HEAD V - MINISTRY OF TRADE AND INDUSTRY

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**: Head V - Ministry of Trade and Industry **

The Chairman: Head V - Ministry of Trade and Industry. Dr Ahmad Magad, you have two cuts. You can take both at the same time.

Multi-national Corporation and Small and Medium Enterprises

Dr Ahmad Mohd Magad (Pasir Ris-Punggol): Sir, I beg to move,

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

Both MNCs and SMEs have played a significant role through the various phases of Singapore's economic transition. Both occupy an important position in Singapore's enterprise ecosystem in terms of generating economic growth and providing employment to Singaporeans.

Among others, SMEs have played a pivotal role in providing support in many aspects to the MNCs and are continuing to do so to this date. However, with increasing competition from both developed and developing countries, many MNCs, especially manufacturing industries, are pressured by rising costs and are forced to locate to countries with lower cost. As a result, the dynamics in MNC-SME relationship is changing rapidly, more so with the forces of globalisation integrating the economies of the world to unprecedented level. However, Sir, with Singapore upgrading and transforming itself into a knowledge and innovation-driven economy, to enhance its

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competitive and comparative advantages, combined with Singapore's excellent infrastructure, stable political environment, a steady supply of well-educated workforce and a strong intellectual property protection regime, many MNCs are finding Singapore attractive to conduct their high-end activities here. I believe our SMEs could leverage on these evolving changes provided that they are wary of the changing needs of the MNCs. Similarly, SMEs could also continue to be relevant to the MNCs even as the latter relocate their business activities to other countries.

Sir, we need to ensure that the special and trusted relationship between MNCs operating here over the last several decades and our SMEs is not only preserved but also strengthened. As such, I believe creating a platform for the two groups to meet and interact regularly will be beneficial to strengthen this relationship.

I would like to propose that a private sector-led initiative like the Action Committee for Entrepreneurship (ACE) be initiated for the MNC-SME segment. As noted by Mr Inderjit Singh during the Budget Statement debate, the progress made by ACE has been encouraging across the private sector there. Although a Minister chairs the Committee, his role is primarily to facilitate rather than to dictate what should be done. Hence, I propose that we should embrace a similar model like ACE for the facilitation of MNCs and SMEs to connect and to come together. Along the same lines, Spring Singapore or IE Singapore could function as a secretariat to coordinate such activities.

Sir, I am not speaking on the second topic on SMEs as the issue I wish to raise has been clarified under the Ministry of Law cut last week.

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Small and Medium Enterprises

Mr Inderjit Singh (Ang Mo Kio): Sir, as our efforts to promote entrepreneurship bear fruits, we will be able to create many more companies that will inevitably be SMEs as they start to grow. If we do not support our SMEs well, many will die prematurely and defeat the purpose and objective of trying to create many more local enterprises. Sir, SMEs need support and they need a focused effort

as what my colleague, Dr Ahmad Magad, just mentioned. As I said many times before, we need a Government agency to play this role, one with equivalent resources given to do a good job.

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I had in last year's debate talked about a LEDB, or local EDB. I am very confident that the results will far outweigh the cost to the Government. Just as the efforts of EDB have yielded the results in the area of FDI attraction and the efforts of ACE have helped in entrepreneurship, an organisation that dedicates its support to the growth of SMEs will yield similar results.

In fact, I am worried about the type of FDIs we have been attracting lately. My impression is that the value add of these investments might not pay for the cost that the Government incurs, because the number of jobs created by these FDIs and also the amount of tax revenues the Government collects might be zero for the lifetime of such investments. Perhaps the Minister can share with the House the value add of the $8 billion or so FDIs that we had attracted last year, and also in previous years. I am sure that for every dollar that we spend on local companies' development and support, it will yield a bigger value add and return for the Government. I am not asking the Government to kill the efforts of the EDB but to redistribute the resources to do both jobs optimally.

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I also do not want to belittle the efforts put in by Spring and IE Singapore in supporting SMEs. In fact, I sit on the board of Spring and we know that a lot of good work is done there. I can see the passion of the people in both of these organisations at the board and management levels, and also the staff of these two organisations. But I know that unless the drive starts from the top, these two organisations will not get the right level of resources to allow them to do their jobs well. I see the opportunity to merge these two organisations as a combined entity, and perhaps this may be the equivalent of the local EDB that we are asking for. I am sure, with the rationalisation of the efforts and the combined resources and realignment of focus, we will see greater success in our efforts to create an environment conducive for the support and growth of SMEs into large multi-nationals of the future. If properly funded, this enlarged entity will be able to fulfil the needs and answer the call of the equivalent agency that we have been talking about, and this call has been going on for many years. And if it continues for many years, it just says that we need to do a lot more, and not enough is done in this area.

I also like to say that in the last few years, we have done a very good job in addressing the cost issues for SMEs and companies in general. Now that we have restructured our economy - and companies which are surviving today are perhaps the stronger ones, and the weaker ones have probably collapsed by now - our next focus should therefore be on the other part of the equation, ie, the numerator side or the demand side to capture greater business opportunities from around the world. So, the Ministry's next focus should be on how to enable companies to capture a bigger pie of global opportunities that exist. The various FTAs could help show us how we

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can do this. Perhaps the Minister, therefore, can clarify and share with us what successes we have had with the many FTAs that we have already signed. The impression that we have is that these are, so far, paper agreements with no net benefits to companies in Singapore.

Sir, I am also happy to note that we are increasing our efforts in promoting R&D in Singapore. We also have had many five-year R&D plans and the main beneficiaries for this have been either Government research institutes, big multi-national companies or Government-linked companies. We have had a very poor reach to SMEs. And I have talked many times in this House about how the equivalent jobs done in SMEs may not get the type of funding that MNCs may get for the jobs that they also do. I, therefore, ask the Minister to share with us how he hopes to ensure that the SMEs will capture a greater pie of this R&D budget that the Government is setting aside. I hope that, this time, we will distribute the funds in a more equal manner so that our local companies have a greater chance of accessing.

Perhaps we can create a focus group, quite along the lines of what Dr Ahmad Magad mentioned just now, that can help cultivate the development of R&D in SMEs along with many other things that we want to do.

Dr Wang Kai Yuen (Bukit Timah): Sir, there about 100,000 SMEs in Singapore and they contribute a quarter of the total value added generated in our economy. Clearly, they are an important sector of our Singapore economy. However, when it comes to Government's policies and support, they feel like the neglected child. When the multi-national companies were providing all the job opportunities up to a decade ago, SMEs were, by and large, left to their own devices. However, during the last recession, when MNCs shuttered their factories, closed their offices and

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packed their bags, we started to realise the value of the SMEs in keeping jobs in Singapore. We discovered that being Singapore companies, boom or bust, they stay in Singapore. Unlike multinational companies, which have the EDB to look after them, there is no single Government agency championing the causes of SMEs.

The Economic Development Feedback Group of the Feedback Unit, under the leadership of Mr George Abraham and Mr Kwek Theng Swee, has highlighted the need of the SMEs researching around the world for examples of how other governments take care of their SMEs. Again, at the Feedback Unit annual conference, they proposed the following recommendations geared towards enhancing Singapore's pro-business environment and enabling entrepreneurship.

First, setting up industrial specific SMEs in industrial parks to group businesses together in a given location. This move will allow businesses to save cost. For instance, food and beverage companies could be grouped together for greater clout. For the food and beverage industry, this is important as the companies in this sector tend to be small and lack the critical mass.

Second, making it compulsory for small companies to join the trade association of their specific industry. With a bigger pool of members, such association would then muster sufficient resources to help members cooperate among themselves and look for new markets. This follows the principle behind the setting up of the Singapore Business Federation. The Federation has bigger clout but its focus is not on the SMEs.

Sir, many SMEs are small only in relative terms. Some SMEs, in fact, hire up to 200 people and have well-thought-out business plans. In executing their plans, they are often hampered by the

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obstacles to obtain good financing. This matter was brought up repeatedly in the House and the Government has reacted in some way, which Mr Inderjit Singh had mentioned, and these are well appreciated by the SMEs. However, the Economic Development Feedback Group still feels that more could be done. For instance, the Feedback Group looked at Japan and discovered that there is a government-sponsored financial institution specifically set up to provide financial loans to SMEs and start-ups. I hope the Singapore Government could also adopt the same model of helping SMEs, especially the start-up companies.

The Chairman: Dr Loo Choon Yong is not here. Mr Lawrence Leow.

Enterprise Development Centres

* *Mr Lawrence Leow Chin Hin (Nominated Member): Sir, the Enterprise Development Centre (EDC) is a very good initiative by the Government that offers a one-stop comprehensive range of services and assistance to local enterprises. Supported by Spring, the Association of Small and Medium Enterprises opened the first EDC in Singapore last March. Since it started operation, the Centre has, to date, serviced more than 1,000 SMEs and handled in excess of 4,000 enquiries. EDC is, in essence, one of the two key channels set up by the Government under the EnterpriseOne initiative to assist our SMEs. The other channel being an online web portal that allows SMEs to identify funding options and Government assistance schemes that best suit their needs.

Sir, following the promising debut of EDC on the local SME scene, I have a few concerns which I would like the Government to address. As I understand, EDC is a scheme that is co-funded by the Government on a three-year plan. Hence, I would like to ask the Minister whether EDC is here to stay and, if so, what is the

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long-term vision for EDC, as it is rather difficult to have an effective long-term programme for EDC without a long-term vision in place.

Next, as there are already three EDCs in operation today, I would like to ask the Minister how many more EDCs will be set up. Given our small market, I am concerned with the problem of
"crowding out" if there are too many EDCs in operation. A more prudent approach would be to let the EDCs that are already operating manage the requirements of the SMEs and decide from there whether there is a further need to set up more EDCs.

Sir, my third and final question is whether the Government would provide sustained funding to EDC, if EDC is here to stay.

Expanding Overseas

Dr Tan Boon Wan (Ang Mo Kio): Sir, many SMEs are keen to venture abroad given the small local market. While they find the idea attractive and interesting, they also find it daunting and challenging. To help these companies, IE Singapore has several incentive schemes in place. However, for these schemes to be helpful, they should not be just post-active but proactive as well as easy to apply. Besides financial support, these companies could also make do with some hand-holding.

Going overseas is no stroll in the park. Besides the cost, cultural and market differences can be wide. Taking a taxi ride can be harrowing. Clearing the immigration and customs can be a chilling experience. The business culture could be a minefield. Some places are controlled by cartels while others may need a local sponsor. To navigate the complexities and obstacles is no easy task.

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Government agencies, such as IE Singapore, could move in first and provide market intelligence, advice and ground support for venturing companies. A consortium where companies pool their resources and strengths is a good approach. Larger companies can help bring along smaller ones. The inclusion of SMEs in trade missions is also helpful. IE Singapore has been helpful in all these aspects. Our Embassies and High Commissions can also be of great help, but we need to do more.

At the end of the day, our SMEs must take the bold step to move forward. They should cooperate with one another for the common good rather than to focus on self-interest, especially when they intend to move in as a group. The benefits may not be evenly distributed but everyone will benefit in some way. The markets are large enough for all our companies. Government agencies must proactively support these companies in the foray into new markets and territories.

Mr Lawrence Leow Chin Hin: Sir, the Government, through IE Singapore, has made available various schemes to assist local enterprises venture abroad and many, amongst the local business community, have actually benefited from these schemes. IE Singapore should be commended for doing a good job in this respect. Be that as it may, there are still companies which are unable to access the schemes made available by IE Singapore, either due to ignorance or because they could not meet the requirements of the schemes.

Sir, one other scheme to help more companies venture abroad successfully which I would like to propose is to have the relevant agencies, like IE Singapore, work on an initiative to identify and promote strategic locations to our companies. China and India are two huge markets in Asia that are ideal starting points for such an initiative. PM Lee had

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once mentioned that there are lots of opportunities that fall within an eight-hour flight radius from us. Within this radius, China and India stand out as two huge markets that we cannot afford to miss. The relevant agency should, first, work with their counterparts in these countries to identify suitable locations and thereafter negotiate and procure a deal that will render companies investing and locating there maximum benefits and relief. If it is politically sensitive for a Government agency to identify and promote only selectively certain locations, the relevant agency can actually rope in SBF, trade associations and business chambers to assist in this area. The key is to identify suitable locations and thereupon actively work with the foreign counterparts to sweeten the ground, so as to incentivise Singapore companies whose operations fit in with these identified locations or are location-neutral to co-locate there.

Sir, the whole idea is to encourage and attract but not to force or coerce, as there will always be those companies who will find these identified locations unsuitable or unattractive. This is inevitable. However, that notwithstanding, if we embark on such an initiative to identify, promote, attract and encourage companies to co-locate in these strategic locations, we will be able to realise the creation of a business cluster in these markets. The benefits of a business cluster are obvious. Apart from the synergistic links amongst the businesses located together within the cluster, by banding them together also serves to strengthen the position of each individual member within the cluster.

Once I had a conversation with a Chinese official on the topic of Singapore business ventures in China. This official made a very crude remark. He said that given our small size, with a population of only four million, even if our entire population goes over to China to invest,

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and if we are dispersed all over, we would be very insignificant and almost negligible. The only way for us to make an impact

is for our businesses venturing there to band together, co-locate and create sizeable clusters. While it may sound crude, it is indeed very true. If we can start to create business clusters in this market today, in a decade or so, they may perhaps see a Singapore Business Community being established in these countries. When this happens, we have cause to rejoice as it means that we have successfully built an external economy outside our geographical territory.

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Sir, with the intensified competition, compounding the effects of a small domestic market, many companies have realised the importance of venturing abroad to extend their reach. The Government has also been actively encouraging companies to globalise. I would like to ask the Government to consider this scheme I have put forth which, I believe, will serve to help many more companies venture abroad and globalise successfully.

Singapore Business Federation

Mr Chew Heng Ching (East Coast): Sir, the Singapore Business Federation (SBF) was formed in the year 2002 through an Act of Parliament. It was meant to be the new apex organisation, representing Singapore business interest, both locally and abroad. Concurrent with this, we have a wide array of business chambers and associations, representing different sectors of the business community.

Sir, I must declare my interest here as I am the Chairman of one of these Chambers, ie, the Singapore International Chamber of Commerce. When the SBF was first formed, there was great unhappiness by many companies to be

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compelled by law to become members of the SBF and to pay subscription fees, hence increasing their business cost. I must feed back that till today, many companies are still begrudging the need to pay compulsory subscriptions to the SBF. They still feel that they do not need the services of the SBF. Indeed, many prefer to use the free professional services rendered by IE Singapore. I wish to ask the Minister if he will give an update to this House on what the SBF has been doing and whether it has achieved its objectives as the apex body of businesses here. What has been the financial position of the SBF, ie, its revenue, expenditure and surpluses, including accumulated surpluses?

Sir, the position of CEO has been vacant for some time. Why are there no takers for that position? May I suggest to the Ministry that perhaps it is timely to conduct a stock-take on the SBF, review its achievements and challenges, and as part of this review, consider lowering subscription rates for its members?

Free Trade Agreements

Mr Inderjit Singh: Sir, I support the issues brought up by Mr Chew Heng Ching on the effectiveness of SBF. And I have a suggestion on how we can make SBF look like a value-added organisation and not compete with the various Chambers, and that is related to my question on the FTAs. I mentioned that companies have yet to see the benefits of FTAs. I think the organisation that could play a significant role is SBF. Just as in ACE through the internationalisation of Action Crucible, through very tedious mentoring approach, our members have been able to help Singapore companies internationalise. It is an accounts management approach done by volunteers. If SBF could take the responsibility to be the organisation that

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understands and helps to operationalise these FTAs, I am sure many companies will then want to go to SBF and will not question the value-added that SBF has. We will then also see the added benefit of our companies benefiting from the many FTAs that have already been signed and the many more that are coming on board very soon.

Dr John Chen Seow Phun (Hong Kah): Sir, Singapore has signed FTAs with a number of countries, including the developed nations, such as the US and Japan. These FTAs give us better access to these developed markets compared to other countries for goods that need the rules of origin. Therefore, there are products that other countries could make or value add in Singapore to gain access to these developed markets. Their coming to Singapore will provide jobs to Singaporeans and contribute to our GDP. My question for the Minister is whether MTI has considered what products we can attract companies from these other countries, such as China, to manufacture here and whether MTI has an action plan to attract such investments to Singapore. If yes, what are the types of investments and from what countries? Has MTI attracted any in the last few years?

The Chairman: Prof. Ivan Png, you have two cuts, take them together. Total of 7 minutes.

Economic Incentive Schemes

Prof. Ivan Png Paak Liang: Sir, the Government offers a range of incentives to businesses, including tax incentives, loans, grants and co-investments. MTI's Economic Development Assistance Scheme is budgeted for $2.125 billion in Phase IV. In years 2004 and 2005, the EDB provided for grants of $106 million and $82 million respectively. In the same two years, EDB had loans outstanding of $523 and $107 million respectively.

Sir, I ask if the Ministry could please share with the House three points: (1)

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What performance measure does it use to evaluate the results of these grants and loans?

(2) What have been the results in Phases III and IV of the Economic Development Assistance Scheme? Sir, I have referred to the EDB's Annual Report. It does publish data on such things as fixed asset investment, total value added, total business spending. However, the problem is that it does not say how much of these are due to EDB grants, loans, etc, and how much would have come to Singapore anyway. To evaluate the policy, we really need to know the incremental value-add of the policies. How much extra as an investment, how much extra value added, how much extra business spending resulted from EDB grants and incentives?

(3) As discussed during the Budget debate, we should be concerned about the economic impact, both in economic performance and revenue loss of tax incentives. May I suggest to MTI that it agrees with the Ministry of Finance a tax revenue budget for economic incentives. This tax revenue budget would measure the value of tax incentives given out, specifically the amount of revenue loss resulting from these tax incentives. In this way, we could put tax incentives on a similar footing as grants and loans that we budget for tax, budget for grants and loans, and we could more accurately measure and compare the cost vis-a-vis benefits of these various schemes.

_Research and Development (R &D) _

Sir, just last month, Minister Lim Hng Kiang announced the Science and Technology Plan 2010. Allow me to applaud Minister Lim for publishing the plan and also the review of the previous plan. This is a big step towards greater transparency and good governance.

Sir, the plan has three targets at the national level by the year 2010. (1)

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Increase national R&D spending to 3% of GDP; (2) Increase the private sector share of R&D to two-thirds; (3) Increase research manpower to catch up with Sweden and Japan.

As a researcher, I applaud investments in R&D. However, as an economist, I worry about two aspects of the R&D plan. First, the key targets are inputs. I and, I think, most economists and other policy makers would rather aim at output targets. Let me propose the following alternative, increase our growth rate of multi-factor productivity to the top quartile in the OECD. Sir, please refer to the chart which is being distributed by Parliament staff. You will see Singapore's multi-factor productivity growth right at the end on the right hand side. It leaves much to be improved. Over the period, 1990 to 2002, we were placed just above the OECD median, at about slightly under 1%. Sir, we are much more flexible and dynamic than many of these OECD countries. Yet, our productivity growth pales by comparison. So instead of aiming at national R&D spending be 3% of GDP, let us aim that our growth rate of multi-factor productivity be in the top quartile of the OECD.

Sir, my second worry. The Science and Technology Plan 2010 increases A*STAR's budget by over 20% from $4 billion to $5.15 billion. It creates a National Research Foundation on a budget of $5 billion. I worry about the ability of our research organisation to make good use of a sharp increase in funds. Let me give an analogy. Suppose that we are running at 7 km an hour, and we want to accelerate to 10 km an hour. Yes, if we want to run faster, we must eat more. But the additional food must be calibrated according to how fast we are running, not just stuffing in food and hoping we can run faster. Indeed, I have heard talk of a "feeding frenzy" as foreign researchers swarm to Singapore for the rich research funding.

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Sir, A STAR's performance indicators include the number of patent applications and industry funding. Again, the number of patents has the flavour of an output target. It is just a matter of how much money you put into filing applications. Let me propose an alternative indicator which, I think, would be more reflective - the royalty income from patents and commercialisation. After all, we are not interested in collecting pieces of paper but rather their economic impact. So let us measure the royalty income. I do applaud A STAR's focus on industry funding as a performance measure. That is great! But let me suggest another one. Besides industry funding, let us also measure A STAR by the amount of co-funding of A STAR's research by foreign national agencies and international agencies, for instance, the US National Science Foundation, the US Defence Advance Research Projects Agency, the European Union and the various UN organisations.

Assoc. Prof. Ong Soh Khim (Nominated Member): Sir, I declare that I am an academic at NUS.

$13.55 billion will be pumped into R&D over the next five years, of which more than half will go to MTI and its research agency and research institutes. This is certainly good news, but I perceive that overseas researchers and institutes could be more excited than Singaporeans over this news! It is necessary to look into how these research resources will be used to transform Singapore into an R&D driven economy with the outputs that we wish to achieve.

First, in attracting and recruiting world-renowned scientists to Singapore, it has been reported recently in the local media that what attracted these scientists were Singapore's offer of "direct funding, less restrictive rules for research and the freedom to commercialise their science".

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A web-based magazine, however, reported that Singapore offers "unrestricted research, top-notch equipment and limitless funds" to these scientists, as long as they agree to relocate to Singapore. How contrasting this is! It has also been reported that Singapore promises these foreign renowned scientists world-class laboratories and more than enough money to pursue work that is not fundable, or is too controversial back in the home countries of these scientists. So far, this has worked and many "whales" have been caught by our local research agency. They are renowned researchers from the US, Japan and UK who have made their names in cancer and life science research, including Sirs and a Nobel Laureate.

There is nothing wrong in attracting renowned foreign scientists to Singapore, and I agree with the Prime Minister that we should attract foreign R&D talents. But I think we have to ask ourselves a few questions.

(1) If a world-renowned scientist is not able or faces certain difficulties to find grants to support a certain research work back home in his own country, there must be some reasons and important factors to it, and we should analyse carefully before we throw in huge amounts of money for this scientist to come to Singapore and conduct the research work here. A different angle to view this is: is the Singapore Government offering them huge sums of research grants without requiring them to clearly state their research objectives and deliverables in the form of writing research grants?

(2) In attracting these world-renowned scientists with huge research grants and salaries, what are the key performance indicators that we have set for them to meet, and within what kind of a timeframe do these scientists have to deliver what they promise?

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(3) Have excessive money and research grants been paid to "catch these whales"? Will these "whales" turn into "ikan bilis" after a while?

(4) Is "buying scientists" the right approach for Singapore to put us on the world map of R&D? How many such scientists can Singapore "buy" as each may cost at least a few millions, considering the salaries and research grants that have been paid to them?

(5) Have we given a different treatment to the foreign scientists as compared to home-grown researchers in research grant application and approval? Many foreign scientists have echoed in the various media reports that Singapore's quick access to funding, speedy grant approvals and lack of burdensome paperwork are the attractions for them to relocate here. This seems to contradict what local researchers have experienced. Often, we hear from local researchers that they need to write grant applications to the research agency, fulfil burdensome paperwork and the grant approval, if successful, will usually only come maybe nine months or a year later.

Sir, I have no quibble over these measures or quick access to funding, speedy grant approvals and less paperwork. My plea is only for equal treatment, not to favour the foreign scientists and therefore discriminate against the local R&D talents. We are not asking for special favours, we are only asking for the chance to compete equally.

Scientific research today is increasingly about access to grants and rewards, such as fame, prizes and commercial spin-offs,

ie, incentives that can sometimes lead to unethical practices, such as the South Korean stem cell research scandal. In Singapore, we have the BAC to guide biomedical research, and we have an external oversight system. However, we need a sound research

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governance framework that is aimed at continuous improvement of standards and the reduction of unacceptable variations in research practices to safeguard scientific integrity, ensure financial probity and prevent fraud and misconduct in research.

We are reminded of proper corporate governance in the recent meltdown of NKF. In line with proper accountability and transparency, we need proper research governance to enhance accountability and transparency in the money spent on catching these "whales".

If I may be frank here, Singapore has been taken to be a "Santa Claus" by many overseas researchers and research institutes (RIs). As the Prime Minister has said, "We will not spend it blindly. We will make sure it is well spent."

Secondly, as the Prime Minister has said, we need to get the appropriate performance measures, because how we measure influences what people will do. We need to have a coherent set of KPIs to measure the achievement of the comprehensive R&D strategy that will be implemented. We should not be relying on winning awards and competitions alone, or the total number of research publications and citations count. We should also not be too skewed towards commercialisation of technologies and ideas as this would influence the research towards a more downstream development work. What we need is a range of indicators, such as the number of publications, citation counts, patents filed, patent commercialised, research dollar attracted from industry, investment dollar attracted for IP commercialisation, etc. This whole range of indicators should not be applied equally to all institutions conducting research work. Rather, it should depend on the institution, whether it is a university, polytechnic or RI. A different combination of these indicators should be applied to measure the research output.

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Lastly, much funds set aside for R&D have been spent on development of expensive iconic buildings, such as the $500 million Biopolis and the $700 million Fusionpolis. In the Science and Technology Plan 2010, 3% of the total R&D budget will be spent on such infrastructures. Sir, what will put us on the world map of R&D is not the iconic building that costs millions to build and millions to maintain, but the research output in terms of breakthroughs, patents, commercialised products, IPs and technology transfers from RIs to the industry.

National Research Foundation

Dr Wang Kai Yuen: Sir, there is no doubt that Singapore needs to create its own intellectual property rights in the fields of science and technology where it has the competitive advantages. The Singapore Government has earmarked some $12 billion to finance public sector R&D activities for the five-year period starting from 2006 to 2010. This is more than double the amount of the previous five-year period. Of this amount, $5 billion has been allocated to the National Research Foundation. This seems like a lot of money. After all, the Progress Package that we just announced for every Singaporean only amounted to $2.6 billion. Yet, compared to what other nations spend on R&D, it is still small change.

Therefore, in my view, Sir, picking up the winners in the early phase of the game becomes very important. Yet, doing so is extremely difficult, especially when civil servants picked to do the job need to ensure that public money is properly accounted for. Thus, in the past, we tended to allocate funds to the public sector R&D institutes affiliated to the various universities. So, perhaps our culture and mindset need to be changed.

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I have just noted that Dr John Chen spoke with the aid of a computer. Sir, I am not sure whether that is in line with the Standing Orders. If it is not in line with the Standing Orders, perhaps we should also take the opportunity to change the Standing Orders so that we can move with the technology.

My question to the Minister is what measures we are going to adopt to measure the success of the R&D programmes. I also agree with Prof. Ivan Png that perhaps an output-based performance measure is better than an input-based one.

The Minister for Trade and Industry (Mr Lim Hng Kiang): Mr Chairman, first, let me thank Members for their very many insightful comments and suggestions. Many Members have spoken about how we can help our local enterprises, as well as the importance of research and development (R&D). These are indeed two areas that will strengthen our competitiveness in the coming years, and where we will be giving more emphasis over the next five years. I would also like to divide the issues raised into two levels.

At the macro level, Members have suggested ways to improve our competitiveness and adjustments to our economic policies. I think all of us agree that the Singapore economy has recovered and the prospects are positive. We are ranked very high in terms of competitiveness, effective tax rates, ease in doing business, quality of infrastructure, and our connectivity. We also have a strong pipeline of investments, our trade growth is robust and our tourism receipts are growing. Furthermore, with our focus on R&D and investment in our talent, I am confident that our competitiveness would be reinforced.

But, at the second level, I sense that Members would like to see how our economic policies and programmes can be

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effectively implemented to help our companies grow and create jobs. I agree completely with Members. We must ensure that our strong GDP is translated into growth opportunities for our companies, that more FTAs mean more export opportunities, and that higher R&D spending results in technology upgrading in our companies. Let me elaborate as I respond to the comments raised by Members.

First of all, Dr Ahmad Magad has suggested a platform for the MNCs and SMEs to regularly meet and interact. I agree with him that we should strengthen the economic linkages between the MNCs and the SMEs. One such platform is the EDB's Local Industry Upgrading Programme (LIUP), where MNCs form strategic partnerships with their SME suppliers and other companies. It is a win-win partnership. MNCs can build up a strong supplier base supporting their requirements, while the SMEs can avail themselves of the MNCs' technical and managerial expertise to upgrade and be more competitive.

Over the last five years, the LIUP has assisted some 670 local companies. One good example is Baxter Healthcare SA and its group of local suppliers. Baxter manufactures medical products, such as intravenous sets and renal pumps. Under the LIUP programme, Baxter has worked to develop the suppliers' capabilities through knowledge transfers and promotion of quality standards. Last year, for example, it conducted two training sessions for 24 of its local suppliers to equip them with the ability to supply quality predictive tools to streamline their manufacturing processes.

As Members will remember, this is how we built up the electronics industry over 30 years. The MNCs provided the base that led to the development of the local precision engineering industry, which comprises many SMEs serving the tooling

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and component needs of the MNCs. Some of our SMEs later grew and internationalised, such as Unisteel and Seksun. Others became contract manufacturers, such as MMI. The vibrant local precision engineering industry in turn attracted more electronics MNCs, and further strengthened our electronics cluster. The supply chain management for electronic products gave the logistics sector a boost, with several SMEs growing to become sizeable regional logistics players, such as Accord Express Holdings. Not only that, it has also given rise to a huge electronics international wholesaling and trading cluster in Singapore, creating more business opportunities for additional local companies.

This same story is repeated in our chemicals, transport engineering and biomedical sciences (BMS) clusters. Increasingly, we are seeing the spill-over of such linkages across clusters. For instance, the local precision engineering industry, which started off supporting the electronics industry, is now also serving new growth areas like the medical technology, aerospace and automotive industries.

The second suggestion put up by several Members, such as Dr Tan Boon Wan, Mr Inderjit Singh and Mr Lawrence Leow, is how to help our companies go overseas. They have suggested two approaches: (i) by banding together, such as through consortiums; and (ii) Mr Lawrence Leow suggested going together, also as a cluster, in the same location.

This is something that IE Singapore fully supports. By banding together, our companies increase their chances of success. Through the iPartners programme, IE encourages the formation of strategic alliances among our local companies, both the large and the small enterprises. Last year, for example, IE supported 12 new alliances, comprising

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60 companies, which are expected to generate over S$415 million in overseas sales.

One such alliance is the Singapore Building and Infrastructure Consortium (SBIC). Led by SembCorp Engineers and Constructors Pte Ltd and DP Architects Pte Ltd, the consortium is targeting the Middle East market. Collectively, the 14 consortium members represent the complete value chain for the building and construction sector, from master-planning, engineering, consultancy, construction to procurement. This enables the SBIC to present an integrated team capable of delivering complete solutions, thereby boosting their chances of success, especially in securing larger contracts.

The LIUP programme and the iPartners programme illustrate that our approach to developing our SMEs is a painstaking one, involving sector by sector, consortium by consortium. We cannot just wave a magic wand and every SME will be helped.

Mr Inderjit Singh proposed establishing a Local EDB, while Dr Wang Kai Yuen suggested also centralising help to the SMEs. I remember reading in the newspapers that Dr Ong Chit Chung, during the Budget debate, had said that SMEs were like Cinderellas and called on the Government to send in a Prince Charming to transform Cinderella into a princess. But we have 120,000 SME Cinderellas in all shapes and sizes, and they all wear different sizes of glass slippers. They range from our neighbourhood stores, to bigger names like Osim, Inter-Roller and HTL. It is hard to imagine that a single agency can be a Prince Charming, with the full breadth and depth of sectoral knowledge and domain expertise to fully cater to all our SMEs' needs. For example, we need BCA's involvement to help our SMEs in the

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construction and renovation sector; IDA's help for IT and media development; and WDA's help for workforce upgrading and retraining. Hence, the more sensible approach of developing our SMEs is to adopt a "whole-of-government" approach rather than a single agency.

What we have done is to appoint Spring as the overall champion for SMEs. Spring will leverage on the strengths and expertise of the other agencies to provide holistic and integrated services to our SMEs, in line with the vision of "Many Agencies, One Government".

A concrete result of this integrated, multi-agency approach is the recent launch of EnterpriseOne, which stands for "One Network for Enterprises". The portal at www.business.gov.sg is a Government-wide initiative managed by Spring in partnership with business chambers and industry associations. It enhances the SMEs' access to business information, Government e-services from more than 30 agencies, and advisory and consultative services. I urge Members to give it a try and I welcome your feedback on the effectiveness and usefulness of this portal.

The second pillar of the EnterpriseOne initiative is the network of Enterprise Development Centres (EDCs) that are being set up. These EDCs are run by the various business chambers and associations, and they offer business advisory and consultancy services. Today, SMEs can visit any one of the three EDCs at the Association of Small and Medium Enterprises, the Singapore Manufacturers' Federation and the Singapore Chinese Chamber of Commerce and Industry.

Mr Lawrence Leow has asked about the Government's long-term plans for these EDCs. The idea of EDCs was actually prompted by industry's calls for a consultancy or advisory panel which

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SMEs can turn to for business advice, be it to upgrade, expand or venture overseas. Recognising that most SMEs will not be able to afford

the services of the likes of McKinsey, the Government sought the cooperation of the major business chambers and industry associations to provide guidance and advice to our enterprises and our would-be entrepreneurs.

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As each chamber and association has a specific business focus, the EDC so formed will similarly have its own focus and area of specialisation. For example, the EDC at the Singapore Manufacturers' Federation focuses on mainly manufacturing-related diagnostic and consultancy services, while the one at the Singapore Chinese Chamber provides comprehensive advice on doing business in China.

So far, as Mr Lawrence Leow has pointed out, the Government has provided co-funding support to defray the set-up costs for the EDCs. In the longer-term, we hope that the EDCs will evolve into thriving centres for business information and knowledge exchange, sufficiently valued by the SMEs that they become an integral part of the chambers and the industry associations. The Government will thus work closely with the EDCs to help them succeed and be commercially viable and sustainable over time.

Mr Chairman, the next level of our support is working with the industry associations to develop vibrant industry clusters. The industry associations know the business environment, the challenges and issues faced by the SME members much better than the Government does. Thus, by working with them and through them, we can better reach out and target our assistance to our SMEs.

It was with this in mind that the Government launched the $50 million

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Local Enterprise and Association Development (LEAD) programme to support able and willing industry associations in spearheading industry development efforts. The LEAD programme has had very good success to date. So far, the Government has approved grants of more than $20 million to six associations in industries such as the restaurant industry, the food manufacturing industry, furniture, textile and garment, process industry and the precision engineering sector. These projects are expected to add more than S$800 million to the economy and create more than 4,000 new jobs.

I have given examples of these previously in the House of the work done by the food manufacturers and the textile and garment and furniture industry associations. I think Members would also have read newspaper reports, the most recent one by the Furniture Association of their plans to develop Sungei Kadut to improve design and to increase their export opportunities.

Let me today give you another example, the Print and Media Association of Singapore. Some may perceive printing as a sunset industry in Singapore because of our high labour costs. But our printing companies have been very resilient, surviving downturns and strong competition by finding niches for themselves and moving towards high value print jobs. For example CS Graphics prints fine quality art books for key clients such as the Metropolitan Museum of Arts. Another group of local printing companies has come together, such as Fabulous Printers, COS Printers and Markono Print Media, in order to support Blackwell Publishing, one of the world's leading scientific, technical and medical journal publishers. Blackwell is drawn to our local printers because of their quality and their competitive prices, as well as Singapore's strong supply chain capabilities, which enable them to quickly

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distribute their journals worldwide. Some of our printers not only do the printing, but also maintain a website and fulfil the orders for Blackwell.

Mr Chairman, let me now turn to specific areas where SMEs need help. The first area is financing. We have been systematically improving the financing infrastructure for enterprises by plugging the funding gaps through a mixture of loans and equity schemes. For this, I would like to thank Mr Inderjit Singh and the Financing Crucible of the Action Community for Entrepreneurship (ACE) for their contributions and effort.

Last year alone saw the launch of several new financing schemes. Among them is the SME ACCESS Loan to help SMEs, especially under-served enterprises without collateral or with a limited track record. To date, over S$100 million in loans have been extended to more than 400 SMEs. To spur greater angel investments, EDB has also recently launched the $30 million Business Angel Scheme. This was launched in September last year. In October last year, IE Singapore started the Trade Credit Insurance Programme, which offers premium trade credit insurance rates through the pooling of demand. The scheme has already benefited more than 270 companies with a total volume of sales insured amounting to over $45 million in just three months. We will continue to work on improving the access of our enterprises to financing. I think in PM's response in the Budget debate, he gave Members a printout of several sheets of all the schemes and we welcome feedback from Members on how to improve these financing schemes.

Dr Wang Kai Yuen suggested that the Government could consider a single Government-funded institution to provide

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financing to the SMEs. Currently, there are already many private sector financial institutions which are providing loans to SMEs. In fact, more banks are recognising the potential of the SME market and have set up specialised teams to focus on SME customers. For the Government to set up its own SME banking or financial institution to compete against the private sector will be against the "Yellow Pages Rule". The Government has instead partnered some 16 financial institutions to administer the loans to our SMEs, so that we can leverage on their market expertise as well as to foster the start of hopefully a lasting banking relationship between the SMEs and the financial institutions. This win-win arrangement has worked well so far. Over the past five years, Spring and IE Singapore have worked with financial institutions to facilitate more than $3.1 billion worth of loans to more than 12,500 companies.

What the Government in fact can do is to designate more financial resources to help our local enterprises grow. This is indeed what we are prepared to do. I am happy to announce that the Government will set aside $3.9 billion over the next five years (FY2006-2010) for this purpose. Grants will take up $900 million, an increase of 35% over the previous five years. The remaining $3 billion will be in loans, and through partnerships with our various financial institutions, this is expected to catalyse more than $6 billion worth of loan financing, almost 60% more than the previous five years. So we are prepared to put more resources to support our local companies.

The second area in helping our companies is to encourage them and facilitate them to expand overseas. I mentioned just now about the consortiums. Let me also briefly outline what IE Singapore is doing to help our companies go overseas.

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IE does so through a 3C framework - Competency, Capital and Connections. For example, last year, IE Singapore helped some 32,000 companies through its services and its activities. Let me highlight some of the key initiatives under each of these 3Cs.

Competency involves helping our companies to build up capabilities so that they can compete more effectively in overseas markets. Last year, some 1,900 companies leveraged on IE's capability-building programmes, particularly in branding, design and international manpower development.

It is important that companies formulate a viable market strategy before entering any new market. The Internationalisation Roadmapping Programme was launched early this year to help companies develop long-term business planning strategies as part of their internationalisation plans.

The second "C" is Capital. Coupled with other inroads that we have made on supporting financing, we have also promoted the Regionalisation Finance Scheme, which is a fixed interest loan scheme. Since 2001, it has committed over $54 million in loans, benefiting some 43 companies as at end 2005.

The third "C" is Connections. SMEs, in particular, need help to enter into overseas markets. To build connections, SMEs can participate in outgoing missions and fairs organised by IE Singapore as well as IE Singapore's networking platforms, namely, Network China, Network Indonesia and Network India. Companies can also tap on the International Marketing Activities Programme which supports the activities organised by trade associations and chambers, or the Pathfinder Scheme for Distribution, which helps exporters by

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matching them with overseas intermediaries who have extensive local business networks.

Mr Lawrence Leow suggested that our SMEs can go together and find suitable locations when they go overseas. I think this is indeed what many have done, not directly through the Government but indirectly. As you know, Singapore companies have helped built industrial estates in Batam, Bintan, Vietnam, China and India. Many of our SMEs find comfort in operating in many of these industrial estates developed by our local companies. Going forward, there are other plans to develop SEZs, both in Indonesia, in India and further afield also in Russia. If companies find that this is sensible strategy to locate in business districts and industrial estates developed by Singapore companies, then this is one strategy they can pursue. But I would be loath to concentrate all our resources just in one or two industrial estates and encourage or direct all our companies to go there. We should allow our companies to diversify and go to different industrial estates and different countries to pursue their opportunities.

Let me now turn to another area which is the FTAs. So far, we have signed 11 FTAs. Mr Inderjit Singh asked exactly how our companies have benefited from the FTAs. I would say in several ways. First, the FTAs gave our companies a competitive advantage through the elimination or reduction of the tariff as well as non-tariff barriers. Second, the FTAs can help our companies gain access to emerging markets such as India and the Middle East. Finally, our FTAs contain safeguards to provide our companies with better protection when they venture overseas. This protection can include guarantees on repatriation of capital and profits, as well as investor-state dispute settlement mechanisms. But I believe we can do more.

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In order to help our companies take advantage of all these benefits, MTI and its partner agencies have been reaching out to the business community through various activities and programmes, eg, seminars, workshops and guide books. A dedicated FTA website has also been set up. This year, IE Singapore has established a special unit to help companies leverage on FTAs. This special unit will not only organise seminars and provide general information, but also provide the individual company with consultations, to show them exactly how they can make full use of the FTAs for the products that they are producing and exporting. I therefore encourage our businessmen to take advantage of these resources and make full use of these FTAs.

Dr John Chen has also asked whether the FTAs have been successful or helpful for us in bringing investments into Singapore and he mentioned particularly the case of China. I would say that Singapore's extensive FTA networks have added to our overall value proposition in attracting investments to Singapore.

In fact, when EDB officers approach the various clients, they actively market our strong network of FTAs when highlighting our strengths to potential investors. When they make client calls on the companies they will, in fact, work out what the FTAs can offer these companies and talk directly with the company executives on how if they invest in Singapore they can take advantage of these FTAs.

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We also work with companies to identify the areas where our FTAs are able to offer a preferential edge over other competing investment locations, be they in terms of tariff savings or investment protection. And we have had some successes. Let me give you an illustration.

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A leading US manufacturer of oilfield drilling equipment doubled its manufacturing plant capacity in Singapore. It did so because the tariff savings from the US-Singapore FTA, combined with Singapore's logistics infrastructure and our competitive costs, made it more economical for it to manufacture here and export to the US. So, even though the tariff saving is only a few percentage points, this has increased its margin and swayed the decision for it to expand in Singapore rather than in the US.

So, overall, I would say the FTAs have added value to Singapore's attractiveness as an investment location.

Let me now turn to some of the other issues raised by Members. Mr Chew Heng Ching has asked for an update of the SBF.

Members will remember that the SBF was set up in 2002 to create an apex organisation to represent Singapore's business interests more effectively, locally and abroad. SBF membership was made mandatory as the earlier practice of voluntary membership by business chambers and associations had not been effective. Compulsory membership will ensure that SBF has a strong membership base, and has the mandate of the entire business community. Compulsory membership of business chambers or business associations at the apex level is not uncommon. France, Germany and Brazil also have this practice.

However, only local companies with paid-up capital and foreign companies with authorised capital of $0.5 million and above are required to be members of the SBF. Small companies, partnerships, sole proprietors and companies without any employees are exempted. As a result, SBF has exempted some 142,000 companies and another 140,000 partnerships and sole proprietors. In fact, SBF has only a membership of 15,046 which constitutes just 9.6% of all companies in Singapore.

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So, even though we make it compulsory, through this exemption process, the membership profile of SBS only constitutes 10% of all companies.

Furthermore, if you look at these 15,000 companies, about 11,500 of them have paid up/authorised share capital of less than $5 million. And, therefore, their annual fees range from $300 to $400 per year, or about $1 a day. So I do not think this is a very heavy financial burden. As you know, the SBF has had only four years of operation. It is young by any standard of a business association. So I urge Members and other businesses to give SBF a chance to develop. In due course, we will do a stock-take and encourage the SBF to find ways where it can provide value to its members.

Let me now turn to the question raised by Prof. Ivan Pang about the performance measures that we use to evaluate the Economic Development Assistance Scheme (EDAS) and also Mr Inderjit Singh's comment about the value of the FDIs that we have attracted to Singapore.

As you know, attracting FDIs is a very important component of our investment and development strategies. Even though Singapore is a capital-surplus country we believe that the foreign direct investment into Singapore is very important because it not only brings in capital but, more importantly, it brings in technology and gives us access to export markets. The Prime Minister also explained during the Budget response that we are in a very different environment nowadays. We are competing for foreign direct investments not just with the other emerging economies but also with the developed countries as well. So the Economic Development Assistance Scheme (EDAS) is a very important tool by which the EDB uses to bring in foreign investments to Singapore. And EDB goes about it in evaluating whether the EDAS is to be used through four key indicators. EDB

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will look at, for manufacturing, the Fixed Asset Investments that the foreign investor is bringing in and, for services, the Total Business Spending arising from investor's commitments in Singapore. In the evaluation, EDB will also estimate the value-added and also the number of new jobs generated as a result of these investments. As the Prime Minister indicated, as long as all these items are in the positive, generate jobs, create value-add, then we are prepared to provide EDAS and other incentives to bring in the investments.

So over the last five years, EDB attracted $42.5 billion in manufacturing Fixed Asset Investments and $10.6 billion in services Total Business Spending. These investment commitments will create a total value add of $50.4 billion per year and 110,000 new jobs when fully realised. Of the 110,000 jobs created, 71% will be skilled and professional. So it is very important for us that this pipeline of investments continues to give strength to our economy, add to the value-add and help generate jobs.

Prof. Ivan Png has suggested that we consider a tax revenue budget to manage revenue loss through tax incentives. As I have explained earlier, we are in a very competitive environment. We have to compete with both the developed countries, as well as with the emerging countries for such investments. Our tax incentives are also granted by tying the companies to new investments. If we had not provided these incentives, the companies could have taken their investment to competing locations. We would, therefore, not have collected the taxes to begin with. But, nevertheless, we will look at his idea of a tax revenue budget to see whether it can be used to complement our methods of evaluating the investment proposals that we want to attract to Singapore.

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The final question I would like to address is research and development. As the Prime Minister highlighted in his Budget debate round-up speech, R&D is a major effort and we are undertaking to transform our economy by building a strong foundation for our sustainable growth and competitiveness. Going forward, in a global knowledge-based economy, competition will not be simply about lowering costs but, increasingly, it is about talent and creating value. So, I think all Members are agreed that building up our R&D capability is, therefore, a crucial piece of securing our economic future. There will be risks, but it is something we have to do. I think what Members are more concerned about is how do we go about investing our R&D funds in a way that will deliver the output that we desire. If you look at R&D, and this is a very complicated subject, based on the interventions by Members, you can see that there is great difficulty in measuring the output of R&D because this is a very long term process. But we have to be bold and we have to take this step to invest heavily in our R&D effort.

Basically, if you look at comparisons among various countries, it is always easier to compare the inputs, the percentage of GDP devoted to R&D or the amount of funds or resources, both the public and private sectors, put into R&D. When you start looking at output, I think the indicators are more difficult to arrive at. The easy output indicators will be, for example, the number of research scientists and engineers that are active in the country. I think, on this measure, Singapore has done well through our successive Science and Technology Plan (S&T). The number of research scientists and engineers in Singapore has progressively been increased. I think that puts us in a very strong position, going forward, because R&D is all about talent

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and we need to build up our local talent to undertake R&D.

Prof. Ivan Png also suggested other measures. Let me just go through some of them. He suggested using the Multi-Factor Productivity as an indicator. Prof. Ivan Png is an economist, I am not, but my little knowledge of MFP indicates that it is not really a measure of productivity alone. So the table he showed is not a measure of the low productivity of Singapore economy. If you look at the productivity parameter, in fact, Singapore has done fairly well. But when you look at Multi-Factor Productivity, this factor is really any GDP growth that cannot be attributed to changes in labour or capital inputs and so it is a very illusive concept and an illusive parameter to measure. Perhaps what we need is a research grant to see how MFP can be used as a way of measuring the competitiveness or the productivity of the economy. But I know that MFP does not specifically measure R&D output. That much I know. But how we can use MFP to measure the effectiveness of R&D, that is something that we have to study further.

Prof. Ivan Png also suggested that we look at the grants that we are able to secure from overseas R&D agencies as one way of measuring performance. I think this is a valid point and, in fact, A*STAR agencies and research institutes have been fairly successful in securing fundings from other national and international agencies, such as the US National Institute of Health, the US Defence Advance Research Project Agency (DARPA), and also from the European Commission. I think this reflects well on us on several counts. One, it shows that our standards of research are high. Two, it shows that some of the areas that we are collaborating in are also in areas which these agencies are interested in. But I will be concerned if we use this as a primary factor of the

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effectiveness of research because if we send the wrong signals to our research agencies, if they pursue this factor, then I think what they will be doing is that they will be aligning our research objectives in line with all these agencies in order to get their funding. And I am not sure this is entirely the right thing for us to do because, as a small country with competencies in different areas, we do want our research directed at different sectors. So, this ability to secure fundings from international and other national agencies is a useful way to collaborate, that we are reaching certain standards and that we are doing things right, but I would not want to make this the primary output factor.

I think the main issue that we need to address, going forward, in R&D is, one, we must put in more resources, if we want to be in the game. We have to take the risk. If we are very cautious, we run the risk of losing out. Two, we want to make sure these resources are invested in the right areas and this requires both a bottom-up as well as a top-down process. The bottom-up process involves us tapping a big panel of research experts to draw upon the expertise and to understand which are the areas that we should invest in. The top-down input involves the Prime Minister chairing the Research Council so that he has an overview and that he is assured that the resources are directed at the right areas and that it is not just money chasing after a few big names or encouraging a feed frenzy.

Next, the other key principle is that we want to encourage the leverage of the industries and that is the reason why we target

to achieve two-thirds of the research to be done by the companies, because the companies will know where the commercial potential is, and I think it is one way we can be assured that the research money will be appropriately

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spent, if we have the partnership with the private companies.

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The fourth principle is that I do not think we can be very far wrong if we invest in talent. So a large part of the S&T plan is to build up our local talent, encourage our students to do PhDs and take up research as a career.

Sir, with all these measures in place, I think we are well poised to go into this programme. The Government has decided to put in resources into this programme and it is our responsibility to make sure that these resources are properly spent, and that we get the best benefit out of these resources.

Prof. Ivan Png Paak Liang: Sir, a clarifying question to the Hon. Minister. He has presented us with magnificent numbers for the fixed assets and total business spending attracted by EDB. Could I ask the Hon. Minister what is the incremental quantity? Some of these investments would have come even if we had not given grants and tax incentives. We really need to understand what is the incremental quantity. Because we have a good Government, we have good infrastructures, and some of these investments would have come any way. What is the incremental amount that came because of the incentives? That is what we need to know.

Secondly, the Hon. Minister has agreed that there is no good measure of R&D. I agree. The best possible one - as far as I know, and OECD uses this - is the growth of multi-factor productivity. The fact that it is hard to measure does not mean that we should duck and not measure at all. If it is hard to measure, we should try to get the best possible measure. We should not just run away from it.

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Mr Lim Hng Kiang: Sir, our approach to attracting investments, as I have mentioned just now, is to evaluate each investment proposal very carefully. And if we can get by without giving the potential investor the incentives, the Member can be assured that EDB and JTC would not do so. So, if we look at our track record, MTI and EDB would generally ask for a significantly large EDAS budget, because we need a fairly significant war chest to be able to go out and promote Singapore and to attract investments. But if we look at the actual expenditure, in terms of equity, grants and loans, we will find that, in fact, it is a very small percentage of the budget that is granted to MTI and EDB. I think this should reassure Members that we adopt a very disciplined and focused approach in our attempts to bring in investments.

We try not to give specific numbers because, as I said, we are in a very competitive environment. Other investment promotion agencies also look at what we are giving and try to top it. As the Prime Minister mentioned, investors sometimes come with a list of proposals on what they are getting from other countries and ask us to better the offer. We are very wary of such tactics and we do not want to fall prey to such tactics.

Mr Inderjit Singh: Sir, on the issue of value add, one thing that has always been on my mind is whether we have ever recovered all the investments that we brought in Jurong Island. Have we been effective in generating value add for the country?

Mr Lim Hng Kiang: On the issue of Jurong Island, I can say unequivocally that it has been a good investment and it has been very good for Singapore.

Entrepreneurship

Dr Ahmad Mohd Magad: Sir, I would like to thank Minister Lim particularly for

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his extensive elaboration of the many improvements to several existing schemes meant to assist our SMEs. I am sure the SME committee will be pleased with the new announcements.

Sir, in an age of hyper competition and radical innovation, to achieve long-term sustainable results to position entrepreneurship as one of the key pillars for the future economy, we could and should do more to preach entrepreneurship as a serious viable alternative to employment. Beyond easier access to funds and beyond stepped-up education about entrepreneurship, radical entrepreneurship initiatives require strong persistence and encouragement. For example, in the creative industry, cost of talent and developing commercialisable products are high, and developing such may cut across the ups and downs of business cycle. We certainly would not want to see our entrepreneurs giving up all their efforts when they are just ripe on the edge of success but do not go on. This is where I would like to ask the Government to do more by providing them the necessary support, which includes mentoring for business continuity, helping connect them with appropriate sources of funds and providing them with grants for protection of their intellectual properties. Provisions of such support will ensure that the entrepreneurs could be focused on their product development and, subsequently, successfully bring their products to the market in the shortest possible time.

Mr Inderjit Singh: Sir, the Government has had a significant impact on the economic landscape of the country, and in the promotion of entrepreneurship, when the Government decided that creating local companies was as important as attracting foreign MNCs. Our effort has resulted in the creation of ACE, and we have seen very good successes in a number of areas.

I have a few questions in this regard. One is very specific and it is on the issue

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of the 60-plus Government incentive schemes. I had taken on the task, together with my committee, to review them, and we have made proposals to MTI. Perhaps the Minister can give us an update on whether some of the recommendations made are useful and will be adopted.

The issue of financing has also been widely discussed. Many Members have always brought this up in any discussion that we have during feedback sessions. This comes out as a big issue. As the Minister has mentioned, I also believe, from my latest feedback, that we have a tremendous progress in this area, the latest being the approval of the OTC and also the Business Angel Fund that the Minister mentioned a while ago. But I believe that one area that the Government could do better is the way that risk capital is looked at and utilised.

We spent about US$1 billion some years ago to attract foreign VCs into Singapore. I am not too sure if we have achieved the desired outcome. The reason I say this is because the anecdotal evidence seems to indicate that many of the VCs that we attracted into Singapore seem to be more actively investing in companies outside Singapore, and they have made very few investments in Singapore. Could we, therefore, have designed things a bit differently to achieve better results in creating and supporting more local enterprises? But, as in most cases, caution seems to be the order of the day when it comes to support for local SMEs and local entrepreneurs.

Sir, risk capital is risk capital, and the Government should be contented if it does not make too much returns, not as much as what typical VCs make. And this has been the example that was brought up by some Members, the model that Korea and perhaps in the US where the government spends more money to do a developmental type of role. When it

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comes to putting money into GLCs and VCs, the Government has been more gung-ho than putting it into local companies. And we seem to have also made some spectacular losses in investment in VCs as well as some GLCs. Whereas in the area of LEFS, which is the loan scheme that the Minister mentioned, I think the Government has made good returns when they should have been contented with just breakeven type of returns since, again, it is a developmental type of role that the Government plays.

Finally, in the area of economic planning, I feel that it has been too much of a one-way process where we have the Government thinking and deciding the type of industries to develop. Of course, EDB and the planning agencies in the Government have done a good job over the years. But I think we could have a greater involvement of the private sector in planning the future of our economy. And perhaps a two-way process, instead of deciding what the Government wants to focus on and communicating it to the private sector, we have greater involvement earlier on in the whole process. I think if we can do this, we will have a greater chance of creating an even stronger economy for the country.

Dr Tan Sze Wee (Nominated Member): Sir, the Ministry of Trade and Industry has the noble task of growing the economy, expanding the trade levels and developing a pro-enterprise environment that will position Singapore as a key trade and business hub.

The Entrepreneurial Talent Development Fund (ETDF) was introduced by MTI in 2004, targeted at students from institutes of higher learning, to develop talent by encouraging 'learning by doing' and encouraging these students to participate in various business ventures over the next five years to develop the spirit of entrepreneurship in our young.

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My question, therefore, is to ask the Minister, when the ETDF was introduced, $25 million was earmarked in total for the fund. For FY2004, $2.41 million was the amount drawn down by SPRING (as in actual figures) and in FY2005, the revised amount needed by SPRING was $700,000 versus an original estimated amount of $2.5 million in FY2005. For FY2006, the amount was only $500,000.

The Chairman: I am sorry, Dr Tan, your time is up. Miss Penny Low.

Social Enterprise Fund

Miss Penny Low (Pasir Ris-Punggol): Sir, in the first world-wide estimates of just how big the non-profit sector is, Johns Hopkins University studied 37 nations and found a total operating expenditure in 2002 to be at US$1.6 trillion. In other words, if the non-profit sector were a country, they would be the fifth largest economy in the world. In the US alone, the non-profit sector employs nearly 11 million Americans, or about 7% of the workforce, and contributes more than 9% of GDP with a total asset of US$1.7 trillion in 2003.

Currently, most of the fees and dues were the greatest generators of income followed by government payments, private contributions and other sources. But this income composition is about to change with the rise of for-profit social enterprises. For-profit social enterprises are legally incorporated entities explicitly designed to pursue a social mission. Often, for-profit ventures identify social gaps and look for innovative market means to create system change and sustainable organisations. While their primary objective is social impact, their for-profit structure requires paying attention to a double bottom line, ie, dual social and financial objectives that guide

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managerial decision making and determine success. Some examples are Grameen Bank, Shore Bank Corporation, Easybeinggreen and a listed company called Free Play, which help to create jobs in difficult sectors and cultivate self-reliant societies. I believe the Minister would agree with me that encouraging for-profit social enterprises to bloom can help redefine our people sector economy from one that is charity or Government driven to one that is sustainable and profitable in the long term. This, of course, can be translated to less tax dollars needed to fund social programmes. I see the for-profit social enterprise as a main business table agenda item, and not a CSR after-thought. It is a potential new engine of growth. Growing this sector possibly with favourable fiscal measures and Government incentives, like funding from SPRING, subsidised land rent, or even a special business zone, as mentioned by Dr Wang Kai Yuen, and even staff secondment from public agencies will help social needs as well as contribute to GDP. I urge that MTI take an enlightened view on the for-profit organisations and help kick start the for-profit people sector and help move Singapore towards a vibrant and connected people sector economy.

Tourism

Mr Low Thia Khiang (Hougang): (In Mandarin): Sir, first of all, I would like to commend the Singapore Tourism Board for their recent efforts in promoting Singapore's tourism industry. In order to attract more tourists to Singapore, the Singapore Tourism Board mobilised a lot of resources to prepare some guide books with rich local flavours, and they have introduced a lot of lesser-known local attractions to the tourists, for example, the elaborately produced "Walking Guide to Katong/Joo Chiat". Unfortunately, in the Chinese version of this guidebook, owing to some mistranslation, there was a piece of material that is really laughable.

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In introducing Joo Chiat and Katong, it states, "Many people do not know the difference between Joo Chiat and Katong. In fact, Joo Chiat is situated within Katong, and Katong is Chew Joo Chiat's grandfather. It represents a very large area."

On reading this, I have a doubt on the statement of Katong being the grandfather of Chew Joo Chiat. Who is this Katong? I believe the editor was deliberately trying to create a suspense. In another page, I found the answer. It says, "Do you know that Katong is named after a species of sea turtle found in Singapore?" This is to say that Chew Joo Chiat's grandfather, Katong, was a sea turtle. If this is brought to the knowledge of Chew Joo Chiat's descendants, I am sure they will go after the Singapore Tourism Board for turning them into descendants of a sea turtle.

2.45 pm

The Singapore Tourism Board is our international tourism ambassador charged with the heavy responsibility of introducing Singapore to the international tourists. I think many tourists' first impression of Singapore comes from the guidebooks. Now with the emergence of Chinese market of one billion people, I think we have to be more careful with the translation, otherwise we would become a laughing stock and undermine our international image.

Dr Geh Min: Sir, last year, Singapore had a bumper record of 8.9 million tourists and generated $10.8 billion in tourist receipts. But 10 years ago, in 1996, we made even more in tourism receipts, $11 billion, with fewer tourists, 7.3 million. This calculates to 1.6 million less tourists but $200 million more in tourist receipts, in my opinion, a better performance, in terms of cost-effectiveness. And yet, we are now targeting to double our tourist numbers in

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10 years' time, in order to triple our tourist receipts.

The advent of two IRs and the surge of tourists from China and India should enable us to ride this new wave of tourism growth and achieve these targets, but I would like to ask the Minister: is this the best and most sustainable way to grow our tourism industry? Or is it just the easiest way? Does it value add?

The exponential growth of tourists and tourist infrastructure can exceed the limits of healthy growth and tilt us towards a malignant growth if we just continue crunching numbers. Are we creating new markets or are we just chasing old ones? Does Singapore have the land and resources to cope with this pressure? How many hotels will we need? And where is the land for them to come from? What types of jobs will be created? What percentage of these will be skilled jobs?

Mass tourism is notoriously fickle and susceptible to fashion, economic downturns, currency changes, epidemics, terrorism or the fear of any of these. And not only does it put a heavy strain on a country's resources but it also negatively impacts on the residents by increasing petty crimes - we read about that recently - drug trafficking, prostitution, the risk of diseases and their quality of life in general. It also deters the more discerning and discriminating visitor. In my opinion, it would be easier to revive Singapore from a reputation as backwater than to rescue a tarnished down market tourist reputation.

Therefore, I think Singapore should resist the lure of numbers and focus on value-added tourists like students, long-term or repeat visitors, people who come for a specific purpose - cultural and arts tourists, medical tourists, even eco-tourists. We should also focus on the silver tourist industry. These people will have brand loyalty and integrate with

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rather than compete with locals, and they will add value. They will create high-end rather than low-end jobs. In my opinion, a truly cosmopolitan global city is one where locals and foreigners can interact in a meaningful and mutually beneficial way, not pass like ships in the night.

I therefore recommend a more comprehensive and sustainable long-term tourist policy that builds on our core strengths and that deepens our rootedness.

The Chairman: Your time is up, Dr Geh Min. Mr Alex Chan.

Mr Alexander Chan Meng Wah (Nominated Member): Sir, Singapore is chosen to position itself as a global city that is prepared to compete for the world's investment and consumption dollars and for the best human capital. Global competition among cities is intense for technology investments, and the EDB has a long history of success in doing this for Singapore. In the past, we could just offer land, engineers, tax incentives and reliable logistics to win. Today, as PM Lee said in his Budget debate's closing speech, we need to meet or beat an ever growing list of the best of breed items. But chasing and winning the race for foreign investments is only one part of the success equation. The receptacles or factors of operations for the conduct of successful business must be available, ready and also competitively best of breed. This includes our hard and soft infrastructures, our human capital and our overall social environment. We have proven that we can build, run and maintain our hard infrastructures. We are now being tested whether we can educate, train and retrain our human capital to meet the challenges of the future. We are now also showing that we

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are able to invest or wanting to invest heavily in R&D to generate the future technology that will hopefully have a strong economic impact on Singapore and indeed the world. There are no guarantees for economic returns, but without the bold attempt to engage the future possibilities, we will surely be out of the race and lose our significance.

The point I am trying to make is in today's incredibly noisy world, getting noticed is a "must have" first step. Dubai, through its mega-tourism project, is a good example. Getting visitors to the doorstep and trying the product is the next step, then having a memorable experience and a good outcome must surely be the objective for repeat and sustainable business. Achieving the memorable experience and the "wow" outcome is a collective effort of all Singaporeans in product knowledge and customer service culture. It also requires the concerted effort of private and public partnerships and inter-agency coordination to make the entire business value chain a viable and sustainable one in a challenging and small domestic market. I think we need to nurture domestic tourism and local consumption spending in our own tourism products. The Esplanade would never be successful if Singaporeans are unwilling to pay for entertainment. The S-League would not succeed if we do not support and pay admission charges to watch the matches.

Since the budgets are prepared and segmented by Ministries, my questions are: Is there a budget for promotion of domestic tourism and for ideas creation, product generation and origination of services and products, just as we have for technology R&D? Which are the agencies involved and which agency is leading or driving the coordination? Are we adequately investing in new ideas and projects? Is the Government prepared to be aggressive to seed fund new ideas?

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Integrated Resort

Miss Penny Low: Sir, since the start of the IR debate, the final selection criteria and operating framework of IR has gone through quite some changes. With these revisions, what is the expected benefits to our economy, in terms of (a) employment; (b) GDP boost; and (c) long-term economic strategy. It surprises me that while the social consequences of IR are long-term challenges, the selection criteria of IR weigh in favour of upfront considerations, like design and tourism appeal. Given the price that society has to pay, perhaps the winning IR should be one that gives the most strategic value add to Singapore's long-term economic interest, and not one that gives the most one-off tourist appeal, one-off project funds or be the most aesthetically appealing proposal. If tourism is indeed our long-term strategic interest, then the criteria should go further to ask what brings repeat visitors. We want regular spenders to fuel our economy, and not just one-off curious onlookers. In addition, given a global shortage of gaming professionals, what is our strategy in attracting them to Singapore?

The Chairman: Order. I propose to take the break now.

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

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.15 pm.

Sitting accordingly suspended

at 2.52 pm until 3.15 pm.

Sitting resumed at 3.15 pm

[Mr Speaker in the Chair]

Debate in Committee of Supply resumed.

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[Mr Speaker in the Chair]

Head V (cont.) -

The Second Minister for Trade and Industry (Dr Vivian Balakrishnan): Mr Chairman, Sir, Dr Ahmad Magad quite rightly pointed out that deep pockets are needed for product development, especially in the creative industries.

The Government has put aside more than $200 million with MICA and its agencies in order to provide a wide array of incentives, which are mainly grants and co-investments, to develop and encourage the creative industries. Besides content creation, the incentives also cover capability development, opportunities to showcase works at international platforms, cross-disciplinary innovations, and the engagement of consultancy services. In addition, in order to give the digital media a further boost, the Economic Development Board has committed $500 million over the next five years, with long-term plans for another $500 million over the subsequent five years.

MDA's efforts with industry players have translated into production value of at least $7 million in 2005 alone, and the value of work done in Singapore, we estimate, will grow over the next two to three years to as much as $30-$40 million.

Dr Magad has also suggested that the Government explore offering grants for patenting product creations. I would like to highlight that the EDB manages the "Patent Application Fund (PAF) Plus" scheme, which offers grant assistance to help cover part of the cost of professional and official fees for filing a patent. Since its inception in 2002, we have had 348 successful applications and given out some $2.6 million in grants.

Dr Tan Sze Wee was concerned with the low take-up rate of the Entrepreneurial

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Talent Development Fund (ETDF). The ETDF aims to nurture entrepreneurial talent by providing matching funding for business ventures started by students in the Institutes of Higher Learning (IHLs), ie, the three universities and five polytechnics.

The programme only began in 2004, and the IHLs needed time to set up their internal mechanisms to administer it. Consequently, the money disbursed in 2005 was not high. Some funds disbursed to the IHLs have also not yet been fully utilised. SPRING has taken this into account when estimating a lower draw for FY 2006. This is in no way an indication that the programme is slowing down.

In fact, I am sure Members of this House would agree with me that we should be more concerned with quality rather than quantity. Thus far, we are heartened by its results. Just the other day, I was shown an example of a student venture under this scheme. It is called MXR Cubes. It offers "mixed reality" or "augmented reality" books and toys, in which two-dimensional texts and pictures are converted into three-dimensional interactive products. This product has been described as "the next generation of children's book", and their work has been featured internationally by CNN, CNBC and BBC. These are the types of products and enterprises from our universities and polytechnics that we want to support.

SPRING is currently working with the IHLs to further promote this programme to more students. We have received feedback. So we will fine-tune some of the criteria so that there will be more flexibility in administering this programme, but without lowering quality.

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I would like to thank Mr Inderjit Singh and his taskforce in the Finance Crucible of Action Community for Entrepreneurship (ACE) for their sterling work in reviewing a whole host of our programmes and grants in order to help provide more financing options for our start-up companies and enterprises in Singapore. He submitted, I think, a total of about 34 recommendations for change, and I am glad to note that two-thirds of the recommendations have been accepted or are still in the process of being reviewed. For those for which our agencies have had to say no, we will write back to Mr Singh to give him explicit reasons why we could not say yes at this point in time.

One recommendation which SPRING will be following up on is the recommendation to streamline some of our capability development schemes into a single umbrella so that it becomes easier to access. IE Singapore will also take into account the recommendations of the taskforce in its review of the Regionalisation Finance Scheme. This is all work currently in progress.

Mr Singh also mentioned the over-the-counter trading platform which would provide another avenue for start-up enterprises to access equity funding. Largely because of his work and prodding, the legislation was changed in September or October last year to provide an exemption in the Securities and Futures Act, and I am glad to inform Members that I think within the next two to three months, we should see Phillip Securities roll out an over-the-counter platform, and this will be a welcome addition to the financing options available to our enterprises.

Mr Singh also brought up a more generic point about the Government's use of risk capital. He was concerned that perhaps we were more willing to take risk and put investments in MNCs and GLCs,

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and not enough in local companies. I have checked on this. The Government does have risk capital in local enterprises. Examples are schemes such as the Start-up Enterprise Development Scheme (SEEDS); the Business Angel Scheme, which really was initiated because of a discussion over tea that Mr Singh started; and, of course, the recently launched Enterprise Fund. We have seen some success in the SEEDS programme, with 11 SEEDS-supported companies having now crossed the $1 million mark in terms of revenue, and six of them have won international awards. This is why we have injected further funds into SEEDS and the Business Angel Scheme. So we have put in an additional $60 million. The Enterprise Fund, which currently stands at S$35.5 million, will grow to a $100-million fund, and this will provide additional financing for start-ups and SMEs to tap into.

In addition, of the total investments made by the Technopreneurship Investment Fund (TIF), 50% or $600 million have been invested in Singapore-based companies. This means, for every dollar of the $1 billion which the Government invested in TIF, 50 cents has been channelled back to Singapore.

We have two other schemes which have helped our companies.

(1) The Research Incentive Scheme for Companies (RISC), in which 25% to 30% of the awards in this scheme are for local companies; and

(2) The Innovation Development Scheme, in which 70% of the beneficiaries are Singapore-based companies.

So I would like to correct the misperception out there that the Government does not put risk capital into local companies. We do.

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Mr Singh has also asked about the role of the private sector in the formulation of the Government's long-term economic plans. Mr Singh is the Vice Chairman of ACE. I happen to chair it because I am supposed to be the Minister-in-charge of Entrepreneurship. But I am happily outnumbered by 29 other members, every single one of whom is a private sector individual. Those who have served on the Committee, which include Mr Inderjit Singh and Dr Loo Choon Yong, will agree that we have had extremely useful exchanges of perspectives and information. Rules, regulatory and cultural changes, educational programmes and a whole host of things have been done so much more effectively because of the access to private sector input. This is not the only forum at which the Government takes private sector input.

Members may have heard of the Pro-Enterprise Panel (PEP). This is the panel which, over the last five years, has reviewed 1,500 suggestions on rule changes, and has accepted more than half for implementation. This panel is chaired by the Head of Civil Service but, again, has very strong representation by the private sector. This has made our ability to change rules so much more responsive to private sector needs.

SPRING itself, as my Minister has said earlier, which we are using as the champion for interfacing with the SMEs, has significant private-sector representation on its Board of Directors, starting from the Chairwoman onwards. Moreover, Members will recall that when the Prime Minister announced the establishment of the Research, Innovation and Enterprise Council (RIEC), if you look at the list of the people who have been invited to serve on that Council, you will see here, again, evidence of clear private sector involvement, and we hope therefore to be able to tap their perspectives and wisdom as we formulate our long-term economic plans.

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Let me move on to social enterprises. Miss Penny Low gave a good speech explaining the benefits and potential growth of social enterprises. Social enterprises are basically businesses with a social mission. As she pointed out in her speech, they can be not-for-profit and they can also be for-profit. Our interest in them - and I would say it is still early days yet - is that, if they could succeed in creating new jobs or in providing additional revenue streams for charity, so that they would not have to be absolutely dependent on the charity dollar, then this would be a welcome addition to our economic landscape.

My Ministry, MCYS, has the ComCare Enterprise Fund (CEF), which provides seed funding for up to 80% of the total project cost, up to a limit of $300,000, for new social enterprises. But they must have viable business plans. Since the launch of the CEF in March 2003, a total of 48 projects have been approved and around $4.7 million committed. The nature of the CEF-funded social enterprises varies very greatly, depending on the interests of its founders. Some provide direct employment to the needy, whilst others aim to generate profits to support programmes for the elderly and the needy. The sectors range from food and beverage to consultancy, retail and home-based services. Yesterday, at the lunch with the Singapore Action Group for Elders (SAGE), they said they wanted to start putting a group of retired electricians and plumbers into another social enterprise. So, there will be lots more ideas which will be generated, and we will look for opportunities to support them.

In addition, social enterprises are also welcome to tap on the existing Government assistance schemes which are extended to small and medium enterprises (SMEs), such as the Local Enterprise Technical Assistance Scheme

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(LETAS) and the Micro Loan programme from SPRING. But I want to emphasise that they must clear the hurdle as viable businesses, which is why I would also disagree with Miss Penny Low's suggestion that we provide subsidised land for them. If we were to provide subsidised factors of production for social enterprises, then we are creating an uneven playing field and unfair competition for all our other SMEs out there which, I believe, would be a step in the wrong direction. But having said that, we will look for legitimate, competitive and fair ways for social enterprises to develop in our economic landscape.

Let me move on to tourism. The World Tourism Organisation has projected that global tourist arrivals will grow at 4% per annum over the next decade, with the growth in Asia alone exceeding 6%. It is a choice for us whether to exploit this growing market. Yes, there may be some downsides, but there is a significant upside, and this is not something which we should sniff at and give up without a fight or without making a significant attempt to tap into. The Singapore Tourism Board (STB), therefore, plans to triple tourism receipts to $30 billion annually and to double visitor arrivals to 17 million. We estimate that this will create an additional 100,000 jobs for the tourism sector by 2015, and this is what our vision for tourism in 2015 is. The tourism sector will, therefore, be one of the major growth engines for our economy.

I agree with Dr Geh Min that we should not aim blindly just to increase the absolute number of tourists, although having said that, that is still useful. But what we are really interested in, a better indicator, is tourism receipts, because an increase in tourism receipts directly translates to a higher value-add or a better Gross Domestic Product (GDP) for our economy and, if I may add, jobs. It is thus not enough to just increase arrivals,

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but we need to put in place strategies, as Dr Geh Min suggested, to extend the length of stay and to encourage high yielding repeat visitors.

Let me give an example of this. Traditionally, many of our PRC visitors to Singapore have come as part of a tri-destination tour which includes Malaysia and Thailand. They tended to stay not more than one day here, sometimes not even in a hotel in Singapore. So they would generate a lot of tourism numbers, visitor arrivals, but the yield, in terms of tourism receipts, was low and there was a very short length of stay. STB is now promoting more single-destination Singapore tours that generally span three or more days. In fact,

I have just checked the statistics. The length of stay for visitors from PRC has been going up significantly and so has their tourism expenditure. Despite the fact that there has been a 2.5% fall in Chinese visitors last year, the revenues have gone up significantly.

3.30 pm

Let me therefore elaborate on some of our key strategies to increase tourism receipts. Firstly, we need to have a range of tourism attractions and products in order to increase and enhance our competitive advantage as a destination for business and leisure visitors. I agree totally with Mr Alex Chan that we must be noticed, we must get mindshare on international media so that when people are looking for their next place to visit, they think of us, they think of Singapore. And, therefore, we need attractions which are compelling and unique, and it is not just a matter of building hardware, as many of you have said. In fact, in order to appeal to more sophisticated travellers, we need software, we need new marquee events, programmes, novel ideas, marketing packages, arts and culture, entertainment, education and sports.

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But this should be executed by the private sector rather than provided by the Government. Let me give you a few examples. The Singapore Flyer observation wheel and the two Integrated Resorts are examples of private sector-led projects that will bring world-class attractions and creative concepts to Singapore. The Government's role is to paint a compelling vision, provide the regulatory environment and enable these things to happen, but the actual creative push and business imperative must come from the private sector. We have a $2 billion Tourism Development Fund which has been set up in order to catalyse this private sector investment into our tourism infrastructure.

There was also a question on which agency is responsible for tourism. Members of this House will know that we do not have a tourism Ministry per se . I oversee tourism in my capacity within MTI, but I will tell you the key advantage which we have in not having a separate Ministry is precisely the fact that it depends on so many other agencies and Government. We need to work with MND, within MTI, we need to work with MICA and, sometimes, we need assistance from MFA. It is really one of those Government multi-agency projects. I can say, with hand over heart, having done this now for some time, that this approach works. So you do not need to worry that the lack of a single Ministry, or point of focus agency, in any way detracts from our efforts in tourism.

I thank Mr Low Thia Khiang for pointing out some inaccuracies in the brochures. I am sure the people in Joo Chiat are not descendants of sea turtles. But my good friend, Mr Chan Soo Sen, has said that in China, " hai gui " refers to entrepreneurs who have made good overseas and come back home. I think if we have more of such people in Singapore like that, that is not necessarily a bad thing. But having said that, we will make sure those things are corrected and it is

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not an excuse for inaccurate translations to occur. But it is better that translations are made, or that we at least attempt to make translations, than for us to say that we are so concerned with accuracy that we do not even take the risk for making translations.

Speaking of translations, I think Mr Low would also agree with me that we have made a lot of progress in ensuring multi-lingual signs at airports, MRT stations and other places, so that Singapore is now much more friendly for tourists who are coming here from various destinations.

Let me briefly touch on Integrated Resorts which Miss Penny Low asked about. The two IRs will widen the range of leisure and entertainment options available in Singapore and will generate significant economic benefits. During the submissions of the Request for Concepts last year, we estimated that the two IRs are expected to add about $1.5 billion for annual Gross Domestic Product and create some 35,000 jobs, direct and indirect, throughout the economy. We believe these figures are still valid. Of course, the actual numbers will depend on the actual proposals selected and how things work. It is obviously a fluid and competitive field that these two Integrated Resorts will be entering.

Miss Penny Low highlighted the fact that the winning IR proposal should be selected on the basis of our long-term strategic interest. Obviously so. We have calibrated the four main criteria. The main criteria are tourism appeal, 40%; architectural concept and design, 30%; development investment, 20%; and strength of the consortium partners, 10%. The criterion with the highest weight is tourism appeal and contribution. We are not just talking about the number of tourists that will visit in the first year of

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its arrival. This is a long-term project, and I want to remind Members of the House that when the private sector puts in such a significant amount of resources, they are going to want to make sure that this succeeds in the long term. So in the long term, I think we will get significant numbers of visitors, significant expenditures by those visitors, and we will get new and innovative entertainment concepts in those places, even the architecture.

Many people have asked why we have put such high weight on the architecture for the Integrated Resort at Marina Bay. First, it occupies a very central location within our new downtown and will, to some extent, be a defining feature of the area of that district. Secondly, unique and compelling architecture is a tourism attraction in its own right, and you only need to think of museums around the world which have had such an impact on tourism arrivals.

Let me conclude by saying that for the tourism sector, things are looking up. Our visitor arrivals last year reached a record high of 8.94 million, an increase of 7% over 2004. Tourism receipts grew by 10% to $10.8 billion. And we are well on our track to achieving our Tourism 2015 vision. But we will continue to be responsive to the needs of the industry, rethink old assumptions and take calculated risks. In the past year, we have taken many steps which will change our tourism landscape for many years to come. While we push new boundaries to make ourselves an appealing destination for visitors, we will ensure that we take appropriate social and security safeguards to make sure that we do not kill the goose that lays the golden eggs.

Mr Low Thia Khiang: Sir, I would like to seek clarifications from the Minister. I would like to know what concrete steps have been or would be taken by STB on the accuracy of tourism materials,

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especially pertaining to the Chinese Language materials. We had a year or two ago of this wrong translation on the Hungry Ghost Festival where it becomes " Xiong Ya Li Gui Jie ". Now we have a Chinese translation making sea turtles grandfather of Chew Joo Chiat. I think it will do well to make sure that it will not happen again.

I do not know whether the Minister is aware that when his good friend, Minister of State, Mr Chan Soo Sen, told him about " hai gui pai " , ie, the return of the entrepreneur from overseas, the same as the "hai gui" (sea turtles) is wrong. The " gui " in " hai gui pai " means "return", which has the same sound of " gui " as in " wu gui " (sea turtles). But it means a different thing.

Dr Vivian Balakrishnan: I am certainly not an expert in the Chinese Language, and I can assure the Member that STB does not rely on me to vet their translations. Having said that, one mistake is one too many and we will have to do our best to ensure that this does not happen again. The point I want to make is that I can never guarantee that there will be no mistakes in the future. But I would rather have a situation where we are making our best efforts to ensure that we translate material accurately and that it conveys interesting messages to tourists and also to our locals who read that material. I would like to thank Members of the House who, from time to time, if they see any error in our signboards, brochures, publicity materials or things on television, let us know, and we will fix it.

Dr Geh Min: Mr Chairman, I would like to thank the Minister for his very comprehensive reply and emphasis that it is not numbers alone that we are pursuing, but it is tourism receipts.

I would like to just clarify. I understand from what he said that we

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cannot increase the receipts without a certain increase in volume and that is why we are aiming to double our tourist numbers in 10 years' time, because there is no way we can increase the receipts to the desired level if we do not do that. Is that correct?

I would just like to follow that up and say that if we double our tourist numbers, at a conservative estimate, especially if we hope that they will stay a little bit longer and that they do not stay outside of Singapore, we will need 30,000-50,000 more hotel rooms, unless maybe we create "B and B" in HDB. This, to me, seems to be something that you cannot just create overnight. You have to put the land aside. Even if you involve the private sector, the private sector cannot act if URA does not give the land. I understand that, for example, Shangri-La only has about 800 rooms. So if we are creating 30,000-50,000 more rooms, this will be a big commitment in terms of land and resources. Of course, it will create jobs, yes, when we are developing, but do we want that many more hotel rooms? Is this not something that we have to plan in advance?

Dr Vivian Balakrishnan: The Member is absolutely right. This is not something which will happen overnight. That is why I said this has to be a multi-agency effort. In order to double the tourist arrivals, in order to lengthen the length of stay, we will need many more hotel rooms. But frankly, this is a good problem to have. It is much better to have a problem where I have a shortage of hotel rooms, and we have to ask URA to see whether there are more sites available or, indeed, to increase the intensity on development in those sites so that we can have those hotel rooms.

There are also other innovative solutions. As she has said, there are some people who are using homestay as an option. There will also be further spin-

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offs to hotels and places of residence around Singapore, outside Singapore as well , the use of ships, berths, in the national waters around Singapore. There have to be many more innovative ideas on how to house them. But the more important point is whether you are going to say that because we do not want so many tourists in Singapore, we turn our backs from an economic opportunity which is expanding right in front of our eyes. My attitude is this is too good a thing to turn away from. Let us find a way, sensitively, rationally and innovatively to tap into this opportunity without, at the same time, losing the greenery and security - the very reasons that bring people to Singapore in the first place. We will do this sensitively.

Government-linked Companies

Mr Lawrence Leow Chin Hin: Mr Chairman, Sir, the Government's move to divest businesses that are non-strategic and non-core is to be lauded.

On first look, the impending divestment of JTC's business to the private sector appears to be another move in this direction. However, on closer examination, it is a divestment that has raised several concerns.

Sir, in my opinion, the impending divestment of JTC's business is a divestment of a strategic business. JTC was established with the objective of making available industrial land and space at competitive rates to promote our economy. I feel that such a role of JTC cannot be replaced by the private sector and the divestment of JTC's business will bring with it wide-ranging implications.

First, what will happen to the price of industrial land and space after JTC diminishes its role as an agency that supplies industrialists with land and space

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at competitive pricing? Will it then lead to a rise in business cost?

Sir, the next concern relates to control and usage of industrial land and properties. At present, JTC can take back industrial buildings and facilities that are tenanted to companies

in old industrial estates and redeploy them. JTC could upgrade the old estates, redesignate or recluster them to meet the future needs of our economy. However, depending on the extent of the divestment, such control and flexibility over old industrial estates could be lost after divestment.

3.45 pm

Sir, I would like to put forth the following questions: first, why did the Government decide to divest JTC business, which carries with it implications across the entire industry and which is a strategic area that the Government should retain control? Second, what are the measures the Government has in place to ensure that industrial land and space would remain competitive after the divestment and that business cost would not be driven up consequently.

Town Councils

Mr Chew Heng Ching (East Coast): Sir, as the Coordinating Chairman of all PAP Town Councils in Singapore, I speak on behalf of my fellow Town Council Chairmen.

Since the liberalisation of the electricity market by the Government, Town Councils have been able to achieve some savings in electricity costs through directly purchasing electricity from retailers in the market. Sir, but this is limited to the larger utility accounts, ie, accounts with consumption of more than 10,000 kilowatt-hour per month. However, savings achieved to date by Town Councils are minimal as most of the utility

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accounts under the Town Councils do not exceed 10,000 kilowatt-hour per month consumption.

Sir, with oil prices on the up trend and increases in electricity tariff, Town Councils have been facing increasing electricity cost in the upkeep of their estates. It will certainly help Town Councils cope with the increase in utility costs if the Government would expedite the liberalisation of the electricity market to include accounts with consumption below 10,000 kilowatt-hour per month. I, therefore, wish to ask the Minister if he would expedite the liberalisation of electricity market to include the smaller accounts and, hence, allow Town Councils to enjoy lower rates of electricity consumption through economies of scale.

Consumer Protection

Mr Yeo Guat Kwang (Aljunied): Sir, the Consumer Protection (Fair Trading) Act (CPFTA) came into effect on 1st March 2004. Under the Act, financial services are expressly excluded. I hope MTI could amend the Act to include financial services this time.

Sir, there is also a need to look at the setting up of a framework on proper disclosure of information relating to the sale of time-share club and resort membership. In this regard, there is no need for a private Member's Bill to push for new legislation if we could just extend CPFTA to include regulatory framework to enhance transparency in this area.

On enforcement and effectiveness of CPFTA, Sir, CASE would like to highlight that businesses are now taking things lightly as they know that it is expensive for a specific body, like CASE or STB, to take up legal actions against them. Many ignore our invitation for them to sign the Voluntary Compliance Agreement (VCA). As the Act is silent on such delay, errant

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businesses are taking advantage of such a loophole. We should review the Act.

Sir, the Act should also be amended to protect specific bodies, like CASE and STB, from legal action when they publicise such unfair acts in the media.

Another CASE proposal is to include the introduction of the opt-in practice under CPFTA. I hope MTI could respond positively to all the proposed amendments to strengthen our CPFTA to better protect consumers' interest overall.

Last but not least, CASE would like to urge MTI to consider looking into the possibility of introducing what is commonly called the "Lemon Law". We propose that the "Lemon Law" applies to all consumer goods. Such a law would give the right to consumers to require the business to replace goods that are defective and are beyond repair. We could incorporate the "Lemon Law" into the Sale of Goods Act.

The Minister of State for Trade and Industry (Mr Chan Soo Sen): Mr Chairman, Sir, Mr Lawrence Leow asked the Government to ensure that when we divest companies, we do not create dominant market players that would undermine competition in the marketplace. As a general rule, the Government would observe the yellow pages rule and divest out of business where there is active private sector participation and there is no strategic value to the Government owning such businesses. The state of competition in the industry post-divestment would be a key consideration in any decision to divest Government holdings, so we proceed with a lot of caution.

In the case of JTC, we have announced on 21st November 2005 that JTC would divest its ready-built industry facilities in certain market segments, including 71 high-rise factory blocks,

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three business park buildings, one warehouse and 800 units of workshops. Since then, JTC has appointed a financial consultant to formulate a divestment plan, which includes exploring the possible modes of divestment and the implementation timeline. The plan will factor in the need for competitive market forces to work well post-divestment. We expect the divestment plan to be finalised by the middle of this year.

The divestment of these JTC properties will enhance market competition in the provision of industrial space over the long term. Companies will have more choices in the supply of industrial space to meet their various needs, especially in the high-rise factory segment where JTC would divest its 25% market share. Private sector industrial developers will be able to operate flexibly to accommodate industry needs and to provide good customer service. We will monitor the supply of industrial space and provide for an orderly release of industrial land sites through the Government Land Sales programme. This will help ensure that prices do not escalate unduly due to tightness of supply. In other words, we understand all your concerns. We will proceed carefully so that there will not be undue increase in business costs.

Mr Chew Heng Ching asked for a speedier liberalisation of the electricity market so that Town Councils can benefit from choosing their retailers. I believe this call would have resonance in many other sectors too. Since the electricity retail market started progressive liberalisation in year 2001, about 10,000 electricity consumers have become contestable. This includes about 172 electricity accounts that belong to the Town Councils. Town Councils may approach EMA on how to apply for contestability as there are criteria that they have to meet, such as a

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consumption of at least 10,000 kilowatt-hour per month and other technical requirements. Town Councils with contestable accounts have generally been satisfied with the utility savings achieved. EMA is currently exploring how to leverage on new technology to achieve cost savings in retailing electricity to smaller consumers so that they can also benefit from contestability. EMA will announce the details once they are ready. Hopefully, it will not take too long.

Mr Yeo Guat Kwang spoke on the Consumer Protection (Fair Trading) Act (CPFTA). I would like to assure Mr Yeo that anything to do with protecting consumer's interest will be positively taken into consideration by my Ministry. In fact, following Mr Yeo's suggestion in the Committee of Supply last year to review CPFTA, MTI has set up a taskforce to do so. The taskforce is co-chaired by MTI and CASE and it includes representatives from consumer and business bodies as well as public agencies. The taskforce has made several useful recommendations, one of which is to extend the scope of CPFTA to cover financial services. So MTI supports this recommendation and is currently working with MAS on the implementation details.

Mr Yeo also highlighted the difficulties faced by specific bodies, such as CASE, in dealing with errant retailers. The CPFTA has clearly laid out the circumstances under which specific bodies can file an injunction order. If an errant retailer refuses to cooperate or sign a Voluntary Compliance Agreement (VCA), I would encourage the specified body to follow through with the enforcement procedures and obtain an injunction order against the retailer. I think this may be a little bit troublesome, but it will send a clear and strong signal that the specified body will not hesitate to act against such retailers. So he may look for a good case on which to implement this procedure.

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Mr Yeo also raised a matter on the so-called "Lemon Law". This was something that the taskforce had also considered. But, given the extensive effect of this law and the recent developments in other countries, the taskforce has recommended that further studies be done. MTI will take into account the taskforce's various recommendations and conduct public consultation for the proposed changes to CPFTA regulations.

As far as the regulations on time-share are concerned, complaints against time-share companies have remained high, with 158 complaints lodged with CASE last year. MTI agrees with Prof. Ivan Png's workgroup that there should be proper disclosure of material information by time-share companies so that consumers can make informed choices. But MTI does not believe that the solution lies in incorporating a code of governance for time-share companies within CPFTA. Such a code is better set by the industry or a consumer body like CASE. The CPFTA is also not designed to have an on-going monitoring mechanism to ensure that the time-share company will continue to abide by a code of governance after a sale. This is better undertaken through an industry, or consumer-led scheme like CaseTrust, where there is an accreditation system to ensure continued compliance.

So, in short, I want to assure Mr Yeo again that, through the mechanism of consultation with CASE, we will continue to improve on measures to protect the interests of our consumers.

The Chairman: We still have some time left before the guillotine. Yes, Mr Lawrence Leow.

Mr Lawrence Leow Chin Hin: Sir, many of the SMEs are concerned that the industrial rental may end up like REITs' play in the retail malls where rentals only go up. So, would the Government consider getting feedback from the users

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of industrial space, and not rely solely on the consultant's recommendation alone?

Mr Chan Soo Sen: Sir, I would be very happy to do so if Mr Lawrence Leow's Association wants to organise one. I have already told him, during the ASME installation ceremony about a month ago, that I am always ready to go and listen, bringing along the officials who are responsible for the areas that he is interested in.

Dr Loo Choon Yong: Would the Minister of State be able to enlighten the House the mechanisms that he has put in place after the divestment of JTC to the private sector to prevent the industrial property price from going up so high according to market forces when there is a shortage, so much so that SMEs and other manufacturers would find it prohibitive to manufacture in Singapore and, thereby, eroding our competitiveness again?

Mr Chan Soo Sen: We do not believe this will happen. As I have explained just now, the way divestments would be done, we would do our homework - put in a lot of studies, engage financial analysts - to ensure things are properly done. At the same time, we also have a feedback and consultation mechanism with associations such as ASME. We can consider intervention if things go wrong, but we will first try to ensure that we would not come to that.

Dr Loo Choon Yong: I believe, Sir, that the best time to put in this kind of checks would be when you are divesting, not after you have divested and you want to change the ground rules. I think there are legal consequences when you want to do that. There is a bigger interest at stake here, which is our competitiveness in terms of land cost and cost of manufacturing. So I would urge the Minister to reconsider this and make sure that he puts in his divestment agreement

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something which will be indexed, so that we will not become uncompetitive. Taking feedback is one thing. Does he have the legal rights and power to redress the problem once it has happened? It is now a glut. Industrial properties have slackened. But think of the time when property prices doubled and trebled. Whoever bought your JTC properties is not going to turn away from good windfall profit.

4.00 pm

The Chairman: Any more clarifications? If none, Dr Ahmad Magad, are you withdrawing your amendment?

Dr Ahmad Mohd Magad: Sir, on behalf of the many Members who have raised cuts and questions, I would like to thank the two Ministers and the Minister of State for their extensive clarifications and responses they have provided.

On that note, Sir, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The sum of $457,397,860 for Head V ordered to stand part of the Main Estimates.

The sum of $4,379,748,000 for Head V ordered to stand part of the Development Estimates.