range of quantifiable

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and non-quantifiable benefits. And our assessment is, overall, this should be a positive venture for Singapore.

The race aside, STB is working closely with partner agencies, industry stakeholders and community organisations on a calendar of events around the race period. These include the inaugural Singapore River Festival, the Singapore Biennale and the Singapore Motorshow. The events also extend to the heartlands, the Go-Karting, and so on. In all, we expect this to be a successful event.

On R&D, my Minister has already outlined our efforts to develop a knowledge-based economy. The A*STAR and the S&T2010 plan have focused on fostering world-class scientific research and nurturing R&D talent.

Mr Low Thia Khiang has asked about our efforts to groom local research talent. A STAR has been investing in building local talent since 2001 through the National Science Scholarships and A STAR Graduate Scholarships. Through these scholarship programmes, we hand pick the best local talent, and groom them to become future scientific leaders for Singapore. To date, we have over 700 scholars in the pipeline, who are studying at leading universities around the world. And our goal, as the Minister has said, is to train 1,000 by the year 2015. These scholars will also, beyond their PhD degrees, be having attachments to some of the top research scientists from around the world.

Mr Low has also asked whether we have been sufficiently proactive in cultivating local talents. I want to inform the House that more than 85% of the A STAR scholarships awarded are to Singaporeans. Non-Singaporeans who take up A STAR scholarships are also expected to take up citizenship during the course of their studies. I would like to assure Members of the House that

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bringing in foreign research talent is an integral part of nurturing and developing our own local pool of talent, and hence these should be viewed as complementary and not conflicting strategies.

Going forward, to harness the economic value of our R&D investments, commercialisation will be a key focus for A*STAR to make our research dollars count. We will do this by strengthening the links with industry and by bringing technologies that are developed through R&D to the market.

Strong linkages between research institutes and industry clusters will ensure that the discoveries in our laboratories are relevant to the needs of industry. From April to December last year, the Biomedical Research Council and Science and Engineering Research Council (SERC) initiated 171 new R&D collaborations with industries – notably, the SERC Aerospace programme.

Mr Low and Miss Penny Low have asked if our local businesses benefit from our R&D strategies. There are many examples of SMEs who have benefited from the "Growing Enterprises with Technology Upgrade", the GET-Up scheme, and I can elaborate on that if they want later. But let me just stress that, in particular, 166 A*STAR researchers have joined the ranks of 116 SMEs to help jump-start and strengthen their in-house R&D capabilities. This flow of talent from the institutes to the SMEs remains one of the most practical forms of assistance that SMEs can benefit from.

A STAR is also committed to bringing technologies to market. There are many examples of these. But we should not measure the value of the research that is done in A STAR purely by the value of the divestments or the spin-offs. As I have elaborated, it is a manpower issue, it is the benefits that accrue across the entire economy, and we should look at

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the entire spectrum in forming a judgment on an endeavour which is long term in nature.

Let me conclude by saying that to further strengthen Exploit's efforts in bringing Intellectual Property (IP), we will launch a new programme called Exploit-IP, which will promote international IP partnerships to benefit Singapore businesses – Miss Penny Low's point about collaborative R&D. And Exploit Technologies will also be launching the Technology Transfer Network this year. The Network will bring together Exploit and the Institutes of Higher Learning to facilitate the transfer of IP.

In terms of KPIs, let me just say that our R&D expenditure as a percentage of GDP has gone up from 1.9% to 2.4%. The number of research scientists and engineers per 10,000 of our labour force has increased from 66 in 2000 to 87 in 2006. And in terms of patents, between 2000 and 2006, patent applications increased by two-and-a-half times to 2036 in 2006.

Sir, let me conclude by saying that I think our R&D strategy as well as our policies on tourism and energy continue to be robust and position Singapore well for the future.

SME Development and Entrepreneurship

Mr Inderjit Singh: Sir, in the last two years, we did well in focusing our efforts to build a strong and sustainable SME sector. SPRING has realigned its focus to become the agency championing SMEs. It gave up quite a bit of its old functions, including the divestment of PSB to focus on SMEs. The CEO and his management team have done well in helping to strengthen and grow the SME sector.

The new Chairman of SPRING, Mr Philip Yeo, is now finally passionately focusing on SME development. The

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Government has finally listened to years of calls from Members and the private sector to set up an SME champion agency, and that is SPRING. And also due to the work done by the Action Committee for Entrepreneurship (ACE) together with the various MTI agencies, like SPRING and IE, financing is no longer the number one concern among SMEs.

We have made very good progress but a few areas of financing gaps still exist. After the dotcom bust of 2000, many of the private equity players decided to focus largely on the late-stage companies, leaving very little money available to fund innovative companies at the very early stages. On the other hand, many growth companies have stretched their balance sheets and cannot borrow any money, and they are too small for any public listing. So we have viable companies that have problems in terms of short-term financing. There is therefore a clear market failure in these two areas. I feel that the Government can provide equity funding for growth companies with good potential for Government making modest returns, and not losses in these investments. I hope that the Government can also help develop the early stage VC industry focused on investing in Singapore's start-ups capable of growing rapidly.

Sir, the tax incentives under the Enterprise Investment Incentive Scheme, while well intended, the scheme, I believe, has not been effective in achieving the objectives in encouraging angel investors to invest in start-up for two reasons. First, it is quite onerous to qualify for this incentive and, second, this is applicable to investments into qualifying companies that failed, with losses recognisable in the 2nd to the 6th year after investment is made. I believe it would be better for the Government to allow tax deductibility for investments into start-ups when the

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investments are made and not when the companies fail. I feel that the scheme should be changed from the current negative approach focusing on failures as a pre-requisite for tax write-offs to one of giving the write-offs at the time of investments being made.

I think the intention of the Government to promote innovation and R&D in local enterprises, especially among SMEs, is a right one and will benefit the economy in the long term. I, however, have a concern with respect to the execution of disbursing the incentives announced. Many past Government schemes benefited the larger companies since the officers implementing these schemes found it easier to work with bigger companies to achieve their objectives in disbursing the incentives. For example, with the SDF, I know that in the past, larger companies, including MNCs and GLCs, benefited more than SMEs. MTI therefore needs to ensure that the KPIs of the Government agencies administering the SDF and R&D schemes should be pegged to number of companies reached, including as many SMEs as possible.

Sir, in the area of internationalisation, increasingly many companies are looking to internationalise at a very early stage of their development. IE Singapore, however, has traditionally focused on larger and more established companies. We should make IE Singapore more accessible to our SMEs and start-ups. Otherwise, SPRING may have to add an additional role to support the internationalisation efforts of our smaller companies.

Sir, on commercialisation of R&D, we heard Minister of State Iswaran speak about the initiatives, including the initiatives by Exploit. We have many research outputs available done by our universities and our research institutes that are still sitting on the shelf for want of a proper commercialisation plan, or

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finding a suitable partner. I think we have attempted to license and sell these outputs many times, but I believe that the approach taken is wrong. The approach taken is one of trying to derive maximum value at the time of divesting some of this research. I would suggest that we do not focus on economic gains, but on trying to get as much research outputs as possible out to industry. And I think the end result will be beneficial and the gains will come in the long term.

I also like to suggest that we allow researchers to work directly with industry than to go through an organisation like Exploit and become a bottleneck, and this will, in fact, be a bigger problem in trying to commercialise the research. Sir, the other solution that we can look at is the example in the US of the Small Business Technology Transfer Programme. It has been very effective. I think we can implement such a scheme.

Sir, on the whole, I think we have done a good job in supporting SMEs and entrepreneurship promotion, and I would like to congratulate MTI for that.

SPRING Singapore Business Leaders Initiative

Mdm Ho Geok Choo (West Coast): Sir, SPRING Singapore must be commended for its efforts in cultivating young leaders. I believe SPRING can go further and nurture entrepreneurial instincts among our youths and get them more involved in entrepreneurship at much younger age. As it is, MOE has tied up with Citibank to teach our youngsters in school how to be more money savvy. There can be tie-ups between SPRING, MOE and other institutions to sharpen the business acumen of our younger Singaporeans. Industrial attachment programmes that polytechnics have been doing can be replicated in JCs. SPRING can develop partnerships with industry leaders and JCs to let their first-year JC students gain

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some industry experience through structured programmes as opposed to private internships that can have an ad hoc quality.

Sir, I declare my interest here. A recent HR Challenge, the first of its kind in Singapore, was organised by SHRI and attracted some 300 applications from ITEs, polytechnics and universities. I was impressed by the many ideas put forward by the participants. Furthermore, they also completed case studies on companies in Singapore and focused on specific business issues, such as sourcing, talent management, succession planning and compensation. To support this event, SHRI had to approach companies in Singapore for sponsorship. It was well supported, indicating the level of interest on the part of Singaporean companies.

To take this successful event further, I would like to urge SPRING to embrace HR Challenge as its main sponsor and collaborate with professional bodies like SHRI, whose initiatives in building human capabilities for the human capital industry must be encouraged further.

SPRING Singapore Partnerships

1.30 pm

Sir, SPRING Singapore should again be commended for its journey of partnership to make for a more vibrant SME sector. In its network are the Government agencies comprising EDB, IE Singapore and A*STAR; and from the private sector, SBF and ASME, and the list goes on.

However, starkly absent are the professional bodies, which are also making huge contributions to the economic growth of Singapore. SPRING would be justified in embracing a third category - the professional body. With Singapore evolving as a human capital hub and with human capital being acknowledged as a strategic asset in our

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knowledge-based economy, human capital competencies and expertise should be recognised as performing a pivotal role. Therefore, I urge that this category be eligible for the same level of support and assistance, specifically support should be provided to SMEs to help them professionalise their HR practices and management. Given the lack of resources for domain experts with each SME, I would urge SPRING to explore setting up an outsourcing agency, specialising in HR and organisational improvements, to take the SMEs one step further in their pursuit of HR and organisational effectiveness.

Consumer Protection

Mr Yeo Guat Kwang (Aljunied): Sir, last year in this House, we were glad that MTI had considered favourably the recommendations put up by the task force set up to review the Consumer Protection Fair Trading Act (CPFTA). Now I hope the Minister could further strengthen the CPFTA for better consumer protection.

First, I would like to request that the Minister introduce new regulations under the CPFTA to make motor vehicle dealers more transparent in their deposit policies. The number of complaints received by the Consumers Association of Singapore (CASE) against the motorcar industry is increasing. In 2005, it was about 1,227 but, in 2007, it was raised to 1,707 cases. One of the issues is the forfeiture of the deposits by vendors when the contract fell through.

Second, CPFTA should include regulations to govern how unsolicited goods and goods provided on an opt-out basis should be treated, and so on.

Third, according to CASE's records, the number of complaints against timeshare industry is the highest among all. In year 2007, we received 2,456

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cases. If we are not prepared to introduce specific timeshare legislation to regulate the industry, the CPFTA should be amended to further regulate sale of timeshare schemes in Singapore. This should also apply to businesses which provide leasing, advertising and/or consultancy services to terminate, cancel, sell, transfer, purchase, lease, rent and/or recover of any monies paid under any existing timeshare contract or agreement.

The current three days cooling-off period provided is also too short. I hope MTI could strengthen the CPFTA to increase the cooling-off period of timeshare contract and that such cooling-off period also applies to businesses offering reselling, terminating or upgrading of timeshare membership. In addition, the claim limit under the CPFTA should be raised from $20,000 to $30,000 so that more timeshare contracts could be covered. We also hope that the time bar on specified bodies action under the CPFTA be extended beyond the one-year period to give the specified bodies, like STB, and CASE, more time to deal with cases.

Sir, many consumers are also complaining that they are given "lemons" when they buy products. What they mean is that they were given products with problems by default. Since there is no legislation spelling out consumers' right to pursue for refund or replacement, businesses are dragging their feet in assisting consumers with such problems. We find this unacceptable and would like the Minister to consider introducing a lemon law or provisions in any of our existing consumer laws to cover this aspect for any consumer transactions. I suggest a joint task force be formed to take a closer look at the experiences of other countries that have implemented such a law.

With the recent outcry about tainted toys being sold to children, we feel that

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there is also a need to ensure that toys, or for that matter any products, that retailers bring into Singapore must meet certain safety standards. We need to put in place a product liability law to put the onus on the retailers or the manufacturers to ensure product safety before they place their products for sale in Singapore. This will give consumers the right to pursue for refund or replacement speedily at a lower cost.

Consumer Protection – Fair Trading Act

Mr Lim Biow Chuan (Marine Parade): Sir, let me first declare my interest on this topic. I am the Vice-President of the Consumers Association of Singapore (CASE).

Last year, MTI informed members of this Committee that they had agreed to all the eight recommendations of the Task Force Review Committee regarding the proposed amendments to the Consumer Protection Fair Trading Act, or CPFTA, for short. MTI had also held a public consultation exercise in September last year to invite public feedback on the proposed amendments to the Act. Four sets of subsidiary legislation were also proposed. May I ask MTI for an update on the progress of the revision to the law. Would MTI be able to provide an indication as to the timeline before the CPFTA would be amended and the subsidiary regulations introduced?

May I also seek a confirmation from MTI that the financial sector would also be included in this revised CPFTA. It is critical that we provide an avenue for consumers to seek recourse against rogue agents or companies who engage in unfair practice in selling their financial products, especially to the illiterate or elderly who may not be aware of the risks involved in making such a purchase. We also call on MTI to designate the Monetary Authority of Singapore (MAS) to be the specified body to monitor these businesses in the

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financial sector. Clearly, MAS would have more clout with them.

Next, Sir, complaints against car dealers for making unfair forfeitures of car purchase deposits have risen over the past two years. The proposed Motor Vehicle Dealer Deposits Regulations require these car dealers to be more transparent about their deposit refund policy. May I ask MTI to consider imposing a penalty on car dealers who delay in refunding deposits paid by consumers? This will discourage car dealers from taking their time to refund deposits paid for by consumers who will need the funds for payment to another car dealer.

Like Mr Yeo before me, I also wish to ask MTI whether they would agree to the proposal by CASE to increase the prescribed limit under the CPFTA from $20,000 to $30,000. The reason for the proposal is really to allow more consumers to bring forth claims under the CPFTA where they have entered into a transaction involving unfair practice by a retailer.

Next, Sir, if I may speak about the review of a "specified body" under the CPFTA. Currently, CASE and the Singapore Tourism Board are the only two specified bodies under the CPFTA. We are operating almost like the Fair Trading Office in other countries with similar consumer protection legislation.

Last year, whilst exercising the duties and obligations as a specified body, CASE has incurred a disproportionate amount of costs trying to bring errant businesses to the negotiation table to persuade these businesses to sign a Voluntary Compliance Agreement, or a VCA. Basically, the VCA is to persuade the businesses not to engage in unfair practices or to breach the CPFTA. Where the errant businesses fail or refuse to sign the VCA, then CASE will have no choice but to

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apply to the Injunction Proposal Review Panel, under the CPFTA, for approval to commence injunction proceedings against the business. The application for an injunction is not taken lightly and only as a last resort because of this need to protect unsuspecting consumers from being taken advantage of. Unfortunately, Sir, the legal cost of the injunction application is prohibitive and there is no guarantee that CASE would be able to recover such cost from the business if the business eventually becomes insolvent.

CASE would like to seek an amendment to the CPFTA to ask that the role of the specified body stops after making a successful application to the Injunction Proposal Review Panel. This Panel is currently chaired by an ex-High Court judge. Once the Review Panel has approved the application, then the Attorney-General Chambers can be directed to take out the injunction proceedings against the recalcitrant business instead. In this proposal, the onus and cost of prosecution will rest with the State instead of on a non-profit organisation, like CASE, which is limited by financial means to carry out prosecution.

Our estimate is that it has cost CASE more than $180,000 to date for three injunction applications, none of which has been concluded pending a Court decision. So the costs may continue to go up and we really do not know whether we can recover such costs from the errant business.

So I urge MTI to consider our proposal to amend the CPFTA for the specified body's role to stop after the successful application to the Review Panel.

The Minister of State for Trade and Industry (Mr Lee Yi Shyan): Sir, may I have your permission to speak a little bit over

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the time as I have a number of topics to cover.

The Chairman: I would be generous. I give you the time.

Mr Lee Yi Shyan: Thank you, Mr Chairman. I want to thank Members for sharing their thoughtful comments and constructive suggestions on SMEs. Let me assure Members that we share the same sentiments on the importance of the SME sector. MTI is committed to create the most conducive environment for our start-ups and SMEs to thrive.

The SME sector is a critical component of our economy. For the past three years, its value-add growth at 11% year-on-year has outpaced the overall GDP growth of 7.7%. In the past three years alone (2004-2007), the SME sector created an additional 330,000 jobs and accounted for 63% of the net employment creation. They were instrumental in reducing our unemployment rate to an all-time low of 2.1%.

As a group, the top 500 SMEs had combined profits of more than $665 million dollars last year, compared to only $70 million in 1999. By their sheer entrepreneurship and resourcefulness, our SMEs have grown to be larger, more sophisticated and internationally competitive.

In response to Members' enquiries, let me elaborate on the Government's framework in supporting our SMEs. There are four pillars: namely, financing, manpower, markets and capacity building.

The guiding principle in the area of financing has been for the Government to catalyse the private sector to create more financial products customised to meet the needs of SMEs. Working with financial institutions, in 2007, SPRING Singapore made available 3,000 loans amounting to $700 million through the Local Enterprise Finance Scheme (LEFS) and the Loan

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Insurance Scheme (LIS). With further enhancement and lowered premium rates (from 2% to 1.5%), the LIS is expected to catalyse a projected total of $3 billion of private sector loans over the next four years.

Mr Inderjit Singh has contributed greatly through his efforts in the Action Community for Entrepreneurship (ACE). As shown in a SME development survey, obtaining financing is no longer a top concern for SMEs. We thank Mr Inderjit Singh for his excellent leadership in identifying and plugging financial gaps in our system.

I agree with Mdm Ho Geok Choo on the importance of manpower development in growing our SMEs. SMEs need capable professionals and strong leaders to succeed. However, with many of our best young talents opting for well-paying careers with multinationals, it is not easy for SMEs to attract and retain good talents.

To address this, SPRING has put together a $60 million Business Leaders Initiative (BLI) to nurture current and future business leaders for SMEs. This BLI caters to talent development at three levels: SME leadership, middle managers and young executives.

At the apex, the Advanced Management Programme (AMP) focuses on the training of CEOs and senior leadership. The Management Development Scholarship (MDS) targets middle management. Soon, SPRING will launch the Executive Development Scholarship (EDS), an undergraduate scholarship targeted at promising students. Collectively, BLI hopes to train 1,000 CEOs and Senior Managers by 2012.

Mdm Ho may be pleased to know that SPRING and Workforce Development Agency (WDA) will also be rolling out the HR Capability Development Programme

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for SMEs this year. The programme will help SMEs implement good HR systems, practices and procedures.

To grow, SMEs cannot rely solely on our domestic markets but must venture abroad. In recent years, we have seen many SMEs making successful forays into overseas markets. A recent survey also shows that 70% of our SMEs derived part of their sales revenue from overseas markets. That our SMEs are internationally oriented is an encouraging sign. This means that their business models are potentially scalable.

I would like to assure Mr Singh that IE Singapore plays an active role in assisting SMEs by organising missions, fairs and networking platforms for them to build connections. The International Marketing Activities Programme (IMAP) supports activities organised by trade associations and chambers to help their members market their products and services overseas. In fact, of the 40,000 companies that made use of IE Singapore's services in 2007, 80% were SMEs.

1.45 pm

My Minister had earlier spoken on how SME associations were being held at the industry level through the Local Enterprise Association Development (LEAD) programme. At the company level, our agencies have developed many capacity building programmes to cater to the needs of SMEs at different growth stages.

In the area of branding and marketing, IE Singapore and SPRING have a joint programme called "BrandPact". One beneficiary of BrandPact is a company called bYSI. bYSI started its first retail outlet in Tiong Bahru in 1998 selling women's clothes. With BrandPact in 2005, bYSI was able to re-define its market niche by focusing on the fashion needs of career women. Its sales have

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been growing at 30% since. The company currently operates 10 outlets overseas, and is looking to expand further into the Middle East. In December last year, the company won the "Singapore Prestigious Brand Award".

To assist SMEs in developing new capabilities in product development and process innovation, SPRING launched the Capability Development Programme (CDP) in four sectors: marine, logistic, F&B and medical devices. The $5 million MedTech capability development programme, for instance, enables local precision engineering SMEs to develop new process know-how to supply to the medical device industry. The participating SMEs hope to generate $300 million of new sales from the medical devices industry over the next three years.

The reason why we have invested so much on upgrading capabilities, and will continue to do so, is to increase SMEs' capacity for value creation. This is more effective in the long run, than providing temporary band-aid solutions to help SMEs cope with the rising business costs, as Ms Jessica Tan reminded us. We should not create artificial conditions that insulate our SMEs from global competition. The responsible strategy for us has to be to continue investments to upgrade our SMEs.

Mr Zaqy Mohamad pointed out that we would need to nurture innovative enterprises to create both quality GDP growth and high-value jobs for Singaporeans. I agree with him. Innovative enterprises and knowledge industries are our future.

To nurture innovative enterprises, we adopt a three-pronged strategy. The first prong is to encourage greater R&D and innovation by existing enterprises. The newly launched "R&D Incentive for Start-

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up Enterprise" (RISE) announced by the Minister for Finance is designed for that. Mr Teo Ser Luck questioned if SMEs would benefit from RISE because they tend not to invest much in R&D. Our latest SME development survey shows that a significant 14% of all startups spent between $100,000-$300,000 on R&D in 2007. We certainly hope that, over time, more SMEs will invest more in R&D and make full use of RISE.

There is a view that R&D and innovation are only applicable to high-tech industries. This is not necessarily always the case. More World System Pte Ltd, better known to Singaporeans as the Waraku chain of restaurants, is the first in Asia to leverage on R&D to develop pasta that cooks in a mere 15 seconds, as compared to 10 minutes. As a result, this has cut down the waiting time for customers significantly.

We agree with Mr Teo and Mr Singh that SMEs and startups should have access to various programmes aimed at promoting company-level innovation and R&D. In fact, we share the belief that SMEs and startups are amongst the best places for the new innovations to sprout.

To spread the benefits of R&D findings of our Research Institutes, the Technology Innovation Programme (TIP) has seconded 31 A*STAR researchers to SMEs. To encourage SMEs to undertake outsourced R&D, SPRING has established Centres of Innovation (COIs) in four sectors, including Food and Precision Engineering to provide technology consultancy.

Mr Inderjit Singh commented that in commercialising our RIs' research findings, the relevant departments should not have profit-maximisation as their goal. We agree. In the case of Exploit Technologies, we want to assure Mr Singh that its goal is to make A*STAR's technologies as widely accessible to the industry as possible. This is in line with

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the objective to derive economic benefits from our R&D investments. The issue though is not of licensing fees being unrealistically high. The main qualm for many SMEs has been their wanting to have full IP right or exclusive licensing in return for their partial cost-sharing. As such, A*STAR finds it difficult to accede to such requests as it would like to proliferate its technologies to as many enterprises as possible.

The second prong to grow innovative enterprises is to create a broad entrepreneurship community. I agree with Mdm Ho Geok Choo that the entrepreneurial ethos needs to be cultivated from young. Starting in schools, we need to infuse students with an entrepreneurial zeal. SPRING’s Entrepreneurship Talent Development Fund (ETDF) provides monetary support to young budding entrepreneurs in our universities and polytechnics to start their ventures. To date, this fund has invested $1.4 million in 44 student startups.

Promoting entrepreneurship cannot be the Government's responsibility alone. Our entire society must embrace the values of self reliance, resourcefulness and tenacity. For entrepreneurship to take root, our people must learn to take risks, think out of the box and tolerate failures.

Realising this, the Action Community for Entrepreneurship (ACE) has sought to build a community of people passionate in and committed to entrepreneurship development. ACE reaches out to a wide sector of the business circle, including entrepreneurs, financiers, lawyers, consultants and educationists. Through the ACE Speakers' Circuit, for instance, successful entrepreneurs share their experiences to inspire students and youths on entrepreneurship. So far, more than 150 Speakers' Circuit sessions have been held, reaching out to about 30,000 students and teachers.

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Finally, the third prong is to grow innovative startups. Today, we are happy to see many of our SMEs, such as Hyflux, OSIM, Inter-Roller and Breadtalk, establishing themselves regionally and internationally. These companies were once small. But because they are resourceful and innovative, they get to where they are today. New startups are important to us for they may be just a startup today, and could well become a Starbucks, Facebook, Google or YouTube tomorrow.

We thank Mr Singh for his suggestion of looking into financing for growth-stage enterprises. I would, however, add that the Government is also mindful not to intervene in the market unless there is a clear market failure. It is our belief that direct investments into companies are best left to the private sector.

Mr Singh has also pointed out the gap which innovative companies in Singapore face: between taking an idea from concept to commercialisation. He also cited the apparent success of the Small Business Innovation Research (or SBIR) programme in USA in commercialising new technologies. We will study his suggestions.

Still on the subject of helping startups in R&D, SPRING intends to support the establishment of "full service" incubators in our RIs and the private sector. These incubators could provide startups with a one-stop service for mentorship, business connections, technology matching services, capital and access to other resources.

Let me now move to the topic of consumer protection. Mr Yeo Guat Kwang and Mr Lim Biow Chuan both touched on the CPFTA. Sir, allow me to provide an update.

The CPFTA was reviewed in late 2006 by a taskforce led by CASE and

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MTI. The taskforce submitted various recommendations, which my Ministry had accepted. We conducted a public consultation in October last year and are now finalising our proposals, taking into account the feedback received.

I will elaborate on some of the main proposals under consideration. First, financial services, such as banking and insurance, are currently excluded from the CPFTA. We are working to remove this exclusion, which would give consumers the option of seeking redress through the CPFTA. Consumers will also benefit from additional protection in areas, such as undue pressure on consumers during sale, which are currently not covered by the financial services-related legislation.

Second, businesses sometimes send goods or provide services to consumers without their prior consent, and subsequently demand payment from them, or goods or services may also be provided on a free trial basis, placing a burden on consumers to opt out from the arrangement. We will introduce new regulations to allow consumers to treat all unsolicited goods and services as unconditional free gifts from the businesses, unless the consumer has acknowledged in writing his willingness to accept and pay for them. For goods and services provided on a free trial basis, the regulations will require businesses to remind consumers that the trial period is ending.

Third, motor vehicle dealers often package the purchase and financing of the vehicle together, and then collect a deposit from the consumer. There has been feedback that some dealers have been confiscating the deposits, citing a failed loan application as the reason, but without showing any proof. We will introduce new regulations to require dealers to disclose their deposit policies

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clearly in their sales contracts, so that consumers can make informed decisions.

Fourth, specified bodies, namely CASE and STB, can take various actions against errant businesses to court. Currently, the specified bodies have to do so within a timeframe of one year. In light of experience gained, we will extend the timeframe to provide them with sufficient time to perform their due diligence.

Fifth, the CPFTA's prescribed limit is currently set at $20,000. We will increase this to $30,000 to take into account larger consumer transactions over the years.

These changes will enhance the level of consumer protection provided by the CPFTA, strengthen CASE's efforts and, ultimately, improve consumers' welfare. We intend to make the necessary legislative changes this year.

MTI shares CASE's concern over the number of complaints against the timeshare industry. We will therefore strengthen the CPFTA's regulation of timeshare products. The CPFTA currently allows consumers to cancel their timeshare contracts within a three-day cooling period. We intend to extend this to five days.

However, I would like to caution against rushing to regulate any industry that shows its first sign of consumer disputes. First, legislation adds to compliance cost; and over-legislation can also stifle new and innovative business formation. Second, the principle of "caveat emptor" or "buyers beware" remains the cornerstone of the consumer protection framework in Singapore. For it is in exercising their judgment, including rejecting shoddy goods, that our consumers could develop a sharp instinct in differentiating quality offerings and bogus claims.

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Let me now move to other consumer issues. Products with latent defects are known colloquially as "lemons". Consumers today already enjoy a certain level of protection against such goods, as they can reject these products and seek damages. Nevertheless, we welcome Mr Yeo's suggestion to jointly study the feasibility of a lemon law in Singapore.

Consumer protection is not just about mandating rules. We must take a balanced approach that seeks to safeguard the interests of consumers without imposing an onerous regulatory burden on the industry.

So instead of Government prescribing standards all the time, we will encourage industry-accreditation and self-regulation to the highest standard possible. We will also continue to work with CASE on the best ways to educate consumers.

Sir, allow me to summarise in Mandarin.

( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Sir, the SME sector is an important pillar of our economy. For the past three years, the value-add growth of 160,000 SMEs has outpaced the overall GDP growth of 7.7%. At the same time, it has created an additional 330,000 new jobs. To create a pro-business environment to nurture the SMEs, the Government will continue to improve the operating environment of SMEs, and cut down the unnecessary red tape. To assist SMEs to raise their competitiveness, MTI will invest in the four pillars, namely, financing, manpower training, capacity building and helping SMEs internationalise.

Our economic outlook and overall competitiveness does not rely on the number of MNCs, but rather it depends on the SME sector which accounted for 99% of the corporate sector, and whether these SMEs can successfully transform

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their business model, that is, to step out of conservative and low efficiency models, and shift towards knowledge-based industries. This shift in business model is critical to our future economic development and it is a major concern for the Government.

Therefore, our Government has urged SMEs to do their best to learn, absorb new knowledge and be innovative. SMEs should build up their core competencies and develop unique operating models.

We hope that the small enterprises will spring up like bamboo shoots after a spring rain, and bigger enterprises will grow and flourish, and that we will have a vibrant and prosperous SME sector.

Therefore, if we can focus on developing long term capabilities of our SMEs, with unyielding determination, hard work, innovation and continue to strive for excellence, our SMEs will be able to overcome the short-term difficulties and move towards a brighter future.

*Cols. 1799-1800

2.00 pm

Mr Inderjit Singh: Sir, I have a question on the manpower crunch. I had raised that and I would like the Minister to elaborate.

We had a dialogue session with our resource panel and industry experts who had raised this as a very major issue. Although the quotas have been released, they cannot get it from the traditional sources, and had asked for diversification of their sources of labour.

The second problem that they highlighted was the IR. To staff the IRs, companies have been poaching from our local hotels, which is creating a vacuum. So we are going to create a vacuum somewhere, if we do not suddenly bring in a whole source of workers from outside and, specifically, the issue of the

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Philippines not being a qualified source for workers working in the IR. Could the Minister elaborate on this?

Mr Lim Hng Kiang: Sir, I thank the Member for seeking the clarification.

On the whole, we do realise that, with the economy growing so strongly, manpower is one of the key constraints holding back further growth. We have been working very closely with the Ministry of Manpower and, to their credit, they have relaxed the quotas, they have expanded S-Passes and, as I have explained in my speech, we look at each cluster and we try to tackle the manpower needs of each cluster.

Sir, take the example of the IRs. We do recognise that, with the two IRs and the many plans that we have in place for tourism, we are generating some 60,000 jobs over the next few years. When we see this in the context of the 180,000 jobs in the tourism sector, we are talking about a 30% increase over two to three years. So we have been working with all the stakeholders. I would not describe it as poaching, but there will have to be some reshuffling of the manpower assets. We cannot have all the new employees in the IRs just coming from new sources. So they will be employing some of the people from existing hotels, and existing hotels, for example, would have to have recruit new people.

As Minister of State Iswaran explained just now, we have, in fact, been working very closely with the stakeholders to put in place a very comprehensive plan covering all the vocations needed. We have worked down to great details what are the vocations. Members might be interested to know that the biggest challenge is really animal trainers because, with the IRs, and especially Resort World with seaworld and marine world, they are

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looking for animal trainers, and the only people today employed as animal trainers are really at our zoo. So we have to work with all the various entities to make sure that, for every vocation, we train the people ahead of time.

Mr Low Thia Khiang: Sir, the Government spends a lot of money on R&D, and the Minister said that A*STAR aims to have 1,000 local PhDs by 2015. Can I assume that all of them are Singapore citizens? Is this target pool of 1,000 big enough to have a critical mass for Singapore to sustain its R&D efforts in the long term? Besides the scholarships which Minister of State mentioned just now, does MTI have any other plans to attract Singaporeans to take up R&D as a career, besides animal trainers? What other opportunities are offered to the local graduates who take up R&D as a career? What is the strategy for MTI to actually move Singapore up the value chain in R&D? Is MTI complacent with being guppies in R&D?

Mr Lim Hng Kiang: Sir, as Minister of State Iswaran explained, R&D is a very long-term effort and we need to harness all available talent, both overseas and Singaporeans. We cannot embark on a R&D strategy that is anchored on Singaporean talent alone. If we do so, I think we are shortchanging ourselves. If you visit any R&D institution anywhere in the world, and you go to any of these research laboratories, the first thing that strikes you is the number of nationalities that the researchers come from. So we will be shortchanging ourselves if we just concentrate on Singaporeans and we do not draw in foreign talents.

Our intention is that, out of the whole R&D pool that we have, 50% will be Singaporeans and, out of the Singaporean pool, half of them would be PhD-qualified. We are using that framework and we are providing the scholarships and the opportunities. As Mr Iswaran said, the

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scholarships that we offer, we encourage the people who take them up to take up Singapore citizenship before they come back and work. So, eventually, all those who take up our scholarships, when they sign the bond, they will be Singapore citizens.

The whole research effort covers the whole spectrum. We have previously been very successful at research working with the companies, what we call the mission-oriented research, related to the industry. We realise that, going forward, we need to build up a stronger basic science base, both in our universities as well as in our research institutions. At the same time, we also need to cover the other end of the spectrum, which is the applications research that will benefit our SMEs. So, if you look at our whole research strategy, we have been quite successful and quite good in the middle area working with the big companies, both MNCs as well as the local big companies in mission-oriented research where we give them research grants, we work and collaborate jointly. In fact, we set up a research institute for each one of the strategic cluster that we have in Singapore. And this has been a very successful strategy. But going forward, we need to go upstream into our universities and to basic sciences, and we need to go downstream into our polytechnics, into providing researchers to our industries, first to the industry associations as well as to the companies. And I think the answers that Mr Iswaran has given cover all these areas.

So we have a fairly comprehensive research strategy. The results will only show itself, I am afraid, over the medium and long term. But this requires us to maintain this very sustained effort and to build up our resources from bottom-up. In the meantime, if we do not attract foreign talent, the so-called whales, I think we will be taking a far longer time to reach the end stage that we want. So by

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incorporating foreign talent, we shorten the time for us to build up the capability and, we hope, as Mr Low Thia Khiang described it, the guppies that we nurture will eventually also become world-class renowned scientists.

Dr Teo Ho Pin (Bukit Panjang): Sir, I have two questions for the Minister:

(1) What is MTI doing to further enhance competition among the petrol companies so as to contain pump prices in Singapore?

(2) Are MTI and CASE monitoring petrol prices to ensure fair trading for consumers?

Mr Lim Hng Kiang: Sir, we have explained the petrol kiosk sector in Singapore several times. First of all, it is a competitive sector. The Government does not interfere with the price-setting. We believe there is enough competitive pressure among the key players. We encourage the posting of prices and discounts so that motorists know what they are paying before they enter the petrol kiosks.

Over the years, we have been tracking the petrol prices. They have gone up as oil prices go up, and they have come down, albeit with a bit of a lag, when oil prices come down. So I believe the petrol sector reflects the competition that is already existing there.

Ms Eunice Elizabeth Olsen: Sir, I thank the Senior Minister of State for his reply. I seek two clarifications.

(1) Before it is possible to sustain a market for solar power, may I just ask whether MTI is doing enough to create that market?

(2) We can see that tax credits and rebates are used in so many instances, eg, green cars, which will be quite expensive

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without rebates. This means that the use of tax credits and rebates is clearly a reflection of priorities. So may I ask why subsidising the use of renewable energy is not so important for MTI for now?

Mr Iswaran: Sir, I thank Ms Olsen for the clarification sought.

MTI is really not in the business of trying to create a market for solar power. We look at it as we create economic activity and invite more investments and economic activities to Singapore, and the demand for energy is a consequence of that effort. We then seek to meet that demand by diversifying our sources and making sure that we have adequate supply. So solar energy is really just one part of that. Today, as you have already heard, a significant portion of our energy needs are met through piped natural gas and, eventually, liquefied natural gas. We also use fuel oils at peaks, and solar and other sources would become additions to that array.

The other question is on reflection of priorities, as evidenced by subsidies and so on. I think Ms Olsen is going back to her point about why we cannot subsidise or do feed-in-tariffs. There is a fundamental difference. When we talk about energy subsidies, energy is a very basic commodity that cuts through the entire economy. The question to be asked is what do we gain by subsidising solar power. This is because the true cost of solar power is indeed higher. If the intention is to promote the industry, then the right strategy is to help the industry get to a position of competitiveness vis-a-vis existing supplies of energy. That is why we are investing in R&D and other technology measures in order to help solar reach that stage, as indeed any other sector that we are able to support. But to subsidise is to distort

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the market in terms of production and consumption decisions, and we do not think that is the right thing to do.

Mr Yeo Guat Kwang: Sir, the Minister of State mentioned that MTI will introduce new regulations and amend the current regulations this year. May I know which part of this year? Is it the early part of this year, ie, first quarter, second quarter, or is it third quarter or fourth quarter? This is because, every day, there are consumers who fall victim to unfair practices.

Mr Lee Yi Shyan: Sir, I want to thank Mr Yeo for his clarification. The issue of improving and strengthening the CPFTA has been for a while and, indeed, the consensus between MTI and CASE has been established. What is needed right now is for us to work with the Ministry of Law and also MAS to possibly include some other industries that could be included in the amendment at the same time. Without going into all the details, we need a bit of time in these agency discussions as to what is to be included and what is to be excluded. But we hope that in the next few months, by the first half of this year, we could have the CPFTA revised.

Mr Zaqy Mohamad: Sir, I have a couple of questions in my cuts that were not really addressed. How does the Minister rate our success in terms of internationalisation efforts? I think the window of opportunity is here today. I am not too sure how long it will last, but we have been developing Asian markets and those in the Middle East and Eastern Europe which we are currently cultivating.

My second question is: are we matching rightly today? Can we improve our success rates to right matching, ie, matching the right segments with the right demand? I would like to have the Minister's view on this.

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Mr Lim Hng Kiang: Sir, it is hard to give a grade for a major effort, such as the internationalisation effort. I would say that, from the various missions and the specific markets that we have embarked on, we have had some good successes – in the Middle East and China. I talked about the trade and exports expanding in India. So I would say we have done fairly well. But every time we go to a new market, our businessmen come back and tell us about the opportunities there. Our real problem is the vehicles to tap these opportunities. In the end, we have to fall back on the same few companies, the same few entities. And when we ask our companies to go into new markets, they find themselves very stretched. So our key constraint is really the vehicles to take full advantage of all these opportunities overseas.

Mr Inderjit Singh: Sir, the Minister of State spoke about our attempt to reduce energy cost by diversifying sources of energy. We did discuss in this House last year about introducing competition in the power generation sector. Specifically,

we discussed about Island Power. Can I ask the Minister on the status of this and why is it taking so long for that to happen?

2.15 pm

Mr Iswaran: Just to clarify, we are not diversifying our fuel sources so that we can lower cost. It is for security reasons – energy security – because your diversified sources may still be just as expensive. But having said that, his key question is: how is our power sector liberalisation, and in particular competition, going? I think it is going well, we have an open system, we invite interested players to come in and put in proposals to EMA, and then EMA will evaluate and license accordingly.

As for Island Power, they have made their decision earlier and we believe that they are now making some commercial

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assessment of the situation because some events have moved and because of the altered circumstances, they have to reassess their decision, and it is really up to Island Power to make clear what their plans are.

Mdm Ho Geok Choo: I would just like to seek a clarification from Minister of State Lee Yi Shyan. I am indeed heartened to note that WDA and SPRING Singapore will be rolling out the HR Capability Programme for the SMEs. I would like to understand how this plan will be implemented in the industry, given the fact that the SMEs are so dispersed and they do not enjoy economies of scale.

Mr Lee Yi Shyan: One of the key principles of our agencies in bringing solutions to the SMEs has been to work with the private sector because our agencies realise that they do not have all the competencies in-house and all the resources to cater to many of the SMEs' varying requirements. As Mdm Ho pointed out, SMEs is a very wide sector and, therefore, in devising these solutions, SPRING and WDA will work with professional bodies and HR firms to come up with products that have mass appeal as well as, at the same time, provide customised solutions that can address the companies' needs at the firm level.

Miss Penny Low: Sir, I would like to first thank Minister of State Iswaran for his very comprehensive as well as very inspiring answer. In fact, he has inspired me to think that there might be a match between the social enterprise sector and the shortages in the manpower –

The Chairman: Please be "inspired" to ask your clarification.

Miss Penny Low: Yes. Social enterprise, let me explain, seeks to unlock the potential manpower in Singapore that is currently under-utilised, and tourism sector itself has got a great shortage.

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Would MTI consider forming a special task force to work closely with the social enterprise sector itself to address the manpower gap as well as to tap on the hospitality industry opportunities to help the marginalised sector level up? I think this would be a truly win-win strategy to help Singapore do well and do good.

Mr Iswaran: Sir, I did not mean to overstate the case for social enterprises and tourism, but just to illustrate the possibilities. But having said that, I think there are possibilities as one or two anecdotal evidence already suggest. I would say that rather than set up a task force or a committee which really goes against the grain of this kind of venture, I think there are specific examples and we can see how, working together with STB and relevant agencies, we can facilitate that. That might be a more productive approach, at least at the outset.

The Chairman: Mr Inderjit Singh, do you wish to withdraw the amendment?

Mr Inderjit Singh: Sir, I would like to thank the Minister and the two Ministers of State for their comprehensive replies. I also would like to take the opportunity to congratulate MTI for doing a good job in many areas, including SME promotion and the promotion of entrepreneurship. I think they have done a great job, so they deserve a "Thank you" from us. I therefore beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $620,201,900 for Head V ordered to stand part of the Main Estimate.

The sum of 4,959,967,800 for Head V ordered to stand part of the Development Estimate.