Committee of Supply – Head V (Ministry of Trade and Industry)

Debate in Committee of Supply resumed.

[Mdm Speaker in the Chair]

Economy, Internationalisation and Committee on the Future Economy

Mr Liang Eng Hwa (Holland-Bukit Timah): Mdm Chair, I beg to move, "That the total sum to be allocated for Head V of the Estimates be reduced by $100."

Mdm Chair, should we be concerned about the state of our economy? The economy grew by 2% in 2015 and we are expected to grow between 1% and 3% in 2016. So, by the aggregate macro indicators, we grew slower, but we are not in recession. Based on the Ministry of Trade and Industry's (MTI's) forecast for the year, we should not be in recession this year as well. But is this the situation on the ground? Based on sentiment surveys and many other anecdotal observations and feedback, businesses have reflected that times are bad and many are struggling to manage both top and bottom lines. Are we at risk of entering into a recession?

Well, the manufacturing sector is already in recession. It recorded its weakest performance in the last quarter of 2015, with a contraction of 6.7%. This is extending the decline of 6% in the preceding quarter. Manufacturing, which includes electronics and the oil and gas sectors, tends to be more outward-oriented and, hence, are directly exposed to the current weak global demand.

The services sector, which is more domestic-focused, grew at a moderate pace of 2.8% in the last quarter but the sector is faced with supply side constraints and margin squeeze.

The current narrative for the global growth outlook does not look good as well. Just two days ago, the International Monetary Fund (IMF) warned of the loss of growth momentum and frigidity in the global economy. Since the start of the year, uncertainty and downside risks have also increased, the state of China's economy being the foremost concern. If China dropped the ball on its reform to rebalance its economy, we could see a much sharper slowdown in its growth and it will hit us directly and immediately.

On the home front, we are pressing on with restructuring and industry transformation as laid out in the Industry Transformation Roadmap, pending the completion of the review.

Against these forces at play, what is MTI's latest view on the economy this year and whether our economy is resilient enough to cope with the external shocks and the internal restructuring? Does MTI intend to do more to help companies manage the downside risks and uncertainties?

To the credit of MTI and International Enterprise (IE) Singapore, several enhancements to existing schemes were announced last year, such as the Market Readiness Assistance Scheme and the Global Company Partnership Scheme administered by IE Singapore and new schemes, like the International Growth Scheme, amongst others, introduced to help companies which are internationalising.

I would like to hear from the Minister if the schemes have been useful or well taken up by the businesses. For this year's Committee of Supply (COS), would MTI introduce more support for companies, especially small and medium enterprises (SMEs) looking to expand overseas?

Mdm Chair, SMEs are a major pillar of our economy and their activities account for about half of our gross domestic product (GDP). Their continued growth and vibrancy are of utmost importance to achieving our goal of becoming an innovative and value-creating economy. As we restructure the economy, we have to help our SMEs build capabilities, including improving productivity, and seek growth opportunities through internationalising. The risks of SMEs being displaced as we restructure the economy are real. While it is not possible to save any single company from failing, our economic agencies should do their utmost to help the SMEs transform, upgrade and capture new growth opportunities.

Mdm Chair, the advent of disruptive technologies and the emergence of new business models are fast changing the economic order. We are not spared. But then, on the defensive, we should gear ourselves to ride on this wave of change and seize the new opportunities. Obviously, it will require us to reorientate and, more importantly, for the workers to reskill for the new types of jobs to come. Lifelong learning and continuous skills upgrading are the best defence against skills obsolescence and structural unemployment.

SkillsFuture can be the immediate tool available to workers to learn and safeguard workers' employability throughout their work life cycle. But I believe that MTI and its agencies can also work with the industries and companies to leverage the resources offered by SkillsFuture and ensure the skills readiness of our workers. It will require greater horizontal coordination and management attention on the part of the stakeholders involved so that we can achieve the desired state of right jobs, right skills and right match, as articulated by the Minister for Finance yesterday.

Finally, we are all excited about the set-up of the Committee for the Future Economy (CFE) and look forward to the recommendations of the Committee. In this era of fast-paced technological changes and never-ending innovation, it is increasingly challenging to predict product trends or to anticipate what the next big thing would be. In that regard, the CFE has a very tough job. Could the Minister also provide an update on the progress of the CFE so far?

The Chairman: Mr Cedric Foo, you have three cuts. Please take them together.

Criteria for Foreign Investments

Mr Cedric Foo Chee Keng (Pioneer): Thank you, Mdm Chair. This is on the Government's criteria which are used when attracting and incentivising inward foreign investments into Singapore.

The Economic Development Board (EDB) was established in the 1960s to assist the newly independent Singapore to create jobs for Singaporeans by attracting foreign investments to our shores. All these years, EDB has done an excellent job, successfully attracting many multinational companies to Singapore and creating many jobs for Singaporeans.

However, today's economic and job considerations for Singapore are very different from past decades. Land is becoming scarcer and there is also a "social limit" in the number of foreign workers that Singapore can accommodate. Robotics, automation and offshoring are also replacing workers in many sectors, including jobs held by professionals, managers, executives and technicians (PMETs).

I would, therefore, like to ask the Minister how MTI and EDB will go about addressing such factors as I have described. Most importantly, how would his Ministry seek out or attract companies and industries abroad which will best create jobs with skills requirement that matches what our Institutes of Higher Learning (IHLs) are producing and that are more resilient to automation and offshoring?

If we can do this well, we can then attract the right companies to be based here to provide high-quality and more enduring jobs suited to our local conditions and also the skillsets that Singaporean workers either possess now or those skillsets that our IHLs are producing.

ASEAN Economic Community (AEC)

Mdm Chair, next, on the establishment of the ASEAN Economic Community (AEC) as of 31 December last year. The underlying principles of AEC are the free flow of goods, services, investments, capital and skilled labour. Many Singapore businesses are excited about AEC as there will be lower barriers to trade and investments. AEC could also lead to the expansion of financial products and services in the Association of Southeast Asian Nations (ASEAN) region and could benefit Singapore as ASEAN's regional financial hub.

Conversely, there are some views here in Singapore that our workers may not benefit as they will lose jobs as other ASEAN countries attract investments to their shores. Workers here are also concerned about job losses as Singapore companies based here right now may relocate production or services to cheaper and more barrier-free ASEAN countries.

Would the Minister share his views on these common fears and whether or not they are valid? What can Singapore companies and workers do to minimise the negative implications of AEC and to capitalise on the benefits offered by AEC?

I do take note at this point that free-trade agreements are not necessarily a zero-sum game, as Minister Vivian Balakrishnan has spoken about just now.

Trans-Pacific Partnership (TPP)

Third, Madam, is on the Trans-Pacific Partnership (TPP) agreement.

Mdm Chair, the TPP portends to offer many benefits to Singapore and Singaporean workers. On 4 February this year, it was signed by 12 member countries − Singapore, the United States (US), Japan, Malaysia, Vietnam, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru. Representing Singapore in Auckland for the TPP signing was Minister Lim Hng Kiang himself, and the Minister had spoken about the benefits to Singapore investors and businesses of a more open, predictable and transparent regional marketplace.

4.15 pm

The Minister also noted that the TPP signatories comprise nearly 40% of world trade and account for more than 30% of Singapore's total trade. The leaders of the other TPP members also hailed the agreement, with US President Barack Obama saying that the TPP would give the US an advantage over other leading economies, naming China as one that the US would have advantage over, and it is a trade deal "that puts American workers first".

However, in contrast to that view, there are many anti-TPP protesters who blocked streets in Auckland, with protesters indicating their concerns that "the TPP is less about jobs and more about big businesses and corporate greed", to borrow their words, and highlighting fears that the TPP was weighted in the US' favour. Yet, on the other hand, various US Presidential candidates have recently threatened not to recommend a ratification of the TPP by the US Congress. If anything, the views are, indeed, very varied and sometimes conflicting.

Can the Minister describe exactly what benefits the TPP will usher in beyond the various free trade agreements and economic partnerships that Singapore currently already has? Is it true that the TPP is weighted in the US' favour and provides less benefits to other countries and Singapore? Most importantly, beyond benefits for corporations, what are the benefits to Singapore workers? There are some, in our midst, who are worried that such free trade agreements may mean that Singapore will open its doors more freely to other professionals coming to Singapore to work. Can the Minister clarify this issue, because I believe that these are quite of concern to many Singaporeans, especially in light of the slowing economy?

TPP and Singapore Businesses

Mr Pritam Singh (Aljunied): Mdm Chairperson, I first spoke on the TPP and its impact on Singapore's businesses at the debate on the President's Address in 2014. Then, I had asked the Government to flesh out the opportunities and pitfalls awaiting our local SMEs when the TPP is ratified. I also suggested going at this in a big way, beyond communication with chambers of commerce and business federations, so as to encourage greater entrepreneurship amongst our people.

The TPP is likely to remain on the backburner at least until a new US President is sworn into office. However, the reality of not just TPP, but all future trade agreements should be considered with the launch of SkillsFuture and the national drive towards lifelong learning. Trade agreements are sometimes conceived of as the domain of larger SMEs, multinational corporations (MNCs), tax agents and other specialists.

However, it would be useful if the Government can identify areas of growth and greater access for enterprise under the TPP for Singapore, so that Singaporeans with the passion for enterprise and business can align their careers and skills upgrading plans to reap the benefits of our trade agreements. I hope the Ministry can consider this and, at the very least, organise a webpage or similar public resource for such a purpose.

Services Trade Performance

Assoc Prof Randolph Tan (Nominated Member): Mdm Chair, I would like to speak about Singapore's performance in services trade. The services sector's share of the economy has been rising. In recent quarters, with manufacturing in a recession and shedding jobs, it is the services sector that has held up the economy and prevented it from falling into a full-blown recession.

One increasingly important aspect for the performance of the services sector is its exports. Data from the Department of Statistics show that services export grew by about 200% over the period 2003 to 2013, compared to merchandise exports which only grew about 60% over the same period. This difference shows the potential which the services sector has in the future economy.

Unfortunately, the services trade balance turned negative around the year 2000 and has continued in negative territory for much of the time since. In 2015, services trade performance deteriorated, with growth rates of both exports and imports almost flat. How much of a concern are these developments for the Singapore economy? What is MTI's outlook on the impact that recent agreements, such as the ASEAN Economic Community and the TPP, will have on services trade performance? Will we be able to exploit the opportunities offered by these agreements, specifically, not just to improve merchandise trade, but also services trade?

We have examined the drivers of services export. We find that three areas which contributed quite significantly to the weak balance were telecommunications, computer and information, charges for the use of intellectual property, and research and development (R&D). So, my final question is: are the initiatives for promoting R&D and innovation coordinated with specific strategies to strengthen our trade performances in these areas?

Economy and Job Creation

Miss Cheryl Chan Wei Ling (Fengshan): Mdm Chair, businesses are faced with sharpening domestic constraints and grappling with structural transformations. I would like to ask MTI what our strategy is in generating sustainable economic growth and continue creating jobs for Singaporeans.

With dynamism in the economy and growing regional competition, we need to take a multifaceted approach to develop an ecosystem that continuously creates jobs for Singaporeans. As a start, I suggest we need a strategic outlook on what makes up this ecosystem and how to find traction within each of these spaces. Logically, it begins with an end point of what potential industries we can attract or create in and out of Singapore.

As we move up the value chain and innovate within some of the traditional markets or industries, we can identify which we aspire to be in or in becoming a significant representation of. As Mr Cedric Foo has pointed out, EDB has actively scouted for such partnerships in the past and created opportunities for the players to leverage our human capital in Singapore. I think we need to accelerate this search for potential partners once again and create some cohorts of relevant talents in these fields.

With internationalisation, we should view our offices through a global lens. The critical connection between Singaporeans and our work locations should be the people, and not the offices. Our reputable Singapore brand gives us a notch in the international arena, and I think our younger generations should be adventurous in wanting to learn new skills and take opportunities beyond our local shores. It is a different perspective, but one that strengthens our human capital and extends our job horizons over the years.

For more sustainable businesses, especially those in niche areas, it is necessary for us to generate end-to-end support functions in order to thrive. Cost and labour are commonly some of the concerns and would foresee us not being a manufacturer in Singapore for some aspects. But our role in the most critical levers within the ecosystem would be the value that we seek to position ourselves and transform ourselves into.

Trends in Manufacturing and Innovation

Dr Tan Wu Meng (Jurong): Mdm Chair, nationally, manufacturing's share of Singapore's nominal GDP has declined from 21.4% in 2010, to 19.8% in 2015. But manufacturing still has a very key role in our economy. We should keep updating and strengthening our manufacturing sector to keep up with global trends: moving up the value chain and, especially, building and providing products to the world that other global cities are not able to or which would have difficulty matching us.

This seems a big aspiration, but it is also something that could bring us strategic value. Because high-end manufacturing supports an ecosystem of jobs and services, such as engineers and skilled workers, and many sectors that support innovation and technology that support the communities nearby.

We must also continue building a Singaporean Core with the necessary skills. SkillsFuture has great potential here as it helps get Singaporeans ready for the jobs of tomorrow. But what about the industries of tomorrow, Mdm Chair?

In 2013, the McKinsey Global Institute published a report on disruptive technologies – an important global trend. Technologies, such as: (a) additive manufacturing, 3D printing, which is going to disrupt supply chains around the world, because once it becomes easier to 3D print a part in the same town, you may not have to import it from further away; (b) cloud computing, which is going to disrupt the traditional market for local computer resources if you can use a cloud computer; (c) multi-touch interfaces that are disrupting the keyboard, mice and traditional input devices; and (d) automated knowledge work with intelligent assistants that can understand queries in natural language, whether it is the iPhone's Siri or the Cortana product that Microsoft has been working on. They may not have invented a Jarvis yet, but we can see these disrupting what is the work of a traditional personal assistant.

The McKinsey report mentions one key learning point which is very important to Singapore in my view: we maximise value creation when multiple disruptive technologies come together. Because when you put multi-touch screens, intelligent assistants, cloud computing together, you get something very similar to the iPhone or a Samsung smartphone. So, each technology could be an industry on its own, but it is together, when they converge, that they create transformative new markets.

As we prepare for the future economy, we can position Singapore this way, bringing multiple innovations together; not just a hub, but a hub of hubs. Research is not just an ivory tower. Research can improve the lives of people. It can touch people from all walks of life. When recombinant DNA technology was invented many years ago, people thought it was an ivory tower invention. Yet, today, it is fundamental to so many medical treatments, including the insulin injections that many diabetic patients rely on.

We should also incentivise companies to invest for the long term. Clayton Christensen has written about "The Capitalist's Dilemma": short-term shareholders seeking short-term results. This affects R&D investment. So, we should look at ways to encourage long-term investing, perhaps by aligning shareholder influence with shareholder duration. I look forward to the Ministry's inputs.

Help for Manufacturing Sector

Mr Yee Chia Hsing (Chua Chu Kang): Mdm Chair, our manufacturing sector's share of GDP has declined over the past few years. Last year, notwithstanding that GDP for the whole economy has increased by 2%, the manufacturing sector has contracted by 5.2%. The three sectors which have shown the highest growth rates are: (a) wholesale and retail trade, (b) finance and insurance and (c) information and communication.

Given that Singapore has progressed to be a more services-oriented economy, I would like to ask what is the Government's view on the importance of manufacturing to Singapore's economy and what is our approach towards developing and helping the manufacturing sector. In the face of intensifying competition from the region, how can we help key manufacturing sectors transform, innovate, grow and compete globally?

Global Trends

Ms Sun Xueling (Pasir Ris-Punggol): SMEs face developmental issues due to lack of resources and little access to information. I would like to discuss two areas where we can work with trade associations and chambers (TACs) to help our SMEs.

Firstly, on the demand side. The use of big data in business is increasingly prevalent and will become de rigueur. Big data can be used to predict footfall of customers at different times of the day, types of customers that frequent shops, time spent comparing products and even time spent at different parts of a store. With such knowledge, retailers can play with product mix, price elasticity and store layout to maximise revenue.

With big data analysis, their ability to understand, predict and even direct customer behaviour will only increase. How do we enable our SMEs to have access to the same information? Can we work with TACs and IHLs to do big data analysis on consumer behaviour and make available the analysis and public data banks so that our SMEs can leverage them to optimise their offerings and compete effectively?

Secondly, on the supply side, research institutes and large food and beverage (F&B) companies invest in research, innovative packaging to extend the shelf life of food products. Proper control of heat and choice of wrapper can increase the shelf life of products by 40% and also provide consumers reheating and microwavable options. This helps save cost for companies with respect to refrigeration, reduces spoilage during transformation, and increase marketability of products. Can we work with our TACs to keep our SMEs abreast of the packaging technology being researched on and provide them access to technology?

Industry-level Coordination

4.30 pm

Assoc Prof Randolph Tan: Mdm Chair, the Industry Transformation Programme is a significant addition to the economic landscape in Singapore. It is meant to push for change in the entire industry by working hand in hand with stakeholders at the organisational level. It could turn out to be the type of penetrating approach which is needed to overcome resistance to transformation at the industry and firm level.

Similar, though not identical, industry-level schemes have worked elsewhere. Nonetheless, I have some basic questions about whether overcoming a natural instinct of businesses to view businesses as competitors is possible and, even if it were possible, would it be worth the cost.

Improving the degree of industry-level coordination is key to the Industry Transformation Programme. Previous efforts, such as the Local Enterprise and Association Development (LEAD) programme, have shown what the potential challenges could be. In his Budget round-up speech, the Finance Minister yesterday gave the assurance that anti-competitive practices will not be allowed to creep in.

At the other end of the spectrum, there are also coordination challenges. Is industry-level coordination capable of producing a level of cooperation that can be balanced against the natural competitive instinct? As part of an open market economy, will the potential contradictions in seeking to coordinate entities which are supposed to be natural market-oriented competitors take an excessively heavy toll on the coordinating teams?

I understand that these coordinating teams will be formed from public servants from various agencies. So, will the coordination roles of these public servants result in public service agencies and personnel incurring heavy costs on resources? And would it end up impacting the work of the Government?

Finally, how will such industry-level planning for transformation mesh with sectoral manpower planning?

The Chairman: Mr Henry Kwek, you have two cuts, please take them together.

Industry Transformation Programme

Mr Kwek Hian Chuan Henry (Nee Soon): Mdm Chair, thank you for letting me take the two cuts together. My first cut is on the Industry Transformation Programme.

The Ministry of Finance (MOF) has announced the Industry Transformation Programme. As I have mentioned in my Budget speech, this is a bold and necessary move, one that will take Singapore into the next phase of economic development. For the public's benefits, can MTI share how this new approach is different from the current approach and how our sectors and companies will benefit?

Strengthening our Startup Ecosystem

During the recent debate on the President's Address, I shared my concerns that we must strengthen our startup ecosystem. Our outward-facing mainstream economy is facing intense global competition and we must quickly transit into the future economy as startups play an increasingly prominent role. What is the progress of the Government's efforts to develop a startup ecosystem and does the Government plan to do more to support the growth of startups in Singapore? I look forward to hearing MTI's views on this matter.

Startups

Mr Azmoon Ahmad (Nominated Member): Mdm Chair, good afternoon. Thank you very much for giving me the time to speak. I am speaking about startups. Startups are like babies, so, I call them the babies of the industry.

I read an article which sums up the outcome of the Forbes Under 30 Summit in Tel Aviv held recently, which discussed the experiences and lessons learnt on startup companies, amongst many things. It was noted that many startup companies fail, not because they had bad or good ideas, but mainly due to the process of execution. The mistakes the companies made were that they are too focused on the big picture, the big idea and even the product itself and the broad concept. What they missed is spending time on turning the business plan into a thriving business. As the saying goes, "The devil always lies in the details".

In Singapore, we can see a growing number of startups recently, especially in the high-tech domain. I believe it is a positive trend and I also believe they need a lot of support. Apart from having a good idea and the will to venture and start his or her own company, these budding entrepreneurs should also be guided in execution of their business plan. In this light, start-ups can also learn from industry professionals who have the experience and knowledge in turning business plans into desired results.

Vice versa, we should also encourage industry professionals, companies and other voluntary organisations to come forward, participate and contribute to this new and growing trend. The knowledge transfer from one to the other will not only benefit the startup, but also the nation at large. With this, we can start an ecosystem where a buddy-and-mentor relationship can be forged within the startup.

So, my question here, Ministers, is: will the Ministry be willing to consider and provide incentives to professionals, companies and voluntary organisations which are willing to come forward to guide and mentor these budding entrepreneurs and technopreneurs?

Working Capital Loan

Mr Leon Perera (Non-Constituency Member): Mdm Chairperson, there are a number of Government loan risk-sharing schemes. Budget 2016 has set up a new working capital loan scheme with 50% risk-sharing. I would like to ask: is there any evidence the Government can cite and, if not, can a study be done to assess if, indeed, these loan schemes are effective in inducing banks to lend to SMEs, when they otherwise would not?

Even partial risk-sharing is still a risk to the bank. And when there are other options for the banks to use their capital, such as lending to large corporates, risk-sharing may not be enough.

I have heard from some SMEs that even if the bank has to bear less than 50% of the risk, many banks still behave as if that is a significant risk. When applying for loans, many SMEs, even fairly large ones, still face high interest rates, small quantums, requests for personal security guarantees, or outright rejection on grounds, such as inconsistent revenues.

Is there any survey evidence to suggest that SMEs feel that they are out of the woods in terms of access to finance? There would not appear to be any. In fact, the reverse is true. In a Singapore Business Federation (SBF)-DP Info survey last year, the index measuring expectations for access to financing fell to its lowest levels since 2013. The low-risk appetite of banks and lack of credit information on SMEs could be one cause.

In Germany and Japan, countries with vibrant SMEs, links between regional banks and regional companies are critical to ensure access to capital. Other countries also have Export-Import (EXIM) banks suggested by the Economics Strategies Committee in 2010. An EXIM bank with a clear mandate could have provided finance to SMEs to tap on the regional market of over three billion people to grow and become competitive.

The Workers' Party has, in the past, called for the EXIM bank idea to be reexamined with a focus on SMEs. Access to capital is an issue that warrants both fact-based analysis and review of counter measures, including the EXIM bank idea, if our SMEs, which account for two-thirds of employment, are to maintain and create jobs for Singaporeans.

R&D

Ms Foo Mee Har (West Coast): Mdm Chair, the Government recently announced the new plans for our $19 billion Research, Innovation and Enterprise (RIE)2020 effort. It is vital that we maximise our returns from our R&D spend, a critical investment that takes a significant share of our budget expenditure even as our fiscal position gets tighter.

I support the Government's sharpened focus on growing our capabilities in research translation, innovation and facilitating startups, so that research and innovation can be applied to our economic and social needs.

Germany has a robust system of applying R&D to drive innovations in their businesses. One factor that facilitates this is the practice where professors at German universities often hold concurrent appointments overseeing R&D at industry groups, allowing for seamless testing and implementation of research initiatives. I would like to ask the Minister how our future approach to R&D will differ from those of the past. How will the Government support linkages across R&D value chains to bring technology inventions from the laboratories into our industries and grow strong industry clusters?

Madam, I am heartened to read in The Business Times that SMEs' 2014 R&D expenditure surged 38% to $800 million. I would like to ask the Minister what percentage of the $800 million is a function of Government support and whether such expenditure translates to an increase in competitiveness and productivity.

I would also like to ask the Minister for his insights on the performance of R&D in the various sectors and how such insights will help guide future Government funding support, including how SMEs can tap on the RIE2020 to drive innovation and scale up their businesses.

Research and Innovation

Ms Chia Yong Yong (Nominated Member): Mdm Chair, during the debate on the Budget Statement, I urged hon Members that we should consciously work towards owning intellectual property (IP) rights arising from innovation. At the very least, we should own IP rights which are of strategic value to Singapore.

My point was simple: without ownership, we do not have the liberty to own, use and exploit such IP for Singapore. If ownership flows out of Singapore, we not only lose the opportunity for value creation, growth and revenue, we run the risk of being rendered obsolete. We must, therefore, have safeguards against the inadvertent use of our funds and resources to equip our competitors.

Mdm Chair, lest I be misunderstood, I wholly support research collaboration, including collaborations with non-Singaporean entities. There is much that we can learn and benefit from such collaborations. I understand there has to be give-and-take. All I am saying is that in giving and taking, we must know what we want to take for what we are willing to give.

Why this on and on about ownership? Because it is intimately and ultimately affecting the flow-through from our research, the flow-through to Singapore, which is why I would like to know the requirements in place, or the requirements that will be in place, to ensure that Singapore's rights to IP created through its funding are adequately secured. I would like to know the Government's requirements in the retention of valuable foreground IP to benefit Singapore and to be commercialised by Singapore entities.

Here, I would like to clarify that when I refer to Singapore, I am not referring to the Government alone. I am not arguing that all IP rights must be owned by the Singapore Government, but rather that the IP rights must be owned within Singapore, whether it is the Government, industry, enterprise or individuals. Of course, I would also prefer very much that grantees of Government funds for purposes of research and innovation would use the IP that they own and grant licences to the Government for national applications.

Economic impact and community impact – we have a lot of talk about that. We need to know what the measurable outcomes should be – long-term, mid-term, short-term, tangible, intangible. Therefore, I would like to know the guidelines and principles, applied and to be applied in the settings of key performance indicators (KPIs). Who determines such KPIs? I would also request to know what the consequences of not meeting KPIs may be.

Last, but not least, I would be grateful if the Minister could comment on the structured framework suggested in my speech during the debate, that is, for the larger involvement of industry as client, rather than feedback provider, and as IP owner and recipient of research grants.

SMEs to Leverage Research Innovation Enterprise (RIE)2020 Plan

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mdm Chairman, the Government has announced the new plans for our $19 billion RIE2020 effort. So my question is: has Budget 2016 already incorporated the fact that companies, especially SMEs, have the possibility of leveraging on RIE2020 to innovate and create value?

I wish to highlight the importance that R&D can play for SMEs. In the case of Japan, with its shrinking workforce, we have witnessed how crucial R&D has been for not only sustaining the workforce with innovations to boost productivity, but also inventing new technologies that are admired and sold worldwide.

As a small country, we have limited manpower and natural resources. Other countries with more resources are always going to do better when it comes to mainstream products and services. Our SMEs must rise above the crowd with unique selling points and innovative products and services, and that can only be achieved through R&D. But R&D may be costly and may not be easily accessible for some.

I would like to propose that SMEs be encouraged to tap on R&D more prevalently. Some measures could include giving them easier access to R&D institutes, polytechnic research units and usage of unused IP technology so that they can enhance their business, and to conduct laboratory tests, for example, at lower costs at our research institutes or polytechnics.

National Robotics Plan

Mr Leon Perera: Mdm Chairperson, the National Robotics Plan is one of the initiatives in Budget 2016. I would like to speak about social robots, which are robots designed for human interaction, company and assistance.

4.45 pm

Social robotics is now a recognised field that has spawned industry conferences, global collaboration and much investment. I am aware that social robotics is far from new to Singapore. Late last year, the Nanyang Technological University (NTU) unveiled Nadine, a life-size robot. A*Star Social Robotics Laboratory was launched in 2008. The National University of Singapore and other institutes have social robotics programmes but, to the best of my knowledge, Singapore has yet to bring to market a commercially successful social robot product to compete with, for example, Pepper, the iconic social robot from Japan, which is now selling around 1,000 units per month, even though it is not Jarvis.

Mdm Chairperson, I wish to speak about the relevance of social robotics to two fields in Singapore where we are facing growing needs and which can provide test beds for new products: our eldercare and our preschool sectors.

In the eldercare space, I must stress that social robots should never replace genuine and loving human contact from family, friends and caregivers. Having said that, social robots could be designed to interact with older Singaporeans in various languages. They can also monitor vital signs, help dispense medicine, answer questions verbally, help connect phone calls, obtain emergency help and so on.

In the preschool space, social robots could complement the vital role of teachers in the classroom and provide an amusing and engaging way for children to learn and also receive classroom assistance. This might help raise the productivity and effectiveness of our preschool teachers. An example is KASPAR, a social robot designed by the University of Hertfordshire in the United Kingdom (UK) to help children with autism learn responses from the robot through games and interactive play.

Even though the Japanese seem to have a lead in this space, Mdm Chairperson, Singapore is well-placed to prototype and test bed social robots for the eldercare and preschool markets in Asia, given the Asian multi-ethnic and multilingual nature of our society. I hope this is an area that can receive attention from policymakers and be a subject of collaboration between local enterprises and the R&D sector.

The Chairman: Mr Low Thia Khiang, you have three cuts. Please take them together.

Nuclear Energy

Mr Low Thia Khiang (Aljunied): Madam, in 2010, MTI published the results from their Nuclear Feasibility Study. In it, they recommended that nuclear energy was currently not yet suitable for Singapore, but that we needed to "keep our options open for the future".

Both Indonesia and Vietnam have mooted plans to build nuclear power plants. If Indonesia builds a nuclear power plant, there is always a possibility that an earthquake could cause a disaster on the scale of Fukushima and the weather patterns and ocean currents would bring the nuclear fallout to Singapore. Even without natural disasters, a nuclear plant located anywhere in the region would produce a large amount of nuclear waste that would need to be disposed of.

This waste is significantly radioactive and would take tens of thousands of years to be rendered safe. Extremely stringent security must be in place to ensure that this waste does not fall into the hands of terrorists. The waste can be used to make a so-called "dirty" bomb, which would be a very effective weapon of terror. Is Singapore prepared for such a risk?

This is not a remote threat, as Prime Minister Lee has revealed at the Nuclear Security Summit in Washington that Singapore authorities have intercepted a cargo with nuclear material. It is good to know that the Government has tightened its export control regime, upgraded radiation-screening technology at the ports and is building a border laboratory.

The National Research Foundation created a five-year programme in 2014 to conduct research and education into nuclear safety, science and engineering. It aims to train about 10 people a year to produce about 100 nuclear experts at the end of 10 years. However, in two years of operation, the research programme has only managed to train nine people, which is fewer than the target. Could the Government give an update on the progress of the programme and the results?

Energy Security

Madam, Singapore is dependent on foreign imports for its energy needs. Over the years we have reduced our dependency on oil and have increased our use of natural gas for power generation, from 74.4% in 2005 to 95.5% in 2015.

While gas-fired plants are among the most efficient and gas is the cleanest fossil fuel, with more countries importing liquefied natural gas (LNG), we are going to face more competition for LNG sources. This heavy dependency on natural gas opens us to risks of spikes in prices and disruption of supplies. In the medium to long term, what is the status of other energy options that we are looking at to further diversify our energy mix to improve our energy security?

The ASEAN Power Grid (APG) has been mooted in 1997 under the ASEAN Vision 2020 towards ensuring regional energy security while promoting the efficient utilisation and sharing of resources. Would we be able to tap on these energy resources under the programme? What is the current status of the APG project?

Currently, electricity tariffs are calculated based on fuel oil prices. In the past, when the rationale for linking our electricity tariffs to fuel oil prices was that there was no distinct market in Asia for the price of natural gas, hence, indexing its price to fuel oil prices is the next best alternative.

Earlier this year, the Singapore Exchange (SGX) started up a new index for LNG known as SLInG, which provides an industry pricing benchmark. Should we consider now factoring in the LNG Price Index in our formula for electricity tariffs to better reflect the actual costs of power generation?

Energy Market Authority (EMA)

Madam, in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] Singapore has progressively opened the retail electricity market since 2001. As at today, there are 890,000 users who can choose their own electricity suppliers, ranging from large-scale plants to small shops.

The Energy Market Authority (EMA) launched the Electricity Vending System as early as 2007. In 2010, EMA launched a trial of the Intelligent Energy System, and in 2012, it rolled out Phase 2 of the trial in Punggol New Town.

During the COS debate in 2013, Ms Sylvia Lim had enquired about the above trial. She had asked if there are plans to fully liberalise the retail electricity market in the near term. At that time, the Minister only elaborated on the sophisticated technology involved, but did not reveal the results of the trial and the operation of the system.

Mr Iswaran, Minister for Trade, announced last October that Singapore's retail electricity market will be fully liberalised in the second half of 2018. This will allow the remaining 1.3 million users, who are primarily domestic home users, to have the flexibility to choose a supplier according to their electricity usage habits. They will be able to choose the electricity price package, just like choosing a mobile phone service package.

The full liberalisation of the market in 2018 may be good for the domestic users. However, if they do not understand how the retail electricity market operates, they may not be able to choose a price package that will help them save on their electricity bills.

I would like to ask the Minister, if there are any plans to help the public understand the full liberalisation of the electricity market. As this change will impact our entire population, does the Government have any plans to kick-start the publicity campaign earlier, so that people have enough time to digest the news?

The difference between domestic users and commercial users is that one may need to communicate with domestic users in a language other than English. Are authorities well-prepared to roll out the publicity in different languages?

Hitting our Renewable Energy Targets

Mr Louis Ng Kok Kwang (Nee Soon): Madam, as a small, resource-constrained island, we import almost all our energy needs. Therefore, it is important that we plan ahead and find more sustainable ways to cater to our energy consumption. We also need to find more environmentally friendly ways.

However, due to various technical issues with different forms of renewable energy resources, we can only really rely on solar power. It is estimated that by 2030, we could potentially be tapping on renewable energy to contribute up to 8% of Singapore's peak electricity demand. In addition to our focus on research to improve the performance of solar systems, what further steps are we taking to reach our renewable energy goals?

The Minister for Trade and Industry (Trade) (Mr Lim Hng Kiang): Mdm Chair, I would like to thank Members for their comments and suggestions.

Mr Liang Eng Hwa asked about the global economic outlook and the implications for Singapore's economy. The global economic recovery has been weaker than expected and the IMF has again downgraded its global growth forecasts. It has done so almost every year since the Global Financial Crisis. We are now in a paradigm of slower growth, compared to the previous decade. Meanwhile, there are significant global rebalancing forces that must work themselves through over the next three to five years.

First, the key developed economies have been implementing loose monetary policy through measures, such as quantitative easing and low interest rates, in an attempt to revive their economies. Some of them have even introduced negative interest rates. This is unsustainable in the long run and these economies will have to normalise their monetary policies at some point. As the monetary policies normalise, it will affect financial and currency markets as well as capital flows around the world, especially in emerging economies.

Second, the reforms in China are creating a "new normal". Besides rebalancing towards consumption and services-led growth, China has also been increasingly in-sourcing the intermediate goods and services required to produce its manufacturing output, rather than importing them. While China is making this transition, the countries which trade with China will also be affected because supply chains will have to adjust. In Singapore, we will need to find new growth niches in order to remain relevant as China makes its adjustments.

Third, in commodity markets, there has been an oversupply of oil in the global market due to over-investment, leading to a sharp drop in oil prices. With growth in global oil demand expected to remain weak, further adjustments in global oil supply will have to be made. As a result, there may be continued uncertainties surrounding oil prices.

In addition, we will face structural adjustments domestically because of our demographics and ageing population. The local workforce will continue to grow, but at a slower rate than before as more Baby Boomers approach retirement age. Overall workforce growth will be around 1%-2% per annum for the rest of the decade. While all sectors will have to adjust to the tighter supply of labour, labour-intensive services sectors, such as food services, will likely be more adversely affected.

The factors above point to an uncertain economic environment for the next few years. Against this backdrop, we expect Singapore's economic growth to remain modest between 1% and 3% this year. When we are on a slow growth trajectory of 1%-3%, some sectors will grow more strongly than the 1%-3% range and some sectors will be below the 1%-3% range. As Mr Liang Eng Hwa observed, this means that, for some sectors, they are contracting and feel like they are in a recession. This is one of the consequences of a low-growth trajectory. And that is why we are also addressing the challenges at the sectoral level.

Given the current global economic outlook, Mr Liang asked how the Government will help companies ride through this difficult period. We recognise that companies are facing headwinds. The Government is watching the situation very closely and we are prepared to take further action, if necessary. We remain committed to working with companies to overcome these challenges. Let me highlight a few key initiatives.

First, given the tightening credit situation, we are introducing measures, such as the SME Working Capital Loan. This will allow SMEs to access unsecured working capital of up to S$300,000 to complement existing financing schemes to support viable SMEs. Mr Leon Perera asked whether the loan scheme would sufficiently incentivise the banks to extend loans when they otherwise would not. As the Government will co-share 50% of the default risk of the loan portfolio with the participating financial institutions, we expect this to catalyse approximately $2 billion of total loans to companies over the next three years.

The second broad thrust is to provide more support to help companies restructure and transform as well as develop critical capabilities. One way is through the Automation Support Package, which can help companies to improve their productivity by scaling up through automation adoption.

5.00 pm

The third broad thrust is through the provision of infrastructure. The needs of the different sectors are quite diverse. JTC has, therefore, developed a pipeline of innovative developments for the various sectors to better cater to their different needs. Some of the facilities that will be ready this year include Aviation Two @ Seletar Aerospace Park, Chemicals Hub @ Tuas South, Space @ Gul and Space @ Tampines North. Others, like the Food Hub @ Senoko, Furniture Hub @ Sungei Kadut and Logistics Hub @ Gul, will be ready in the next few years, and were developed together with the trade associations and companies to ensure that they meet the specific needs of these sectors. Companies should, therefore, take this opportunity to consider regrouping and consolidating their space and land requirements, and leverage these new facilities to achieve better operational efficiency and higher productivity.

Such transformation will require deep partnerships between the Government and industry, and among the industry players to develop a more competitive sectoral response. We recognise that implementation is key. TACs can do more and, in fact, they want to do more, but are constrained by their limited resources. This is why we are introducing a new LEAD+ programme, which will help TACs to strengthen in-house capabilities in four ways.

First, strengthen leadership within TACs, such as through consultancy support for strategic plan development.

Second, build capability in TAC secretariats, including training to manage corporate functions. The Government is also prepared to second up to 20 Public Service officers over the next five years to TACs under this LEAD+ programme.

Third, develop robust processes, particularly in the areas of human resource, information technology and finance, and enhance their branding of TACs.

Fourth, enhance TACs' ability to provide services to companies, such as market research and technology mapping.

Apart from strengthening TACs' capabilities, we will also partner TACs to drive 30 Collaborative Industry Projects (TAC-CIP) over the next three years. TACs will source for bottom-up, scalable solutions to industry-specific productivity and innovation needs. We expect this programme to benefit over 3,000 SMEs.

For example, the Waste Management and Recycling Association Singapore (WMRAS) led a project to encourage the mass adoption of automated canvas covers for the trucks used in waste collection. A total of six service providers were engaged to pilot this adoption for 39 companies in the waste management industry. Expected outcomes include a 25% increase in productivity of each truck, improvement in working conditions and, therefore, manpower retention, as well as improvement in workplace safety. Minister of State Koh Poh Koon will elaborate on our partnership with TACs when he responds on the segment on SMEs.

Mdm Chair, as we stay the course on economic restructuring, we will continue to ensure that Singapore remains open and attractive to foreign investments. Mr Cedric Foo asked about our foreign investment attraction strategy. We have adopted a targeted approach towards attracting foreign investments that take into account our competitive advantage, growth opportunities as well as constraints in manpower, land and planned international commitments on carbon emissions.

For example, we will continue to pursue opportunities arising from growth drivers, including the rise of consumerism and urbanisation in Asia. Our investments in advanced manufacturing capabilities, such as robotics, 3D printing and digital manufacturing, will also position our manufacturing sector well for the future. More importantly, our efforts must translate into good job opportunities for Singaporeans. We have a comprehensive suite of manpower development initiatives, in partnership with the industry and the Institutes of Higher Learning (IHLs), to ensure that our workforce has the right skillsets to take up the new jobs that have been created. Parliamentary Secretary Low Yen Ling will elaborate on this later.

Beyond attracting companies to Singapore, we are also working to establish stronger trade linkages to support Singapore companies looking to expand overseas. Assoc Prof Randolph Tan asked about our 2015 services trade performance and the opportunities from the AEC as well as TPP.

While our services trade balance is, indeed, negative, the deficit has generally narrowed over the past 10 years. In fact, over the period 2010 to 2014, our services exports have actually recorded robust growth of 8.6% on a compound annual growth rate (CAGR) basis and continue to be a good engine of growth. The slowdown in Singapore's services export growth in 2015 was in line with the weakening global trade environment. Nevertheless, amidst this slowdown, we observed that export growth in the financial services as well as telecommunications, computer and information services sectors remained healthy.

Over the longer term, the outlook for these services sectors remains promising, given the rise of the middle class and urbanisation in regional economies like ASEAN. Specifically, AEC and TPP will provide opportunities for us to expand the reach of Singapore's services exports and facilitate services trade flows to our major services export markets.

Mr Cedric Foo and Mr Pritam Singh asked about the benefits of AEC and TPP to Singaporeans and Singapore companies. AEC will benefit Singapore companies over a broad spectrum of sectors. Virtually all goods now flow throughout the ASEAN region tariff-free. This allows our businesses to trade and gain market access into the region while bearing practically zero customs duties. Restrictions have also been eased in at least 80 services sectors. ASEAN countries now allow majority foreign ownership in many sectors. Along with ASEAN's commitments to facilitate, promote, protect and liberalise cross-border investments, Singapore companies can now venture into the region at lower costs and with greater investment protection.

The engineering services sector provides a useful example of how our companies can benefit from AEC. Singapore companies can now own a 100% stake in Indonesia's engineering design and advisory services, as well as in Myanmar's engineering and construction services sectors. Our companies can also benefit from legally-binding guarantees of preferential services market access in the ASEAN region.

Mdm Chair, regional integration is critical in strengthening Singapore's value proposition as a gateway into Southeast Asia. The tighter the regional integration, the stronger our value proposition as a gateway to ASEAN. Therefore, as a small country, Singapore must adopt an inclusionary approach towards trade agreements. This is why we are a founding member of key trade agreements like the Regional Comprehensive Economic Partnership (RCEP), TPP and the eventual Free Trade Area of the Asia Pacific (FTAAP). Being part of such agreements allows us to influence the rules of engagement and, where possible, enables us to enhance demand of manufactured goods and services from Singapore.

Regional trade deals like the TPP enable us to improve our market access beyond what we already have under our bilateral trade agreements. For example, despite the fact that we have the US-Singapore FTA (USSFTA), few of our automotive parts manufacturers would export to the US today. This is because the US also has the North American Free Trade Agreement (NAFTA), which has created a very competitive automotive supply chain amongst the US, Canada and Mexico. However, when the TPP enters into force, Singapore will have direct access to all the NAFTA markets and, because the rules are applied commonly to all TPP countries, Singapore automotive parts manufacturers may become a competitive supplier of auto parts to TPP countries over time.

In other sectors, such as textiles, our companies, likewise, have difficulties utilising the US-Singapore FTA to enter the US market at a preferential rate, because too little of the raw materials are being produced in Singapore. With the TPP, however, more of the raw materials that we process will count towards being "TPP or Singapore made". Our garment manufacturers can, therefore, look forward to sourcing more competitively from the TPP region and focus on keeping the high-value aspects of production in Singapore, knowing that their exports will now enjoy a comparative advantage because of this "regional cumulation" effect. This is a very significant development, especially for our SMEs in the textile and garment sector.

MTI has been actively engaging businesses on the benefits of the TPP through platforms such as the recent SME Convention 2016. We will work closely with our TACs and our economic agencies will develop more sector-specific outreach sessions.

Mdm Chair, agreements like AEC, RCEP and TPP will enhance the competitiveness of our companies as well as our workers, and support the creation of good jobs for Singaporeans. The SkillsFuture movement will prepare Singaporeans to take advantage of the evolving job landscape and opportunities provided by these regional economic integration efforts. Specific sector plans will be targeted at upskilling workers in both the traditional areas, such as retail, as well as the emerging areas, such as finance technology, or Fintech. MTI is one of the key agencies supporting SkillsFuture and we will continue to work with the various Government agencies to support our companies and workers.

Mdm Chair, we can confidently address the regional and global challenges facing us because Singapore has a strong foundation from which to work from. This includes our strong legal and physical infrastructure, our well-diversified economy and an educated workforce. We need to build on these strengths and continue to implement measures to stay competitive. That is why it is timely to reiterate the key principles that will continue to remain relevant in the years to come.

First of all, as a small economy, we must remain open and connected to grow the external wing of our economy. Our external economy can continue to contribute significantly to our GDP and good jobs. So, we must look at opportunities that lie beyond our shores in markets, such as ASEAN and beyond.

Second, we need to leverage the small size of our economy to our advantage and be more nimble, adaptable and flexible. We must adapt to changes brought about by the rebalancing of the global economy. We cannot simply remain business-as-usual and we cannot be afraid of change, or we will be left behind.

Third, we need to leverage key trends and our strengths to develop growth areas that can create value, and invest in future growth engines to spur our economy. We must prepare ourselves for the future and the Committee on the Future Economy was, therefore, established to leverage these opportunities.

Mdm Chair, through these efforts, we will ensure that Singaporeans will continue to benefit from our economic growth. As the global economy rebalances, we will continue to work with businesses to stay the course on economic transformation and ensure that Singapore remains attractive to foreign investments. Our economic growth strategies will enable us to seize regional as well as global opportunities to create more value. Together, we can continue to create good jobs for Singaporeans and ensure that we are well-positioned for the future.

5.15 pm

The Chairman: Minister Iswaran.

The Minister for Trade and Industry (Industry) (Mr S Iswaran): Mdm Chairperson, I thank all the Members who have spoken on our industry development strategy. They have raised a wide range of questions which I will now endeavour to address.

Miss Cheryl Chan has asked about our strategy to generate sustainable economic growth and create good jobs for Singaporeans. This, in fact, is the focus of CFE, which Mr Liang Eng Hwa enquired about.

Madam, the CFE is the latest in our continued effort to look ahead and prepare for longer-term challenges and structural changes, even as we manage some of the short-term cyclical challenges in our economy. We have done so previously with the Economic Review Committee in 2001; and the Economic Strategies Committee in 2009. And this resolute focus on the long term has really been our hallmark, you could say even our competitive advantage, in the way we have worked on the economy.

In consultation with industry leaders, the CFE is studying the trends that will underpin the next wave of growth markets and sectors. And it is a national effort to understand the threats and opportunities these trends present, and what we need, in this next phase, in terms of corporate capabilities, connectivity, infrastructure and skills so that we can sustain our economy well into the future.

Madam, changes in global trade patterns, market integration that Minister Lim has talked about and also new technologies and novel business models that Mr Liang and Ms Sun Xueling referred to, these are some of the forces that are reshaping the global economic environment. They are disrupting industry structures and value chains and also changing the nature of jobs.

China's in-sourcing of intermediate goods and services, similar trends in the US in terms of re-shoring, will have a major impact on distributed manufacturing networks and cross-border supply chains. Meanwhile, India, ASEAN and other emerging markets have a growing middle class that is demanding more and sophisticated products and services.

New technologies are blurring traditional industry boundaries and creating hybrid sectors like Fintech. They transform existing industries. For example, if you look at 3D printing and advanced robotics, they can revolutionise manufacturing. Many Members have talked about it. The impact is in terms of rapid prototyping, optimised design and vastly improved efficiencies.

Digital technologies, such as big data, Internet-of-Things (IoT), artificial intelligence, and Cloud, these enable innovation and new business models to access markets and address evolving preferences of consumers anywhere in the world at any time. For example, e-commerce is transforming retail. In fact, there is an article on this today in The Straits Times, with big data and predictive analytics allowing retailers to better target customers in whichever market.

These changes, coupled with our domestic constraints, affect different sectors differently. An enterprise level response, while necessary, is not sufficient, given the nature and the scale of these challenges. So, we need broader sector-focused strategies that systematically harness innovation, talent development and partnerships, to sustain the competitiveness and growth of our economy and industries. And that is the essential thrust of the Industry Transformation Programme.

So, how will we do this? I want to illustrate using the manufacturing sector. Dr Tan Wu Meng commented on its strategic value and Mr Yee Chia Hsing asked for the Government's view on its importance.

Madam, the manufacturing sector is a key pillar of our economy that accounts for nearly 20% of nominal GDP in 2015. Though that is slightly lower than in 2010, largely due to the relatively faster growth of financial and insurance services, amongst others, the real value-added of the manufacturing sector, in fact, increased by $4.6 billion over the same period. That is a compound annual growth rate of about 1.4%. Some commented on the decline last year. But that was due to the impact on one or two particular sectors, especially offshore and marine, due to the oil-related impact.

Manufacturing productivity is also higher and has grown faster than the overall economy. From 2009 to 2015, the real value-added per actual hour worked in the sector grew by 6.1% per annum, higher than the 2.7% which is for the overall economy.

And manufacturing, which employs more than half a million people, continues to provide good jobs not just in the sector alone, but in related areas like R&D, after-sales services and distribution. In 2015, more than 60% – six out of 10 – of the resident workers in the sector were in skilled jobs. This is higher again than the overall economy. Median wages in the manufacturing sector are also higher than that for the overall economy.

In addition, the sector generates healthy spillover benefits for the rest of the economy, through its wide range of industry inter-linkages. Based on MTI's estimates, a $1 billion increase in manufacturing value-added due to an increase in final demand will generate about $300 million of value-added and 2,400 jobs in the rest of the economy. So, the spillover impact is substantial. For all these reasons, manufacturing remains important to our economy.

But the nature of manufacturing is changing and we must undertake several measures to ensure that the sector is well-positioned for the future. Let me talk about some of those measures.

First, we want to invest in advanced manufacturing technologies, such as additive manufacturing and robotics, and also promote their adoption across different verticals. The global robotics industry is projected to grow from about US$27 billion last year to about US$80 billion in 2025. To seize this opportunity, we will invest over $450 million through the National Robotics Programme (NRP) in the end-to-end development of robotics technology. This will include public-private partnerships among research institutions, companies and public agencies, to pilot robotics technology applications across various industries.

We will support the mass adoption of robotics across sectors to drive productivity. In fact, EDB and the Standards, Productivity and Innovation Board (SPRING) are working with technology partners and system integrators locally to develop standardised and scalable modular robotics solutions. This will allow SMEs to mix and match these modules to suit their needs and, importantly, the cost of adoption can also be reduced by about 50%. These are important upfront work that we need to do in order to not just come up with solutions, but encourage its adoption.

Mr Leon Perera would be interested to note that there are potential robotics applications in the services sector that are currently being worked on in Singapore to automate manual tasks, raise productivity and address manpower challenges. In eldercare, the use of assistive technology can ease the burden on healthcare professionals and caregivers, and nursing homes, such as Peacehaven, are already exploring possible applications. Similarly, with the Singapore Tourism Board's (STB's) support, two robots will be deployed from July this year in Park Avenue Rochester Hotel for housekeeping and back-of-house functions, such as transportation of linen, refuse and bulky items. So, if you go there, you may not see it because it is operating at the back-of-house. But there are plans to take it further to the front-of-house for the delivery of luggage or room service to guests.

The adoption of robotics in areas where you have human interface, what Mr Leon Perera called social robots, would take more effort. Precisely because of the human interface, a lot more effort needs to be done, in terms of how you calibrate these devices in order to serve their purpose and to be able to respond. But there are significant efforts being made and part of it is, of course, what we are trying to do in some of these verticals.

Secondly, in terms of new business models in manufacturing, many of these are emerging. It is expanding the notion of manufacturing and we are working with the industry to capture those opportunities. Let me give Members an example.

Medical technology firms are using analytics – Members have talked about it – to go beyond producing medical devices to providing digital healthcare solutions. So, they are enlarging the value proposition, such as the remote monitoring of medical conditions. EDB and the Ministry of Health supported the Eastern Health Alliance to establish their innovation team at Changi General Hospital to work with the industry and test-bed new healthcare solutions. This team partnered Philips Healthcare to jointly develop a tele-health programme for heart failure patients in Singapore, to care for their health and, more importantly, to reduce the risk of re-admission via tele-monitoring, education and customised care plans. EDB also worked with Philips to establish its Asia-Pacific Centre of Excellence for its hospital-to-home business units in Singapore.

This is an example of how a firm that was in manufacturing of medical technology (medtech) is also moving into larger solutions or related service activities which complement manufacturing. This is something we want to work on and there are other examples in aviation, aeronautics and so on.

Dr Tan Wu Meng highlighted the need to bring together the industries and disruptive technologies of tomorrow. I think this is very important because many new opportunities actually lie precisely at this confluence of different industries and new technologies.

Physical proximity is one means to encourage greater interaction among enterprises, solution providers and researchers that can spark novel ideas and create new products. We have done this at one-north, which is home to some 250 leading companies and global institutions, many incubators, startups and public research institutes and they, collectively, create about 40,000 jobs. This rich ecosystem has spawned many collaborative projects in biomedical sciences, infocommunications, physical sciences and engineering.

The Jurong Innovation District (JID) can do the same for the manufacturing sector, with several new growth areas that can be housed there, for example, advanced manufacturing, robotics which I mentioned, urban solutions, cleantech and also smart logistics as an extension. It will host the entire value chain, which will include R&D, design, prototyping, production and supply chain management, and have access to NTU's research and engineering capabilities. JTC LaunchPad @ JID will be ready in 2017 to support startups, incubators and accelerators.

[Deputy Speaker (Mr Charles Chong) in the Chair]

But ultimately, Chairman, we must ensure that our people benefit from these changes and the opportunities, as Dr Tan Wu Meng has emphasised. Under SkillsFuture, the tripartite partners are working closely with education and training institutions to equip Singaporeans with the requisite skillsets under various sectoral manpower plans. Sir, may I have your permission to display some slides on the LED screen, please?

The Chairman: Yes, please go ahead. [Slides were shown to hon Members.]

Mr S Iswaran: Thank you. One example of a Singaporean who has acquired new skills to meet the needs of his industry is Mohd Jamil Bin Mohd Said from Sanwa-Sayama Precision Engineering Pte Ltd. Mr Jamil joined Sanwa in 1998 as a technician specialising in mold-making. In 2012, he enrolled in the Precision Engineering Master Craftsmen Programme conducted by Nanyang Polytechnic where he acquired technical skills, such as machining process design.

Upon graduation with the Workforce Skills Qualification (WSQ) Diploma in Precision Engineering Master Craftsmen Skill and a WSQ Specialist Diploma in Precision Engineering, Mr Jamil now oversees the mold-making team and facilitates the automation of machining processes. This is a very good example and there are many others like him. We need similar efforts across all sectors and Parliamentary Secretary Low Yen Ling will elaborate further.

Members would have noted that partnerships are central to these industry transformation efforts. Assoc Prof Randolph Tan asked whether such coordination and cooperation can be balanced with the natural competitive instincts of an open-market economy. On the face of it, Chairman, this inherent tension seems irreconcilable. Yet, if we look at our track record and experience, we have always encouraged and nurtured close partnerships among quite diverse stakeholders in our economic system; some of them are "natural partners" and others could even be competitors. Let me illustrate what I mean.

We have supported "natural partners" through schemes, such as the Partnerships for Capability Transformation (PACT), where large enterprises upgrade their suppliers' capabilities, through sourcing and qualification processes, and that is mutually beneficial. Last year, PACT was enhanced to support activities like joint product development between larger enterprises and their suppliers. So, there is co-development.

5.30 pm

We have also brought together competitors in collaborative projects. An example of that is A*STAR's Aerospace Research Consortium, which brings together Airbus, Boeing and Embraer, to undertake pre-competitive research into complex problems facing the industry. This is not just about collaboration with the Government, but also within the private sector. More companies are embracing the idea of open innovation and working collaboratively. These partnerships are not dysfunctional. They are born out of the recognition that even competitors stand to benefit when they cooperate in certain parts of the business process, either because it is an area which is very complex or where the barrier costs are very high. So, a collective effort tends to achieve a much better outcome and they can all share in it.

Mr Henry Kwek and Assoc Prof Randolph Tan asked how the Industry Transformation Programme differs from our current approach. At the enterprise level, the Government will continue to support our companies in their innovation, productivity, skills upgrading and internationalisation efforts. However, as I have mentioned and we have heard in the comments by many Members, the nature of the current trends and challenges is such that it calls for broader strategies at the sectoral level. We need measures which the market may not be ready to supply or adopt. Take, for example, the case of modularised robotics solutions. It may not be quite market-viable yet. We could call this market failure or perhaps market gap. We will need to act proactively in order to generate the solutions which can be adopted.

Under the Industry Transformation Programme, what we can do is bring stakeholders and our resources together, with scale and focus to proactively support each sector's development and response to the differing challenges that they face. And we do not underestimate the scale of this challenge. This is a point that several Members have made.

Industry Transformation is challenging and will require deep partnerships among large and small companies, public research institutions and private enterprises as well as TACs and, of course, Government agencies. Each will bring an important perspective. Centres of innovation, for example, will have a view on the technology landscape. TACs will have a better grasp of industry trends and what the needs of their members are. Unions will have a view on how skills training and workforce development can take place. We need to bring all these together to address some of the most salient issues in the medium to long term for our sectors.

To coordinate and execute the industry transformation effort, we will appoint "cluster champions" from agencies like EDB, SPRING and IE Singapore. But they are not the only ones, because there are other agencies looking at different sectors. I understand Assoc Prof Randolph Tan's fears that this might impose an excessive administrative burden. However, based on our experience, the plans that are being formulated should result in a tighter coordination of efforts and a more effective use of our resources. We will have to implement and work on this, and it is going to be an iterative process as we go forward.

Sir, the Industry Transformation Programme will be complemented at the enterprise level by efforts to support businesses to adopt technology, and key to this is the Automation Support Package which was announced in this Budget. Over the next three years, $400 million of support will be available for more than 300 automation projects. This will comprise three elements: the enhanced Capability Development Grant (CDG) which supports 50% of full-scale automation project costs up to $1 million; the new 100% Investment Allowance (IA); and the enhanced Local Enterprise Finance Scheme (LEFS).

Let me illustrate how a company could benefit so that this is crystalised. Mr Tan is the owner of a local medium-size food manufacturer, with plans to automate and increase production for export. He engages a system integrator to study the automation project, with a consultancy and installation fee of $200,000. He then invests $1.8 million to purchase three robotic arms and a conveyor belt system that integrates the packing and palletising process.

Under the enhanced Capability Development Grant, Mr Tan will receive a support grant of $1 million, defraying $100,000 of consultancy and installation fees, and $900,000 for the cost of capital investments. And Mr Tan will also receive a 100% Investment Allowance on the remaining capital investment of $900,000, which will translate to about $153,000 of tax savings. Finally, Mr Tan can obtain financing for the equipment purchase from financial institutions participating in the enhanced LEFS. And as Members know, the Government's risk-share has been increased from 50% to 70% for SMEs. This should improve Mr Tan's chances of securing a competitive loan.

With the capacity to scale production, he can also tap on IE Singapore's schemes, such as the Market Readiness Assistance and Global Company Partnerships, in order to go overseas. So, taken together, this is a package which will deliver substantial benefits to SMEs that are prepared to take the decision to automate. That decision will also give SMEs the capacity to think about going overseas and entering new markets, for which there are also support schemes available.

Sir, let me now turn to the issues beyond industry transformation and, in particular, the need to fuel growth and value creation by generating new ideas, products, services and business models. Entrepreneurship and innovation are two important enablers of this. Many Members have spoken on this. Mr Henry Kwek asked about the progress of our efforts to develop a startup ecosystem.

Over the years, startup activity has increased, with the number of startups in Singapore more than doubling from 24,000 in 2005 to 55,000 in 2014. Our startups have also attracted more investor interest, which is one measure of their quality. The number of venture capitalist deals doubled from about 70 in 2007 to 140 in 2013, with aggregate deal value increasing seven-fold from $120 million to $860 million. The number as well as the value of these venture capital funded transactions have been significant in the startup space.

Importantly, our efforts to nurture the startup ecosystem have allowed budding entrepreneurs to fulfil their aspirations. One example is Assoc Prof Tina Wong. She is the co-founder and CEO of Peregrine Ophthalmic, a local biotech start-up. With SPRING's support and, together with co-founders, Deputy President and provost of NTU, Prof Freddy Boey, and Chair of the School of Material Science and Engineering at NTU, Prof Subbu Venkatraman, Assoc Prof Wong has developed the world's first sustained-release nanomedicine for ophthalmology for the treatment of glaucoma. Her startup has attracted the attention of the world's top five pharmaceutical companies and will make inroads into the global glaucoma drugs market worth US$4.3 billion, potentially benefiting up to 80 million glaucoma patients by 2020.

Mr Henry Kwek also asked about the Government's future plans to support the growth of startups in Singapore. We plan to support the startup ecosystem by supporting innovative companies to scale through: (a) internationalisation; (b) partnerships; (c) an enabling regulatory environment; and (d) talent development.

First, on internationalisation. There are more and more opportunities for a startup to scale through digital internationalisation. Indeed, you could say that many of these companies are born global because, from the moment they start, they can access international markets. BeMyGuest (BMG) is a local startup that recently became the first Singaporean company to be featured on Fast Company's "World's 50 Most Innovative Companies List 2016" for its online travel platform. IE Singapore supported this company in its digital integration with Ctrip, China's largest online travel agency. This has allowed BMG to establish tie-ups with 25 other Chinese partners and increase bookings by over 100 times in a period of nine months. That is the power of digital access to markets. And this year, the company is also working with IE Singapore to penetrate other Asian markets, such as Japan, India, Indonesia and Korea.

SPRING and IE Singapore will continue to support our companies, especially the startups, to build capabilities in these areas, such as customer analytics, social media marketing, mobile commerce and digital platform development, to benefit from the global digital economy.

Second, on partnerships. What we see more and more of are large enterprises embracing open innovation to access new technologies and ideas. EDB and SPRING have, in fact, been working with many MNCs and large local enterprises (LLEs) to undertake corporate incubation and venture activities, as well as co-innovation partnerships with our startups. What this means is that with such partnerships, our startups will have the financial resources, expertise and networks to scale.

On regulatory environment, let me use the medtech industry as an example. The Health Sciences Authority (HSA) has been adopting a risk-based approach to the regulation of medical devices by ensuring that the controls commensurate with the risk of the devices to individual health. HSA has also expedited approvals for devices that have been cleared by reference agencies. More recently, they have introduced an online Medical Device Risk Classification Tool, which allows companies to quickly identify the risk classification of a medical device within five to 10 minutes. This is important because the risk classification tells them the kind of regulatory hurdles they face. And these five to 10 minutes, to put it in context, are much faster than the previous one to two weeks of paper-based processing. HSA and many of our other regulators are exploring how we can create an enabling environment without compromising their core regulatory objectives.

Mr Azmoon Ahmad asked about our efforts to nurture entrepreneurs. We will continue to provide support for mentorship through initiatives, such as SPRING's Incubator Development Programme (IDP). Under IDP, incubators and accelerators are supported with grants to enhance their capabilities and programmes, including the engagement of mentors. Through the 21 incubators and accelerators supported under IDP, about 90 industry professionals have been engaged to provide mentorship and expertise to our startups. This is something we can scale according to the needs and responses.

Let me now move on to the point on innovation. I agree fully with Ms Foo Mee Har and Ms Chia Yong Yong who emphasised the need to ensure that value is created for Singapore from our $19 billion investment in RIE2020, and our broader investments in R&D. Our investments in R&D have strengthened our innovation ecosystem and created value for Singapore. One measure is the number of research scientist and engineer jobs in Singapore, which has increased from 19,000 in 2004 to 33,000 in 2014. That is a significant increase and, importantly, 70% of those jobs are held by locals. So, we have been able to grow our local capacity as well.

Another measure is the business spending on R&D, which has doubled from $2.6 billion to $5.2 billion over the same 10-year period, catalysed by public spending on R&D. So, on the one hand, the businesses have been catalysed to spend more on R&D, and we also see a commensurate enhancement in our capacity, especially in the local talent pool, to meet those needs.

Importantly, our R&D investments have also enabled new industries to grow. Our biomedical sciences (BMS) R&D initiative, which was launched in the 2000, has spawned a strong BMS sector, contributing over $12 billion in value-added (VA) and employing more than 18,000 people in 2014. As a reference, if I remember correctly, in 2000, VA from the BMS sector was about $4 billion.

To assure Members, we also have a framework to track the KPI of our R&D investments. These range from input measures, such as R&D intensity and researcher intensity, relative to comparable economies so that we have some benchmarking, to measures of the quality of the research, such as citations and papers published, and measures of value creation, which several Members have talked about, through commercialisation, including licensing and spinoffs.

5.45 pm

Ms Chia asked about the treatment of IP ownership arising from R&D activities. In general, A*STAR retains ownership of the IPs that it develops; where an IP is jointly developed with a collaborator, including from the private sector, the IP may be jointly-owned. And we have multiple mechanisms to facilitate the use and commercialisation of that IP later on. Licensing is one, but there are other mechanisms.

Beyond the licensing of IPs, we also have longer-term initiatives to align our R&D investments with the needs of companies and the economy. The Industry Alignment Fund (IAF), which was introduced under RIE2015, seeks to tighten the linkages between R&D capabilities and the industry's needs. We are trying to bring the research in our institutes closer to industry, and IAF is one mechanism to do that. IAF has supported about 600 projects to date. These projects were carried out in collaboration with industry by our public sector research institutes and also pertain to developing capabilities needed by the industry.

Under RIE2020, the IAF funding will be increased by $200 million to $1.8 billion. We are adding to that Fund because that is where we want to emphasise the R&D efforts in the way it is aligned with the industry.

The IAF is also being adapted to meet the changing needs of industry, which are becoming more complex and need to tap on a diverse spectrum of capabilities. For example, Nestle sees opportunities in combining traditional food manufacturing with sophisticated biomedical knowledge, especially on nutrition and formulations. The Nestle Research Centre Asia was established here to leverage A*STAR's research capabilities to develop new nutritional products.

We will allocate about $660 million to this form of IAF-Industry Collaboration Projects, which will draw on the best researchers and capabilities across our public sector research community. And this goes to the point about what we expect in return – we require tangible contributions from industry partners in cash, in terms of the resources they commit and the longevity of that commitment, as a measure of their commitment to the projects and the projects' relevance to industry. Very often, these commitments are also in parallel with other kinds of activities the industry partners are undertaking in Singapore.

I just want to make one final point on this. I know this was not the intent of Ms Chia Yong Yong's comment. The Member qualified it but I would like to restate it. We should be cautious not to adopt a parochial attitude towards innovation or the ownership of IP. That is a very important thing to bear in mind. Some of the best outcomes in innovation are produced when it is undertaken in an open and collaborative manner. We must preserve that environment in our R&D ecosystem. Hence, we must maintain an open innovation ecosystem that fosters collaboration among multiple stakeholders, whether they are public or private, large or small, local or foreign. Such R&D activities bring many other valuable benefits to Singapore which I have enumerated.

Ms Foo Mee Har, Mr Saktiandi Supaat and Ms Sun Xueling rightly pointed out that innovation should play a key role in the push for our SMEs to transform. And we will enhance SMEs' access to technologies and expertise. One way is through the Intellectual Property Intermediary (IPI) under A*STAR, which has helped our companies source technologies locally and overseas. So far, they have matched, I am told, more than 70 companies.

Recently, this intermediary was transferred to SPRING. Through SPRING's network amongst SMEs and TACs, I think the level of technology transfer that is relevant to the needs of SMEs is going to be significantly improved.

There is also an initiative to simplify licensing terms for SMEs. I was very pleased to learn that A*STAR's licensing agreements are now shorter and use simpler language. We can all do with simpler language and it has reduced the time required for licensing significantly.

We will also do more – and I think this is something that is noteworthy for Members – to grow the in-house innovation capabilities of our SMEs. A*STAR and SPRING's GET-Up Programme actually seconds our public researchers in our IHLs, research institutes and polytechnics to SMEs to undertake innovation projects. So, they become the employees of that company to work on their research blueprint, in order to develop particular solutions. In many cases, they have gone on to become commercially valuable. To date, we have more than 600 researchers who have been seconded to SMEs. Under RIE2020, we will enhance the programme to second senior research scientists and engineers (RSEs) to SMEs.

Sir, may I, finally, turn to our goal of ensuring a secure, reliable and sustainable supply of competitively-priced energy to our economy?

Mr Low Thia Khiang asked about the Government's plans to enhance and diversify our energy sources. We have taken significant steps in this regard. Our LNG terminal, which commenced operations in 2013, allows us to geographically diversify our sources of natural gas, which is our main source of energy. Just to take up Mr Low's point, you could say that we are intensifying our use of LNG. But what we are actually doing with the LNG terminal is diversifying geographically our sources of natural gas. That is a very important strategic step and something that should not be underestimated in terms of its value to Singapore. We have been expanding the terminal capacity and the fourth tank could be completed by 2018, which would take throughput capacity to 11 million tonnes per annum. EMA is studying the need for more.

There are some questions on renewables which Parliamentary Secretary Ms Low Yen Ling will take up. We are also studying the feasibility of electricity imports in the medium to long term. That is where the ASEAN Power Grid is relevant. It is really a plan to have a network of the grid infrastructure for an integrated ASEAN electricity market. To date, Members may not be surprised to hear that six of the 16 planned bilateral interconnection projects have been completed, including one between Singapore and Peninsular Malaysia.

Mr Low Thia Khiang asked about the potential impact to Singapore should our neighbours embark on a nuclear power programme. The pre-feasibility study, which the Member noted was completed in 2012, concluded that the currently available nuclear energy technologies were not yet suitable for deployment in Singapore. However, we are strengthening our capabilities to understand nuclear science and technology to allow us to assess the implications for Singapore of evolving nuclear energy technologies and regional nuclear energy developments.

In April 2014, the Government announced the plan for a $63-million Nuclear Safety Research and Education Programme to support capability development in this space. It comprises the Singapore Nuclear Research and Safety Initiative focusing on research and developing capabilities in nuclear safety science and engineering, and the Nuclear Education and Training Fund to support education and training in these areas. It works on a wide range of areas and I am happy to furnish more information. But so far, four of the research projects have commenced in 2015 and the remaining five are expected to commence in 2016.

In terms of scholarships, so far, nine scholarships have been awarded. Mr Low Thia Khiang commented that it is lower than expected. Well, the only comment that I would make is that this is a rather specialised field. It is not so easy to get people in their applications to say, "Let's take up the scholarship to go and do nuclear studies". What we have done is to reach out to try and attract students to take this up, and we will continue to invest in these efforts significantly. Importantly, it is also about working together with other nuclear technology partners in other established venues like in France and the US and so on, which adds to our knowledge and ability to build up the core of Singapore-based capabilities to understand this space.

Finally, on the responsibility of countries that deploy nuclear energy, they have to be accountable to their population and to the neighbouring regions to ensure that high safety and security standards, based on those set by the International Atomic Energy Agency (IAEA) and international conventions, such as the Convention on Nuclear Safety, are adhered to. This is both on aspects of operations as well as issues of disposal of nuclear waste which Mr Low Thia Khiang mentioned.

It is important that our region collectively build and strengthen our emergency preparedness and response as nuclear and radiological emergencies have basically no boundaries. We are working with the ASEAN countries through the ASEAN Network of Regulatory Bodies of Atomic Energy (ASEANTOM) and IAEA to strengthen cooperation in this area and to share radiation monitoring data.

Mr Low Thia Khiang has asked if electricity prices can be delinked from oil and linked to natural gas or LNG instead. It is quite ironic because, right now, we actually have lower electricity prices because of lower oil prices. So, we should be careful what we wish for. Having said that, the crux of the matter is not about picking which is going to be cheaper because, at some point, oil prices may be low; at other times, it may be high, and we will see a similar impact on gas prices.

What we really want to do is to allow options in Singapore where the buyers of gas have the opportunity to create a portfolio which they think best suits their risk appetite and hedges against the movements that they are concerned about. So, SLInG, which Mr Low highlighted, is one possibility. It is very new and not quite ready yet for that sort of indexing, but we think that it has potential and we have to see how the market responds.

There is also the question of full retail contestability. As announced, the plan is to have full retail contestability in the electricity market by 2018. Certainly, well before we embark on that, we will need to have a comprehensive education programme to make sure households and individuals understand.

Having said that, I want to make two points. First, we need to get the system right before we talk about communication. So, that is what the work is on now. The system is not just about the technical aspects but also the potential suppliers, how they will come in and what kind of packages they offer. Secondly, we also want to make sure that there is a default fall-back option for households, precisely because some of the households may not be able to fully appreciate the decisions or may not want to make those sorts of choices. These are some of the policy aspects that are being worked out. Once we are ready, we will embark on an education programme to socialise our households to the opportunities.

Sir, I have addressed the key points and I want to end by emphasising that the fact of the matter is our economy faces important challenges arising from all the forces we have talked about. It calls for proactive measures at the sectoral level, even as companies try and adapt to some of the challenges that they face. So, we are responding with efforts like the Industry Transformation Programme (ITP) and also through efforts to boost entrepreneurship and pervasive innovation in order to create value in the economy.

I would conclude by saying that it is a formidable task but not insurmountable. The key is that we have all parties on board in order to achieve the objectives that we have set for ourselves.

Transform SMEs and Industries to be Future-ready

Mr Thomas Chua Kee Seng (Nominated Member): Mr Chairman, in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] Chairman, and fellow Members, trade associations (TAs) can play an important role in helping SMEs and traditional industries to be future-ready. Many TA leaders are dedicating their services to their TAs while managing their businesses. Although companies compete amongst themselves in businesses, everyone in their TA stands united and works hand in hand for the common interests and with the goal of enhancing the overall image of the industry. The motivation behind it is passion and a "never-say-die" mindset.

However, we have to acknowledge that no one can stop its evolution. Traditional industries need to move with the times and make adjustments proactively. I would like to share the approach by three TAs in this regard.

The first is the Singapore Precision Engineering and Technology Association (SPETA), renamed from "Tooling" to "Technology". The second is the Singapore Houseware Association, which was renamed from "Chinaware" to "Houseware". The change of name provides broader scope for these TAs.

Another example is the Singapore Industrial Automation Association. They did not change their name, but repositioned themselves through their events. Their conference and exhibition were named ioTAsia, with "ioT" being the "Internet of things", a very modern technology terminology. A change in name or positioning of the organisation reflects the change in mindset of TA leaders and it is the first step to transformation.

Thus, when Minister Heng Swee Keat announced that 20 TAs would receive the Government's assistance to formulate their industry transformation blueprints, and that Government officers would be seconded as "industry leaders" to the various industries, many TAs started speculting on which would be the lucky ones. Would their TA be selected? I am wondering how the knowledge and experience of the 20 officers would be applied to the TAs? According to a report by The Business Times, there are currently more than 350 TAs nationwide. How can other TAs participate in this project after the 20 officers have been assigned?

To effectively promote the collaboration between the Government and TAs, I would like to highlight two dilemmas of TA leaders. Firstly, the sustainability of TAs. TAs are non-profit organisations and have limited operational funds. With the support of the Government, some projects which have shown initial good results would see Government officers being over-eager to deliver the KPIs, to the extent of even bypassing the TAs and taking over the projects via setting up new entities.

Secondly, the phenomenon of "celebrity-chasing" by Government agencies. TAs which have performed well are overwhelmingly sought after and supported by different Government agencies with various assistance schemes and incentives. However, those TAs with limited resources but which work hard in search of new directions can only fend for themselves although they need even more assistance. This situation takes place probably because Government officers have a preconceived notion, that is, supporting TAs that they deem promising and not wanting to waste time on TAs that they feel would not be able to make it.

I need to reiterate that bringing up these two dilemmas does not affect TAs' support and expectations of Government policies. As the President of the Singapore Chinese Chamber of Commerce and Industry (SCCCI), I am heartened that the Chamber's TA Hub has received the strong support of many Government agencies and TA members. We hope to provide the various TAs with a platform and space to better lead their respective industries. At the same time, we hope that the TA leaders from the different industries can meet one another more often, creating chemistry for new business and new opportunities.

Chairman, after listening to the speeches in Parliament over the past few days, I fully agree with the union leaders who called for companies and employees to move with the times and be well-prepared for the future. During business transformation, even with a comprehensive plan, the management still needs to have good communications with their staff, especially when it involves adjustments to work processes or the introduction of automation equipment.

Some staff are accustomed to their current practices and do not want to learn new skills. Some employees worry that with the company's transformation, they will lose their edge and even fear losing their jobs. This kind of mindset is resistant to change.

Looking at the current business environment and advances in new technologies, no one can guarantee that their specialties will always have a market. Therefore, the employers and employees of SMEs and traditional industries must work together to be future-ready.

6.00 pm

Support for SMEs

Miss Cheryl Chan Wei Ling: Mr Chairman, while I am glad that both the Ministers have addressed some of the challenges and also some of the support packages or schemes that would be made available, but, with the weak global growth, the immediate business outlook for some of SMEs, as well as startups is still poor. Here, I would like to suggest a few areas in which the Government can step in to assist on a short-term basis and help the companies continue to transform and remain competitive.

First, for startups and SMEs, managing startups and ongoing costs is one of the key challenges. Any schemes that support reduction of their fixed costs will be useful for them to manage their cash flow. Cost of labour and rental are the main components of their fixed costs. The Government can consider providing some of their subsidised rental and tax rebate for a fixed period, based on some mutually agreed objectives, like innovative business models, target financial returns and others.

Second, I am glad that Minister Lim Hng Kiang has referred to the fact there would be the LEAD+ programme that would actually provide these shared corporate support functions. To take that further, I would suggest that they can also provide job opportunities for some of the retirees who have past management and extensive business experiences. A platform can be established for matching these retirees to SMEs and startups to serve as mentors and consultants so that they continue providing their know-how in the field.

Lastly, for businesses, managing cost is only one of the many aspects that they have to handle amidst the challenging economic conditions. The silver lining for businesses that survive tough situations is that their businesses would have stress-tested a differentiating edge −.one with an agility to adapt and constantly keep abreast of market trends. And the crux of this is the culture within the company and the mindset of the business owners. As a step to encouraging more innovation and piloting some of these creative ideas, we need an open, flexible and trusting environment. To facilitate this, I hope that the Government could strengthen the framework for IP protection, streamline some of the channels for information search and their applications, as well as to leverage the trade networks that could assist them in future expansion as part of the transformation process.

Slow Economy Affecting SMEs

Mr Yee Chia Hsing: Mr Chairman, businesses, in particular SMEs, are being affected by global factors, such as a slowdown in China, as well as domestic factors, such as high business costs.

During the debate on the President's Address, I spoke on the slowing economy. For instance, annual container volume handled at our ports for 2015 was 8.7% lower than for 2014. The numbers for this year continue to paint a gloomy picture. Container volume handled in the first two months this year is 9.7% lower than for last year.

In the face of these challenges, business confidence among SMEs has been slipping. The latest index by SBF and DP Information Group to measure business sentiment amongst SMEs showed that SMEs do not expect any growth during the next six months, with the Index at its lowest since it was first published in 2010. Can MTI share what is the Government doing to help companies ride through this difficult period?

Transformation – SMEs

Mr Azmoon Ahmad: Mr Chairman, I regard the ITP which the Minister for Finance has outlined in his Budget speech as highly significant. It is a mega shift which Singapore is about to embark on. I am quite certain this will have a significant impact and repercussions on our SMEs at all levels.

I am also quite concerned with those SMEs at the lower segment, especially if a one-size-fits-all approach is taken. This is especially so when there are gaps of varying degrees of capabilities and competencies among our SMEs. We can roughly say that there are various types of SMEs: the normal SMEs, small SMEs, very small SMEs and very, very small SMEs, and even further down the road.

With each facing its own unique difficulties, I am sure each will also need to find its own set of formulas and solutions to survive and grow. From financing to resources, to processes and organisational capabilities, each SME has to decide what has to be focused on.

I reckon this is like a sportsperson who wants to improve on his performance. Engaging a coach will then suggest that the sportsperson will undergo a step-by-step regime, thus building up the right muscles to elevate his or her strategic parts of the body and, ultimately, toning up the muscles where they really need for that particular type of sport. Not embarking on the right regime may lead to the wrong muscles being developed and, hence, not able to reach the desired outcome.

I would presume that, likewise, this is needed in the growing of our SMEs from one level to the next, thus moving in tandem with the overall strategic goals of the nation. I reckon it is well understood that different regimes have to be offered to the different levels of SMEs. My question, henceforth, is: has the Ministry already planned or is in the process of planning a targeted approach for the lower level SMEs which, I presume, will need very specific, if not customised assistance?

Help for Micro SMEs

Mr Louis Ng Kok Kwang: Sir, with an expected global economic slowdown, small business owners are, understandably, concerned about their company and are looking to the Government to provide some help and support during the downturn.

As I mentioned in my speech during the Budget debate, they are concerned about the lowering of the cash payout rates for the Productivity and Innovation Credit Scheme and that the Government is proceeding with increasing the foreign worker levies for the services and construction sectors.

There is also concern that a significant portion of the Budget seems to be tailored towards helping the larger SMEs. Considering that micro SMEs will be hit the hardest during an economic slowdown, what initiatives will the Ministry be launching to help these smaller SMEs?

Apprenticeship and Deep Skills

Mr Sitoh Yih Pin (Potong Pasir): Mr Chairman, I am heartened by the Minister for Finance's emphasis on fostering innovation and improving productivity in the latest Budget.

Targeted support for hiring of older workers, as well as automation efforts, are steps in the right direction as our workforce matures and we face constraints with the number of foreign workers.

There are also measures in this Budget that help SMEs to embrace innovation and improve productivity. ITP and TechSkills Accelerator are exciting initiatives that help our companies and workers adapt to rapidly changing economic realities. Change is the only constant in life.

Sir, but while business cycles shrink and we must embrace change, I hope that the Government, especially MTI and MOF, can help our workers develop deep skills in their chosen fields. Deputy Prime Minister Tharman has also said on several occasions that our workers need to develop deep skills, in particular, in the finance and logistics sectors. He used the term "deep mastery" and referred to the German model of Mittelstand companies. I cannot agree more.

The Mittelstand companies are the rough equivalent of our SMEs but they are also quite different. They are very focused on doing something really well, are very nimble and customer-centric. But what really differentiates the Mittelstand companies from Singapore SMEs is that they have a very strong system of apprenticeship that helps their workers develop deep skills. It is these deep skills, developed over time and generations, that give Mittelstand and, indeed, German Industry, their competitive edge in the world.

Sir, I think the idea and value of apprenticeship are under-appreciated in Singapore. Exceptions to be found are in the traditional professions of medicine, law and accounting where training is still considered very much a part of the apprenticeship process. It is no surprise that these examples are considered highly skilled professions.

6.15 pm

Our SMEs hire two-thirds of the workforce and produce 50% of our GDP. That is not a very encouraging statistic in terms of productivity. And I suspect this is due to the fact that our SMEs do not have a robust apprenticeship system that engenders the development of deep skills. Job-hopping between companies and sectors almost certainly does not lead to deep skills.

Deep skills are needed not just for productivity but for innovation as well. Innovation is not about sitting around and having a "Eureka" moment. Innovation also requires deep skills and mastery. The beautiful fonts we associate today with Apple computers and iPhones were due to the fact that Steve Jobs attended calligraphy classes in college conducted by a former Trappist Monk called Robert Palladino who had mastery of calligraphy and fonts. Locally, the salted egg yolk croissant which has become very popular lately is also a result of deep skills. If you cannot make a decent croissant, you certainly cannot make a good salted egg version.

So, I would like to ask the Minister what measures are in place to encourage SMEs to give apprenticeships and what incentives are there to engender the spirit of apprenticeship among our workforce. Our workers must look at apprenticeship as a necessary step to developing deep skills and, hence, excellence.

Productivity Growth

Mr Saktiandi Supaat: Mr Chairman, over the years, we know our average productivity growth has slowed. This is especially so for sectors, such as retail and F&B. Companies in these sectors are also faced with constraints, from a tight labour market to high business costs. Deputy Prime Minister Tharman also highlighted recently that there has been a divergence in productivity growth between outward-oriented sectors and domestically-focused ones. Even as outward-oriented sectors, such as logistics and manufacturing, saw productivity growth of 3.2% each year over the last five years, in the domestically-oriented sectors, such as retail and F&B, productivity has fallen by about 0.6% each year in the last three years.

I note that a number of efforts have been made by various agencies to encourage innovation and the usage of technology to boost productivity, but the impact on productivity has not been evident. Have we got to the root cause of this issue? How have our productivity initiatives been working, in particular, for the domestically-oriented sectors? Can MTI share the efforts to capture new measures of productivity that can be monitored for policy purposes? What is MTI's strategy to raise productivity growth, particularly in the most affected sectors? And if we already have one, are we on track?

The low productivity rates, coupled with disproportionately high wages, are worrying as this situation is not sustainable. It suggests that either wages will eventually have to fall as we price ourselves out of the market, or productivity has to go up. But the latter would need some concerted effort and focus, and current measures may need more time before we can see the benefits.

Trade Bodies and Chambers

Mr Leon Perera: Mr Chairman, in Budget 2016, the Government has pledged more resources to our TACs and it is no doubt good that we aim to level up TACs to play more of a pan-industry role. But I would like to sound one cautionary note.

TACs are, generally, run by an executive committee (exco) that consists of representatives from different companies. If there is to be much greater involvement in communication with Government agencies, it is the exco and staff reporting to the exco at the TACs who will be on the frontline of that communication. Those exco members also have their own individual corporate interests.

In working with TACs, I urge MTI to take pains to ensure that communication efforts and engagement are as inclusive as possible towards all TAC members. This is so as to mitigate any risk that the TAC exco members will use or will be perceived, rightly or wrongly, to be using any access to Government resources or information for the benefit of their own firms, rather than for the whole TAC membership. Promptly circulating minutes of meetings between the Government and the TAC staff and exco to all members would be one way to manage this.

Trade Associations and Chambers

Ms Foo Mee Har: Chairman, it has been announced in this Budget of the increased role for TACs in helping their respective sectors transform and scale up. The pivotal roles that TAs play in supporting their industries have a long history dating back to the Middle Ages.

Today, in some of the most competitive economies, such as the US and Germany, TAs fulfil wide-ranging functions, including lobbying and guiding Government regulations, setting standards and best practices, R&D, upgrading processes and products in their industry, education and professional development for those employed in their industries and, often, they also act as a watchdog and develop codes of practice to increase stakeholders' confidence. In Korea and Taiwan, TACs act as formidable consortiums to capture overseas business.

In contrast, Sir, SMEs in Singapore tell me that TACs here have much room to step up to the role expected of them. With a few exceptions, most TACs have weak capabilities and few resources despite being most sincere about the intentions to support their industries. Most companies I spoke to are sceptical of TACs' abilities to lead the development of industry-wide transformation projects.

Sir, Minister Lim Hng Kiang just shared several new schemes to support TACs, such as the new LEAD+ programme to help TACs improve their outreach, attract talent, develop their capabilities, and strengthen their processes and services. But, Sir, the LEAD programme has already been in operation for over 10 years. In fact, just last year, Minister Lim Hng Kiang awarded further funding totalling $7 million to six TACs.

So, I would like to ask the Minister what impact has this support had over the last 10 years in helping TACs contribute meaningfully to the industries? How can we be sure that the additional funding this round that has been announced for TACs will, indeed, add value to the ground? How can TACs start to position themselves for the pivotal role demanded of them in this Budget, which calls for development of transformation roadmaps for over 20 sectors, in order to help companies lift productivity and drive innovation?

Sir, I am pleased to hear that the Government is planning to second up to 20 officers to TACs to improve partnership with the sector and facilitate better understanding of the needs of our companies. Like the hon Member Mr Thomas Chua, I urge the Government to consider having a larger number of such officers as there is a large number of TACs. Secondment of public officers will enable the much needed depth of understanding of specific needs of the industries and will empower them to be in a better position to design tailor-made support schemes and specialised infrastructural developments to spearhead transformation and innovation of the industries.

Sir, there is no better time for TACs to reinvent their role as sector leaders. I hope that all will rise to the challenge and that we will all do our best to support them.

Business Space and Rental

Mr Chen Show Mao (Aljunied): Sir, commercial and industrial rentals are a perennial issue for Singapore SMEs and have been for quite some time.

In 2013, it was reported that a survey conducted by the Institute of Certified Public Accountants of Singapore found over eight-tenths of respondents wanted measures to reduce rental costs as their number one wish-list items for businesses.

Recently, the economy appears to have hit a bad patch. SBF, in their position paper for a Vibrant Singapore, mentioned that even with increased supply and slowing demand for rental premises, rents are still a concern for many businesses. This likely reflects their experience with higher annual increases over the longer term.

Over the longer term, access to low-rent premises has diminished, following the corporatisation of JTC assets as well as the commercial pricing of Housing and Development Board (HDB) rentals. Commercial and industrial rentals have risen substantially over the years. These now are significant expense items that breed insecurity for many small businesses.

We call on the Government to not only keep commercial and industrial rental increases near or below inflation but also keep their absolute amounts manageable as part of the more serious effort to nurture SMEs as the third pillar. This may require actions to, first, take a long-term view of reducing business rentals and have JTC pick up, in part, their former approach of building lower-cost industrial and commercial property before many of their many properties were privatised. Based on indications of strong demand for existing low-cost facilities, like incubators, this will go a long way towards stimulating the startup and SME sector.

Second, similarly increase the supply of HDB commercial space and lower the rentals for HDB commercial properties, which have increased substantially over the past 20 years, in order to stimulate retail-oriented businesses in the SME and startup sector and bring added diversity and vibrancy to our heartlands. This would be a welcome investment to nurture the SME sector. The extent by which HDB commercial rentals should be lowered can be calibrated based on available Budget surpluses and other considerations.

Sir, in keeping with the spirit of innovation, if nothing else, I hope the Minister will consider seriously these suggestions and, perhaps, test out the solutions in connection with the development of the JID or other special entrepreneurial zones made available to local SMEs through SPRING's schemes to promote start-ups.

Potential Adjustments to Rental Prices

Mr Kwek Hian Chuan Henry: Chairman, I would like to make a cut on potential adjustments to rental prices. I am happy to hear that the Government stands ready to act if the economy continues to slow down. Moving forward, should our domestic economy worsen considerably to warrant an off-Budget measure, and should our market rentals not adjust accordingly, would the Government consider taking the lead in reducing business costs by lowering JTC and HDB industrial and commercial property rental rates? Such a move could accelerate the rental adjustments to a more sustainable long-run equilibrium.

Consumer Issues

Mr Lim Biow Chuan (Mountbatten): Mr Chairman, may I declare my interestss as President of the Consumers Association of Singapore (CASE). Over the past few years, more and more Singaporeans go online to buy goods and services. And with more transactions, CASE has also seen more complaints.

The major complaints are: (a) failure to honour; and (b) misleading claims by vendors online. Unfortunately, online transactions are not well-regulated. Consumers are sometimes made to tick some boxes and agree to the vendor's standard terms and conditions. Some of these clauses are unfair or unreasonable. For example, one vendor made it compulsory for disputes to be referred to arbitration, knowing full well that most disputes involve smaller sums and consumers cannot afford the high costs of arbitration. It also means the ouster of the jurisdiction of the Small Claims Tribunal. Another case involves a vendor who introduced pre-ticked boxes for consumers, making them sign up as a member paying monthly fees without the consumer realising it.

I urge the Government to review the legislation regarding online purchases. Make it compulsory for vendors or retailers to provide clearer product information and full details about the online retailers. Allow online consumers to be given a right to return goods within seven days and get a full refund. Ban the practice of having pre-ticked boxes whereby consumers are misled to agreeing to certain terms unless they know how to untick the boxes. Ensure that all disputes can still be referred to the Small Claims Tribunal and not restricted to arbitration.

CASE is also concerned that more and more businesses are collecting prepayment for their products. When the business fails, consumers would not be able to recover their deposits and would suffer losses. This happened when a bridal shop closed last year and, recently, when a travel agency ceased operations.

I appeal to the Ministry to introduce greater consumer protection for consumers who have made advance payments to businesses in good faith, and then, these consumers find that when the business subsequently cease operations, they are left without recourse, except that they can make a claim as an unsecured creditor against a liquidator.

6.30 pm

I urge the Ministry to consider introducing laws to ensure that prepayment deposits collected are paid to an escrow account only and not directly to the business or, alternatively, some other ways to protect prepayment deposits for consumers.

Last year, I expressed concerns about the lack of teeth in the Consumer Protection Fair Trading Act (CPFTA) and for criminal action to be taken against dishonest traders or contractors who have cheated consumers. MTI agreed to review the matter. So, may I seek an update on the proposed amendments to the CPFTA?

Finally, may I also ask the Ministry whether they can provide up-to-date information about petrol prices so that there is more transparency about petrol prices? This will allow consumers to know which is the cheapest petrol being sold by the petrol companies and allow greater competition.

The Chairman: The Minister of State for Trade and Industry.

The Minister of State for Trade and Industry (Dr Koh Poh Koon): Mr Chairman, may I have your permission to display some slides later on in my speech?

The Chairman: Yes. [Slides were shown to hon Members.]

Dr Koh Poh Koon: Thank you, Sir. As mentioned by the Minister for Trade Lim Hng Kiang, we recognise that companies are facing headwinds this year. Some sectors will be more affected than others. Mr Yee Chia Hsing and Miss Cheryl Chan asked about how the Government will help SMEs ride through this period.

During this year's Budget Statement, the Minister for Finance announced a number of measures to address the near-term concerns of our companies, especially SMEs. And these include measures, such as the enhanced corporate income tax rebate, holding off foreign worker levies for certain selected sectors and the new SME Working Capital Loan Scheme. The Government is monitoring this very closely and we stand ready to act when necessary. Let me highlight that these new measures are over and above the existing suite of assistance schemes that we have introduced over the years to help SMEs in their transformation journey.

I am pleased to announce that over the next five years, the Government will set aside a grant budget of over S$2.3 billion under the fifth tranche of the Enterprise Development Fund (EDF 5), specifically for the development of local enterprises. This is a significant increase from the $1.4 billion approved under the previous tranche. EDF 5 will support existing SPRING and IE Singapore schemes, and EDF 5 will go towards supporting ITP that the Minister for Finance has announced.

Mr Liang Eng Hwa may wish to note that this will go towards supporting SMEs to upgrade and capture new growth opportunities. But even as we set aside more funds for development of local enterprises, we are also sharpening our assistance schemes to make sure that our interventions are more targeted. This will ensure that we get the most out of our limited resources. For instance, we will put more resources into schemes that have created the biggest impact on our SMEs. One such scheme is SPRING's CDG.

I am glad to also announce that another scheme will be enhanced which is the Ministry of Communications and Information (MCI) and IDA's Infocomm for Productivity and Growth (IPG), which is funded from the National Productivity Fund (NPF). The $500-million IPG was first introduced at Budget 2014 to accelerate the take-up of IT solutions by SMEs and this will be enhanced in three ways.

Firstly, the scope of the scheme will be widened to support costs like retrofitting and business consultancy that are needed to unlock the productivity potential of the solutions. Secondly, help will be made available for SMEs to upgrade to the most effective solutions, even if they have received help from IPG before. And to maximise impact, we will also support the costs of solutions across all branches of the business.

I would like to assure Mr Louis Ng and Mr Azmoon Ahmad that Government support is open to all local enterprises, including the smaller ones. Depending on their specific needs, many SMEs have made use of the $5,000 Innovation and Capability Voucher (ICV) for consultancy services, and to adopt the various Integrated Solutions, such as fleet management systems and mobile ordering and payment schemes.

So, there are solutions that SMEs can adopt based on their individual specific needs. But the key challenge is in the outreach to this diverse group of 116,000 local micro-enterprises which can range from our HDB heartlander shops to a car workshop, for example. To make Government assistance more accessible to SMEs, especially the smaller ones, SPRING has worked with TACs to set up a network of 12 SME Centres, all across Singapore, housed within TACs, our Community Development Council (CDC) offices as well as within the heartlands. Like general practitioner (GP) clinics, these SME Centres have been serving as the first port of call for SMEs and providing one-to-one consultations on business and productivity assistance. In 2015, our Business Advisors at the SME Centres reached out to more than 22,000 SMEs. But I hope that SMEs will also take the opportunity to be proactive in seeking help from these SME Centres, especially if they are in need of assistance.

As mentioned by the Minister for Finance, the second half of 2016 will also see the public launch of the Business Grants Portal, which will make grants even more accessible to our SMEs.

Ms Sun Xueling shared her concerns about SMEs' access to information. Apart from one-to-one consultations at these 12 SME Centres, our economic agencies like SPRING and IE Singapore have been conducting regular dialogue sessions with SMEs to discuss the latest trends and opportunities for SMEs. Just last week, SME Centres held a Convention for SMEs to share knowledge on business model transformation and innovation. Additionally, SMEs can also visit SPRING's SME Portal, which is in both English and Chinese-language, for information on broad level industry trends, business guides as well as business opportunities.

Our companies, especially in the SME sector, must transform and do so urgently. As a small country with limited resources, we cannot compete on costs alone. We recognise that costs, as Miss Cheryl Chan pointed out, continue to be of concern to businesses. The two business costs often cited by businesses are labour and rent, as Mr Chen Show Mao said earlier.

The truth about labour costs is that between 2009 and 2015, real wage growth outpaced productivity growth. While labour productivity, as measured by value-added per worker, rose by 2.2% per annum over this period, the real median income of full-time employed residents, however, rose by a higher 2.5% per annum. This has contributed to an increase in unit labour cost of 1.5% per annum over the same period. Therefore, we need to press on with increasing our productivity to keep pace with wage increases.

Next, on rental costs. Mr Chen Show Mao expressed concerns about rental costs in our shops. Mr Henry Kwek also suggested that steps be taken to lower rents should the economic situation worsen. But in reality, rents are already coming down and will continue to face downward pressure from a further supply of rental spaces coming on stream.

Let me illustrate. In 2015, industrial rents fell by 2.1% compared to the previous year. In the next two years, an average of 2.3 million square metres of industrial space will come on stream annually. Similarly, for office and retail space, rents have fallen by 6.5% and 4.1% respectively in 2015, while a large supply of 993,000 square metres of office space and 808,000 square metres of retail space remains in the pipeline in the near future.

Mr Saktiandi Supaat asked about the root cause of our slow productivity growth. Let me, first, say that slowing productivity growth is not something unique to Singapore. It is a global challenge. Productivity growth in the Organisation for Economic Cooperation and Development economies, for example, has fallen below 1% since 2012 and has remained weak at 0.3% in 2014.

More than five years into our national productivity drive, we are on track to achieve the Economic Strategies Committee's target of 2% to 3% productivity growth for the decade as a whole from 2009 to 2019.

At the macro level, between 2009 and 2015, labour productivity, as measured by value-added per actual hour worked, grew by 2.7% per annum. However, most of this was due to the high productivity growth in 2010. Productivity growth since then has weakened.

At the sectoral level, however, the situation is somewhat more varied. Some sectors, especially the outward-oriented ones, are doing better than others. For example, since 2009, our finance and insurance sector achieved productivity growth of 4.7% per annum. Overall, labour productivity of the outward-oriented sectors grew by 5.1% per annum from 2009 to 2015. On the other hand, our domestic sectors, such as retail and food services, where the bulk of the companies are still heavily reliant on manpower, are not doing as well. From 2009 to 2015, the labour productivity growth of these domestically-oriented sectors remained rather weak, at 0.8% per annum. Therefore, we need to press on with productivity drives in these weaker sectors.

Mr Saktiandi Supaat asked about our productivity strategies going forward. For our productivity drive to succeed, we must go beyond Government incentives and Government measures. Business and consumer mindsets must change. Let me illustrate this with the retail sector.

Under the second five-year Retail Productivity Plan that was announced last year, one key focus area is sales growth. SPRING will support retailers to improve their online sales by collaborating with e-commerce players, such as SingPost, Google, eBay and RedMart. This will be especially helpful for retailers who already have their own brands as they can reach out to markets beyond Singapore.

According to a recent report by Bain and Company, two-thirds of the 150 million digital consumers in Southeast Asia are already shopping online. This is a huge online market compared to the physical market of five million in Singapore.

A number of local retailers understand that the opportunity for e-commerce is here and now. Forward-looking businesses are already changing in response to the changing consumer shopping habits. The Singapore Food Manufacturers' Association (SFMA) has also worked with IE Singapore to launch the first Singapore Pavilion e-commerce shopfront on Tmall.com, China's largest e-commerce marketplace. This has helped Singapore food manufacturers benefit from the collective branding, joint marketing, as well as the sharing of warehouses and logistics. And since the platform's launch in August 2015, 40 food companies have participated in this initiative.

We have been focusing a lot on what the Government should do and how our businesses can transform. However, the reality is that businesses also respond to consumer needs and behaviour, and the retail sector cannot transform quickly enough if consumer mindsets and purchasing habits do not change. Consumers can also play their part in helping our businesses to transform. For example, we have been working with the major supermarkets to proliferate the use of "self-checkout counters". If consumers adopt such behaviours, it will help to release manpower from these supermarkets to do higher value jobs.

To shift consumer mindsets, MTI has launched a series of publicity campaigns to promote this "Do-it-yourself (DIY) culture" within our consumers. In a survey conducted after the campaigns, 94% of respondents said they were aware of such self-checkout facilities. Among these, 97% of them have used the facilities. If consumers play their part and we see businesses responding to it, we will get better traction in our productivity drive.

Mr Thomas Chua asked about the need to help our traditional sectors transform and upgrade. One key strategy is the cluster development approach to revitalise and transform traditional sectors. We want to create a social environment where co-located SMEs can collaborate more with one another and find common solutions to solve common problems. Miss Cheryl Chan may wish to note that by clustering companies from sector-specific areas together, SMEs can share infrastructure and services to enjoy better economies of scale and lower the start-up costs. With reference to Mr Chen Show Mao's comment, this is one way that we have changed how we use business space while maintaining affordability and competitiveness.

For example, the JTC Food Hub@Senoko, conceptualised jointly by JTC, SFMA and the Singapore Manufacturing Federation (SMF), houses a shared cold room and warehouse facility (CWF). At the food hub signing ceremony I attended last week, food manufacturing and services companies told me that they could save on start-up and operating costs by tapping on these ready-built facilities and services offered by the CWF operator.

I am happy to announce to Members that JTC will be developing a new Metals, Machinery and Timber (MMT) Hub in Kranji for SMEs in metals, machinery and timber trades. To be completed in 2020, this multi-storey MMT Hub will have high ceilings and heavy floor loading to accommodate tenants' heavy automation machinery and products. These specifications will then allow companies to explore productive initiatives, such as the installation of overhead cranes, to replace and reduce their reliance on fork lifts.

6.45 pm

In addition, Mr Chen Show Mao may wish to note that JTC's subletting policy provides companies with the flexibility to adjust their space usage according to business needs and supports space sharing by allowing lessees to sublet up to 30% of the total gross floor area to other companies for better synergy or to put temporarily unused space to better use. However, in terms of market share, JTC industrial space currently constitutes only 8% of all industrial space and we do not have the critical mass to influence overall market pricing.

Beyond our local environment, SMEs must also pay attention to the global environment and seize opportunities as they arise. As Mr Liang Eng Hwa pointed out, the Market Readiness Assistance (MRA) programme and Global Company Partnership (GCP) programme were enhanced last year to help companies internationalise and take advantage of these overseas business opportunities.

Just to give some numbers, in 2015, IE Singapore supported 34,000 companies in their internationalisation efforts, and this is a 21% increase over 2014. Over 80% of these companies were SMEs. Through the MRA programme, more than 30,700 companies were supported, and the take-up rate of MRA grants increased by seven-fold over 2014, benefiting mainly SMEs with an annual turnover of below $5 million. And under the GCP programme, over 3,800 companies received help to grow their business overseas in 2015. IE Singapore also helped companies to secure $769 million in trade and financing loans in 2015, up from $753 million in 2014.

Secondly, there was more focus on accelerating overseas growth of Singapore companies. IE Singapore introduced a new tax incentive – the International Growth Scheme, and expanded the scope of Internationalisation Finance Scheme to include mergers and acquisitions.

Thirdly, we introduced more targeted assistance to address the manpower needs of internationalising companies. IE Singapore enhanced the Double Tax Deduction for Internationalisation (DTDi) to include qualifying manpower expenses for Singaporeans who are posted overseas. This supports businesses that are expanding overseas and creates more skilled jobs and opportunities for our Singaporeans. The Minister for Finance has announced that the scheme will be extended for another four years until 31 March 2020.

The Minister for Industry, Mr S Iswaran, talked about the ITP. One key plank of this effort is our partnership with our TAs. Mr Chairman, if I may now speak in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] Ms Foo Mee Har and Mr Thomas Chua spoke about the role of our TACs. With over 300 TACs in Singapore, the TAC landscape is very diverse – ranging from the broad-based ethnic chambers, to industry associations, as well as smaller TACs with only a handful of members.

The Government has been working closely with the business-focused TACs to reach out to SMEs. For instance, our apex chamber, the SBF, is one of our key partners in the Committee on the Future Economy (CFE).

Besides working together with the broad-based TACs, our economic agencies will need to take a more targeted approach to drive transformation of our key sectors. For ITP to be implemented successfully, effective partnerships with TACs are crucial. If SME Centres can be compared to GP clinics, then the role of TACs in ITP would be akin to that of "specialist doctors". Allow me to elaborate further.

First, businesses best understand the trends, opportunities and challenges of their sectors. In this regard, TACs can play a critical role in leading the transformation of their respective sectors, by organising the industry players and set the direction for growth and transformation of the sector. The Government has to work hand in hand with our businesses. There is a saying that "the business arena is like the battlefield"; businesses should work closely with one another to achieve greater results. In this regard, the Government can set the economic strategies but, at the tactical level, businesses must still lead the charge.

Second, TACs' extensive reach and business networks also create a multiplier effect for the Government to touch base with many more SMEs than Government agencies alone are able to. Ms Sun Xueling had asked about how SMEs can be alerted to business trends and opportunities. One effective way is through TACs. Mr Leon Perera may also wish to note that Government support for TACs is carefully scoped out and meant to create as wide an impact as possible. Since 2005, SPRING and IE Singapore have worked with 35 TACs on various sector upgrading projects under the LEAD programme. As of March 2016, 35 TACs have been supported for more than 180 industry-upgrading projects, totalling more than $120 million in grant and benefiting about 40,000 local enterprises.

Third, TACs can also support their sectors' growth by facilitating the aggregation of demand and provide shared resources for the industry. This can free up the time and energies of many SMEs and allow them to focus on their core functions.

Fourth, TACs can embark on Operation and Technology Roadmapping (OTR) with A*STAR under the GET-Up Programme for their respective sectors. OTR is a detailed step-by-step plan that lays out the technological capabilities needed for companies or sectors to remain competitive.

Fifth, as Mr Thomas Chua has noted, TACs can also bring SMEs together and help them internationalise. For example, a number of TACs have worked with IE Singapore on the Deal Hunter Programme to help SMEs source for business leads on a collective basis. Under this programme, the Franchising and Licensing Association (Singapore) organised 47 meetings in Japan for six companies, resulting in 15 business leads and overseas sales of $530,000.

For TACs that are willing and ready to take on a larger role, the Government will put in more resources to build up their capabilities. Ms Foo Mee Har and Mr Thomas Chua may wish to note that we will be introducing the LEAD+ programme to help TACs from selected sectors. For a start, we will be working more closely with TACs that have already achieved a certain level of competency, and from priority sectors for transformation and growth.

To help address the need for leadership development among TACs, SPRING's LEAD+ programme will support selected TACs on strategic planning, succession planning within TACs, as well as groom younger leaders. To strengthen the management of the TAC secretariat, SPRING will support training of the leadership team to manage corporate functions and also the secondment of up to 20 public officers over five years to TACs. SPRING will support up to 70% of the cost of this secondment and development programmes. In addition, SPRING will also support the upgrading of internal processes within TACs, such as in HR, information technology and finance, by providing funding for consultancy, hardware and software upgrading.

To spur transformation of the sector, SPRING will work with TACs under LEAD+ to strengthen the services they provide to their members. For instance, it will support a wide range of TAC-led activities, including collaboration with Centres of Innovation (COIs), OTR and market sensing activities. LEAD+ will be introduced in phases, starting with TACs that are already on board the LEAD programme.

For smaller TACs that may lack the scale or capabilities, I encourage them to start by embarking on LEAD projects with SPRING. As mentioned by the Minister for Trade Lim Hng Kiang, TACs can also work with SPRING on TAC-Collaborative Industry Projects, in order to benefit their members. Through these projects, TACs and SMEs can work with our research institutes and tap on new technologies, which could include data analytics and food packaging technologies, as mentioned by Ms Sun Xueling.

TACs can also come together and collaborate. For instance, our TACs in the logistics sector can also work with TACs in the food or retail sectors, to provide solutions to one another's problems in a synergistic and complementary manner. Smaller TACs can also consider moving to the TA Hub at Jurong Town Hall. By clustering at the TA Hub, smaller TACs can share facilities, tap on secretariat support from the larger TACs and explore collaboration in areas, such as training and organising overseas missions. I am happy to note that in addition to SCCCI, more than 10 TACs have indicated their interest to locate at TA Hub.

The Minister for Finance also spoke widely about the importance of partnerships in the ITP. But just as importantly, transformation must, first, come from the companies themselves. We have grants for companies, and TACs can take a proactive role in transformation and innovation. But all these will come to nought if companies do not have the hunger to transform. As Mr Thomas Chua mentioned during the Budget debate, SMEs need to have the correct mindset and must want to transform. By working with TACs, we want to foster a stronger spirit of self-reliance within our local enterprises.

(In English): Mr Lim Biow Chuan has asked if more protection for consumers can be legislated. The CPFTA is regularly reviewed to ensure that it continues to provide consumers with adequate protection. We started our review last year and have engaged industry, including CASE, for their views. We are nearing the end of this review and intend to start public consultations soon.

Let me respond to Mr Lim Biow Chuan's specific points. First, our proposed enhancements to the CPFTA will include strengthening the injunction framework to prevent errant retailers from side-stepping injunction orders, and appointing an administering Government agency with investigation and enforcement powers. Those who engage in criminal activities, such as outright cheating, will continue to be investigated by the Police under the Penal Code.

Secondly, to mandate that businesses put prepayments into escrow accounts will raise business costs which, unfortunately, would ultimately be passed on to consumers. Instead, consumers can protect their prepayments by choosing retailers that are CaseTrust-accredited. Most CaseTrust-accredited retailers provide protection for consumer prepayments. We encourage more TAs to work with CASE on accreditation schemes to better safeguard consumers' interests.

Thirdly, the CPFTA provides the same protection to consumers, whether their purchases are made online or from our regular brick-and-mortar retailers. On practices, such as pre-ticked boxes and arbitration clauses, the CPFTA already requires retailers to make material information clear to consumers prior to these transactions. We are working with CASE to educate consumers on the importance of reading the terms and conditions before finalising the transaction.

Fourthly, MTI has engaged CASE on making information on petrol prices and discounts more accessible to consumers. CASE is working towards putting such information on their website.

Mr Chairman, in conclusion, economic restructuring is a long-term effort which cannot be put on hold. SMEs must make use of every opportunity to upgrade their capabilities. The Government, too, needs to work closely with the industry on this and, hence, needs to strengthen our partnership with TACs. I am confident that we will emerge from our challenges a stronger economy, with our SMEs more competitive than before.

The Chairman: Parliamentary Secretary, Trade and Industry.

7.00 pm

The Parliamentary Secretary to the Ministers for Trade and Industry (Ms Low Yen Ling): Mr Chairman, I would like to thank Members for their comments and suggestions.

The Minister for Trade Mr Lim Hng Kiang, the Minister for Industry Mr S Iswaran and the Minister of State Dr Koh Poh Koon, have explained how our economic strategies will prepare us for the future and create good jobs for Singaporeans. I will now round up MTI's speeches by elaborating on the initiatives specific to renewable energy and manpower that will position Singapore for the future.

Mr Louis Ng asked about the steps we are taking to achieve our renewable energy goals. Given our geography, solar energy is the most viable form of renewable energy in Singapore. The Government is, therefore, proactively facilitating the greater deployment of solar energy while ensuring grid stability.

For example, the Government is funding R&D to facilitate the deployment of solar energy and has streamlined regulations for households using solar power. Alongside improvements in the cost competitiveness of the technology, these have allowed solar adoption to rise from two megawatt peak (MWp) in 2009 to 57 MWp in 2015.

Under the SolarNova programme led by EDB and HDB, the Government is also taking the lead to accelerate solar deployment in Singapore by aggregating solar demand across various Government agencies. HDB, the Ministry of Home Affairs and the Public Utilities Board awarded a tender for an energy supplier to meet 76 MWp of combined demand in December last year, and tenders of 30 to 50 MWp sizes are expected to be launched around every nine months by HDB on behalf of the public agencies. The SolarNova programme will play a key role in furthering our plans to raise solar energy deployment in our system.

Let me now turn to manpower. I would like to thank Mr Liang Eng Hwa for highlighting the importance of our SkillsFuture movement in enabling our workforce to adapt and be future-ready for the future economy. To make this happen, we need everyone to be part of this movement − companies, unions, TACs and all Singaporeans. Together, we equip ourselves to stay competitive and relevant.

We need to attune ourselves to new work trends emerging from disruptive technologies and global developments. Like what the two Ministers have highlighted, there are now jobs in exciting new areas, such as fintech, that did not even exist just a few years ago. The digital economy is also flourishing. According to a report by Accenture, the increased use of digital technologies could add at least $1.36 trillion to the total global economic output in 2020. This has led to new job opportunities in fields like data analytics and e-commerce.

These fast-moving developments are changing the way we work. Today, operators in routine assembly work may also have to master the use of advanced technologies, such as additive manufacturing and robotics solutions. Across various sectors, jobs are being optimised through technology solutions. As Mr Liang Eng Hwa rightly said, we should gear ourselves to ride the waves of change and seize the opportunities of the future economy.

Mr Chairman, may I have your permission to display some slides on the LED screens, please?

The Chairman: Yes. [Some slides were shown to hon Members.]

Ms Low Yen Ling: Take the example of Ms Lilian Yeo, a 58-year-old sales supervisor for Decks. Decks is the retailer for Surfers Paradise and Island Shop products. Decks has adopted radio frequency identification (RFID) for both its front- and back-of-house operations. Lilian's can-do spirit helped her adapt and learn this new technology. She is now adept at using RFID and appreciates how technology has eased her job and given her more time to focus on frontline duties like serving and interacting with customers. So, like Ms Lilian Yeo, we need to be flexible and stand ready to be trained to develop industry-relevant skills.

To stay ahead of the curve, we must continue to train and produce workers with skills that meet the demands of industries. We can open the doors to a better future by embracing the spirit of lifelong learning. Please allow me to give the House a quick update on the various SkillsFuture initiatives that support Singaporeans on this constant journey, starting with our youths, then the working adults and then businesses.

We fully agree with Mr Sitoh Yih Pin that one of the ways to engender the development of deep skills is through apprenticeships, particularly for our SMEs. To this end, MTI supports the SkillsFuture Earn and Learn Programme (ELP). ELP is a work-study programme matching our fresh graduates from polytechnics and ITEs to suitable companies, including SMEs, in sectors related to their disciplines of study. This not only helps companies to attract talent; it also allows participants to develop deep industry-relevant skillsets during their apprenticeships.

Besides apprenticeships for our youths, we must also nurture in them a curiosity and desire for global exposure. This can certainly support our companies' internationalisation drive as we grow the pool of talents in our workforce ready with the necessary skillsets to support our external economy. The ability to work in international teams and harness cross-cultural capabilities are some of the skills that are offered in the Young Talent Programme (YTP) by IE Singapore.

To prepare them for global careers, YTP offers our students opportunities for overseas immersion through internships and work-study programmes. In November last year, IE Singapore officially extended the YTP-Market Immersion Programme to the polytechnics. Since then, about 200 polytechnic students have gone to China, Germany, the US and the ASEAN countries. I am pleased to report that we will implement the programme in ITEs later this year as well. This will provide more opportunities for our students to gain international exposure.

Our young people will learn how to navigate across cultures and differences. This picture shows Mr Raiyan Muhammad bin Musa from Ngee Ann Polytechnic with some of the friends that he met during his internship at The Ascott Limited in Vietnam. Besides these friends, Raiyan shared with us that he had colleagues from France, the UK, India and Malaysia. During the internship, Raiyan learnt how to connect across cultures and nationalities in the workplace. Such experiences during the formative years will give our young people a potential head start into a global career.

In addition to building young talent for global jobs, we are also grooming promising Singaporeans to take on leadership positions through the SkillsFuture Leadership Development Initiative (LDI). It aims to grow a pipeline of Singaporean leaders across all career levels. As part of LDI, EDB has been partnering companies to design and implement leadership development roadmaps tailored to their business objectives and HR priorities. For example, MasterCard's Management Associate Programme has an overseas stint in emerging markets that provides fresh graduates with global exposure and in-market experience across key business units. Upon completion of the programme, the management associates will be better positioned to take on larger roles in the company.

We all know talent is key for businesses, big or small, to grow and succeed. For SMEs that may not have the resources to build up their talent development and worker competencies, we have created the SkillsFuture Mentors Programme under SPRING Singapore. The agency works with industry partners to build a pool of mentors who support the development of SMEs' capabilities and help them participate in SkillsFuture initiatives. Since its launch in December last year, 70 mentors have been qualified and 15 SMEs have been matched in sectors, such as retail and engineering. Over the next three years, we aim to build up a pool of 400 mentors to support 2,000 SMEs across different sectors. Moving forward, the Government will continue to invest in SkillsFuture to ensure that our workers and companies are well-positioned to meet the challenges of the future. Mr Chairman, please allow me to continue in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] Upskilling is key to the vitality of our economy. It is not only a means to future-proof our workers, but also a key facet of industry transformation. As the Minister for Finance and Minister for Trade and Industry (Industry) have explained, ITP will integrate our restructuring efforts in productivity, innovation and manpower development at the sectoral level to maximise impact.

An integral element of this plan is the Sectoral Manpower Plans (SMPs), which identify the strategies and action plans required for developing sector-specific skills. Last year, SMPs were launched in sectors, such as hotel and retail, setting out five-year manpower strategies that support the growth of these sectors.

SMPs are developed and implemented together with Sectoral Tripartite Committees (STCs), consisting of unions, TACs and companies. The strategies under the Hotel SMP, for example, are being implemented on the ground in partnership with STB, the Workforce Development Agency, hotels, the National Trades Union Congress, the Food, Drinks and Allied Workers Union (FDAWU) and the Singapore Hotel Association (SHA).

Through consultations and discussions with various partners, SkillsFuture aims to strengthen the nexus between the needs of industries and manpower development.

There are also many other ways that our companies can be part of the SkillsFuture movement. Besides providing training opportunities, our companies can also offer competency-based career progression pathways to motivate and retain talent.

Take, for example, Tee Hai Chem, a local company that sponsors high-performing employees on part-time diploma studies. Tee Hai told us that they believe that people are their most important asset and that all their staff are given equal opportunities to upgrade their skills and knowledge. Mr Kelvin Ong joined the company in 2010. He started out not knowing much about logistics. But Tee Hai recognised his good performance and potential and sponsored him to study a part-time Diploma in Logistics Management. I am heartened to learn that, after starting out as a storekeeper, Kelvin is now a logistics supervisor at the company. Indeed, Kelvin's success is not just his own, but also the company's.

Here, MTI would like to encourage our companies to be long-sighted as well as courageous to innovate and transform, so that they will be well-placed to compete on the international stage. Besides using technology to improve efficiency, companies must be willing to redesign jobs, train their staff and help them upskill. In time to come, with increased productivity, their revenues will also increase.

From the employees' point of view, the opportunity to take on higher-skilled and higher-value jobs will mean greater job satisfaction and better wages.

Companies that invest in their employees' training and development will be well-positioned to take on the new challenges of our new economy. We would like to see more companies like Tee Hai Chem who invest in their employees for the future. Allow me to conclude in English.

(In English): We understand skills upgrading takes effort and may not be easy for all, especially for mature workers. But successful upskilling is possible at any age when one is armed with a positive and can-do attitude. Take Mr Mohammad Romzi Bin Kassim, for instance. The 46-year-old employee at PestBusters has upgraded his knowledge and skills by attending several technical and WSQ training courses. In just six years, Romzi has been promoted three times from a pest control technician to being an executive. And he does not intend to stop learning. He is keen to hone his craft with technology and has been selected to learn best practices in pest control work in Melbourne under Mediacorp's sponsorship. Romzi's proactive approach towards learning certainly exemplifies SkillsFuture's spirit of passion for lifelong learning.

7.15 pm

Mr Chairperson, the Government remains committed to supporting the development of our workforce. But we cannot do this alone. Lilian, Raiyan, Kelvin and Romzi have shown us that all of us can take ownership of our own training and career paths. We call upon our partners and every Singaporean to come on board the SkillsFuture movement. Together, we will build a future-ready workforce empowered to overcome challenges and stay on track for success in the global economy.

The Chairman: Clarifications from Members, if any? Mr Liang Eng Hwa.

Mr Liang Eng Hwa: Well, I applaud the Government's move to establish the cluster champions consisting of teams of officers from the public sector rolling up their sleeves and fast-tracking the transformation of about 20 sectors. That is a tremendous effort, accounting for about 80% of our economy. But also, it requires the officers to adopt a new approach of working beyond just within the service. As the Government, you work in a Government agency; but, now, to work with the markets, you work with the businesses.

So, in terms of resourcing and organising, I would like to ask the Minister how does the Ministry at this stage set up the headcount that is needed, the changes in terms of the different agencies to be able to drive this sector roadmap that was introduced by the Finance Minister?

Mr S Iswaran: Sir, I thank the Member for his clarification. As I stated, and as we all acknowledged, it is a major task and it will require a coordinated effort across various stakeholders – companies, TACs, Centres of Innovation and also in terms of the unions. We will be appointing cluster champions from our various Statutory Boards for some of these key sectors.

What we propose to do is that, in the time-honoured tradition of financial prudence, we will start by working within what we already have. But, of course, where necessary, and it may well be necessary, we will then seek assistance from the MOF.

The Chairman: Mr Leon Perera.

Mr Leon Perera: Mr Chairman, in his Budget wrap-up speech, the Minister of Finance referred to the Holistic Industry Productivity Scorecard (HIPS) system that is run by SBF, which provides a calculator of productivity and allows companies to log on to the system, input some data, calculate the productivity level and benchmarks the productivity level against certain industry norms.

If I recall correctly, the Minister for Finance said that there are roughly 80 companies currently using this HIPS system from SBF. He said this in response to my suggestion for a national productivity benchmarking system. So, I would like to ask MTI whether they will be working with SBF, perhaps to take this tool and push it out to all the companies that we have. I believe that we have 180,000 businesses and companies. SBF's target is to get 30,000 of them onto HIPS by 2020. So, that still leaves many, many more companies that have not been using the system.

If SBF achieves that target, will the Government actually work with SBF to push out this tool, as a benchmarking tool, not just against industry norms and Singapore, but also industry norms globally, so that our SMEs can have a very clear quantifiable view of what they can achieve, what they can aspire to achieve in terms of productivity?

Dr Koh Poh Koon: Mr Chairman, I thank the Member for his question. The Government has been working closely with SBF on many initiatives and we will continue to do so. As far as productivity benchmarking is concerned, there are various benchmarks that can be utilised.

The Government publishes labour productivity benchmarks, such as value-added per worker and value-added per actual hour worked. The Government also publishes sector-specific outcome indicators, such as site productivity for the construction sector. Other than the benchmark that the Member has mentioned, companies can also use the calculator on the "Way to Go" website to determine their productivity and compare it against other benchmarks.

The Government's productivity assistance schemes are intended to support all companies and we will continue to utilise benchmarks that are useful for us to assess the productivity of companies.

Ms Foo Mee Har: With the great initiative to second public officers to TACs to help them deepen their knowledge and to support TACs, I would like to ask the Minister whether the decision-making and empowerment of these officers would be enhanced, so that they can truly do something meaningful, for example, to tailor-make schemes for these sectors? Also, if they are empowered, what is the decision-making process so that they can get things through quite quickly, so that the TACs which have got a good plan, can get on with it?

Mr Lim Hng Kiang: The key in seconding public officers to TACs is to strengthen their secretariat because we recognise the key to a successful implementation requires the secretariat to be reinforced. We have to work very carefully because, as we all know, TACs differ very significantly. Many of the TACs have adequately resourced secretariats already. What we need to do is to work with them to strategise and to work out the sectoral plan. Some TACs require reinforcement. This is the area where the secondment of the 20 public officers will make some impact. Then we will have to see how it goes. Based on the experience of working with these TACs, we will have to then amend and adapt our plans accordingly.

The Chairman: Mr Liang Eng Hwa, please go ahead.

Mr Liang Eng Hwa: The Minister did talk about the benefits of TPP. Clearly, quite a list of things that our businesses can benefit from. We know that TPP is now political football, as we observe the US elections. I would like to ask the Minister whether he still sees hope that we can get this ratified in the US administration and Congress and whether we should now bank on RCEP instead, given that we are likely to have an agreement this year and, hopefully, the smooth ratification as well. Given that we also have a US-Singapore FTA, with that FTA plus RCEP, without TPP, does it impact us that much? I wish to hear the Minister's views on this.

Mr Lim Hng Kiang: We have all been following the progress of TPP in the various countries, all 12 of us. The good news is that the Japanese are proceeding to get TPP ratified in their Diet before July, before the Upper House's elections.

For the US, they have been telling us that they are very deeply engaged with the Congress leadership. They have very good experience taking the Trade Promotion Authority, the fast-track authority, through Congress. They know roughly where the votes lie – both in the House as well as the Senate. They are having very close links with the congressional leaders in the different groups to see whether this vote pool is still valid for the next step of ratification. So, we are watching the developments.

As I had mentioned in my speech just now, although we have the bilateral US-Singapore FTA, the TPP adds on to this, because, for one, the TPP gives us a free trade agreement with Canada and Mexico, which we do not have bilateral FTAs with thus far. But more importantly, the TPP gives us better market access because of regional cumulation. I gave the examples of automotive components and textiles and garments. Singapore companies can now source from TPP countries and this is then added on to qualify for the rules of origin to enter preferentially into the TPP markets.

So, even though we may have the US-Singapore FTA, the TPP adds a new dimension and more market access. Therefore, it is very important for us to have the TPP ratified as soon as possible so that our companies can benefit from the TPP.

On the RCEP, it is a very different set of dynamics, because we have the ASEAN countries and the six ASEAN+1 dialogue partners. As we know, with the dialogue partners – Australia, New Zealand, China, Japan, Korea and India – the dynamics are very complicated. For example, to get the RCEP resolved, you have to solve the bilateral dynamics between India and China, just to illustrate. So, it is not a simple task where we can get to a successful conclusion of RCEP by the end of the year. We still need many, many more steps to get there.

As to the dynamics between TPP and RCEP, it is quite obvious that when TPP was concluded, there was greater pressure on RCEP participants to get RCEP also concluded. If we do not ratify the TPP, then I am very concerned that the pressure on RCEP may be lifted. RCEP participants may not feel the same pressure to get it concluded. This is already in addition to the very complicated political dynamics within the 10+6 participants of RCEP.

Mr Low Thia Khiang: Mr Chairman, since the TPP and RCEP are so complicated, are we looking at some other alternatives? China recently has announced "One Belt One Road" as a new macroeconomic strategy. Is MTI looking into how Singapore can position itself to take advantage of the new economic strategy?

Mr Lim Hng Kiang: Our strategy for China is very comprehensive. We have a bilateral FTA which we are in the process of reviewing and improving. That is the bilateral Singapore-China FTA.

We have an ASEAN-China FTA, which also presents quite a lot of additional benefits to us. Last year, we just concluded an upgrade of the ASEAN-China FTA. Over and above this, we have the RCEP. The reason why I consider the RCEP very important is, as I had explained in my speech just now, in North America, you have NAFTA, and that makes it very difficult for us to break into NAFTA, because the supply chain of the US, Canada and Mexico is very closely integrated.

So, when we have TPP, we are now able to be part of that bigger ecosystem. As I had mentioned, our automotive components companies now have a fair chance of breaking into the automotive market in the US and compete with Mexico and Canada.

In Asia, there is a potential NAFTA-equivalent if China, Korea and Japan conclude their trilateral FTA. If that happens, Singapore will be excluded. So, it is very important for us to have the RCEP, so that we are part of the 10+6, so that we are also part of a bigger market and a bigger ecosystem. As I had emphasised in my speech just now, our trade policy must be inclusionary. We should not be left out, because we want market access to as many markets as possible.

Mr Chen Show Mao: I thank the Minister of State for his answer and his advice to wait and see on the declining trend in business rental. He mentioned that JTC has only 18% of the industrial space for rent and, therefore, does not have much influence over the rent of industrial space. I would like to ask the Minister of State whether JTC would consider increasing that percentage through the provision of additional, new, low-cost industrial space.

7.30 pm

Dr Koh Poh Koon: Mr Chairman, I thank the Member for his clarifications. As mentioned in my speech earlier, there will be 2.3 million square metres of industrial space that will come on stream annually in the next two years. I think market forces would allow rentals to soften over the next couple of years. With the supply of retail and industrial space coming up, I do not think we are in any position to add to the supply.

The Chairman: If there are no other clarifications, Mr Liang, would you like to withdraw your amendment?

Mr Liang Eng Hwa: Thank you, Mr Chairman. In this year's Budget, clearly, the word "transformation" is key. It is mentioned so many times – as well as "industry transformation". These are obviously the priority items in this year's Budget. And thereafter, we will have the CFE where, again, MTI will be all hands on deck to push ahead with the transformation. Minister Iswaran mentioned about the formidable task ahead and we empathise with the responsibility on MTI's shoulders. I just want to say that MTI and the family of agencies should draw on the inspiration of the power-packed Transformers, since they are transforming the economy, and then charge ahead.

With that, we wish you all the best and we are with you. I want to thank Minister Lim, Minister Iswaran, Minister of State Koh Poh Koon and Parliamentary Secretary Low Yen Ling for their replies. I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $924,799,100 for Head V ordered to stand part of the Main Estimates.

The sum of $5,662,788,200 for Head V ordered to stand part of the Development Estimates.