INVESTMENT AND JOB CREATION OUTLOOK

Mr A. Nithiah Nandan asked the Minister for Trade and Industry what is the investment and job creation outlook for 2003.

The Minister for Trade and Industry (BG George Yong-Boon Yeo): The global economic and political environment this year remains clouded in uncertainty. First, we face the likelihood of a US-led war in Iraq and the continuing threat of terrorism. Second, growth in the EU and Japan is likely to remain below par due to structural impediments in the two economies. Third, there remains excess capacity from the investment bubble. Capacity utilisation in a number of industries remains low. Because of these uncertainties, many companies adopt a cautious approach in their investment decisions.

Nevertheless, investors continued to show confidence in Singapore because of our strong fundamentals, prudent fiscal and monetary policies, our excellent infrastructure and our extensive trade linkages. Investors have also taken note of our continuing efforts to upgrade our workforce and our R&D capability. Despite the difficult economic conditions last year, we attracted commitments of S$9.0 billion in manufacturing fixed asset investment and S$2.1 billion in services, total business spending. For this year, EDB expects investment commitments to be S$8.0 billion in the manufacturing sector and S$1.9 billion in services. These investments are expected to create a total of 18,000 new jobs when realised.

The overall job market is expected to remain soft this year. However, jobs are still being created and there are many unfilled vacancies in the job market, as Minister of State Dr Ng Eng Hen has just explained. A survey by MOM on private sector establishments shows that there were about 17,000 job vacancies in September last year. These jobs are in both the manufacturing and services sectors. Our economic agencies are working closely with MOM and industry to improve job matching and the training of our workforce. We must continue to keep our labour market flexible and competitive, and to encourage our workers to continue to upgrade and adapt. Then the employment outlook will improve as our economy recovers.

On a more positive note, once the uncertainties surrounding a possible US-Iraq war are out of the way, global growth is likely to pick up. If the Middle East situation clears by the middle of the year, the US economy may see good recovery in the second half. President Bush is of course anxious that the US economy should pick up in the run-up to the 2004 presidential elections. If the US economy improves, the Singapore economy should improve with it.

Mr A. Nithiah Nandan (Nominated Member): Sir, I would like to commend MTI and the economic agencies for all the efforts taken in attracting investments and for the creation of jobs for Singaporeans. But as the Minister has indicated, there are great uncertainties in this current period. What are the steps his Ministry has taken to keep investments which have come into Singapore to remain in Singapore? At the same time, what further economic stimulus packages can be introduced to attract investments, so that there will be greater job creation? And in this difficult period, what are the other measures being taken to help workers who sincerely could not find a job?

BG George Yong-Boon Yeo: Mr Speaker, Sir, I thank the NMP for his question about the competitiveness of the Singapore economy. There are really two sets of issues which we have got to address. One is the internal factors which will enhance our international competitiveness and, second, our external economic linkages. The internal factors have been addressed comprehensively by the Economic Review Committee which report will be coming out quite soon. And I am sure when the report comes out, there will be a major debate in this Chamber.

The basic ideas are quite simple. We have got to keep costs down, reduce taxes, improve labour market flexibility so that, as our economy becomes more sophisticated and variegated, our labour market is diverse and sophisticated enough to make adjustments. Just a simple example. Today, if you drive through the city in the middle of the night, it is alive and buzzing - so many lights are on, so many activities are taking place. To power such an economy, our overall labour market situation must adapt. So in the factory, there are mostly foreign workers, in the financial district, there are our lawyers, they work around the clock, and there are restaurants to service them, there are buses, trains, taxis, to bring them from point A to point B. We must make all the internal adjustments, where necessary, to ensure that our economy remains competitive in the new world ahead of us - lowering taxes, CPF restructuring, labour market flexibility, making sure that our infrastructure is tip-top, investing in education, in worker retraining, R&D. So all these issues will be addressed comprehensively by the Economic Review Committee.

Externally, we have got to position ourselves to exploit new growth potential in the region. As Members are aware, we have been working very hard to establish free trade agreements with the major economies. We now have free trade agreements with Australia and New Zealand, with the European Free Trade Area, with Japan, and we recently concluded a free trade agreement with the US which, hopefully, should become operational early next year. And we are not stopping there. We are working to strengthen economic integration in the region, enhance our links to China, to India and to other parts of the world.

Looking ahead, there will be two big balloons inflating - China, on the one hand, and India, on the other. And we must position ourselves so that whatever happens to the region around us, we will lift with them, in other words, strengthen, build upon our strong links to the US, Europe, Japan, build up new links to India and China, and then work our guts out to consolidate the region so that we will grow along with all the others. It is a diversified strategy. It does not depend on any one single link alone. This is to maximise our chances for the future. If we can do all these things, internally and externally, then I believe that, when the global economic cycle turns up again, we will move along quickly. The key is to be very alert to changing trends and to accept that the world in front of us will look very different from the world behind us.

Can we make the adjustments? Can our workers make the adjustments? I believe that our younger Singaporeans who are very well educated can. Yes, they may have to accept lower wages when they enter the job market, some of them have got wealthy parents, so they prefer to take a few months off to see the world and to understand more things. Well, fine. Our big worry is the older workers, particularly those who are either used to much higher income, or those who never had the education because they grew up in a different period of Singapore's history. So we must do everything possible to help them. They must also make the adjustment and accept that conditions have changed and the things which they would not have considered in the past, they should now consider for the future. And we must help them, if they are in difficulty, and certainly help their children so that the next generation will be as well equipped as possible. If we do all these things, then I think we are in good shape.

Mdm Ho Geok Choo: Sir, I would like to ask the Minister, as for the new jobs that are created and brought in by the new investments, I notice that they are mostly in the high-end types - the biotech, the life sciences. We still have a group of people who no matter how we train them, they are not going to fit into these jobs. So what jobs are there left for this group of people?

BG George Yong-Boon Yeo: Mr Speaker, Sir, we give a lot of emphasis to high value-added investments because these have got the most direct and indirect spin-offs for the Singapore economy. When we build a new pharmaceutical plant or a new cracker, hundreds of millions of dollars of investments, but each only hiring maybe a few hundred direct workers. So it appears as if we are not generating the jobs. But, in fact, for each of these investments, a lot of other jobs are being created around them. Take, for instance, each wafer fab requires not only PhDs, engineers and polytechnic graduates, but easily 40%-60% are less skilled workers who must still move things around, keep the place clean, do the maintenance, do the gardening. Then there are the suppliers, there are canteen operators, there are transport workers who help them; then in the financial district are those who do the legal documents, provide the loans.

The most vivid illustration is Jurong Island. After September 11, we tightened up security on Jurong Island and issued smart cards to those who need to enter the island regularly. Initially, JTC expected 10,000 cards should be more than enough because there were fewer than 10,000 workers. In the end, we had to issue 100,000 smart cards because there are so many people living off Jurong Island. So do not disdain the high value-added investments because each such tip brings along with it a whole pyramid of employment opportunities. If we target lower peaks, those lower peaks will be very quickly swept away by more competitive market conditions in China, India and elsewhere. So our strategy is to go for the areas in which we have a competitive and an enduring advantage and trusting that in the process, other opportunities will be created. If the big investments are in, there will be a lot of feeding for SMEs. But it is not automatic. We have got to readjust ourselves to meet these new requirements, and not expect that the opportunities that we had in the past must necessarily obtain in the future when the economy turns up again. In fact, we can be quite sure that the needs in the future are different and that many adjustments will have to be made.