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

The Chairman: Head V, Ministry of Trade and Industry. Mr Liang Eng Hwa.

Committee on the Future Economy ‒ Recommendations and Implementation

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."

Our economic strategies have evolved at different phases of the country's development. As the global economic landscape changes, we correspondingly updated our economic strategies and developed new competitive advantages and capabilities to ride on the prevailing opportunities.

In our earlier post-Independence years, we started off competing as a low-cost manufacturing location, attracting multinational corporations (MNCs) to set up in Singapore while at the same time also growing our own timber by building up home-bred companies. Complementing our strength as an entrepot, we built up export-led industrial capabilities augmented with a skillful workforce.

In the 1980s and 1990s, we further moved up the value ladder, creating value-adding hubs, such as manufacturing, petrochemicals, financial services, shipbuilding, air and sea transportation, among others. We also encouraged local enterprises to go regional and seek growth through internationalisation.

By any measure, our economic development has been a great success. It has progressed the country, created good jobs, incomes and opportunities, brought about a better quality of life and strengthened our financial security.

Fast forward to today, the operating context has once again changed and, this time round, with fast disruptive implications. The rise of anti-globalisation sentiments and the inward-looking policies of the new United States (US) administration are real and present concerns, although we do hope that these changes are not permanent and can improve over time.

But what is of more consequence to us are the permanent and irreversible changes that are taking place even as we speak. For example, the global value chains are being restructured and, as a result, we have seen international trade slowed. Countries like China and the US are in-sourcing more than before due to availability of better production technologies. This has direct and indirect impacts on manufacturing, shipping, port and other supporting sectors where we have built up strong capabilities.

But the overriding reason why it is the time again to reposition our economy is the rapid technological changes that are fast disrupting businesses, products, services, the value chain and the way we earn our living.

In the midst of these developments, domestically for Singapore, our economy started to grow at a more mature pace of about 2%. Our population entered into a steeper rate of ageing and we are nearing the limits of the growth of our workforce. In other words, we will soon reach the full potential of the economy unless we add new capacity and capabilities again and create new growth drivers.

What this means is that we have pretty much plucked most of the lower hanging fruits or even the middle hanging fruits. From here on, our next unit of growth would have to come from plucking the higher hanging fruits which may well taste better.

In CFE lingo, this is what we meant by moving from value-adding to value-creating or, in the case of internationalisation, encouraging our enterprises to move beyond the traditional markets into more challenging international markets to seek further business growth.

Well, it sounds like a new economic strategy is needed and here enters CFE and its recommendations. We need to do the "single or double jump", so to speak, in terms of overall capabilities so that these higher hanging fruits are within our reach. This is doable and we can build on our existing advantages.

What I like about the CFE report is the "true to ourselves" way that it sums up the global and domestic realities that we face today and in the future, and the no-frills but pragmatic way in which it outlines what needs to be done to get to the new promised land.

Whether it is about strengthening Singapore's international linkages, deepening individual skills, enhancing enterprises' capabilities, building a digital economy, the Industry Transformation Maps (ITMs) or working together in new ways, these are not unexpected undertakings but are absolutely essential to transform the economy.

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Even if we could get just some of these efforts to bear fruits, we would have moved or pushed the frontiers forward. In some of these key thrusts, we may need to start in small steps initially to gain traction. Thereafter, we scale up fast so as to multiply the value and move the needle.

ITMs clearly demonstrated this grounded and microeconomic-centric approach. By bringing into the ITM platform relevant stakeholders of the industries, we could harness the collective wisdom of the industries to drive growth and opportunities and leverage the mutual resources and support to overcome challenges and build new capabilities. But ITMs can only succeed if each of the stakeholders ‒ enterprises, the trade associations and chambers (TACs), labour and agencies ‒ are aligned to a common purpose, and almost altruistic about it. Also, ITMs need to have the space and the risk tolerance to experiment new ideas and also necessarily empowered to make speedy ground decisions to respond to fast-changing industry scenarios.

I hope that the whole exercise of CFE has also uplifted businesses' enthusiasm and confidence to embrace the new future. The Government can and should help, support, facilitate and enable. But we also know that too much of it can also be counterproductive.

Already, I felt that the Government's hand is everywhere to be seen within the economy, not to mention the extensive assistance schemes and support offered by agencies like the Standards, Productivity and Innovation Board (SPRING), International Enterprise (IE) Singapore and others.

In the sort of economy that we envisaged where we gear towards value-creating, innovation and more entrepreneurship, there should actually be less of Government and more of the spirit of enterprise, as what the Minister for Finance said yesterday.

[Deputy Speaker (Mr Lim Biow Chuan) in the Chair]

Ultimately, it is still the businesses that will come up with the next "killer" product or services that can sell to the consumers of the world. Businesses should be the trendsetters. The Government can help, but the Government may not always make the right business call.

Sir, I would like to also take this opportunity to ask the Minister a few other specific questions.

Firstly, the CFE report pointed out that Singapore must continue to remain open and connected. But that will also make us more vulnerable to global trends and changes, such as the US withdrawal from the Trans-Pacific Partnership (TPP) and Brexit. How will this strategy of remaining open and connected serve us well, given the rise of anti-globalisation sentiments globally?

Secondly, the Report also highlighted using forward-looking regulations and Government-led demand to support innovation. How does the Government plan to implement these recommendations?

Thirdly, urban solutions were identified as one of the growth sectors that would benefit from the rising middle-class and urbanisation in Asia. How can the Government help companies capture these growth opportunities?

Fourthly, TACs are critical partners in supporting industry transformation. How has the partnership between the Government and TACs progressed? How can TACs play a bigger role, moving forward?

Fifthly, we have been building up our startup landscape for some time now. What is the progress of our efforts? What more does the Government plan to do to enable the startup scene to be vibrant and continue to grow?

Question proposed.

The Chairman: Mr Charles Chong.

Committee on the Future Economy Report

Mr Charles Chong (Punggol East): Mr Chairman, Singaporeans today enjoy a standard of living that is comparable to that of most advanced economies in the world. This has been made possible by our sustained economic growth through the years.

We have also weathered several economic crises in our short history. Significant recent examples of these are the Global Financial Crisis at the end of the last decade, the bursting of the Dotcom Bubble in the early 2000s and the Asian Financial Crisis in the late 1990s. Each time, we have come out of these crises more resilient, and we learn lessons from them and diversify our economy.

While the global economy seems to be recovering from the most recent financial crisis, growth is projected to be subdued and lower than in the previous decade.

Furthermore, the events that took place last year in the United Kingdom (UK) and in the US point to a world that is turning increasingly inwards. This is a worrying trend, which seems to have found some traction in some other countries, including a number in continental Europe.

While a move away from globalisation will likely hurt all economies, small and open ones like Singapore's will be hit particularly badly, as our fortunes are inextricably tied to the rest of the world's.

The report produced by CFE recognises these challenges. It also says that we can aim for 2%-3% growth in the medium term. However, this is quite a bit lower than the 5% that we were used to for many years. For example, our gross domestic product (GDP) growth averaged 5% from 2001-2010, despite the bursting of the Dotcom Bubble at the start of that period and the Global Financial Crisis at the end of the decade.

In 2016, we grew at 2% which, as the Minister for Finance has observed, is at the lower end of the 2%-3% target referred to by CFE, even though it is still in line with the medium-term projections.

Mr Chairman, the effects of this have, however, been felt by Singaporeans and many residents I have spoken with in my constituency they have told me that they are personally feeling the pinch of the slower growing economy.

With this in mind, I would like to ask the Minister for Trade and Industry to elaborate on the outlook for Singapore's economic growth in the short to medium term and how it will continue to create good jobs for Singaporeans.

Outlook for the Singapore Economy

Ms Foo Mee Har (West Coast): Chairman, the Singapore economy grew by 2% in 2016, boosted by a better than expected fourth quarter performance from a rebound in the electronics and biomedical manufacturing clusters. However, growth in other sectors remained weak. The Ministry of Trade and Industry (MTI) has forecasted that the economy is likely to grow between 1% and 3% and global growth is expected to pick up slightly in 2017.

Faced with a modest outlook for the coming year, I am concerned about the risks to growth from the rise of anti-globalisation sentiment, Brexit, uncertainties about the Trump administration's economic policies and the possibility of a sharper than expected slowdown in China. However, we do see that Asia remains to be a bright spot, driven by infrastructure development and e-commerce.

What challenges and opportunities does the Minister see for Singapore and Singaporeans, amidst these developments? What measures are being rolled out by our Government to help the nation navigate the external uncertainties, including trade policies? How can our firms and individuals position themselves to thrive under these conditions? Should we be hopeful, Minister, that the pickup in the fourth quarter will endure and that Singapore has turned the corner?

On the ground, people are worried about their job security. Many businesses are struggling with the effects of globalisation. Labour market constraints and high cost of doing business remain key challenges. The business community complains about the rising compliance costs and that Singapore has grown less flexible and competitive. They also hear about the ambitious developments in neighbouring countries and worry that Singapore risks being marginalised. Some economists have gone as far as labelling Singapore as the "new sick man of Asia".

Notwithstanding the comprehensive set of recommendations by CFE, there is no silver bullet and many of the proposed initiatives take time to take effect, requiring significant efforts from all stakeholders. So, I would like to ask the Minister about his assessment of the outlook of Singapore's economy for the next two to three years?

Managing Retail Rental Cost

Mr Kwek Hian Chuan Henry (Nee Soon): While CFE is focused on the long-term economic transformation, is there more that the Government can do to manage key business costs, such as rentals? We have seen rental costs decline considerably for industrial land, and Jurong Town Corporation (JTC) seemed to have made some downward adjustments. But there could be room for the Government to do more to influence the retail market rental. Should the retail slump worsen, as a short-term counter-cyclical measure, could the Government consider reducing property tax for retail real estate, on condition that the property tax savings get passed entirely to the operating businesses?

Regulations

Miss Cheng Li Hui (Tampines): Small and medium enterprises (SMEs) today are faced with a number of cost pressures, from the water price increase, diesel tax increase, annual JTC land rent adjustments and so on.

Today, I would like to focus on the cost of regulations. An SME owner Mr Ong told me this story. One day, as he drove past some roadworks, he saw two men digging a pit, two men supervising, one with a blue helmet, another with a white helmet. A guy sitting on the excavator waiting to start work, with a signalman and a rigger man on standby for the excavator to start digging, plus two signalmen to direct traffic. Nine men in total to dig a hole. He asked if this was productive. I explained that this work process seemed to comply with the Building and Construction Authority's (BCA's) requirements.

I am sure some of us have heard construction company owners speaking of their frustrations keeping up with regulations, mandatory training for their workforce, shortage of labour quota and so on.

I am not so familiar with the construction industry. So, I did a check on some of the compliance requirements. Please bear with me as I run through some of them.

Under the Contractors' Registration System (CRS), there are seven major groups of registration heads, namely, Construction Workheads (CW), Construction-Related Workheads (CR), Mechanical and Electrical (ME), Maintenance (MW), Trade (TR), Supply (SY) and Regulatory (RW). Contractors and subcontractors only need to register in CRS if they wish to participate in public works and tenders.

During this economic slowdown, many companies do rely on Government jobs. I am sure the Minister of State's announcement that the Government will bring forward $700 million of infrastructure works in the next two years will be welcomed by the construction industry. However, this may not help the smaller companies. Let me explain why.

CRS is further divided into seven major categories − Construction (CW), Maintenance (MW), Supply (SY) and so on. In total, there are 63 workheads, and each of them has their own special requirements. Smaller construction companies may find it difficult to find the right heads, let alone fulfil the strict requirements. As a result, many construction companies have resorted to collaborating with one another to make use of their professional certificates to tender for projects. This may sound like a joint venture, but it is not. Borrowing of certificates drives up costs and compromises the intended objectives of CRS.

This is just one aspect. There are many regulations from the Monetary Authority of Singapore (MAS), JTC, the Urban Redevelopment Authority (URA), BCA, the Ministry of Manpower (MOM), the National Environment Agency that the business owner must try to understand and comply with. For the large companies, they have the infrastructure and the capital. However, for smaller companies, the multitude of regulations take capital and energy away from innovation.

I am not suggesting that we do away with regulations but they are there for a purpose. But surely, there must be cost efficiencies if we scrutinise and optimise the myriad of regulations that is imposed by agencies today. I would, therefore, like to propose that we initiate a study to identify and consolidate regulations while ensuring that we continue to protect and guard the interests and safety of the public. In doing so, we could lower the compliance costs for some SMEs.

Business Space and Rental

Mr Chen Show Mao (Aljunied): Sir, over the past year and more, commercial rental for industry, office and shops has declined. Yet, a significant number of SMEs continue to cite the need for Government assistance relating to business rental. After this year's Budget was delivered, the Singapore Business Federation (SBF) said it was disappointed with the inadequate short-term support to lower business costs, including "the absence of measures on rental rebates for businesses in general."

Why is that? Quite apart from the fact that no assistance is too much assistance as far as prospective recipients are concerned, it seems that businesses facing challenging times may find even falling business rental a substantial burden. And for SMEs in some sectors more than others, business rental makes up a significant part of their operating costs. Could the Ministry consider whether targeted assistance, for example, rental rebates directed at qualifying SMEs or startups in certain sectors may be feasible, say, to stimulate retail-oriented SMEs, startups or microbusinesses, so as to bring added diversity and vibrancy to our heartlands? There are good reasons for this: to help SMEs relieve some of the pressure they feel and better take on the challenges of restructuring and drive innovation.

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Business Rental Costs

Mr Dennis Tan Lip Fong (Non-Constituency Member): Sir, I would like to call on the Government to do a comprehensive study of the history of business rental costs in Singapore.

In survey after survey, year after year, escalating business costs have been cited as a perennial bugbear for SMEs. In its Budget recommendations for 2016 and 2017, SBF highlighted that there was an urgent need to assist SMEs with business costs in the immediate term so as to help them overcome near-term economic headwinds, and high rental costs have consistently ranked among the top cost concerns for businesses. In 2015, rental of premises was found to be the second factor with the greatest impact on profitability, coming in after manpower costs. Even though concerns over rental have finally dipped slightly in 2016 owing to slower growth overall, this is a problem that we must still pay close attention to.

I hope the Government will consider conducting a major comprehensive historical and international benchmarking study on business rental costs to understand why rental costs rose so rapidly over the past two decades and why, despite the Government's efforts in recent years to release more land through the Industrial Government Land Sales (IGLS) programme so as to ensure more industrial space, SMEs are still feeling the squeeze. The study should also include how the cost of doing business in Singapore compares globally, identify areas where the Government can provide greater support to our local businesses, and provide concrete recommendations in this regard. Only by having a deep understanding of the factors that cause rental costs to escalate can we incorporate the lessons into our long-term strategy and avoid crushing rental surges in future.

The Chairman: Dr Tan Wu Meng, do you want to take both cuts together?

Marine and Offshore Engineering Sector

Dr Tan Wu Meng (Jurong): Let me declare that I am on the Council of Advisers for the Shipbuilding and Marine Engineering Employees' Union (SMEEU).

Our workers ‒ our brothers and sisters − are concerned about the Marine and Offshore Engineering sector. Oil prices are not what they used to be. There is a sense of uncertainty in the industry. Any job losses will affect workers, breadwinners, families.

Retrenchments would also hurt the industry as well. When a worker is let go, skills are lost, institutional memory is lost. It makes it harder for the industry to pick up again when the economy and the sector improve, so it is all the more important that we help our workers, that we help our brothers and sisters.

So, can the Ministry advise whether the Government's measures to support the sector have been successful? What measures does the Government use to determine success? And what more is the Government planning to do?

Regionalisation and Shared Standards

For some sectors like e-commerce and e-payments, platform interoperability matters. But more generally in other sectors, too, a shared operating system benefits all the participants − less back-office paperwork for vendors, ease of use for customers and a scalability of the user base and opportunities.

So, I would like to ask: how is the Ministry working with regional partners and collaborators to build shared industry standards − almost a shared operating system − to deepen regional cooperation to benefit the different regional partners and our local businesses as well?

Globalisation Strategy

Miss Cheryl Chan Wei Ling (Fengshan): Sir, multiple trade indicators have shown that global trade has weakened in the past five years. GDP growth for developed economies is stagnating and fewer investments are taking place amidst the uncertainties around the world. In the past decade, Singapore's economy has been dependent on global trade. And this is likely to remain as we continue to be constrained by a lack of natural resources and small domestic consumption.

Political themes around the world are leading to a lot of uncertainty and could become game changers. But one thing that is certain is that free trade has invariably changed when viewed with the same lenses. If we look at the two powerhouses globally − the US and China ‒ their plans and developments have huge implications on the global economy. Any fiscal stimulus and deregulation from these countries will result in a domino effect through the value chain. Brexit is one such example. They may be at the early stages before formal negotiation with the European Union (EU), but their potential departure has tipped the iceberg after a ripple effect amongst the countries in the EU.

In the US, Trump's growth agenda seems to focus on three areas: short-term fiscal boost through lowering taxes for companies, domestic deregulation in the energy and healthcare sector, putting America first in foreign trade policy. This discussion of a new tax regime for companies have actually brought about mixed reactions. Similarly, in China, expansionary monetary and fiscal policies supported their growth with 6.7% GDP in 2016, but it is their slowest in 26 years. Moving ahead, it is clear that China cannot sustain its growth using previous policies. They have made announcements on a policy shift towards stability and industrial production growth. With these changing policies from our large trading partners, how will this impact Singapore? I would like to ask the Minister if there are changes in our strategy and tactical approaches towards globalisation. If so, how are we reviewing our existing free trade agreements (FTAs) and developing new ones? Also, what industry sectors are more likely to be affected?

Trans-Pacific Partnership

Mr Lee Yi Shyan (East Coast): Sir, Singapore's economic development has benefited from global trade liberalisation and globalisation trends. Global trade has grown significantly in the last two decades, supported by global trade liberalisation and the proliferation of global value chains and rising incomes.

Our network of FTAs has given us preferential access to key markets, stronger trade linkages with our FTA partners and opened up opportunities for our companies. We also built on our position as a gateway to the region and to become an important hub for businesses.

However, the global trade landscape is fast changing. As the report of CFE has pointed out, trade and globalisation have become more politicised, as they are blamed for rising income inequality or the inability to create good jobs.

At the same time, the Committee also called for Singapore to strive to remain open and connected to the world. I, for one, agree that it is even more important today to stay open and be connected. But it will be challenging for us to do so in this current climate. Much depends on what the major economies will do. The US has withdrawn from TPP. There are also signs of increasing protectionism amongst the G20 economies.

In this challenging climate, what is MTI doing to ensure that Singapore and its key trade partners stay open and connected? How can we improve on our Association of Southeast Asian Nations (ASEAN)-centric FTAs and what is next in terms of Singapore's trade agreements? Will Singapore enhance existing bilateral FTAs and build new ones?

Companies Tapping ASEAN Opportunities

Mr Saktiandi Supaat (Bishan-Toa Payoh): Sir, the CFE report mentioned that Asia, especially Southeast Asia, is a region of high growth. We have very good diplomatic relations and trade with many of the Asian countries and our neighbouring ASEAN countries, which is a good start. How can local businesses tap on these opportunities and how will the Government support them? I am hoping for more proactive measures of creating jobs and directing overseas projects, particularly those in construction and infrastructure planning, to the local companies.

I had also mentioned in the Budget speech about building up our next generation in regional languages and cultures, so that they can connect easily with the regional counterparts. Besides the SkillsFuture Leadership programme, how much more can we do for the future generation of business leaders?

The Chairman: Minister Lim.

The Minister for Trade and Industry (Trade) (Mr Lim Hng Kiang): Mr Chairman, I thank Members for their comments and suggestions.

Mr Liang Eng Hwa and Ms Foo Mee Har asked about the global economic outlook and the implications for the Singapore economy. We expect global growth to remain modest in 2017, with growth projected to pick up slightly to 3.4%, from 3.1% in 2016. The US economy is projected to grow at a faster pace, primarily supported by domestic demand. Growth in the Eurozone is likely to remain modest, while China's economic growth is expected to ease on the back of its continued restructuring.

The global outlook also remains clouded with uncertainties and downside risks. Upcoming elections in key Eurozone economies may pose uncertainties regarding the direction of the monetary union. If anti-globalisation sentiments and protectionism take root, global trade will be adversely affected. Political risks and uncertainty in the new US administration's policies have also led to greater economic uncertainties and financial market volatility. These factors could, in turn, weigh on business and consumer confidence, dampening investment and consumption. At the same time, technological changes continue to gather pace, disrupting entire industries even as they create new opportunities. Many of these changes are still playing out and it is difficult to know with certainty how things will develop.

So, against this backdrop, the Singapore economy as a whole is on a stable and steady growth trajectory. GDP growth came in at 2% in 2016. Barring downside risks, we expect growth in 2017 to be similar to 2016. Mr Charles Chong observed that the growth rates have come down in recent years. As CFE has highlighted, we have to adapt to a lower but more sustainable rate of 2% to 3% growth as our economy matures and undergoes structural adjustments.

Mr Charles Chong asked about the outlook in the short and medium term. Let me try and summarise the key developments and trends.

First, our restructuring efforts are gaining traction. We have narrowed our productivity gap with other advanced economies, although there is scope for improvement, especially for domestically-oriented sectors. Overall labour productivity grew at a modest pace of 1.5% per annum from 2010 to 2016. Over this period, the productivity of outward-oriented sectors, such as manufacturing, wholesale trade and finance and insurance, have increased by 2.7% per annum, while that of the domestically-oriented sectors, such as construction, retail and food and beverage (F&B), grew by 0.7% per annum. As our restructuring efforts gather momentum, we can expect to see steady progress in achieving our productivity targets.

Second, our labour market remains resilient. Wage growth has been comparable to or higher than many advanced economies, in part due to the tightness in our labour market. Between 2010 and 2016, real median gross monthly income of full-time employed residents grew by 3.1% per annum. At the same time, the annual average resident unemployment rate has remained low, at 3% or lower since 2011, while the resident labour force participation rate has remained high. So, despite the difficult conditions that we are facing, our labour market is holding up.

Third, despite an uncertain environment, we remain globally competitive. The World Economic Forum's Global Competitiveness Report 2016-2017 ranked Singapore as the second most competitive economy in the world. We continue to attract a steady pipeline of investments, thus creating new job opportunities. Over the past five years, the Economic Development Board's (EDB's) investment commitments have brought in an average of S$12 billion in fixed asset investment and S$7 billion in total business expenditure annually. These investments are expected to create an average of 20,000 jobs annually when the projects are fully implemented.

Ms Foo Mee Har observed that despite the 2% growth in 2016, business sentiments remain weak. One reason for this is the uneven performance across different segments of our economy. Take manufacturing, for example. Growth in the sector was led by the semiconductor segment, which grew by 31% in 2016 and, to a lesser extent, the machinery and systems segment, which grew by around 5%.

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On the other hand, the marine and offshore engineering segment continued to contract. Similarly, the printing and the miscellaneous industries segments of the general manufacturing cluster saw a drop in their output last year. It is thus not surprising that while firms in the semiconductor and machinery and systems segments are positive about their business prospects, firms in the marine and offshore, printing and miscellaneous industries segments would feel pessimistic.

Similarly, even though the services sectors on the whole saw subdued growth in 2016, there continues to be bright spots, such as in information technology (IT) services, education, health and social services. On the other hand, the retail trade segment will continue to face structural challenges as it adapts to e-commerce and weak consumer demand.

Even within the same sector, the performance of firms was also uneven. For example, within the logistics sector, firms with major contracts from the marine and offshore engineering segment were harder hit. Conversely, firms that had a diverse portfolio of clients from different industries, especially those that provided more integrated and specialised value-added services, did better than the industry average.

This uneven performance across our economy and the uncertain economic outlook explain the weak business sentiments and the sense of insecurity among our workers. Recognising that there are different opportunities and challenges for each sector, the ITMs are the right approach to address the specific needs of each industry. That is why we focus on ITMs.

The Government will continue working with our businesses and unions to overcome challenges that we are facing.

First, we introduced several initiatives at Budget 2016 to support our companies. They are still relevant and effective in dealing with the current situation.

One initiative is the SME Working Capital Loan, which allows SMEs to access unsecured working capital of up to $300,000 and complements existing financial schemes to support our SMEs. As at the end of 2016, more than $700 million and 4,800 loans have been catalysed, benefiting around 4,300 SMEs. With the improved credit availability under this scheme, our SMEs can better address their cash flow concerns and their growth financing needs.

Another initiative is the Automation Support Package (ASP), which complements SPRING's existing Capability Development Grant in helping companies achieve productivity improvements. In 2016, these two schemes collectively supported 226 automation projects. An example of a company that has benefited from this scheme is Commonwealth Culinary Creations Pte Ltd (CCC). This is a food supplier. Through the use of automation, CCC improved the quality, consistency and range of their confections. Their output per shift doubled, even though they used less manpower than before. This allowed CCC to scale up and take on larger business opportunities as well as supported its long-term goal to expand regionally and to the Middle East.

Second, the Government closely monitors our economy and stands ready to take decisive action if needed. In November last year, we introduced the Marine and Offshore Engineering (M&OE) Bridging Loan and enhanced the M&OE Internationalisation Finance Scheme to facilitate M&OE companies' access to working capital and financing. Both aim to stabilise the M&OE sector as it copes with prolonged weaknesses in oil prices.

Dr Tan Wu Meng asked if the support measures have been successful. The measures are expected to catalyse about $1.6 billion in loans over one year. As of February 2017, applications amounting to more than $90 million of loans have been approved. Based on feedback from participating financial institutions, we expect the pipeline demand to be strong, with more than 100 companies already indicating interest in the scheme. The access to financing will help companies finance their operations, bridge short-term cash flow gaps and take on new projects. Stabilising the industry will help to preserve Singapore's core capabilities in the sector and save jobs. With the stabilisation of oil prices, we are beginning to see some upstream and mid-stream activities taking place in the oil and gas sector. There is, of course, a certain amount of lag in the sector, so some of the suppliers and stockists may not feel the impact as yet. But anyway, the Government continues to monitor the sector closely and we track indicators, such as order books and output levels in the sector, and we continue to evaluate the feedback from industry players.

Third, we will continue to keep a close eye on business costs to ensure that they do not rise excessively. The unit business cost (UBC) index for the manufacturing sector fell 8.5% from 2015 to 2016. For the services sector, the unit business cost index increased at a more moderate 0.1% year-on-year for the first three quarters of 2016, compared to an average 0.5% increase per annum of the four years before that.

Mr Henry Kwek, Ms Cheng Li Hui, Mr Chen Show Mao and Mr Dennis Tan spoke about rental costs, which are a component of unit business cost. Let me try and address the issues in the following way.

First, we have to understand the contribution of rental costs for the different sectors. We do acknowledge that SMEs in the retail sector and in the F&B sector, rental cost, as a share of their total business costs, is around 30% and is, therefore, significant. But for the other sectors, rental cost is not so significant. For example, in the manufacturing sector, rental cost is a small share of total business cost at between 0.7% and 4.8%. Similarly, in most services sectors, rental cost constitutes around 5% of business cost.

Second, in the last three years, the rentals have been declining in all the various sectors ‒ industrial space, commercial space, retail and office. So, the problem has not been so severe in the last three years.

Third, the Government believes in letting market forces set the rent and we allow the private sector to provide the responses in supplying the demand. Where we intervene is where we recognise some possible market failures. For example, in startups where it is not so commercially viable to provide the space, the Government will step in and, indeed, we have. JTC set up LaunchPad@one-north in 2015 and plans to build a network of LaunchPads around Singapore. The next one will be completed in the Jurong Innovation District this year. JTC has also been developing industrial facilities with shared services for SMEs in order to reduce their capital expenditure and operational costs in such specialised facilities.

Mr Henry Kwek suggested reducing property tax for retail real estate. This will not help most of our retailers because the landlords would benefit directly and it is very difficult for the Government to instruct landlords to pass on the tax savings to tenants. We cannot compel them to do so in return for the rebates, as such a condition will not be enforceable operationally. Therefore, the Government has other ways to support our businesses, including schemes like the Capability Development Grant, which encourages businesses to build business capabilities by defraying up to 70% of qualifying project costs. This is a sustainable way to manage business costs, rather than through direct intervention through rental rebates.

Mr Chairman, let me now turn to the medium- and long-term challenges. We are confident that Singapore is well-positioned to seize opportunities of the future. CFE has identified two key thrusts − first, remaining open and connected and, second, building deep capabilities. Let me elaborate on the first thrust, and Minister Iswaran will speak more on the second.

Mr Liang Eng Hwa asked how our strategy of remaining open and connected will serve us, given the rise of anti-globalisation sentiments globally. Trade and external demand are key drivers of our economy, accounting for two-thirds of our GDP. Small and open economies like Singapore are especially vulnerable to global developments but, at the same time, our external linkages can also make us more resilient.

Our trade connections across the world have enabled our companies to access new markets and cutting-edge technology and have created good jobs for Singaporeans.

International Enterprise (IE) Singapore's 2016 Internationalisation Survey showed that our companies' overseas revenue grew 4.2% year-on-year, compared to the total revenue growth of 1.3% year-on-year. So, going overseas allows us to tap into the higher growth potential of Asia. When companies internationalise, about 60% of jobs created are for professionals, managers, executives and technicians (PMET) jobs. So, internationalisation helps us to create good jobs for Singaporeans.

Miss Cheryl Chan and Mr Saktiandi Supaat asked how we can support our companies to tap on overseas opportunities. We can do so in four ways.

First, we must continue to leverage our trade agreements. We have a network of 21 FTAs with 32 trading partners in multiple regions. These agreements helped our companies to benefit from tariff savings of over $900 million in 2015.

Our trade agreements also lower other barriers to trade. Under the Gulf Cooperation Council (GCC)-Singapore FTA, there is mutual recognition of halal standards. This means that a product that is halal-certified by the Islamic Religious Council of Singapore (MUIS) does not have to go through additional halal certification processes when it enters the GCC countries. So, this provides added certainty for companies which export products to the GCC countries.

Miss Cheryl Chan and Mr Lee Yi Shyan also asked what is next for our trade agreements, and Dr Tan Wu Meng asked how we are working with our regional partners to deepen cooperation on standards. Under the ASEAN Economic Community, ASEAN member states are looking at the harmonisation and mutual recognition of standards across a wide range of sectors, including automotives, cosmetics and medical devices, and aligning them to international standards wherever possible. We are also working with our ASEAN member states to improve trade facilitation through the ASEAN-wide Self-Certification regime and the ASEAN Single Window (ASW). These initiatives will also reduce the administrative burden and cost to our traders. We will also press on with our efforts for greater regional connectivity through the Regional Comprehensive Economic Partnership (RCEP).

We will also ensure that our agreements meet our changing business needs, especially in the digital economy. Common trade rules governing e-commerce will promote greater digital connectivity in the region by reducing barriers to e-commerce and improving security of electronic transactions. All these will be introduced and incorporated in our new trade agreements.

The second way we can support our companies is by deepening our linkages at the provincial, state and city levels. We can do so through bilateral platforms and government-to-government (G-to-G) projects. In China, Singapore companies have made inroads through our seven provincial business councils. Our third G-to-G project, the Chongqing Connectivity Initiative (CCI) will also enable us to engage the provinces in western China.

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As provinces and cities within a country will differ in strengths and challenges, we also adapt accordingly. For example, the Vietnam-Singapore Industrial Park (VSIP) projects are spread across six provinces in Vietnam and cater to the priorities of each province, taking into account the locals' skillsets as well as investors' demand. So, Singapore food companies, for example, have set up in VSIP 1 in Binh Duong province in southern Vietnam to cater to the growing middle class and the expanding demand for premium food products. Meanwhile, companies in electronics manufacturing and logistics services have set up in VSIP 3 in Bac Ninh province in northern Vietnam to support the increased presence of consumer electronics MNCs.

We should also deepen our engagements at the city level. For instance, in Indonesia, Bandung and Makassar are keen to incorporate digital solutions in their city development. With IE Singapore's assistance, a Singapore e-government solutions company, Ecquaria, set up a software development centre in Bandung and is in discussions with the Bandung City Administration on the provision of e-government services. IE Singapore also signed a Memorandum of Understanding with Makassar to facilitate Singapore companies in providing Smart City solutions and technology.

There are also opportunities to be seized in developed markets. Singapore has hosted delegations from US states like Texas, Alabama and Washington, all of whom have been eager to find new markets for their exports and welcome new investments. At the same time, there is interest from Singapore companies to invest in the US. For example, AC Global Energy acquired technology from their US partner to convert pine wood to green diesel, biochar and wood vinegar. They currently operate a biodiesel plant in Tennessee and are looking to build another plant in Alabama. So, working closely with our economic agencies, we will identify mutually beneficial partnerships at the state level.

The third way we will support our companies is by strengthening our internationalisation efforts. The digital economy presents opportunities for SMEs to access new markets. Kino Biotech, an SME which sells healthcare products, such as collagen drinks, is using e-commerce to augment its internationalisation efforts to enter the Chinese market. With IE Singapore's assistance, Kino Biotech began listing their products on Alibaba's Tmall Singapore Shop in 2016 and found e-commerce to be an effective sales channel. They have now developed their own e-commerce platform, Kinofy, to serve as a marketplace for health and beauty products targeted at the Chinese market, and this platform will soon be supporting products from other companies as well.

In addition, Singapore companies can partner larger companies to venture abroad. InvitroCue, a home-grown biotechnology firm that was spun-off from the Agency for Science, Technology and Research (A*STAR), provides cell-based models for global pharmaceutical companies to test drug and medical devices. Since August last year, InvitroCue has collaborated with Qiagen Suzhou, a joint venture between Dutch MNC Qiagen and Suzhou Industrial Park Biotechnology Development, to jointly develop, brand and market new technologies.

Singapore companies enjoy greater economies of scale by going abroad together. TACs play a unique role in such collaborations. Last year, the Singapore Manufacturing Federation (SMF) and IE Singapore partnered our companies to help them collectively obtain lower product listing fees and better shelf displays, as well as organise promotional activities. SMF also helped to oversee the consolidation of our companies' exports, shipping them to the supermarkets in shared containers. Through this collaboration, our companies were able to bring their products overseas at a lower cost, compared to if they had done so themselves.

The final way which we will support our companies is through the Global Innovation Alliance (GIA), as announced by the Minister for Finance. The future economy will be characterised by a global network of innovation and talent. Cities which are plugged into this network will have a strong advantage. By linking our enterprises and students with overseas partners in major innovation hubs and key demand markets, our companies and people will benefit from the opportunities as well as the overseas exposure. Similarly, Singapore can also tap on the best global talent and ideas to stay at the forefront of innovation.

GIA's focus in each city will be tailored according to its strengths. In cities like San Francisco and Beijing, where there are thriving, world-class innovation ecosystems, we want our students and companies to be immersed in the environment and to be able to interact with them. In cities like Jakarta, innovation ecosystems are just rapidly taking shape and our companies should, therefore, be participating in these developments. Minister Iswaran and Minister of State Dr Koh Poh Koon will explain how our SMEs and startups can benefit from this initiative.

Mr Chairman, over the years, Singapore has adopted a consistent and deliberate strategy to remain open and connected. This has opened up new opportunities for our businesses and people, even during challenging times. Amidst the uncertain operating environment, we are convinced that staying the course remains the right thing to do. An open and connected Singapore will be better placed to tap on the opportunities of the future economy.

Industry Transformation Programme

Ms Foo Mee Har: Chairman, ITMs were part of the $4.5 billion programme announced in the 2016 Budget aimed at promoting growth, helping companies become more competitive and creating good jobs in 23 industries. ITMs integrate planning and implementation, bringing together industry partners, TACs, unions and public agencies. Six ITMs have been launched so far, with 17 more expected to be launched this year. What results have been achieved and what lessons have we learnt? How can we fast-track the implementation of the other ITMs and ensure that they are implemented successfully?

The Minister for Finance shared that ITMs are "live" plans that will be adjusted along the way. We are in uncharted waters, with no blueprint or map to lead the way forward. And, together, we will feel our way through. It is encouraging that, rather than pick winners, MTI has chosen to build industry-level capabilities for all 23 sectors concurrently. But given our limited resources and the executional complexity in implementing these ITMs, would it not be more prudent to prioritise our efforts on industries with high-growth potential and well-established sector partnership structures?

TACs have been identified as playing a pivotal role in helping their respective sectors transform and scale up. During last year's Committee of Supply (COS) debate, I pointed out that TACs need to step up to their role and there is much that is expected of them. So, what impact, I would like to ask the Minister, the new Local Enterprise and Association Development-Plus (LEAD+) programme had in helping TACs improve their outreach, attract talent, develop their capabilities and strengthen their processes and services? Could the Minister share some good examples of how selected TACs have been successful in leading the development of industry-wide transformation and helping their members to make inroads overseas? We really need to learn from countries with strong trade associations, such as Germany, Korea and Taiwan, on how their TACs have helped their industries raise productivity, invest in jobs and skills, leverage research and development (R&D), promote the adoption of technology and form formidable consortiums to capture overseas business.

During my Budget speech, I highlighted the pivotal role, the great example that MAS has played in creating the enabling environment for the finance sector. I would like to ask the Minister what other sectors in the pipeline have similar plans to boost productivity, competitiveness and enable growth and innovation.

Industry Transformation Maps (ITMs) and Their Effectiveness

Ms Sun Xueling (Pasir Ris-Punggol): Sir, for ITMs, ideally, firms, TACs, unions and the Government would work together to understand the constraints that firms face and brainstorm how, with new modalities and new technologies, firms could move forward together.

The reality is that firms go into the discussion with different perspectives. Big firms wonder what is in this for me? Will there be discussion into who and what the potential disruptors to my business will be and what I should do? Will there be investments into new areas of growth and how can I benefit from that? Small firms wonder will there be honest sharing of best practices? Will I get to know more suppliers, more customers to help grow my business and will the Government help with grants to make my return on investment from using new technologies and new processes more appealing?

With such dynamics in place, how do we bring firms together to share the strengths that work for them and which could be trade secrets and also for firms to be honest about their weaknesses? I suggest that the economic lead agencies conduct in-depth one-to-one discussions to thoroughly understand the corporates and what they need.

To avoid being constrained by local models and local environment when putting together the ITMs, I suggest that disruptors, entrepreneurs from adjacent industries and overseas markets be brought into the ITM discussions. Resource panels can be set up to ensure that there are systematic exploration and follow-up on their inputs.

Lastly, setting the parameters for ITMs is going to be a crucial part of positioning the firms for success. Working on those potential parameters and eliminating potentials along the way is, in itself, helping firms make sense of an uncertain environment and helping them feel their way forward.

Manufacturing Competitiveness

Miss Cheryl Chan Wei Ling: Sir, in 2015, manufacturing accounted for 20% of Singapore's GDP. This is a decline from earlier years as alternate cost competitive locations surfaced and availability of industry resources improved in emerging markets.

From the CFE report, it was recommended that Singapore continue to build a globally competitive manufacturing sector. Can the Minister provide more details behind the recommendation?

Additive manufacturing sector and robotics automation were cited in the Research, Innovation and Enterprise (RIE)2020 as cutting-edge technology across different industry verticals. Additive manufacturing had a long gestation period since the 1980s. It has improved and advanced tremendously in the past five years when digitalisation became more widespread and materials improved.

Extensive collaboration and consolidation have been taking place in the industry and this trend would only continue. The challenge is that global manufacturers like General Electric (GE), Airbus, Bosch, Siemens and so on of the different vertical industries are directly acquiring and investing in leading companies of 3D equipment manufacturers, software platforms and materials for printing. With their substantive investments and a strong focus on R&D and vertically integrated manufacturing capabilities, they will be ahead of the industry players when it comes to commercialisation. Which aspect is RIE2020 focused on? Will the collaborations we pursue result in a flow-through from research to social and economic impact, which is a key thrust of RIE2020?

Apart from our focus on ITMs, I hope the Ministry in future will take an active review to look ahead at emerging trends and gaps of the different industries so as to facilitate earlier skills training of our workforce and timely introduction of new courses or curriculum within our education system.

The Chairman: Mr Charles Chong, do you wish to take both cuts together? It is seven minutes.

Resource Pooling

Mr Charles Chong: Thank you, Mr Chairman. I will speak on both my cuts. The first cut relates to industry transformation and how we can help our businesses lower costs through a practice known as resource pooling. The second cut I will address innovation.

The Government has said that industry transformation will require strong partnerships at various levels. To this end, ITMs aim to coordinate policies from different agencies for each of the 23 industries covered by the Government's Industry Transformation Programme.

Each ITM is led by a single agency with overall responsibility for coordinating among the relevant agencies. This makes very good sense and is less confusing for our companies, who can look to the lead agency for their industry.

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I understand also that the Government wants to work closely with our unions and TACs to promote industry transformation. This is also something to be encouraged as these stakeholders can provide valuable feedback, insights and connections to help us with this.

But apart from these sorts of public-private partnerships, another type of partnership is also needed to take place more often and on a larger scale, namely, partnerships within the private sector.

For example, businesses, especially SMEs, can consider employing a practice known as resource pooling. This refers to the sharing of the purchase cost of big-ticket items amongst companies which need to use it, thus lowering the cost per SME. This will help us adopt new technologies, which can sometimes be expensive to adopt without sufficient scale.

Resource pooling amongst businesses has proven effective in raising productivity and lowering business costs. However, it remains less common in Singapore, compared to countries like Japan.

I would, therefore, like to ask the Minister whether ITMs will be able to promote resource-pooling among businesses.

Innovation

In my second cut, I would like to address the broader topic of innovation and how we can strengthen our innovation ecosystem. This is very important, because we are entering a new phase of growth that will be increasingly driven by technology and innovation.

ITMs are a step in the right direction, but transforming industries is not easy, with many stakeholders involved.

This is why we must get our innovation and productivity strategies right. We have done well in the past and, over the years, we have built up a dynamic research ecosystem with excellent research-intensive universities, mission-oriented research institutes under A*STAR, as well as a growing base of innovative local companies. The challenge is to do even better, given our slowing workforce growth.

Competition is also intensifying as other countries, including some in this region, are taking steps to increase their attractiveness as innovation hubs.

More broadly, we must ensure that we have a robust research RIE system in place to complement our efforts under the ITMs.

The Government has made significant investments in R&D over the years, including the latest $19 billion investment under RIE2020. It is important to ensure that we have structures and policies in place, so that our R&D investments can lead to positive economic outcomes. In particular, in line with the trend of open innovation, it is important to forge connections and partnerships across public and private sector players in our ecosystem.

I would, therefore, like to ask the Minister how we can strengthen our innovation ecosystem so that we can better prepare our companies to keep pace with technological developments.

Finally, it was recently announced that A*STAR will be transforming itself, quoting the news reports, "to keep pace with industry changes and promote cross-disciplinary collaboration". A*STAR plays an important role in our innovation system. It bridges the gap between academia and industry, and partners enterprises across the spectrum to transfer and co-develop technologies. Could the Minister provide a little more elucidation on what A*STAR's transformation will entail and how A*STAR will be better organised to support the changing needs of industry?

Research and Innovation

Ms Chia Yong Yong (Nominated Member): In a competitive environment, we learn from one another. Very often, competitors copy one another. Very often they become better. The more successful one is, the more one is liable to be copied. The same is true for companies, the same is true for countries. The easiest competencies for competitors to imitate tend to be those that are tangible, such as infrastructures. Changi Airport may be visible, such as the Singapore Girl and transactable.

On the other hand, intangible resources, such as intellectual capital, are harder to imitate. Intellectual capital comprises human capital, intellectual assets and intellectual property. For intellectual capital to be effective as our competitive edge and advantage, it must be directed, managed, developed, applied and protected holistically and strategically.

Put simplistically, the durability of our competitive advantage is a function of the speed at which we can be imitated. In the world that we now live in, it is not just about staying ahead. It is about staying alive.

I am heartened that at the highest level of our leadership, innovation and the prudent management of intellectual property and capital are seen as critical to our survival. I hope that the agencies designing and implementing the schemes to support innovation will also see that it is a matter of survival for our country.

I am heartened that, at the policy level, we could be seeing moves away from expenditure as a key performance indicator (KPI). But even so, I hope that we will see a true mindset change in the relevant agencies, and not just cosmetic changes.

I hope to be enlightened as to whether Singapore has crafted an overarching national innovation vision to steer our innovation policies to support national and institutional innovation programmes and projects and to provide the framework by which we would assess our performance against what we intend to achieve under our national innovation vision and how they compare with others globally. I hope we will move away from an "ownself clap ownself" assessment approach. I understand there will be structural reforms, I would like to know what the structural reforms are and will entail.

Finally, allow me to share what I once heard. It was a conversation between two ladies, when one contemptuously told the other that a certain Mrs X had yet undergone another facelift. When she was asked how she knew, the first-mentioned lady said: "Why, it is as clear as the nose on her forehead!"

The point I would like to make, Mr Chairman, is that the devil is in the details and the mindset. If we make only cosmetic changes or, if we do not execute structural changes rightly, we may end up with a nose on our forehead.

The Chairman: Mr Leon Perera, you have three cuts. Do you want to take them together?

Impact of R&D Spending

Mr Leon Perera (Non-Constituency Member): Yes, please. Sir, we need to nurture RIE as a key driver of Singapore's economic success. What is equally important is to thoroughly review the economic impact of such public sector R&D spending so that we know what is working and what is not. Here, I have three questions.

Aside from the published data for the public R&D sector like employees, projects, patents, startup numbers, R&D spending and so on, does the Ministry study and publish the economic multipliers resulting from this spending? For instance, which fields of R&D have the highest long-term multiplier effect?

Secondly, what has been the economic impact of intellectual property (IP) generated from the R&D spent? For example, has this IP helped to create total business spending in the wider economy and, if so, how much.

Thirdly, does the Ministry also have a count of jobs that are directly or indirectly generated from that IP? Running and publishing regular analyses of this nature for Parliament and the public to review would help to ensure that our R&D spending is optimised for economic and other benefits.

Such analyses do not preclude some R&D spending going to knowledge creation for intrinsically altruistic and academic purposes. But knowing exactly what the economic impact is makes for greater transparency and better decision-making.

Innovation Competitions

The second cut is on innovation competitions. Sir, the Defence Advanced Research Projects Agency (DARPA) in America holds competitions, such as the DARPA Robotics Challenge, DARPA Urban Challenge, where participants from various backgrounds and disciplines are challenged to develop revolutionary solutions to practical problems. For example, after the Fukushima nuclear disaster in 2011, DARPA organised a Robotics Challenge that spanned four years, aiming to spur research and technological advancement in the field of disaster robotics. The prize for the fastest robot to navigate an obstacle course based on conditions in Fukushima was $2 million and was won by the South Korean team.

Such large-scale competitions do not only stimulate innovation and the progress of the industry, but also encourage the right qualities of perseverance, creativity and teamwork among those in the R&D field. The resulting intellectual property could be harnessed to benefit the Singapore economy.

I would like to suggest that the Government, perhaps through public-private partnerships, hold competitions with significant grants or prizes to stimulate commercialisable idea generation from companies, campuses, research institutes (RIs), research centres (RCs) and the general public, with some conditions attached to facilitate the use of the resulting IP for the benefit of the Singapore economy.

Private Sector Role in Economic Planning

Sir, private sector staff do serve on the Boards of our many economic agencies. But I suggest that we make more use of secondments of staff from private companies to the public sector to serve short stints to help with economic planning or promotion initiatives.

In the UK, the central civil service has just introduced a new framework for managing secondments into and out of civil service jobs, aimed at building meaningful links between the civil service and business leaders. Sir, I have met a few such private sector secondees into the British public service in the past and they demonstrated a keen knowledge of both private sector norms and constraints, as well as public sector priorities. Britain is also seeking private sector secondees to help prepare for the upcoming Brexit negotiations, which will be technically very complex. Japan similarly has private sector secondees working in its ministries to quite a significant extent.

In Singapore, there could be good demand for secondments in both directions, as business executives and civil servants may see the benefits of a stint on the other side. Of course, there are some potential pitfalls of secondment − ensuring that the stints are not too long or too short, enabling secondees to adapt to a new work culture and so on − but these can be addressed through good human resource (HR) frameworks.

Given the challenges of a 21st century economy and the predominance of lifelong civil servants in the upper echelons of public organisations and political officeholders, secondments from the private sector could better enable us to form and execute our economic policies.

Government Adapting to Changes

Mr Yee Chia Hsing (Chua Chu Kang): Mr Chairman, Singapore, as an open economy that participates in international trade, is highly susceptible to external shocks and changes in business cycles.

CFE highlighted the importance of innovation, digitalisation and productivity for us to meet the challenges ahead, while the CFE report is mainly targeted at the private sector and there are ITMs to help companies and workers in various industries adapt to the future changes. Could the Ministry share how the Government and public sector are also adapting?

Pro-Business Environment

Mr Lee Yi Shyan: Mr Chairman, Singapore's sound regulatory environment has always been an important part of our attractive business environment. Our processes and regulations have provided a safe and predictable environment for our people and enterprises.

However, as the CFE report mentioned, this is an era of rapid technological change. The emergence of new business models has upended traditional industries, such as Uber and Grab in the taxi industry, and Airbnb in the hotel industry.

The Government will need to be nimbler, given the rapid pace of innovation and shorter technology cycles. I would like to ask the Minister for Industry how the Government, at the broad level, will adjust the way it works to keep pace with these trends.

Specifically, our regulations will need to keep up with the speed of industry disruption. These should adopt a balanced approach, placing safeguards on the risks in new industries, but also enhancing the ease of doing business. What changes will the Government make to ensure that we have an innovation-friendly and agile regulatory environment which supports the growth of promising sectors?

As part of our pro-business environment, it is also important to have clear and simple regulations to provide a conducive environment for businesses to start and grow. Overly complex regulatory processes leave business with less time and money for their actual business activities and this impedes corporate growth and innovation.

Therefore, besides pushing regulatory innovations in the new sectors, how will the Government ensure that our business regulations are streamlined and simplified to render Singapore most business-friendly against global competition? Will the Ministry consider a "Cut Red Tape task force" to greatly reduce layers of regulations added over time by various agencies?

The Chairman: Mr Henry Kwek, you have two cuts.

Regulations and Government-led Demand

Mr Kwek Hian Chuan Henry: Sir, both in and outside of Parliament, I have consistently advocated that as Singapore invents the future in key areas, it will be good if we can bring our startups along with us. I also talked about ways to implement regulatory sandboxes, modifying tender systems to give emerging companies with strong ideas a better shot at success. And in terms of regulations, leaning towards consumer preferences which are more embracing of the new economy.

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Therefore, I am delighted to hear that CFE recommends using forward-looking regulations and Government-led demand to support innovation.

Can MTI provide specifics on how the Government plans to implement these recommendations? Can MTI also share which are the industries that we expect to see these implemented in?

Opportunities from Urban Solutions

More than half of the world live or work in urban areas and this number is increasing significantly every year, especially in Asia. This rapid growth, coupled with the rising expectations of the growing middle class, creates significant strains in cities.

Singapore is consistently ranked as one of the world's most liveable cities, with strengths in water management, green constructions, smart energy management, greenery management and inclusive urban planning.

We are also recognised as a global thought leader in this field, with initiatives, such as the Centre for Liveable Cities (CLC) and the Lee Kuan Yew (LKY) School's Water Institute, as well as an increasing number of global conventions and international events, such as World Cities Summit or the Singapore International Water Week.

Indeed, CFE identified urban solutions as one of the growth sectors that would benefit from the rising middle class and urbanisation in Asia. As Singapore invents the future, it is important that we bring our companies along this journey.

Can MTI share some of the successful, emerging Singapore-based companies that are successfully doing so in Singapore? Moving forward, can MTI share the specific ways in which the Government can do more to help our companies capture these growth opportunities?

Targets for Renewable Energy

Assoc Prof Daniel Goh Pei Siong (Non-Constituency Member): Sir, the intended implementation of an upstream carbon tax in 2019 shows our country's commitment to climate change mitigation. However, a carbon tax alone will not spur energy conservation and reduce emissions. The announcement has spurred talk that this could result in up to a 4.3% rise in electricity prices for downstream consumers. Industries could prepare for this rise in the next few years, factor in the rise in costs and end up not reducing energy consumption. The only one who would profit then would be the Government.

One of the most common tools used in conjunction with carbon taxation or cap-and-trade regimes around the world is the setting of hard targets for renewable energy production, coupled with carbon offset incentives. We should cement Singapore's commitment to energy conservation by setting a target for renewable energy production. Currently, only 4% of electricity in Singapore is produced from sources other than natural gas and petroleum. We should aim for 10% renewable energy production by 2025. This will put us on par with other small developed countries like South Korea which has a target of 7% by 2020 and Belgium, with 13%.

To provide incentives for power stations and other large emitters to turn to renewables, the Government should link the investment and use of renewable energy to carbon tax offsets. These offsets can be partly funded by revenue from the carbon tax revenue in the initial years.

The Chairman: Mr Yee Chia Hsing. You have three cuts. Please take the first two cuts only.

Plans for Clean Energy Sector

Mr Yee Chia Hsing: Thank you, Chairman. Chairman, there has been a growing interest in sustainability following our ratification of the Paris Agreement on Climate Change. We have pledged to reduce our carbon emission per dollar of GDP by 36% from 2005 levels by 2030. In his Budget Speech, Finance Minister Heng Swee Keat mentioned that a carbon tax will be levied starting from 2019.

One of our plans to reduce our carbon footprint is to raise the adoption of solar power to 350-megawatt peak (MWp) by 2020, which represents 5% of peak electricity demand. The SolarNova programme is a step in the right direction, although mainly in public areas of Singapore.

As it stands, when electricity from solar energy is exported back to the grid, solar facilities owners will sell the electricity back at a lower rate than the normal electricity price due to the deduction of a grid charge.

In many other countries, the reverse is true and solar facilities owners can sell the solar electricity at a higher rate than the normal electricity price. This is to encourage the adoption of clean energy. To encourage more installations of solar and other clean energy facilities, could we consider that grid charges be levied on a one-time basis commensurate with the cost of processing and connecting the facility to the grid, rather than on an ongoing basis? I would also like to ask the Ministry to elaborate further on our plans to encourage the use of clean energy in Singapore.

Tiered Electricity Tariffs

Next, Chairman, we are introducing a carbon tax on large direct emitters of greenhouse gases from 2019. The National Climate Change Secretariat said that this proposed tax rate is equivalent to a rise in electricity prices of between 0.43 and 0.86 cents per kilowatt-hour (kWh). It also stated that this could mean between 2.1% and 4.3% increase in electricity prices compared to current rates. On this note, I would like to suggest implementing a system of tiered charging for electricity based on consumption. We can consider setting the tier at a high level, hence we do not penalise the bulk of the households in Singapore.

Perhaps, we can set a benchmark for only the top 5% to 10% users of electricity for a start. The additional revenue can be used to subsidise the lower-income households so as to minimise the impact of the carbon tax on them.

The Chairman: Minister Iswaran.

The Minister for Trade and Industry (Industry) (Mr S Iswaran): Mr Chairman, I want to thank all the Members who have spoken on the MTI debate so far. At the debate on the Budget Statement, I emphasised that we need to gear up our economy and our enterprises so that they can seize the significant opportunities presented by the growth of Asia and the rise of the middle class here. So, I want to now elaborate on the work that MTI and our agencies are doing towards that objective.

The backdrop, as many Members have observed, is a confluence of political, economic and technological trends that is quite unparalleled in recent times. As many Members have emphasised, anti-globalisation and protectionist sentiments appear to be gaining momentum in the US and Europe. Global trade and production patterns are changing and the value chains are being reconfigured. Technological advances are disrupting business models and changing the nature of jobs.

It is increasingly harder to anticipate which sector, enterprise model or job type will be the next to see a major transformation. For example, the impact today of Uber, the sharing economy and fintech was not fully appreciated as recently as five years ago. We expect more industries to be "Uberised", but we cannot be sure which ones, when and to what extent.

Given such uncertainty, the most durable strategy is to focus on the fundamentals that will keep Singapore relevant to the world and its needs. This is why CFE has emphasised two basic points, Openness and Capability. Strengthening these fundamentals is the surest way to prepare Singapore for the future.

Minister Lim has already explained how Singapore and how we are growing and showing that Singapore remains connected to the world and open to trade, investments and talent. Secondly, it is also important for our people to deepen their skills, and companies to transform by building capabilities for higher levels of productivity, innovation and internationalisation. And I will elaborate on this aspect.

ITMs are a key mechanism to build enterprise capabilities and transform sectors. Ms Sun Xueling suggested deeper engagements with corporates, Mr Leon Perera enquired how we could involve the private sector more. I want to use the food manufacturing ITM which was launched in November last year, as an example to address these questions and suggestions. Mr Chairman, may I have your permission to show some slides?

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

Mr S Iswaran: The ITMs integrate the Government policies and initiatives and promote collaboration among industry stakeholders to achieve transformation and growth through productivity, skills development, innovation and internationalisation. Four key planks.

SPRING is the lead agency for food manufacturing and they work with Government agencies and industry stakeholders to develop the ITM. The goal is to develop Singapore into Asia's leading food and nutrition hub. There are quantitative targets to galvanise the efforts to realise this goal. The aim is to grow our food manufacturing sector's value-add (VA) by 6.5% per annum, overseas income by 8% per annum, and productivity by 4.5% per annum, by 2020. These are, as Members would have acknowledged, quite ambitious targets, especially when we compare with other sectors and historical paths.

Ninety-eight percent of the almost 850 food manufacturing enterprises in Singapore are SMEs. The SMEs have been actively involved in the development of the ITM, which also aims to address their needs. For example, many SMEs found the cost of R&D and technology adoption prohibitive because they lack scale. Therefore, one component of the ITM is to build a network of shared infrastructure to increase productivity and create co-innovation opportunities.

One such shared resource is the high-pressure processing (HPP) tolling facility. Food in its final packaging is subjected to high levels of pressure to extend shelf life. The smallest of such machines cost about $800,000, which is not cost-effective for an SME to purchase for its exclusive use. For example, a typical small juice company with an annual production volume of 40,000 litres, would need such a machine for only about four days in a year.

So, SPRING will be investing at least $1.5 million in such an HPP machine. This machine will be located in Jurong, where there is a concentration of food manufacturing companies, and it will be ready by the fourth quarter of this year. Food manufacturers will be able to use the machine on a pay-per-use basis.

The ITM also aims to help companies collaborate on innovation with initial focus on MNC-SME projects. Montreux Patisserie, a local bakery, has partnered Unilever Food Solutions, for example, to develop new flavours and products. SPRING has started a Food Innovation Cluster (FIC) Workgroup so that our companies can spawn more of such partnerships with global food innovators and corporate accelerators.

As Mr Charles Chong has emphasised, such resource pooling, whether it is in terms of equipment or R&D effort, can help raise productivity and lower business costs. However, resource sharing is still a relatively nascent idea for local food manufacturers, and it is important that our business owners be open to such novel business arrangements if we are to succeed in industry transformation.

ITMs also seek to ensure that regulations do not hinder innovation and transformation. MTI and SPRING, for example, commissioned their review of food manufacturing regulations and the preliminary findings indicated that there is a growing industry interest in novel food ingredients, such as those produced by novel processes or from non-traditional sources. But there is a need to establish and communicate a regulatory pathway for such novel food ingredients. That is something that is now under regulatory review actively by the Government.

If I can pool some of these ideas together, Aalst Chocolate is a company that exemplifies the enterprise transformation that we seek through these ITMs. I hope Members had a chance to try or sample some of their chocolates in the Members' Room earlier. When I last checked, they were all gone, so I am assuming it is because they were consumed.

Established in 2003, as the first Singaporean-owned chocolate manufacturer, Aalst has grown rapidly over the years. Government agencies have supported Aalst as it enhanced productivity through automation, ventured into new overseas markets and invested in research and innovation. With SPRING's Capability Development Grants, Aalst has invested in a series of productivity projects, including an automated production line to improve the efficiency of chocolate production and packaging. It helped Aalst increase production capacity by 70%, which allowed it to scale, meet higher export demand without the need to increase manpower.

Internationalisation has been at the core of Aalst's business strategy from the very beginning, because Singapore's domestic chocolate consumption clearly cannot sustain its growth. Ninety-eight percent of this company's revenues are from exports, and a key success factor has been branding. Aalst has used IE Singapore's Global Company Partnership grants to build a brand framework tailored for different markets. It is now an established player, partnering large companies like Dunkin' Donuts, Unilever and Nestle in various markets and projects.

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Over the years, the company has also leveraged SPRING's SME Talent Programme to identify the right people for its needs. Mr Dean Ng was one of Aalst's first employees under the SME Talent Programme. He joined the company in 2013 as a marketing executive and has since been promoted to a brand manager. He works directly with the chief operating officer to develop marketing plans and initiatives to increase sales and brand awareness in all key markets. Aalst is also in the process of starting student placements under the SkillsFuture Earn and Learn programme.

But the company's growth has also created opportunities for older workers. Mr David Choy, who is now 62, spent much of his career working in the ship maintenance line. At the age of 52, he made the switch to the food manufacturing industry by joining Aalst. He upgraded himself through continual training and development, especially as more new equipment were acquired by the company. Today, he is the "go-to" guy for assistance with Aalst's machinery and he and his life experience is really testimony to the benefits of skills upgrading.

So, to sum up, the ITMs encompass a suite of programmes to help our companies scale up and transform. The aim is to transform every sector, enable enterprises to grow their top-lines and enhance their productivity and competitiveness. Workers will also benefit from these ITMs because they will gain a clear view of the career pathways in the sector and the skills that are required.

To better match skills supply with industry demand, SPRING is working with the unions and industry to develop a Food Manufacturing Skills Framework. Workers can use the framework to map out their careers, assess skills gaps and tap on programmes, such as the Adapt and Grow Initiative of MOM, to enhance their employability. This framework will be ready by 2017. Also, TACs like the Singapore Food Manufacturers' Association (SFMA) and SMF will play an important catalytic role as the industry embarks on projects to internationalise, innovate and develop people and technical standards. Senior Minister of State Sim Ann will elaborate on our efforts to enhance the capacity of TACs in this regard.

Ms Foo Mee Har asked about the progress and outcomes of the ITMs that have been launched so far and the lessons that have been learnt. I think she is rightly focusing on the implementation elements because that is really where the rub is and that is where we will see the biggest outcomes.

I have spoken in detail about the progress of the Food Manufacturing ITM and how it will involve and benefit workers, companies and TACs. We will adopt a similar model for the other 17 ITMs which will be launched by the end of this financial year, meaning financial year (FY) 2017.

It will take time, however, before we can get substantive information to assess the progress and effectiveness of the ITMs. Nonetheless, I would like to emphasise that the ITMs are not static plans. They will be regularly reviewed, by tracking KPIs, and the plans will be updated and modified as we learn more through implementation.

Ms Foo also asked if we should prioritise sectors with high-growth potential and established sector partnership structures for the ITMs. The 23 ITMs account for about 80% of our GDP and, generally, they meet the kind of criteria that Ms Foo has mentioned, and they will all be launched by the end of the FY, as I have said. But the pace of implementation will, to an extent, depend on the response from the industry and the commitment of the stakeholders.

We also have broad-based schemes to support the needs of companies in the non-ITM sectors as well. So, I just want to say that it is not just about looking at the sectors where we see or assess that there is growth potential, because transformation is needed not just where there is significant growth, but also in sectors where there are other structural challenges, such as, for example, in retail. Therefore, we need the transformation and the adaptation that we are looking for through the ITMs to make sure the companies in that space are well-positioned for the future.

I want to turn now to the role of the Government and what the Government is doing on its part to respond to some of these changes. As a key enabler, it is important for the Government to be agile in response to changing industry needs, as has been emphasised by Members Mr Yee Chia Hsing and Mr Lee Yi Shyan. Regulation is a case in point. Singapore, as we all know, is well-regarded for its transparency and ease of doing business due to our robust legal system, well-developed infrastructure and skilled talent pool.

We have to build on these strengths with a more nimble regulatory posture that safeguards legitimate interests, whilst being more responsive to the changing needs and circumstances of industries. And if we do this well, it will be another competitive differentiator for Singapore, especially in an era of rapid technological changes and intense competition.

So, to that end, we do want a more forward-looking regulatory regime that supports innovation, so that new products and services can be test-bedded and brought to market more quickly. And this is also in line with the CFE recommendations on regulations, which Mr Liang Eng Hwa and Mr Henry Kwek enquired about. At last year's COS, I spoke on the Health Sciences Authority's (HSA's) initiatives to create an enabling regulatory environment for the Medtech industry. Since then, an interagency workgroup led by MTI, comprising HSA, EDB, SPRING, A*STAR and IE Singapore has developed additional recommendations.

To allow innovative medical devices to gain quicker access to market, HSA will establish a priority review scheme. Applications submitted under this scheme will be prioritised for review, thus shortening turnaround times to register the device. Patients and healthcare providers will also benefit from earlier access to innovative medical devices.

To give medical device developers greater regulatory certainty, HSA will also launch a "pre-market consultation scheme". With this, companies can consult HSA on the regulatory requirements for devices at the product development stage, well before any formal submissions to register the device for sale or use in Singapore. HSA plans to roll out these initiatives in the second half of this year and will share further details with the industry.

More broadly, to address some of the other points in terms of regulations that have been raised, the Pro-Enterprise Panel (PEP) will continue engaging the industry to identify areas where regulatory processes and compliance costs are of concern to businesses, and work with the agencies to provide solutions. As Miss Cheng Li Hui rightly noted, it is important that we ensure our regulations are not an inadvertent burden to businesses.

I also want to say that our regulations have to keep up with the latest industry trends. And one example is in the area of land zoning. In manufacturing, we are seeing more servicisation, and business models are shifting from production-led to service-driven activities. The current guidelines Business 1 zones, which require companies to use at least 60% of their space for core industrial activities, may be too restrictive for some companies, especially those that are already making this transition.

JTC, SPRING and URA have been working on a more flexible industrial land zoning approach, which will be piloted at a multi-tenanted building to be developed by JTC and located within Woodlands North Coast. Instead of the "60/40" guideline, JTC will introduce more flexible guidelines so that companies can co-locate service-driven activities alongside their manufacturing operations. Companies that have offshored their lower value-added activities can also maintain their more knowledge-intensive activities here, while retaining close oversight of their operations overseas. Market response and feedback to this pilot will be studied, and it will inform any further steps that we take.

More broadly, vibrant live-work-play-learn environments also play a growing role in the attraction and retention of talent. So, beyond flexibility at the development level, we will also pilot greater land use flexibility at the district level in our upcoming growth centres, starting with Punggol. The Minister for National Development will be elaborating on this approach.

However, having outlined some of these moves that the Government is making and the general posture that we are taking, I want to caution that even as the Government adopts greater flexibility in regulations, we must remember that we will be entering unchartered waters and we must be prepared that things may not always turn out as planned, in which case, we should be ready to change course or cut losses as such risks are part and parcel of the innovation process. We should accept them as part of the natural revolution in our system and not always looking for someone to put the blame on when something does not always work out the way we intended it to.

As part of the effort to stay open and connected, we want to help our companies to deepen linkages with overseas networks and partners and seize opportunities in new markets. This is really in the context of our internationalisation efforts. To ensure seamless support for our enterprises' internationalisation effort, we will strengthen the coordination of our agencies' overseas operations under the consolidated "Singapore Centres". These Singapore Centres will serve as the key point of contact for Singapore-based companies when they enter overseas markets, as well as for overseas investors to better understand the business environment in Singapore.

The Singapore Centres will also broaden and deepen our understanding of new markets, including at the city and regional levels, in order to better support our companies as they go overseas, and this is a point that we have emphasised in the course of the CFE studies as well. That we need to, well beyond the broad understanding that we have of these markets, and have a much deeper appreciation for second-tier cities, third-tier cities and other regional opportunities.

We have so far established Singapore Centres in nine key markets and they have been well-received by both local and foreign companies. Some examples include Beijing, Shanghai, Guangzhou, Frankfurt, London and Mumbai. We will extend the Singapore Centres to all the other 36 overseas locations where EDB and IE Singapore are present.

In addition, as the Minister for Finance has announced, we will establish the GIA, whose objective is to help our startups build networks and seize export opportunities in global innovation hubs and new demand markets.

A key component of GIA is to build a network of Innovation Launchpads around the world. Today, our Institutes of Higher Learning, companies and agencies, already have established their own networks overseas. GIA will integrate them into one network which companies can then tap on readily to bring their innovations out to relevant markets. If I may use the example of ViSenze, a local startup providing visual search and image recognition solutions for the e-commerce sector, which has experienced the value of networks first-hand.

In 2016, IE Singapore introduced ViSenze into the Mastercard Start Path accelerator programme in London, a competitive programme geared towards accelerating the growth of promising startups. Through that programme, ViSenze was exposed to Mastercard's panel of international specialists who linked them up with their network of potential global business leads. This enabled ViSenze to expand their presence in the US, as well as enlarge their global customer network.

With GIA, we hope to connect more of our SMEs and startups with the right people and networks in other parts of the world. These will also enable the best foreign ideas and talent to interface with Singapore companies and to find local partners. This will not only enrich our innovation ecosystem but also strengthen our value proposition as a base for foreign companies to come here, test-bed new products and then expand into the region.

Let me turn to innovation. Mr Charles Chong, Ms Chia Yong Yong and also Mr Leon Perera have asked about our objectives in investing in research and innovation and how we can strengthen the research, innovation and enterprise ecosystem.

As Members have already noted, under the RIE2020 Plan, we have made several shifts to ensure Singapore is well-positioned to harness technology and innovation to drive our next phase of economic growth. Let me just illustrate what I mean.

First, our research framework is focused on four domains which hold significant economic opportunities and serve important national needs. These are: (a) advanced manufacturing and engineering; (b) health and biomedical sciences; (c) services and digital economy; and (d) urban solutions and sustainability. Then there are some fundings set aside for the white-space elements.

Second, to tighten linkages between our R&D capabilities and industry needs, we have increased funding for public-private research collaborations under the Industry Alignment Fund (IAF). So, that is going to bring the public sector and the private sector closer together.

Thirdly, to spur the best ideas, we have increased the proportion of competitive funding that is open to all public research performers. So, it is not dedicated; it is open. And that is increased from 20% to 40%. These shifts combine to bring about a significant directional move in our RIE ecosystem.

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Mr Perera asked how we can leverage competitions as a means to develop IP. SPRING has worked with partners, such as the National University of Singapore (NUS), the National Research Foundation (NRF) and the Infocomm Media Development Authority (IMDA), and incubators to co-organise startup competitions judged by angel investors and venture capitalists at events, such as Tech Venture 2016 and InnoFest 2016. The winning teams win prize money and a validation of their business plans and execution ability.

Ms Chia Yong Yong has asked about the structural changes that we will effect to achieve our objectives in research and innovation. Mr Charles Chong has also asked about A*STAR's reorganisation. As Members would recall, as Deputy Prime Minister Teo Chee Hean, in his capacity as Chairman of NRF, announced in February this year, A*STAR has embarked on a transformation effort to bring R&D innovations to industry more quickly and in a more targeted and collaborative manner.

A*STAR's research has always been geared towards meeting the needs of industry and society. They have always had that as their mission orientation. However, with the gathering pace and complexity of technological advances, more and more innovations are occurring at the interstices of disciplines. So, companies must increasingly draw on multidisciplinary capabilities to develop new solutions and they need to do that with greater speed.

A*STAR will move towards more flexible, multidisciplinary programmes. These programmes will also be term-limited, meaning that A*STAR will then have the flexibility to start new programmes in line with evolving industry interests and needs, as well as phase out programmes which are no longer effective in meeting the needs of industry. And this is an inherent flexibility that we want to build up in the institution so that they can be more responsive to the market. Equally importantly, these programmes will provide companies with a convenient modality to collaborate with multiple public research performers on complex, multidisciplinary challenges.

One example of such innovation is in the manufacturing sector and it is nano imprinting. I just want to say a little bit about it because it is a bit technical. I, myself, am just grappling with understanding some of the fundamentals of it. But it basically taps on capabilities, such as nano-fabrication, simulation and modelling. This process enables the creation of textures and patterns at the nano-meter-scale, that is, 10 to the power of minus nine, so as to impart special properties to materials. Examples of such properties include anti-reflection, adhesive and water repellents. It can be applied to materials, such as plastics, glass and metals. Given the growing industry interest in this area, A*STAR has set up the Nano-imprint Foundry that is hosted at the Institute of Materials Research and Engineering (IMRE), which pools together capabilities from IMRE, as well as the Institute of High Performance Computing (IHPC) and the Data Science Institute (DSI). They are pooling different resources from various institutes together in order to take this nano-imprinting effort forward.

Ms Chia Yong Yong and Mr Perera also asked about the economic impact of our public R&D activities and how this is monitored. We track a spectrum of performance indicators to ensure that our investments generate good outcomes.

Firstly, on industry R&D investment. In the RIE2015 tranche, A*STAR undertook close to 9,000 industry projects which catalysed more than S$1.6 billion of industry R&D investments in Singapore.

Secondly, on licensing, over the past 10 years, A*STAR's licensing activity has grown by close to five times from 221 licensing agreements in Science and Technology Panel of 2010 (S&T2010), to 1,030 licensing agreements in RIE2015. Around 70% of the licences were with SMEs.

Thirdly, we track A*STAR's Growing Enterprises Through Technology Upgrade (GET-Up) programme, which is really a programme which provides SMEs with support in technology adoption through the secondment of researchers and technology road-mapping. In RIE2015, a total of 202 SMEs benefited from the programme.

Finally, we track spin-offs. The number of A*STAR's spin-offs has increased from the S&T2010 to 71 in RIE2015. The follow-on funding has also increased from $46 million to $90 million for the same period.

Collectively, these outcomes suggest and indicate that we have been able to get good value out of our investments in R&D. But it is not something that we take for granted because there is always more that can be done and that is why I will elaborate on the range of measures that we are undertaking. Importantly, these measures have also anchored investments and good jobs in Singapore, as well as uplifted the capabilities of local companies. Some of these are hard to quantify but if you ask the EDB officers, if you ask others in the industry, the qualitative engagement and traction within the industry have been very strong.

Ms Chia Yong Yong also asked about how we can assure that IP generated from public sector R&D is managed well to reap economic and societal benefits. Fundamentally, we want our IP policy to ensure that we create and capture value for Singapore through the IPs that we generate.

Recognising that companies have different commercialisation needs, public agencies adopt different approaches to engage industry that include licensing, that is, exclusive or non-exclusive licensing, and also the assignment of IP. Conditions may be imposed to ensure that companies are, in fact, committed to creating value from the IP.

We are making publicly-funded IP more accessible to companies. In particular, we will create a National IP Protocol to provide companies and public agencies with a clear and consistent framework to access publicly-funded IP. With this, companies will have greater clarity over IP ownership practices and standardised and simplified IP negotiations. More importantly, companies will be able to bring innovative products and services quickly to market and reap value. We will share more information on the National IP Protocol in the second quarter of the year.

Mr Liang Eng Hwa and Mr Henry Kwek have asked how we plan to implement the CFE recommendations on lead demand. We want to leverage more lead demand to catalyse innovation and business opportunities for companies. The Government is investing in several areas which are both significant from a domestic needs viewpoint and also in terms of growth possibilities. These include healthcare, urban solutions, security and the Internet-of-Things. These are also areas of opportunity for our smaller and innovative enterprises so that they can build their capabilities and strengthen their track record. This is especially so as the Government can be a valuable reference customer for SMEs which are seeking to capture more deals and venture overseas.

To help our SMEs participate in these opportunities, we will adopt a more targeted, systematic approach to using lead demand, through an enhanced Partnerships for Capability Transformation (PACT) programme which we have already been doing. And this new programme will be called PACT through Government Lead Demand, or Gov-PACT.

Today, EDB and SPRING's PACT programme have the collaboration among large organisations and local SMEs, something that some Members mentioned. We want to build on that to foster more collaboration between Government agencies and SMEs.

Under the Gov-PACT programme, SPRING will work with agencies to put out calls for proposals where SMEs can co-innovate in identified strategic areas, with the Government committing to procure the solution if the specifications are met. Through this programme, SMEs will be given opportunities to develop, test-bed and validate new solutions. SPRING has budgeted $80 million to support SMEs under this programme. Senior Minister of State Sim Ann will elaborate further.

One sector that has benefited from the Government Lead Demand approach is the clean energy sector. The SolarNova programme aggregates public sector demand for solar photovoltaic (PV) panels, and it has catalysed our solar PV industry.

Mr Yee Chia Hsing had asked about the future plans for the clean energy sector in Singapore. The clean energy industry here has grown a small base of about 10 companies in 2007 to around 100 companies last year. And we are committed to developing it further, through a number of initiatives. We will enhance Singapore's position as a living lab and extend the use of lead demand to help more Singapore-based companies build their track record and pursue regional opportunities.

We will maximise deployable space in our dense urban setting, by increasing the use of building integrated PV. We will also explore the application of regulatory sandboxes to microgrids and floating PVs. Finally, we will continue building capabilities in R&D, new renewable energy and energy management technology and financing for the sector.

With these efforts, we expect sustainable growth in our clean energy sector, with more enterprise and job creation, potentially 2,000 new PMET jobs in the sector by 2025. The sector will also help address Singapore's energy security, competitiveness and sustainability needs.

We have already seen the growth of home-grown enterprises like the Singapore solar company Cleantech Solar, which has developed capabilities in roof-top solar system integration and remote monitoring from Singapore, and it has ventured into the region. This includes a roof-top solar project that Coca Cola recently established at its bottling facility in Cambodia. This is Coca Cola's first flagship solar project in Southeast Asia and its system performance is being monitored and optimised in Singapore. And if Members look at it, the water feature is in the shape of a Coca Cola bottle.

Let me now address Assoc Prof Daniel Goh's question on setting renewable energy targets and Mr Yee's point on the costs of connecting solar facilities to the grid. In 2014, we announced a plan to raise the adoption of solar power in our system to 350 MWp by 2020. Since then, the installed capacity has risen from less than 20 MWp to 126 MWp today. It is noteworthy that this growth has been achieved without any subsidies. Rather, it has been aided by the cost of solar power coming down and modular efficiencies improving with technological developments. As a result, solar power has become competitive against the price of electricity from the grid which we also do not subsidise. The global impetus to reduce carbon emissions is another contributory factor.

Looking beyond 2020, we plan to further raise the adoption of solar power in our system to one gigawatt peak (GWp). The Energy Market Authority (EMA) has studied this matter quite carefully as renewable energy resources like solar are intermittent in nature and, therefore, they can affect our system stability. And noting that the cost of intermittency must be balanced against the cost of carbon emissions, perhaps represented by a carbon tax, EMA has concluded that one GWp of solar can be accommodated in our system. This will support the achievement of our 2030 climate change pledge to reduce our emissions intensity by 36% from 2005 levels by 2030.

However, specifically and in response to Assoc Prof Daniel Goh's point, unlike some jurisdictions, we have not set binding targets for renewable energy. The reason is because often, such binding targets result in subsidies and other measures in the effort to get that target and, in the process, they distort price signals and market behaviours.

Instead, our policy has been to ensure that energy, regardless of the source of generation, is priced right to fully reflect the cost of generation and then we let the market work out the equilibrium.

That is why we have avoided Feed-in Tariffs that are common in other jurisdictions, with binding renewable energy targets. Feed-in Tariffs subsidise solar electricity by pricing it higher than electricity from the grid. Instead, what we have done is invested in the development of solar PV technology and the result showed that this has served us well. In fact, even the industry players, many of whom are local enterprises, have given me similar feedback.

On Mr Yee Chia Hsing's point, I should clarify that grid charges are not levied on solar PV owners or any other generation source for that manner. The key point here is this. The electricity price that we pay, there is a grid charge component. That does not go to the company or the entity generating the electricity. That goes to the grid company and, in our case, SP PowerGrid. That is to cover the cost of building and maintaining the national power grid. So, whether you are a conventional generator of electricity or a solar generator, you are basically getting the price that is net off the grid charge.

Mr Yee Chia Hsing also suggested tiering electricity tariffs to penalise the heaviest electricity consumers with higher rates and then use that to subsidise lower-income households. As a practical matter, I want to say that such an approach is quite problematic. For example, how would you determine the tiers for such differential pricing because the circumstances for households and their needs vary quite widely even if they live in the same type of housing. So, it becomes inherently an invidious exercise. Our approach is to price electricity right fully from the first electron and then we provide targeted assistance through the tiered U-Save rebates. The outcome, in some ways, from an equity point of view, is not unlike the intent that Mr Yee has in his suggestion.

Let me now turn to infrastructure. Mr Liang Eng Hwa and Mr Henry Kwek noted that as Asia urbanises, the demand for urban solutions will rise. This goes beyond energy infrastructure to water, waste management, telecommunications and transportation infrastructure.

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And much of the demand in emerging Asia will be for small-scale projects in water and wastewater treatment plants, discrete small scale independent power plants, and renewable energy projects like solar farms and mini-hydro plants. Such projects range in value typically between S$5 million and about S$70 million. That is about the right scale for SMEs.

So, Memiontec, for example, is a company that has built deep capabilities in water asset developments in Singapore. They have capabilities in engineering, procurement, construction management and operations and maintenance works for water reclamation and water treatment. In Singapore, they built a wastewater treatment plant to clean water before it is discharged from our Semakau landfill. Last year, the company also ventured successfully into infrastructure development overseas because they secured a deal to build, own and operate a water treatment plant that would convert water from Jakarta's West Flood Canal into clean water for Jakarta's residents. Memiontec is keen to scale up and secure more of such projects.

We want more of our companies, especially our SMEs, to be able to tap on these growing opportunities. But their expansion is constrained by limited access to project financing for small projects. Typically, commercial lenders are less prepared to provide financing to SMEs unless they put up personal guarantees or recourse to the company's assets. And this makes it difficult for the SMEs to scale up.

That is why we have introduced the Internationalisation Finance Scheme (IFS) Non-Recourse Financing Scheme (Non-recourse Finance), through which the Government will co-share banks' risks in providing non-recourse loans to SMEs for such projects and these non-recourse loans are secured only by the project's assets and its cash flows which will enable SMEs to take on more projects. IE Singapore will give more details later.

At the other end of the spectrum, infrastructure developers who are working on large overseas projects face a different kind of challenge. One, in particular, is to secure loans for large projects undertaken on behalf of the sovereigns of developing countries. And these can be for projects involving rail, ports, airports, conventional power plants and desalination plants, and the typical value exceeds half a billion dollars.

Commercial lenders typically require insurance cover against sovereign risks of emerging markets, while foreign developers rely on their respective export credit agencies for such insurance coverage. Singapore-based developers do not have access to such facilities.

So, to help level the playing field for Singapore-based developers, the Government will enhance the existing IFS administered by IE Singapore, to provide insurance against default of payments by sovereigns in selected emerging markets.

This is an important and measured step in the Government's efforts to help unlock private financing for Singapore-based infrastructure companies and help them secure projects which leverage their capabilities. IE will give more details.

Sir, I have outlined the work that MTI is doing in some of the sectors to illustrate how we are transforming industries and growing the economy, even as we enter a time of greater uncertainty. The focus is on the development of deep skills for our people and building enterprise capabilities for higher productivity, innovation and internationalisation. These are priorities that we have been working on for many years, and we will continue to do so in the context of a more dynamic environment that we are in today.

And ITMs are going to be a key mechanism for us to achieve this. We will adjust our strategies and programmes in response to changes in our environment and adopt a proactive and forward-looking regulatory stance. And we believe that, collectively, these efforts will help ensure that our economy remains vibrant with thriving businesses and good opportunities for Singaporeans.

The Chairman: Mr Yee Chia Hsing, please take your cut on helping SMEs to compete effectively.

Helping SMEs to Compete Effectively

Mr Yee Chia Hsing: Chairman, SMEs are an important part of our economy. As our economy slows down to 1%-3% in the long run and there are more disruptive changes, such as the onset of online retailers, many SMEs are finding it challenging to adapt to these structural changes and compete effectively.

Some of the common reasons cited are mainly implementation costs of the new technology, lack of training and know-how or, simply, reluctance to change. On that note, I would like to ask what the Ministry is doing to help our SMEs increase their competitiveness and capture new opportunities both in the local and global markets.

Forging an Inclusive Economy to Benefit SMEs

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

(In Mandarin): [Please refer to Vernacular Speech.] This year's Budget has placed key focus on innovation and internationalisation in the future economy. The saying goes: A thousand-mile journey begins with the first step. With clear direction, the next step is to achieve this in the fastest way possible.

With regard to innovation capability, let us first look at what SMEs have done. Last year, the Singapore Chinese Chamber of Commerce and Industry (SCCCI) conducted a survey on innovation efforts of enterprises. A total of 233 enterprises took part, with SMEs making up 98.8% of respondents. Survey findings revealed that as investing in innovation may not lead to actual outcomes, less than one-third of respondents had invested in innovation over the past two to three years. Moreover, only 15% collaborated with public research institutes.

SMEs have a shortage of talent. Very few are able to recruit researchers to handle R&D. If they wish to improve their innovation capability, they need to strengthen the collaboration with research institutes. Moving on, we urge more local enterprises to leverage the Government's research resources. Technology innovation is not a matter of difficulty, but the crux is whether there are practical applications.

The Budget announced that A*STAR is scaling up on the Operation and Technology Road-mapping initiative, to support 400 companies over the next four years. In other words, assistance would be forthcoming to 100 companies every year. Currently, Singapore has more than 188,000 SMEs. This is an astronomical figure, compared to the 100 companies that would get relevant assistance within a year. We hope that A*STAR could work with the trade associations to develop technology applications that could be shared with certain industries. Making the benefits accessible to a wider group would assuredly be a more effective way of encouraging technology adoption.

With regard to internationalisation, the Government has committed a $600 million International Partnership Fund to help local enterprises invest in overseas markets. Normally, most funds pursue short-term returns. I hope that this International Partnership Fund would cast its sights for returns over a longer 10-year period or beyond that. Local enterprises which venture abroad to form joint ventures in other countries or tender for projects, need to gear up on sufficient project experience. In November last year, I led a business mission to Myanmar and we were warmly received by the Myanmar Chinese Chamber of Commerce. The Myanmar government also invited us to invest in their infrastructure projects. One of our delegates, who runs a local construction firm, said: "If we could clinch a substantial project in Singapore, this would give us greater confidence to bid for overseas projects."

In order to boost the construction sector, the Government is bringing forward $700 million worth of public sector infrastructure projects. The Government must allow local SMEs to participate in these projects and have the opportunity to become main contractors. Singapore SMEs which work with Government-linked companies and MNCs could gain in experience, improve on standards and chalk up a creditable track record. This could raise their competitiveness in the global marketplace. This, in fact, is the most effective way to help local enterprises internationalise.

Last month, Minister S Iswaran and his team came for a dialogue at the SCCCI; it was attended by trade association leaders and business representatives from more than 20 industries. Both sides engaged in a candid discussion. We discovered that businesses still have certain misunderstandings on how to tackle specific operational details. Moving ahead, we should organise more sessions for trade associations and industry associations to establish better communication with Government officials, bringing these misunderstandings to a minimum.

Improving the competitiveness of local enterprises is our common objective. In order for this objective to be achieved, the Government charts policies and offers resources; trade associations participate and provide useful suggestions; enterprises and entrepreneurs, however, assume the most important role. Innovation and internationalisation basically call for a departure from one's comfort zone, the boldness to try out new things and, in the process, seek perfection. This is where enterprises cannot totally rely on external sources of strength but on individual hard work.

Transforming SMEs

Ms K Thanaletchimi (Nominated Member): Chairman, the Budget has a slew of extensive targeted measures to support industries and companies in their medium- to long-term effort to improve their businesses' productivity and performances.

Last year, MOF provided greater help to SMEs, such as more corporate income tax rebate and the extension of the Special Employment Credit scheme. This year, there are even more targeted help for SMEs to improve their efficiency and go international and digital, with a focus on data analytics and cybersecurity.

In light of this, has the Ministry tracked and monitored the performances of SMEs which received assistance last year? Has the outcome been encouraging? Will MTI provide a progress report showing which sectors have benefited and shown improvement and which, despite all measures and assistance, have yet to yield any results? From the latest MTI report, besides the construction sector, the retail sector seems to have one of the lowest in productivity. What measures can be taken to improve this sector's productivity?

In regard to the Government's Enabling Growth and Innovation measures, besides providing financial support, can the Government take on a greater role in supporting SMEs in their overseas ventures by helping them leverage its network? The Minister earlier alluded to their effort in doing so, but probably we can be more pervasive in this effort.

With today's economy, many SMEs may need more handholding to sustain themselves. Despite all the financial assistance rendered by the Government, some SMEs may end up winding down their businesses and the workers will be adversely affected. Will the Government consider working with the Labour Movement to explore ways to assist these affected workers leverage programmes, such as the "Adapt and Grow" programme, and transit into new employment before the company winds down? These workers can plan and start to upskill and reskill to enhance their employability earlier.

All the Government's support and assistance should be directed to sunrise companies or future-ready companies with potential for growth. Will the Government evaluate the situation and circumstances in which SMEs are given assistance to ensure accountability?

Helping Micro and Heartland Enterprises

Mr Saktiandi Supaat: Sir, this year's Budget has a focus on helping to enhance a broad base of SMEs and, consequently, improve their businesses. However, there are concerns that our micro and heartland enterprise, such as those in our Housing and Development Board (HDB) estates, are being left behind. Although there is this enhanced Revitalisation of Shops (ROS) scheme aimed at rejuvenating the heartland shops, the shops are mostly benefiting from improved physical appeal. This is akin to "putting old wine in a new bottle". The bottle looks attractive but, over time, it will lose its appeal, because the inside has not changed at all.

Many of the heartland businesses are run by the older generation bosses. Their shops have been there since the flats were built, and they abide by the traditional, conventional way of running business. This can eventually lead to their business getting phased out as the age group of their customers get younger and the customers are flocking online and elsewhere. Some of these businesses do wish to move with the times but, unlike SMEs and other enterprises, they are not entitled to things like grants, rebates, consultation and staff training. What is the Government doing to help them?

Heartland businesses contribute to a rustic charm within the neighbourhoods. It is something unique to Singapore's public housing that we will rarely find elsewhere. Moreover, the convenient locations of these shops increase connectivity within the neighbourhood and are popular with the elderly and less-mobile. I hope the Government can do more to help these heartland shops stay abreast of the times and remain relevant to the residents in the neighbourhood.

Support for Micro Enterprises

Miss Cheryl Chan Wei Ling: Sir, there is a significant proportion of micro enterprises in the retail and F&B businesses located in our heartland malls and neighbourhood town centres. Some of the measures introduced to support our SMEs to level up with the industry may not benefit these businesses. Can I know what plans the Ministry has to support these micro enterprises? I have a few suggestions for consideration.

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One, periodic proactive communications of schemes and roadshow at the localised level. Move the satellite SME Centres to the localised level like the specific malls or even the town centres. This would give better access for the business owners to participate and seek assistance.

Two, provide a suite of modules where different businesses can plug and play to adapt in order to enhance their efficiency.

Three, customise some relevant SkillsFuture courses to accommodate the long working hours and the working conditions of the staff in the micro enterprises so that they can work and also successfully upskill.

Lastly, I would like to ask the Minister on the scheme of the SME Working Capital Loan introduced last year. Have the banks been forthcoming since the scheme was introduced? Were there good success rates for application from non-traditional business models?

Competition Act and Interim Orders

Mr Pritam Singh (Aljunied): Chairman, in the middle of last year, the Competition Commission of Singapore announced that it was investigating restrictive industry practices in the supply of lift spare parts for lifts managed by Town Councils.

In its press release on the matter, the Competition Commission acknowledged that there could be cost savings for Town Councils should they engage third-party lift maintenance contractors for various brands as compared to procuring lift maintenance services from original lift installers. To this end, The Straits Times noted that the original complaint was made to the Competition Commission about EM Services, a joint venture between HDB and CapitaLand, sparking an investigation. EM Services was found to have refused to supply spare parts to third-party contractors.

On 12 May 2016, some two years after the initial complaint, EM Services came forward to provide a commitment to supply lift spare parts for the lift brand known to most Singaporeans as "EM", to third-party lift maintenance contractors in Singapore.

Following feedback from a public consultation, the Commission considered EM Services' commitments to fully address competition concerns, presumably concerns which originate from possible breaches of section 47 of the Competition Act.

The long duration of time between the initial complaint and the resolution of the matter would have had potentially significant cost implications for Town Councils, which could have secured favourable maintenance rates from third-party maintenance providers, had a resolution to this matter being achieved earlier.

Section 67 of the Competition Act provides for interim measures in the midst of investigations when the Commission believes a section 47 prohibition has been infringed. The essential ingredients of instituting such interim measures are if the matter is an urgent one to prevent serious injury to a person or a category of persons or, secondly, simply to protect the public interest. It would appear that section 67 could have been employed against any lift company intentionally withholding the supply of lift parts under either of these two limbs.

The high incidence of high-rise living in Singapore and, separately, a spate of lift incidents from 2015 in particular, brought home the point about the public interest in a very real way.

Did the Competition Commission consider making interim orders against EM Services, so as to compel them to sell spare parts to competitor maintenance companies during the period under investigation? If not, why not? Not only would safety concerns and the public interest have been addressed, Town Councils could potentially have saved hundreds of thousands of dollars, thanks to more competitive lift contracts.

Secondly, on what basis did the Competition Commission deem it necessary to conduct a public consultation to affirm EM Services' conditions to supply lift parts? Who was consulted and why did the Competition Commission choose this method of resolution and not impose interim measures?

Disruptions in Life Sciences Sector

Dr Tan Wu Meng: Sir, in recent years, we have seen the emergence of biosimilar drugs in the biologics landscape. Biosimilars are engineered to have the same therapeutic effect as an existing drug − they call it a "reference product" − with no clinically meaningful differences in safety and effectiveness.

They work within existing intellectual property frameworks, so have the potential market impact of what would have been called a generic drug, especially if clinical trials show equivalence. These are a potential disruptive innovation to traditional pharma markets as well as pharma producers in the first-world as well as in Asia. How do we position Singapore's own biologics and drug development sector amidst this changing landscape? What are the challenges and opportunities for our Singapore workers and Singapore industries?

The Chairman: Mr Charles Chong, you have two cuts, can you take them together?

Advanced Manufacturing Technologies

Mr Charles Chong: Thank you, Mr Chairman. Singapore's manufacturing sector has always been a strong anchor for our economy while also being at the same time a key source of our competitiveness which provides us with links to the rest of the world.

Our manufacturing sector has been a good source of growth and a provider of valuable jobs for many years. The sector also helps to diversify our production base and export markets. I was, therefore, very pleased to note that the report by CFE recommended that Singapore continue building a globally competitive manufacturing sector and should retain manufacturing at around 20% of our GDP over the medium term.

It will, however, be challenging for our manufacturing companies to stay relevant and competitive in the current global manufacturing landscape. Technological advances in the industry have made things far more efficient today and the employment of technology in the form of robotics and additive manufacturing has become more widespread.

The use of industrial robots in manufacturing can also help to increase the overall operational efficiency in a wide range of areas. Robots can operate with much more precision and consistency than human operators and also can be employed in processes or instances where it may not be optimal to deploy a human.

On the other hand, additive manufacturing injects greater speed and flexibility in the product development and prototyping process. It can also help to shorten supply chains so that the final product is ready more quickly.

The Government has always encouraged our companies to embrace change and transform themselves. In this particular context, it will mean being open to tapping on these advanced manufacturing technologies for new opportunities.

However, we all know that change is difficult. Some companies may see the need to transform but do not know how to go about doing so. Others may be unsure about whether it will be worth the money to invest in these new technologies and change the way they do business. They may also be worried about business downtime.

In view of this, how is the Government supporting our companies in their transformation journeys to adopt advanced manufacturing technologies? How will the Government help our companies build new capabilities so that they can remain relevant and seize new opportunities for growth?

Global Talent and Mindset

Next, I would like to touch on startups and our innovation ecosystem. Startups are becoming increasingly prominent in the global economy, both as creators of economic value and as disruptors of existing industries. Many countries are placing increasing emphasis on attracting and retaining global entrepreneurial talent to catalyse a vibrant startup culture, much like Silicon Valley, which is a melting pot of the best and brightest tech minds from all over the world.

In Singapore, we are in the process of building an increasingly vibrant startup ecosystem. The CFE report speaks of world-renowned universities and research institutions, and we even teach entrepreneurial skills in our schools now.

Many young people want to start up their own businesses, and this is a very encouraging sign for our economy. But more can be done. CFE noted that a vibrant startup ecosystem requires capable entrepreneurs with a global outlook. Given Singapore's small size, one of the subcommittees recommended that the Government review the existing work pass system, so that it is easier for startup founders and key executives to come to Singapore. However, these should be individuals who are prepared to anchor their businesses in Singapore.

SBF's SME Committee has similarly recommended that the existing EntrePass scheme be enhanced. This scheme allows eligible foreigners to start and operate a new business in Singapore.

I would like to ask the Minister how the Government intends to strengthen Singapore's ability to attract more global entrepreneurial talent here to bring more life and vigour to our local startup scene.

The Chairman: Mr Lim Biow Chuan's speech on Consumer Protection submitted to MTI. Miss Cheryl Chan.

Growth Opportunities

Miss Cheryl Chan Wei Ling: Sir, according to the International Monetary Fund (IMF), the average GDP growth of advanced economies globally in 2016 was 1.6%. Singapore's GDP was 1.8%. With increasing threats to globalisation and potentially fewer foreign direct investments, can we continue to maintain this growth of 1%-3%? Apart from short-term measures, what more must we do to sustain a growth on par with or better than the global forecast for advanced economies?

Emerging markets are forecasted to have a larger growth of 5%-7%. Most emerging markets have requirements to build infrastructures to cater for energy, connectivity and basic needs. They have needs in areas where we consider jobs within traditional markets in Singapore.

With limited land space, there will come a time when we have maximised our built infrastructure and the need for each subsequent mega project will be at least a decade or two apart. Instead of just local demand creation, can we export our services and create job opportunities for Singaporeans in emerging markets? An example of good leading efforts in this respect is the Japanese business community. Japanese companies have capitalised on their technology and expertise to undertake infrastructure-related projects in ASEAN and the African continent, where the capabilities of these emerging markets are at their infancy. It not only created jobs for their people but also further strengthened their capabilities and learnings through diversity against the various country backdrops.

I would like to ask the Minister what the plans are to introduce new market sectors for growth, for example, in aquaculture. Apart from R&D, are there any considerations to develop new industry sectors and assist our local companies to expand manufacturing overseas where different parts of the entire value chain can be strategically located?

Senior Professionals, Managers and Executives (PMEs)

Costly overhead, irrelevant skills, age. These are some common reasons that senior PMEs received when asked to vacate their work positions. It is possible for some individuals that these reasons cited may bear truth, but what if the senior PMEs can still contribute in significant ways? Would they have a role in the workforce and social scene? What plans does the Ministry have to capture this talent pool?

I have met successful examples of senior PMEs who switched industries, had practical expectations of remunerations and some ventured to become new entrepreneurs. Let me explain three areas to be explored.

The first, in last year's COS, I have raised and would ask the Ministry again to consider having senior PMEs with experience and international exposure to mentor the SMEs and startups. Functional experiences under the diverse business conditions are useful knowledge to be shared and imparted. Synergies can be captured for both parties. PMEs can learn new business areas or skills from the startups with fresh, new concepts and, likewise, SMEs can be taken to higher grounds with the network and executional insights. So, I would say a platform to match the requirements and supply of this talent pool is thus essential.

The second area − supplement workforce in specific sectors. Healthcare and education are key growth areas and would continue to face staff shortages. As a society, we constantly demand more care and concern for our young and old. Being a senior, one is probably best placed to understand the mindset and needs of others in that same age group. In contrast to our younger workforce, our seniors will have some time, flexibility and impetus to undergo training and transformation. They can also supplement the social service sector with their people management skills and knowledge.

The last area, overseas postings. Senior PMEs may be less constrained by familial burden as compared to young couples at the early stages of their career and family lives. Those who have had prior overseas assignments or managed regional roles would be well acquainted with such postings. They can bring forth the local establishments from Singapore with desires to anchor overseas and broaden their markets.

Preparing Workers as Industries Transform

Mr Saktiandi Supaat: Sir, the ITMs will certainly see many major changes. Existing jobs will be impacted and new job opportunities will emerge. How will the Government help to prepare the employees? Continuous education is one of the keys and, certainly, SkillsFuture will be helpful. But there is only so much time and money one has to spend on furthering their education. It will be helpful if employees in the affected industries can have a heads-up on what particular areas they should focus on and which skills and courses they can contribute to their new roles. Will there be, for example, 23 manpower ITMs, too?

Knowledge for Regional Markets

Dr Tan Wu Meng: To help young Singaporeans plug into business networks regionally, it takes language skills, region-specific knowledge, things which are not in the textbooks. What steps are we taking to help bring our people up to speed? Are we planning courses in regional languages, regional cultural nuances, even courses on how to interact persuasively in a regional business setting so as to shorten the learning curve and maximise opportunities?

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Tackling International Markets

Ms Sun Xueling: When asked why he had only conducted a roadshow in the US to secure venture capital (VC) funding and not in China, an entrepreneur whose company had created an online portal for services remarked, "I can't do a powerpoint in Chinese and I can't handle negotiations with them. They ask pointed questions about how I am running the company which I am not comfortable with. Further, my product is personal computer (PC)-based whereas they are into mobile apps." And when I probed further if he had been successful in raising funding in the US, the entrepreneur replied, "No, the US investors said we were too physically far away and that it would be difficult for them to review how we are doing post-investment". A very telling example about the various issues we face with internationalisation and what would be needed to overcome them.

First, basic language competency matters. If we are looking to crack nearby markets, being able to converse in Chinese or a Southeast Asian language would be helpful. Secondly, if we are looking to expand overseas, we should accept that cultural norms can be different elsewhere. What could be considered an aggressive mode of discussion could be the cultural norm somewhere else. Further, to have a successful product, we would need to understand the pain points different markets have. Lastly, while we should attempt new and exciting far-flung markets, nearby markets, by value of proximity, allows greater interaction and increases the possibility that business can be done.

I suggest that alongside Government schemes to help our companies set up overseas, we should also support language, cultural studies and programmes which offer immersion opportunities in neighbouring countries to young Singaporeans. This will enable them to understand and create relevant products and services for consumers in the region.

The Chairman: Senior Minister of State Sim Ann.

The Senior Minister of State for Trade and Industry (Ms Sim Ann): Sir, SMEs are the heart of our economy. They are the base from which many brands have emerged and we hope and believe many more great Singapore companies will grow.

The concerns of SMEs are also the Government's concerns. Supporting SMEs is very much at the front and centre of the CFE report as well as this year's Budget. It will also be a key focus of the MTI family in the months and years to come. The feedback from SMEs falls into three main categories.

First, the need for assistance to cope with challenges, both immediate and in the longer term; second, where to go and who to approach for assistance and, third, how to transform themselves. The MTI family's response is clear. We want to help SMEs succeed. We provide assistance. We are making it easier for SMEs to receive assistance and we are doing more to help SMEs implement step-by-step plans if they wish to transform.

For the first category, in terms of how to cope with challenges, several Ministers have already spoken about them. Hence, I shall address the question of whether we can make it easier for SMEs to benefit from our support schemes. We can do so in several ways.

First, by changing the way Government agencies work with one another to support SMEs. Our economic agencies are largely organised based on function and, with a few exceptions, not by industry type.

But SMEs have told us that if they knew that there was one specific agency in charge of their industry, they would feel more assured. They will know the needs of the entire industry are considered holistically. We hear our SMEs. This is why we have organised our industry strategies into ITMs. We now have one lead agency for each industry. We have started rolling out the ITMs. Eventually, we will have 23 ITMs covering more than 80% of our economy.

SMEs can think of each ITM as a guide to the key shifts in the industry. It lays out the practical steps they can take to transform their businesses. There are four major themes: to improve productivity, innovate, internationalise as well as to develop the skills of our workers.

To address Ms K Thanaletchimi's question, we do have indicators to track the progress of the ITMs. At the national level, we track indicators, such as value-add and value-add per worker. At the sector level, each ITM is tailored to the specific needs of the sector. We have sector-specific indicators to track progress in productivity, innovation, internationalisation and in developing the skills of our workers.

Let me now explain how our SMEs can benefit from the ITMs. The Food Services ITM helps SMEs address a key challenge − their heavy reliance on manpower. This is made more acute by an ageing workforce and the fact that many prefer to work in other sectors. As part of the ITM, food services SMEs will be supported in their adoption of technology, as well as the development of productive and innovative business formats.

An example is Omakase Burger, a gourmet burger restaurant chain that specialises in smashed burgers. As some foodies might know, an artisan burger is especially juicy and delicious because the meat patties are shaped by hand and not compressed by machine.

So, a key challenge for Omakase was that a lot of the food processing was manual. Whether the business can grow depends crucially on how many skilled chefs it can hire and, as many of us know, this is one of the biggest bottlenecks in the F&B industry.

Is there no machine that can replicate the taste and texture of a hand-shaped burger patty? It turns out there is, one that uses vacuum suction technology instead of straightforward compression. But it is costly.

With the support of SPRING's Capability Development Grant (CDG), the company was able to automate its processing kitchen in 2016. They purchased this special machine. Now, Omakase can make more of the same delicious burgers and think of expanding operations and growing its top line, without having to find more chefs.

Ms K Thanaletchimi asked how we can improve productivity in our retail sector. This is addressed in the Retail ITM which sets out to drive greater productivity through technology and shared platforms. An example, SPRING has worked with retailers to get them to use self-check-out counters. In 2016, more than 110 self-checkouts were installed in supermarkets. This has allowed a 20% reduction in the demand for cashiers. The former cashiers were redeployed to new stores or reassigned to other duties. Our target is for 50% of large retailers to adopt these established technologies by 2020.

E-commerce and omni-channel sales will also help retailers to better meet customers' needs and allow them to do more with a lean workforce. The Retail ITM encourages and supports SMEs and their workers to take advantage of these strategies.

SPRING is working with Workforce SG to conduct master classes on omni-channel retailing and digital marketing. To date, 38 companies have benefited from these classes and we encourage more to join in.

As Ms Foo Mee Har pointed out, there are potential synergies among the different industries. We agree. That is why we are adopting a cluster approach for our ITM efforts. For instance, we will identify and develop common digital solutions and automation technologies that can be applied across industries. And we will work with SMEs to deploy them.

As an example, within the Lifestyle cluster, there is Techmetics, a robotics and IT solutions company. It provides common automation solutions to the Food Services and Hotels industries and has worked with SPRING and the Singapore Tourism Board to deploy these solutions.

In restaurants like Kinsa Sushi, guests can place their orders through Techmetics' iPad ordering solution. Their food is then delivered by Techi, a robotic waiter.

The company also adapted Techi to meet the needs of hotels. For instance, Techi is at work in Park Avenue @ Rochester, delivering room service. The robot is able to take the lift, travel to the guest's doorstep and notify him through a phone call that the food has arrived. Techi helps the food services and hotels industries do more without needing more staff. It also saves ageing workers from having to perform physically tedious or repetitive tasks.

It also means that homegrown tech companies can showcase their solutions and, hopefully, achieve greater success. We look forward to supporting more SMEs adopt such win-win solutions.

We often hear that SMEs are not sure whom to approach for help. Mr Saktiandi Supaat and Miss Cheryl Chan have raised similar concerns. We did not just reorganise the delivery of assistance in the form of ITMs. As a first touchpoint, we have our SME Centres for SMEs, including our heartland and micro enterprises.

As a first stop, the SME Centres provide customised business advice and help SMEs better understand Government initiatives. Last year, we also enhanced our SME Centres to provide business diagnosis and run capability workshops for SMEs. In total, our Centres assisted about 30,600 enterprises in 2016.

Complementing the SME Centres is our SME Portal, which serves as the first online touchpoint for SMEs. The portal offers Government and commercial information useful for SMEs. It also lists services suitable for SMEs at various business stages.

To improve our companies' access to technology and digital solutions, we will add a one-stop Tech Depot to the SME Portal by the second quarter of 2017. This is a showcase of easily adoptable technology solutions. It will include A*STAR's ready-to-go (RTG) technologies as well as IMDA's prequalified Infocomm and Media (ICM) solutions. These can help companies improve inventory and asset tracking processes, supply chain management and planning processes.

For SMEs looking to embark on a transformation journey, we are more than willing to meet them halfway by providing step-by-step, customised assistance. Let me elaborate on three areas.

Mr Yee Chia Hsing asked how our SMEs can increase their competitiveness, given the rapid technological changes. We have taken steps to help SMEs enhance their technological capabilities. These include improving their access to technology solutions and helping them identify and implement the ones best suited to their needs.

First, for SMEs that require specific help to identify how technology can support their business strategies, A*STAR can help them develop an operation and technology roadmap (OTR). This involves a customised, step-by-step guide of what companies need to do to better leverage technology in their operations. Since 2003, A*STAR has developed over 240 technology roadmaps, with positive feedback.

This year, we will partner the trade associations to expand our network of trained OTR facilitators. We aim to support up to 400 companies over the next four years.

Second, SMEs that wish to develop, prototype and test new products can tap on our new Tech Access initiative. They will get access to A*STAR's installed base of specialised equipment on advanced manufacturing.

This will help them build capabilities in the use of advanced machine tools, new processes, prototyping and testing. SMEs will also receive user training and advice from A*STAR to optimise the effectiveness of the equipment.

As Mr Thomas Chua has noted, TACs are important partners to help us leverage R&D to uplift the capabilities of our SMEs. A*STAR has worked with TACs, such as the Singapore Precision Engineering and Technology Association (SPETA) and the Singapore School Transport Association (SSTA), on specific R&D projects. A*STAR will continue to engage TACs on specific R&D projects, as well as to help them tap on new initiatives like the Tech Access and Tech Depot.

We also want to strengthen our support for SME capability development. SPRING's CDG is one of our key support schemes for this. It supports SMEs to take on upgrading projects across 10 key business areas. In 2016, SMEs took up close to 2,400 CDG projects, totaling $125 million in grants.

To make it easier for companies to do capability development, SPRING simplified the application process for grants below $30,000 in 2015. This has received a positive response and, as a result, many more companies today have been able to benefit from the grant.

We are constantly looking for ways to broaden and deepen our support for capability development. This year, we will strengthen our support in product development by extending the grant coverage to small batch production. Currently, most of our support efforts focus on helping companies develop their products at the R&D and prototyping phase. But for products to be commercially scalable, companies need to ensure that the product design and manufacturing process are optimised. This is tested through small batch production.

We hope the expansion in grant coverage will help to co-share risks associated with this early stage of production and help our SMEs to scale.

Beyond this, we will be taking steps to better drive innovation among our SMEs and startups. This will be with an enhanced GOV-PACT. Today, there are efforts by various Government agencies to work with companies to co-develop innovative solutions. Participating companies can also tap on SPRING's CDG to fund part of the cost involved in the development of new technologies. But we recognise that SMEs and startups still face uncertainty of securing the procurement contract after investing time and resources at the development stages.

To overcome this, SPRING will be working with several Government agencies, such as HDB and JTC, to drive procurement for innovation. We help more SMEs and startups participate in Government projects. For example, the procurement process for projects under this scheme will be broken into stages. An SME or startup will be eligible to move on to the next stage once the current stage proves successful. This will reduce the risk and investment for the SME.

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As one of the agencies pioneering this, JTC has already been working with companies to fund and test-bed innovative solutions. It has worked with vTrium Energy, a local SME, on the test-bedding of flexible solar films within its CleanTech Park and Seletar Aerospace Park. Through the field trials, vTrium was able to prove that their flexible panels work well on curved surfaces and vertical building facades and in a tropical climate.

We hope that this initiative will give SMEs and startups the opportunity to engage the Government as a valuable reference customer and build their track record.

Mr Thomas Chua also asked about how SMEs can participate in the $700 million worth of construction projects that MOF is bringing forward. The Ministry of National Development will be speaking about this at their COS.

We also want to ensure that we have healthy, competitive and efficient markets in Singapore. This is the goal of the Competition Commission of Singapore (CCS) and I thank Mr Pritam Singh for his question. CCS administers the Competition Act, which allows it to issue an interim measures directive to businesses. This is provided there are reasonable grounds to suspect an infringement of the Competition Act and if there is urgency to act for the purpose of either protecting the public interest or preventing serious, irreparable damage to a business. To date, CCS has not issued any interim measures directive. We would like to clarify that in the case of EM Services brought up by Mr Pritam Singh, CCS' view was that the threshold for an interim measures directive, in other words, that third-party contractors had suffered serious and irreparable damage as required under the Competition Act, had not been reached. I would also like to highlight that safety concerns of the public would have been considered by BCA.

With regard to public consultation, it is standard practice for CCS to seek feedback from industry stakeholders on a company's proposed commitments as they are in the best position to assess if the commitments will address the competition issue. CCS would consider the feedback in deciding whether to accept the commitments.

I have explained how the MTI family assists SMEs, how we are making it easier for SMEs to obtain assistance, and how we are moving to help more SMEs in a customised, step-by-step manner to transform. But, given the sheer number of active SMEs in our economy, the Government alone cannot help all businesses transform. We need to strengthen our partnerships and collaboration to help more SMEs succeed.

Ms Foo Mee Har and Mr Liang Eng Hwa have asked about TACs. Our TACs are important enablers in the transformation of industries. They have a good sense of what is happening among their members and have strong industry networks. This allows them to effectively reach out and help more SMEs.

Over the past decade, through the Local Enterprise and Association Development (LEAD) programme, SPRING and IE have engaged about 40 TACs actively. They work on projects to support their members in capability upgrading and internationalisation. Altogether, close to 190 of these projects have been supported, with a committed grant of $190 million.

As an example, the Singapore Food Manufacturers' Association (SFMA) continues to build the international reputation of Singapore food products. It does so through activities, such as helping SMEs find new channels for their products in overseas markets, as well as marketing quality food products as tourism gifts.

Mr Saktiandi Supaat and Miss Cheryl Chan also asked about our plans to support our heartland enterprises. We are working with the Federation of Merchants' Associations, Singapore (FMAS) to deepen their internal capabilities and rejuvenate our heartlands. FMAS was recently awarded projects under our LEAD and LEAD+ programme to do so.

One of the projects FMAS will be working on is to help our heartland enterprises better align their business models to meet new demands of consumers and explore partnerships within the community for capability upgrading. To start off, FMAS is conducting two pilot studies in Bedok and Ang Mo Kio to identify market needs and formulate precinct development plans. In total, this project could benefit more than 2,500 heartland enterprises.

Ms Foo Mee Har may wish to note that during the last Budget, we introduced SPRING's LEAD+ programme to raise the internal capabilities of TACs in four areas, namely, TAC's leadership, management, processes and services. To date, seven TACs have been supported through LEAD+.

We recognise the importance of TACs as our key partners. We will increase the overall FY2016 to 2020 budgets under the LEAD Programme to $100 million to help more TACs to step up and do more for their members.

First, we will expand our outreach to more TACs. We have received feedback from several smaller associations that they would like to embark on projects to help their members. But they say they lack the know-how or experience to do so. To help these TACs take the first step, we will support them in improving their internal systems and processes, as well as in implementing bite-size upgrading projects.

Second, we will strengthen TACs in all the 23 ITM sectors, so that they can play a stronger role in driving industry transformation and internationalisation.

Third, we encourage TACs to collaborate with one another to reap greater benefits. Cross-sectoral, multi-TACs or projects where larger TACs step up to support smaller ones, can be supported up to 90%, from the current 70%. Such projects should have clear productivity enhancements or innovative outcomes that benefit a sizeable number of SMEs.

The full benefits of industry transformation cannot be felt if we have only a handful of progressive, creative SMEs in each industry. These benefits can only be unleashed when the majority of SMEs participate fully in the transformation process.

In this respect, we ask two things of SMEs. If you have found forums, workshops or networking platforms provided by the MTI family to be useful, please spread the word. If you have achieved success with a boost from our assistance schemes, please do not shy away from speaking up when invited or interviewed. This will help contribute to a more collaborative business ecosystem.

I recently attended the Turning Passion into Profits shareback event organised by the Singapore Productivity Centre. The aim was to help raise awareness about the resources and support ecosystem that F&B startups and microenterprises can tap on. I was very encouraged that several successful entrepreneurs came back to share their stories with others.

One example was Ms Diana Teo, co-founder of WaaCow!. This is a fast-casual restaurant retailing premium quality Japanese-inspired rice bowls. She spoke very passionately about the assistance she received. There are many more Diana Teos out there, and their collective sharing will help many more entrepreneurs build better, more competitive businesses.

Sir, SMEs are at the heart of our economy. The MTI family is committed to supporting them. We shall press on with our efforts to restructure the economy, even as we cope with the more immediate challenges. I have explained how we intend to do this through the ITMs, various initiatives to help our SMEs stay competitive, and working in closer partnership with our TACs. Together, I am confident that our SMEs will emerge stronger and better prepared for the future. Sir, in Mandarin, please.

(In Mandarin): [Please refer to Vernacular Speech.] Our SMEs form the key pillar of our economy. How can SMEs transform in the future economy is a key concern shared by the Government and our society.

The Government takes feedback from SMEs very seriously. Firstly, SMEs need assistance as they are limited by scale. Several Ministers who spoke before me have talked about the short-term and long-to-medium term measures that the Government has rolled out to support SMEs, and how to help SMEs stay competitive.

Secondly, quite a number of SMEs say they hope Government assistance schemes can be further simplified, so that it will be easier for them to receive help. We take this issue seriously as well. It is why the Government has set up 12 SME Centres and have constantly worked to enhance the service quality of these centres, so that they can provide more targeted business consultancy services for SMEs. These SME Centres have worked well to complement the SME Portal set up by the Government. We are also actively enhancing the SME Portal with new features like Tech Depot, which provides technology and digital solutions suitable for SMEs. I urge SMEs to fully utilise the SME Centres and SME Portal as the first point of contact for them to seek assistance and obtain information.

Thirdly, SMEs interested in transformation have also said that they hope to receive more guidance on implementation, so as to avoid going through a lengthy process. In this aspect, the Government is happy to provide more detailed assistance, including the SME Go-Digital Programme and the new OTR Scheme.

Of course, instead of helping SMEs one by one, it is more effective to do it through the TACs. To get more SMEs on board various assistance schemes, the Government is also trying to enhance cooperation with the TACs. One good example is FMAS. FMAS embody the spirit of self-help and has strived to carve out a new path and inject vibrancy into neighbourhood businesses. Going forward, we will support FMAS in formulating new development plans for specific neighbourhoods, with Ang Mo Kio and Bedok being the first two to roll out their plans.

I hope to see more SMEs tapping into and strengthening the TACs and their networks, explore faster and better ways to embark on their journey of transformation, to turn a new page not just for themselves but also for the Singapore economy.

The Chairman: Senior Minister of State Koh Poh Koon.

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

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

Dr Koh Poh Koon: Thank you, Sir. Several Members asked about the Government's efforts to help our companies and people adopt new technologies and internationalise.

Let me first address Miss Cheryl Chan's questions on the recommendation by CFE to continue building a globally competitive manufacturing sector. Manufacturing continues to remain a key pillar for our economy. The sector currently accounts for around 20% of our GDP and 14% of total employment. MTI supports the CFE recommendation to retain manufacturing at around 20% of our GDP in the medium term.

As highlighted by Mr Charles Chong, manufacturing creates good job opportunities for our people, contributes to productivity growth and generates positive spillovers to the rest of the economy. Based on MTI's estimates, a S$1-billion increase in manufacturing value-added through final demand generates about S$330 million of value-added, and 2,500 jobs for the rest of the economy, including business services and wholesale trade. Having a manufacturing base also helps us capture opportunities and generate innovation which would otherwise take place overseas.

Our push into advanced manufacturing will help strengthen the competitiveness and relevance of our manufacturing sector. One key difference between advanced and traditional manufacturing is the digitalisation and automation of manufacturing operations and workflow processes, from receiving an order, all the way to the production on the factory floor. Advanced manufacturing will enable companies, both large and small, to raise their productivity, as well as develop adjacent products, services and business models. In turn, this will strengthen Singapore's leadership in key industrial clusters, such as aerospace and semiconductors.

As Miss Cheryl Chan observed, global leading manufacturers have been investing in the development and commercialisation of new manufacturing technologies. Miss Cheryl Chan may be happy to note that many of these players continue to remain keen to work with our public sector research institutes (RIs). For example, aerospace heavy-weights Airbus and Honeywell have leveraged A*STAR's Aerospace Programme to better understand and minimise the causes of defects in aerospace components through additive manufacturing.

Under the Advanced Manufacturing and Engineering (AME) (RIE) 2020 strategy, we will leverage partnerships with leading manufacturers to co-develop and deploy advanced manufacturing technologies. The goal is to enhance the competitiveness of our manufacturing sector and position our enterprises as solution providers of advanced manufacturing technologies.

To this end, based on our established two "Model Factories" to allow companies, particularly our SMEs, to firstly, experience the technologies first-hand in a learning environment, without affecting their existing business operations and, secondly, to collaborate with stakeholders to test-bed and jointly develop innovative solutions for their processes.

The Model Factories will be hosted at the Singapore Institute for Manufacturing Technology (SIMTech) and Advanced Remanufacturing and Technology Centre (ARTC). We aim to have them operational by the fourth quarter of this year. Each Model Factory is designed to support the different technological needs of companies.

A key feature of the Model Factory@SIMTech is a "live" pilot-scale production line that allows companies to gain hands-on experience of advanced manufacturing technologies, prior to full adoption. SIMTech has also developed a suite of digital manufacturing solutions called the Manufacturing Control Tower (MCT) Platform which allows companies to have greater visibility and smarter management of their manufacturing operations through a central control platform that is easily accessible via a simple mobile app.

The second Model Factory@ARTC will allow companies to test-bed the integration of smart, digital and advanced technologies with their existing manufacturing processes for better productivity and resource utilisation.

8.15 pm

Even as A*STAR is setting up these Model Factories I spoke about, one of our local enterprises has already started piloting SIMTech's MCT platform. Precision engineering company CKE Manufacturing is making use of the MCT to monitor the performance of five of its shop-floor machines in real-time. Using a mobile app, CKE's staff are able to track the performance of the machines without having to physically inspect them. The pilot has enabled CKE to improve its manpower deployment by about 50% and optimise the utilisation of its machines. CKE is now looking at connecting all its machines to this MCT platform.

The technology changes that we are witnessing are global in nature and not unique to the manufacturing sector. As Dr Tan Wu Meng noted, the biologics landscape is changing, too. The biosimilars space is nascent and the regulatory environment is still evolving internationally. What we do know is that innovator drugs, such as biosimilars, both require a strong regulatory environment, clinical development and manufacturing know-how to deliver safe and high-quality products to patients. We will continue to build core capabilities in R&D and the advanced manufacturing of biologics, in order to position Singapore well to capture investments arising from biologics, which includes biosimilars, regardless of the eventual market structure in this category of drugs.

We are confident that Singapore is well-placed to harness these disruptions and turn them into opportunities for our companies and people.

Mr Liang Eng Hwa and Mr Charles Chong asked about the Government's efforts to build up our startup landscape. Startups play an important role in our economy because they are nimble. They churn over ideas quickly and are more willing to take risks. Over the past decade, there have been considerable efforts by various stakeholders to develop a thriving startup scene in Singapore. These include nurturing an entrepreneurial culture, providing funding support and catering for the necessary infrastructure. As a result, we have seen a sizeable increase in both the number and the quality of our startups.

First, the number. The total number of startups in Singapore more than doubled from 22,000 in 2003 to 48,000 in 2015.

In terms of quality, our startups have also improved with significant increases in the number and aggregate valuations of startup exits. In 2015, there were 220 venture capital deals completed worth more than US$1 billion combined. This is compared to 26 deals worth US$80 million just five years ago. Notable successes include live customer support chat solution provider Zopim and online marketplace Lazada, which were acquired for about US$30 million in 2014 and US$1 billion in 2016 respectively.

Our efforts have catalysed a robust startup ecosystem here. But we can do more and we should. I co-led a startup deep dive as part of the CFE discussions last year. We studied how to give our startup scene an additional push so that it can take off in a much larger way. We will, therefore, strengthen our startup support in three key areas, namely, (a) branding, (b) funding and (c) talent attraction.

Let me first talk about branding. A coherent brand identity for Singapore startups that resonates among Singaporeans and the rest of the world is important, given the fierce global competition for entrepreneurial talent and funding today. As a first step, therefore, we will establish a new umbrella branding known as "Startup SG" to unify our startup support schemes. Some of the schemes under the Startup SG umbrella branding include:

(a) Startup SG Founder to support first-time entrepreneurs;

(b) Startup SG Tech to support the development of deep-tech innovations;

(c) Startup SG Equity to incentivise equity co-investment for startups;

(d) Startup SG Accelerator to support incubators and accelerators which offer programmes for startups; and

(e) Startup SG Talent to support talent development for startups.

With the unified branding, it will be easier for budding entrepreneurs to identify the relevant schemes for their unique situation and their needs. Over time, we will work with other stakeholders to further strengthen this Startup SG brand.

To further support our startups, we will also enhance two key enablers: first, funding and, secondly, talent.

Let me address the first enabler. Equity financing is important to enable our startups to grow and scale. However, not all startups have the same funding needs or gestation periods. For instance, compared to infocomm technology (ICT) startups that develop online applications or web portals, startups that develop non-ICT or deep technologies typically require higher capital outlays and a much longer gestation period to succeed, due to the prototyping process and product trials that they need to undergo.

Therefore, as part of the Startup SG Equity scheme, we will enhance the Government's co-investment support for promising startups in deep-tech areas, such as in medical technology, clean technology and advanced manufacturing, to catalyse private sector investment for this group. We will enhance the Government's support in two ways.

Firstly, we will double the investment cap for the Government's co-investment portion for deep-tech startups from $2 million to $4 million. This enhancement allows the Government to tier our funding support for ICT and deep-tech startups according to their differing needs.

Secondly, we will increase the proportion of the Government's co-investment funding support for supported investments from 50% to 70%.

The second enabler is talent. As Mr Charles Chong noted, we need a strong talent pool, comprising capable entrepreneurs who can contribute to our local startup scene. Given Singapore's small size, we need to remain open to promising global talent.

The rising global protectionist sentiments that emerged in 2016 present us with the opportunity to position Singapore as an attractive startup location for global talent. Foreign entrepreneurs have the capacity to add to the vibrancy of our startup scene. They complement our local startups through the cross-fertilisation of ideas, catalyse new partnerships and create good jobs for our people. As of 2015, foreign startups employed more than 19,000 workers in total.

In 2003, we introduced a work pass scheme known as EntrePass for foreign entrepreneurs keen to start a business in Singapore. We will further enhance this scheme to create a more conducive environment for promising global talent keen to establish innovative businesses here. Under the enhancements, the existing entry and renewal criteria will be revised. Let me outline the three key changes.

Firstly, we will remove the requirement for applicants to have a paid-up capital of at least S$50,000 in their startups, to welcome global entrepreneurs with good ideas to come in at a much earlier stage and grow their businesses from Singapore.

Secondly, we will broaden the evaluation criteria for global startup founders with an established track record to explore the startup scene here.

Finally, we will extend the validity of each EntrePass from the current one year to two years, after the first renewal at Year 2. In other words, if the foreign entrepreneur can demonstrate progress at the end of the first year, the EntrePass will be extended for another year. Thereafter, subsequent EntrePass renewals will be valid for two years.

These enhancements will better position us to engage and attract a larger talent pool at the global setting at an earlier stage who can contribute to the vibrancy of our local startup scene. The enhancements are especially timely, given the increasing international interest in Singapore as a global startup destination.

In the same spirit of remaining open, we want to encourage our local startups to also adopt a global mindset and tap on our existing extensive bilateral networks as launching pads for their overseas ventures. GIA, mentioned by the Ministers for Trade and Industry Lim Hng Kiang and S Iswaran, seeks to enable this exchange of innovative ideas between our local companies and their foreign counterparts.

In fact, our local partners are already actively facilitating such collaborations. In the US, NUS Enterprise, SingTel Innov8 and SGInnovate jointly set up Block 71 at San Francisco as a launch pad for Singaporean tech startups. Last year, the Action Community for Entrepreneurship (ACE), a private-led initiative aimed at fostering entrepreneurship, also partnered US-based Singaporean networks to establish the ACE-Silicon Valley Chapter. Both of these serve as platforms for our companies to gain access to US markets by tapping the experience and networks of US-based Singaporeans and their US counterparts. GIA will ride on existing initiatives such as these to enable our companies to strengthen inroads, build partnerships in foreign markets and prepare our companies to internationalise. Sir, may I now speak in Mandarin, please?

(In Mandarin): [Please refer to Vernacular Speech.] Mr Thomas Chua, Ms K Thanaletchimi, Ms Sun Xueling and Ms Cheryl Chan asked about the Government's role in supporting companies in their internationalisation efforts, particularly in emerging regions which are experiencing higher growth rates.

As the Minister for Trade Lim Hng Kiang mentioned, internationalisation is a key engine of growth and transformation for our companies, big and small. To scale and transform, our companies must leverage the strong Singapore brand to tap good growth opportunities beyond our shores.

IE Singapore supports companies looking to internationalise through various grant schemes. These include the Market Readiness Assistance (MRA) for companies taking their first steps in internationalisation, and the Global Company Partnership (GCP) which provides more customised help for companies with a more established presence overseas. In 2016, IE Singapore assisted companies in over 37,000 cases, with SMEs accounting for about 80% of them. IE Singapore also helped companies facilitate over 450 projects globally in the same year, up from around 420 projects in 2015. Notably, a significant share of these projects was oriented towards helping companies understand market needs, build track record in new markets or new lines of businesses, leverage digital platforms and channels to access global customers and scale-up, and level up capabilities through technology acquisition and overseas partnership and HR development. Such efforts strengthen the credibility and business reputation of our companies and reinforce their ability to clinch future deals.

As Miss Cheryl Chan pointed out, there are substantial growth opportunities in emerging economies which are experiencing higher growth on the back of rapid urbanisation and consumerism. The focus of our company assistance has, indeed, been on emerging markets. IE Singapore provides highly targeted in-market support to our companies through its global network of 37 Overseas Centres, many of which are located in emerging markets in Southeast Asia, China and India. As the Minister for Industry S Iswaran mentioned, we will strengthen coordination of our agencies' overseas operations under the "Singapore Centres". We will also continue to deepen our in-market presence and networks in these markets and help our companies identify and seize new opportunities.

Additionally, we have several G-to-G projects in overseas markets to help our companies collaborate with in-market partners. One such G-to-G project is CCI, which has allowed our companies to make inroads into the less familiar region of western China.

One company that has collaborated successfully with its Chongqing counterpart under the ambit of CCI is Changi Airports International (CAI), which agreed in January 2017 to form a commercial joint venture with the Chongqing Airport Group to manage the non-aeronautical business at Chongqing Jiangbei International Airport.

As part of CCI, the Singapore Government is also working with our Chinese counterparts to develop the Southern Transport Corridor. When ready, the Southern Transport Corridor will boost connectivity between western China and Southeast Asia via Guangxi, a province that has been designated as China's gateway to ASEAN, by shortening the transit time for goods between both regions. In complementing the Chinese plans to develop the western regions, we can open up even more new opportunities for our companies.

Two companies are riding this wave of opportunity in Guangxi. They are PSA International and Pacific International Lines (PIL). They are currently partnering the Beibu Gulf Port Group to manage port facilities in Qinzhou, which is a key port for international lines and shipments to enter China from the south-west coast.

In September last year, I led a delegation to Nanning to support Singapore's participation at the annual China-ASEAN Expo (CAEXPO), a high-level platform that promotes economic cooperation between ASEAN and China. I am happy to know that the event has provided opportunities for our SMEs to enter the Chinese market.

I will give Members an example here. There is a Singapore company that specialises in mini cupcakes, Tian Tian Wu. Two years ago, the founder had the opportunity to participate in the Singapore Pavilion at CAEXPO. There was overwhelming response for its products. Shortly after, it started to grow its cupcake business in Nanning. Today, Tian Tian Wu has three outlets in Nanning, all served by a central kitchen. I understand that Tian Tian Wu's mini cupcakes are exceptionally popular among children and that parents are assured of the quality and safety due to the Singapore branding. Tian Tian Wu has since expanded its service offerings to include cupcake baking classes for families.

As these companies have shown, there are plenty of opportunities for our companies in diverse sectors arising from the rapid growth of emerging regions around the world. I encourage our companies to take advantage of the available Government support to capture these opportunities and reach greater heights of success.

8.30 pm

(In English): Let me now address Mr Lim Biow Chuan's question, which he submitted earlier to MTI, on how we can better protect our consumers. I wish to assure Mr Lim that we take a serious view of errant retailers who engage in unfair trading practices and will not hesitate to take firm action against them. We amended the Consumer Protection (Fair Trading) Act (CPFTA) in 2016 to empower SPRING with investigative and enforcement powers to take injunction action against errant businesses. Cases that involve criminal activity will be handled by the Police. Members may recall the recent case of parallel car importer Volks Auto. One of its employees was charged for criminal conspiracy to cheat its customers and sentenced to 10 years in jail.

Let me emphasise that company directors who knowingly take monies from prepayment deposits for their own personal purposes may be separately prosecuted under the Companies Act and the Penal Code as well.

Sir, let me conclude. As I have elaborated in my speech, there are plenty of opportunities for our companies and people, be they manufacturing firms looking to adopt technologies, SMEs keen on expanding overseas, or aspiring entrepreneurs. Through our various initiatives and programmes, the Government will support our companies and people to seize these opportunities.

The Chairman: Parliamentary Secretary Ms Low Yen Ling.

The Parliamentary Secretary to the Ministers for Trade and Industry (Ms Low Yen Ling): Mr Chairman, the Ministers for Trade and Industry have spoken about the political developments, economic trends and technological changes that will have an impact on our economy. Singaporeans are naturally concerned about jobs and whether their skills will continue to be relevant.

We would like to assure Singaporeans that we will do our utmost to empower every Singaporean with the capabilities to make a good living. We will equip our people with skills, enable companies to develop their employees and expand our people's horizons to access opportunities.

I agree with Mr Saktiandi Supaat that continuous education should be purposeful. With the ITMs, the Government will collaborate with industry partners, TACs as well as unions to prepare our companies and people for the challenges and opportunities of each of the 23 industries. Possible career pathways and occupations are being charted out even as industries and jobs transform. Singaporeans have a diversity of initiatives under SkillsFuture to stay equipped and relevant. Let me now share how this integrated approach will prepare our people to access new opportunities.

Firstly, we will identify the key industry trends and gear up Singaporeans with the relevant skillsets.

Secondly, we will identify the kind of skills that are relevant within a cluster of industries as this improves skills portability. For example, Mr Suresh Dakshnamoorthy started his career in a marine and offshore company providing quality control of electrical equipment. Six years ago, he made a career switch to Thales, an aerospace company. Although Suresh was unfamiliar with the aviation industry, Thales recognised his skills in electrical inspection as well as his familiarity with quality control tools. Suresh is now a Cell Leader in charge of planning production flows to meet his team's weekly targets. So, we can see from Suresh's example that when we identify common or complementary skillsets within a cluster of industries, we can help our people, our Singaporeans, to take advantage of adjacent employment opportunities.

Thirdly, we will build up a pipeline of local talent to access growth opportunities overseas. Mr Supaat also asked how we can help our local businesses tap on infrastructure-related opportunities in Asia. The Minister for Industry has announced how we will improve companies' access to private cross-border project financing. These initiatives will be complemented by the launch of a new Professional Conversion Programme for Global-Ready Infrastructure Talent (GRIT). We target to place and train 300 individuals over the next five years to develop a pipeline of talent in infrastructure project development. These candidates will receive on-the-job training for up to 18 months and they will gain relevant exposure to regional infrastructure projects. The programme will subsidise a part of the participant's salary. More details will be made known in the next quarter of this year.

Besides equipping our workforce, we will continue to enable companies to actively develop their workers' capabilities and skills. This will, in turn, better support their business objectives, be it to improve productivity, go digital or expand overseas.

Companies have several avenues to tap on. The Government's SkillsFuture Leadership Development Initiative (LDI) offers support to companies that institutionalise programmes to build up leadership capability of Singaporeans, to develop our local bench strength and groom the next generation of Singaporean business leaders. Through this programme, promising individuals gain exposure to key overseas market and critical business functions. Mr Chairman, please allow me to continue in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] MTI recognises that some SMEs may need assistance to build up their HR and talent development capabilities. In this area, we encourage SMEs to tap on the SkillsFuture SME Mentors Programme. SME Mentors can work with you to establish structured learning and development (L&D) systems. These systems can help improve the efficacy of your staff training, as well as uplift your capabilities to offer work-learn and internship places to young local talent.

Miss Cheryl Chan spoke about how micro-enterprises may face difficulty in training their employees due to limited resources. SkillsFuture Singapore (SSG) has been working with Post-Secondary Education Institutions (PSEIs) and training providers to deliver flexible and bite-sized training for working adults so that it is easier for them to undergo training.

For instance, the Singapore Institute of Retail Studies (SIRS) provides bite-sized training that can be structured around business trading hours and conducted at the workplace. SIRS also delivers e-commerce courses and programmes for micro-enterprises.

I agree with Miss Chan that senior PMEs have a wealth of experience and we should tap on them as we build capabilities in our people and companies. Today, we have 116 SkillsFuture SME mentors with extensive experience in various industries. Senior PMEs with strong industry knowledge and people management skills could help our companies develop HR capabilities. For PMEs with this aspiration, I encourage you to participate as a SkillsFuture SME Mentor.

(In English): The Ministers, Senior Minister of State and Minister of State have touched on the needs for companies to look for opportunities beyond our shores. I agree with Dr Tan Wu Meng and Ms Sun Xueling that apart from deep industry skills, our people need to have a global mindset to grasp emerging opportunities.

To nurture this global outlook, the Government is increasing the opportunities for Singaporeans to gain overseas exposure at different stages of their careers. For working adults, the SkillsFuture Study Award for International Business will enable them to acquire skillsets that are needed to navigate the complexities of overseas markets. For our youths, we have the SkillsFuture Young Talent Programme (YTP) that offers overseas internships and work study programmes. We are pleased to report that as at end of 2016, over 500 students have benefited from the YTP international experience.

Exposure is but one aspect of expanded horizons that we are all trying to cultivate. I agree with Ms Sun that the ability to speak the native languages of emerging and growing markets is a definite asset. The knowledge of our mother tongue languages has proven to be very useful in building our business and cultural relations in Asia and the neighbouring markets. For those wishing to brush up on mother tongue languages or pick up new ones like Thai, Vietnamese, Japanese or Korean, SkillsFuture has various language courses to choose from and these can be paid for with the SkillsFuture Credit.

In conclusion, even as our economy and industries transform to meet the challenges that change brings, what remains unchanged is the constant effort of the Government to ensure that our people and our companies are equipped, enabled and given the opportunities to expand the horizon, that we can stay agile, astute and relevant. However, the Government cannot do this alone. We need the industries and unions to work hand in hand with us, as we support our companies and people on this journey of lifelong learning, training and development to stay ahead for the future.

The Chairman: Thank you, Ms Low. We do have a little bit of time for some clarifications. Mr Liang Eng Hwa. Can you please avoid asking questions about chocolates, burgers or cupcakes at this hour?

Mr Liang Eng Hwa: Sure. Thank you, Chairman. I am happy with the announcement of yet another scheme, the Gov-PACT, where the Government will introduce flexibility in the procurement of innovation solutions. Can I ask the Minister what sort of contractual amount we are looking at and how extensive this will be? In some jurisdictions, such schemes also come with some bridge financing for the startups, including for some new inventions, some safeguards for IP. So, is that what we are going to do as well for this scheme?

The Chairman: Can I ask that the replies be kept short, too?

Mr S Iswaran: Chairman, I will keep the reply short. The answer is that it is in the early stage of the scheme. Obviously, the contract sums have to be reasonable because they must be within the reach of whether an early-stage company or an SME. What we will do is, SPRING will work with the Government agencies, as I said, to develop the model, and then we will see how we go from there.

As for financing, I think we have a range of schemes available. We have to see whether that is adequate or there are special needs required.

The Chairman: Mr Pritam Singh.

Mr Pritam Singh: Chairman, just two quick clarifications for Senior Minister of State Sim Ann. With regard to the lift companies under investigation, I understand there are a few more that are still under investigation for anti-competitive practices. When can we expect those investigations to be complete?

The second clarification is with regard to the threshold before which interim measures are instituted against lift companies under investigation. I would suggest that it is not just the interest of the third-party lift manufacturers that the Competition Commission should be concerned about, but also the procurers of those services, like Town Councils, for whom lift costs have increased considerably. Their interest also ought to matter and I hope the Commission can consider that when they look at what sort of measures ought to be instituted against companies found guilty of anti-competitive practices.

Ms Sim Ann: I thank Mr Pritam Singh for the clarifications. I am not able to comment on ongoing investigations, but I am confident that our colleagues at CCS are doing their best and addressing the issue as quickly as they can and as comprehensively as they can.

As for the Member's point about the interest of those who procure the services of the third-party lift maintenance contractors, the CCS had, indeed, in their press release, acknowledged that potential cost savings could be had if competition in the supply of lift spare parts was not curtailed. This is also something that they sought stakeholders' feedback on, and they take this feedback into consideration when deciding whether to accept the commitments that the company eventually undertook. So, all this is taken into account.

The Chairman: Ms Sun Xueling.

8.45 pm

Ms Sun Xueling: I have a question for Minister of State Koh Poh Koon. My question is in regard to the enhanced EntrePass scheme. I would like to enquire if a business plan from the foreign entrepreneur would be required. And given that this is a startup, how would the officers assess the business plan?

Dr Koh Poh Koon: Sir, the agencies that give out the EntrePass would take a look at the track record of the entrepreneur, whether he has been successful in creating and spinning off companies, and whether he is a serial entrepreneur, for example. And in accepting him into the country as a startup, his business plan would have been taken into account as well, and all these will be taken holistically into consideration.

The Chairman: Mr Leon Perera.

Mr Leon Perera: Sir, just a brief clarification to the Minister regarding my third cut about secondment of private sector personnel to MTI. Are there any schemes or programmes right now which allow private sector personnel to be on secondment for short stints to MTI, or even another way around? If not, is this something that MTI may consider for the future?

Mr S Iswaran: I thank the Member for his question. To the best of my knowledge, we do not have any formal scheme for the secondment of private sector individuals to the Ministry or our agencies per se. But I think the intent behind this suggestion was more that the private sector should be deeply involved in our economic planning and development processes. And that is something that is quite a pervasive system. If you look at the CFE process, more than 80% of the members in the main committee were from the private sector. When you go below that, the 9,000 people who were consulted were almost entirely from the private sector. That is a key part of the work. In the ITM process, we are involving businesses in a very intrinsic way, not just in the planning, but in the implementation, review, adaptation and so on. I would add that we have a lot of secondment out from the public sector to the private sector. But I am not sure about the private sector to public agencies, because often the feedback is that they need more talent, not that they want to offer their talent to the public sector.

The Chairman: Mr Yee Chia Hsing.

Mr Yee Chia Hsing: Chairman, I would like to thank Minister Iswaran for his answer on tiered electricity tariff. Anecdotally, I heard of stories where certain expatriate families' utility bills are paid for by the companies, so they keep their aircon on throughout the day, throughout the whole house and the electricity bill can be more than a thousand dollars a month. So, it is exactly these few, I would say, which are the most polluting households, which we would like for them to pay a penalty to change their behaviour.

Mr S Iswaran: Mr Chairman. I assume the Member's focus is not just on expatriate families but, in general, on high consumers of electricity.

In general, the right policy is to make sure everybody understands it. Electricity is not cheap in Singapore. I think we are all aware of that. It is fully priced and there is a reason for that, not unlike the discussion we had on other utilities and in the context of Singapore and in the context of this debate.

So, that is our primary focus. And then, when we offer the support or subsidies, these are for the families that need them more. In general, we are relying on, first, the approach we take in pricing. We have not gone down the path of punitive pricing, also because who is to say who is consuming too much and who is consuming appropriately? You may be in a family in a 3-room flat, but you may be over-consuming. And you may be in a family living in a condominium, but you may be under-consuming.

To set thresholds, there are too many variables involved, and it starts to get the Government into areas that are quite fraught. I would suggest that the right approach is what we have embarked on. It is not perfect by any means, but it is, in general, a methodology that encourages conservation. If people are relying on their companies to pay the bill, then the company should look into their electricity consumption.

The Chairman: Mr Liang Eng Hwa.

Mr Liang Eng Hwa: Chairman, as I remember, MTI does have an anti-profiteering taskforce that was set up some time back. I would like to ask the Minister whether this taskforce is still active. And given the concern about water hikes and how businesses could profiteer, these are concerns from the public whether the taskforce will now swing back into action and start to go around and ensure that there are no profiteering activities happening, especially in the neighbourhood areas?

The Chairman: I think Mr Liang is referring to the Committee against GST profiteering. Minister?

Mr S Iswaran: Actually, Mr Lee Yi Shyan can comment on this, because he used to be the Chair. [Laughter.]

But let me say this. As the Member and also Mr Chairman has observed, the previous avatars this committee was really to address were something very generalised, like the Goods and Services Tax (GST) increase. There was a concern then because the GST has a broad-based effect, and then you do have some concerns about how the tax, in turn, is transmitted through into prices.

In the case of water, it is a very specific tax. Its incidence is, therefore, very targeted. In general, if you look at most of the common commodities and products that are being produced, water, as a proportion of costs, is quite small and should not, therefore, warrant the same kind of concerns.

Having said that, if there are any reports of profiteering or suspected profiteering, that is something we are quite happy to see whether there is appropriate action that can be taken.

The Chairman: All right. Mr Liang, would you wish to withdraw your amendment?

Mr Liang Eng Hwa: I want to thank Minister Lim, Minister Iswaran, Senior Minister of State Sim Ann, Minister of State Koh Poh Koon and Parliamentary Secretary Low Yen Ling for doing justice to the cuts that we have filed, with their very good and comprehensive answers. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The sum of $934,388,300 for Head V ordered to stand part of the Main Estimates.

The sum of $5,226,603,400 for Head V ordered to stand part of the Development Estimates.