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

Economy and Jobs

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

During the Budget Debate, Members in the House have reminded us that growing the economy is not an end in itself, but a means for us to build better lives and better opportunities for Singaporeans. I could not agree more. But we also know that ensuring that we always have that means that is continuously growing and yet inclusive is certainly no mean feat.

As the Minister for Finance has said in his Statement, our path ahead will not be easy, especially in light of the major shifts happening around us, such as a changing global economic landscape, the emergence of new technologies and our own demographic.

In a way, we saw it coming, which is why since the start of this decade, we embarked on the road to restructure and transform our economy. In the early phase of restructuring, the Government tightened foreign labour inflow and nudged wages higher for our local workforce and pushed for productivity improvements. It has inevitably caused pain to some businesses although there were also various assistance schemes introduced, such as the Productivity and Innovation Credit (PIC) scheme, and support for skills upgrading to help mitigate the impact and to improve productivity.

If the 2017 small and medium enterprises (SME) Development Survey is any indication, we may have passed the most painful phase of economic restructuring. In the survey finding which was released in November last year, the proportion of SMEs experiencing difficulties with manpower costs fell from its peak of 85% to pre-2012 level of below 72%. Twenty-twelve is the year when foreign labour tightening was introduced. Indeed, many businesses bit the bullet, made the difficult adjustments and changed their business model in response to the tightened labour market environment. The outcomes are encouraging. Wages have risen and we have also seen credible improvement in overall productivity.

Notwithstanding, there will be companies which are still struggling and adjusting, some of which are cyclical in nature. I am glad that this year's Budget continues to extend help to businesses facing near-term challenges with the continuation of assistances like the Wage Credit Scheme (WCS), the Corporate Income Tax (CIT) rebate and the deferment of the increase of foreign workers' levy (FWL) rates for two sectors.

Workers, too, went through the difficult transitions as companies restructured. The continual need to upgrade and convert to new skills has become part and parcel of working life. Last year, the Professional Conversion Programme (PCP) helped more than 3,700 mid-career individuals take up new jobs. We need to do more to help workers facing career transitions and this Budget also strengthened support for workers under the Adapt and Grow Initiative.

Mr Chairman, the next phase of the economic transformation efforts now zero in on fostering pervasive innovation, building deeper capabilities and forging strong partnerships riding on the already launched Industry Transformation Map (ITM) platforms.

Innovation is the way to go for businesses to stay competitive in the future. Singapore is starting from a position of strength as we already have a critical mass of high-tech sectors, a vibrant startup and financing ecosystem, world-renowned universities and research institutions and a strong global pool of research scientists and engineers.

To foster pervasive innovation, especially for the SMEs, the Budget enhanced various schemes supporting companies to innovate across the entire value chain. Among others, existing grants that support the adoption of pre-scoped, off-the-shelf technologies will be streamlined into a single Productivity Solution Grant (PSG) where the Government will provide funding for up to 70% of the qualifying costs. I look forward to hearing more details about the PSG from the Minister later and how this streamlining would improve support for businesses seeking new solutions.

Another new idea from the Budget is the Open Innovation Platform (OIP). To be piloted this year, it is an online crowdsourcing platform set up to help businesses find partners to co-create solutions. Many smaller companies may not have the resources to seek partnerships to co-develop solutions. This platform can facilitate easier collaborative work among SMEs on joint innovation initiatives.

To provide equity funding for cutting-edge tech startups that draw on intellectual property (IP) generated from publicly funded research, this year's Budget announced the setting up of the $100 million National Research Foundation (NRF)-Temasek IP Commercialisation Vehicle. I hope this can help plug the missing link with regard to translating research outcomes into viable commercial opportunities and thereby produce a new breed of innovative global companies in Singapore following the commercialisation of the IPs. I look forward to hearing more details from the Minister as well.

On building deeper capabilities, the Budget signalled the shift away from broad-based measures, such as PIC, to a more targeted and innovation-focused approach. I do agree that in this next phase where we deepen transformation, a more customised and slightly more flexible approach will yield better results.

With the impending merger of Standards, Productivity and Innovation Board (SPRING) Singapore and IE Singapore into Enterprise Singapore, it makes logical sense to streamline the Capability Development Grant (CDG) and Global Company Partnership (GCP) into the new workhorse now known as Enterprise Development Grant (EDG). Can the Minister share how the new integrated EDG can better support companies to deepen capabilities?

Digital capabilities will be the new competitive advantage for businesses. The adoption of digital technologies can transform business processes, improve productivity, and help SMEs export products and services more easily. With digital technology, even the smallest SME can have the opportunity to export its products and services globally, hence, expanding their growth frontiers.

There are good opportunities in the digital space in the region. For example, besides China, the Association of Southeast Asian Nations (ASEAN) can also be a strong potential growth market in e-commerce for companies to explore.

There are already various support schemes for SMEs to adopt digital technologies. The SME Go Digital Programme was launched in 2017 and the Tech Skills Accelerator (TeSA) launched in 2016 are both flagship programmes assisting businesses and individuals to develop digital capabilities.

Clearly, there is significant room for more SMEs to move forward and to use digital technologies to enhance competitiveness and to grow their businesses. Of course, developing digital capabilities does come with investment costs and risks, but not going digital may well be an unviable position soon. It is better to take some risks now, learn the right lessons. If it does not work out, do recognise that this is a continuous journey of upgrading.

With the aim to forge stronger partnerships, this year's Budget also spring cleaned the existing schemes, such as EDB's Partnerships for Capability Transformation (PACT) and SPRING Singapore's PACT, into a single PACT scheme. I would like to ask the Minister how has PACT performed thus far under each of the agencies and how will the integration into a single PACT benefit companies?

Finally, the much talked about ITMs are now the key execution platform to transform the sectors which are identified either as growth clusters or in need of significant productivity upgrades. While we hope that more SMEs can be involved in the ITMs, we should be realistic that in sectors where there is a very large base of SMEs, it is not possible to have everyone on board from Day 1. Here, the companies can also be proactive to come forward, with the trade associations and chambers (TACs) playing the key role of raising awareness and facilitating the deeper involvement of ITMs.

Nevertheless, I would like to seek an update from the Minister on the progress of some of the ITMs that were launched over a year ago, such as the lifestyle cluster ITMs which encompass food services, food manufacturing, retail and hotels. I would like to ask the Minister how is the traction so far.

My last point is about skills and jobs. As the business landscape changes, we need to ensure that skills of our workers remain relevant and our skills training can respond quickly to emerging skills and tech disruptions.

Can I ask how the Government is working with industry and employers to ensure training remains relevant? Also, how is the Government helping the professionals, managers, executives and technicians (PMETs) who have been displaced or who wish to move into growth sectors the Government has identified? Finally, how are we helping our people to acquire deeper knowledge of the regional markets even as we seek opportunities in the region?

Outlook in Terms of GDP Growth

Mr Yee Chia Hsing (Chua Chu Kang): Mr Chairman, the global economy and Singapore economy posted better than expected gross domestic product (GDP) growth rates in 2017, while in 2018, economic growth is expected to be moderate. I would like to ask the Ministry to go into more details on this year's outlook.

Sir, although our GDP expanded by 3.6% last year, the growth seems to be concentrated in some sectors while the rest of the economy lagged behind. As Prime Minister Lee mentioned during Chinese New Year, productivity and economic growth are still mainly concentrated in manufacturing and export-driven sectors. Because of this, the general sentiment on the ground is that many SMEs which are not related to these two sectors are less optimistic and feel as though they are still in a recession, even as we mention that our economy is expanding.

Mr Chairman, I would also like to ask the Ministry on how it can help make our economic growth more broad-based.

The Chairman: Mr Henry Kwek, you can take both cuts, please.

Riding on Rising Asia

Mr Kwek Hian Chuan Henry (Nee Soon): Thank you, Mr Chairman. My first cut is on riding on rising Asia. Despite the global uncertainties, Asia is cited as a region of high growth. What are the Government's plans to help Singapore companies take advantage of a rising Asia?

Can the Government elaborate on the specific measures that we are doing for key growth markets within Asia, as well as for the various growth sectors?

Can the Government also share about the broad-based measures that we are doing to encourage Singapore companies to internationalise, and for our people to take on international careers within growing Asia? Are there any pressing gaps that our industries and workforce face that must be addressed?

Lastly, can the Government share on the progress made to strengthen our Asia-specific market research firms mentioned in previous Budgets?

Tapping on ASEAN's Potential

Much has been said about ASEAN's potential – youthful demographics, large population, and sizeable headroom for growth. But those can only be achieved if ASEAN member states work together to unlock the potential. At the same time, given ASEAN's dynamism, we have also seen rapid economic improvements in many bright spots within ASEAN, so Singapore cannot take for granted our economic hub status within ASEAN.

As such, Singapore must always work hard to shape the economic architecture of ASEAN, so as to benefit ASEAN and Singapore. And this is especially so, given our responsibility as ASEAN Chair this year. Can the Government share on our efforts to unlock this potential to benefit Singapore and Singaporeans?

Besides positive economic conditions, Singapore companies and citizens must also be ready to seize opportunities within ASEAN. What more is the Government doing to ensure that we have prepared to capture the opportunities created?

Lastly, in my Budget speech, I talked about getting Singaporeans to think ASEAN. I provided five recommendations. I hope the various Government agencies can look into that.

ASEAN Plan

Mr Low Thia Khiang (Aljunied): Chairman, Sir, we have been a keen proponent of the ASEAN Economic Community (AEC). It was during the 13th ASEAN Summit in 2007 when Singapore was last the ASEAN Chair that the blueprint to establish AEC was adopted.

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If integrated as a single market and production base, the AEC will become the fourth largest economic bloc in the world, just behind the United States (US), China and the European Union (EU). For Singapore, AEC is not just an aspiration, but also a strategic necessity, to mitigate the geopolitical risks of the region being mired in economic under-development and political instability, and the region becoming divided and caught among the great economies of China, India and the US.

AEC was to be established by end of 2015, but ASEAN failed to achieve one-fifth of the 506 measures and had deferred them for 10 years to 2025.

Singapore is now ASEAN Chair again and we are in a good position to facilitate the economic integration. In January this year, Minister Lim Hng Kiang said Singapore will focus on the digital economy and trade facilitation. This seems to be rather low key, compared to the work that is needed to push forward the already-delayed AEC.

Does the Ministry of Trade and Industry (MTI) have a more concerted plan to develop the AEC while Singapore is ASEAN Chair? What can Singapore do to better integrate the most important sectors in the region, for example, the electronics sector, especially in the context of the other major shifts in the disruption caused by new technologies?

The Chairman: Ms Sun Xueling, you can take your two cuts together.

Riding the Asian Wave

Ms Sun Xueling (Pasir Ris-Punggol): Mr Chairman, growth in Asian emerging markets as a whole is projected to average 6% from 2015 to 2020. Even though the 6% growth rate may not be high by historical standards, Asia is expected to continue outperforming the rest of the world by a significant margin.

In India, Prime Minister Modi's administration is pressing ahead with reforms aimed at enhancing the business environment. China’s 13th Five-Year Plan demonstrates its leaders’ commitment to rebalance demand and revive productivity growth through a more competitive market-based allocation of resources. In ASEAN, there has been a ramping-up of public investments through various infrastructure projects. The region around us is gearing up to provide its citizens greater prosperity and greater opportunities for foreign direct investments.

Since decades ago, Singapore’s fortune has been closely tied to the region. Our local business community is active in the region and many family businesses have networks across Asia.

With Technology and rising consumerism, the population in the region is seeking new products and services. Their young population’s rising incomes and skills also mean that they are participating in the region’s supply chain in a new way.

Mr Chairman, with these changes happening in Asia, how does Singapore and our companies leverage new opportunities and what are the Government’s plans to help Singapore companies take advantage of a rising Asia?

Unlocking ASEAN's Potential

ASEAN is a major hub for manufacturing and trade, as well as one of the fastest growing consumer markets in the world. It is one of the largest economic zones, with growth being rapid and relatively stable for the past two decades. Although Asean is becoming more integrated, investors have shared about local preferences and cultural sensitivities. A one-size-fits-all corporate strategy can, therefore, not be applied across widely varying markets.

With Singapore helming ASEAN's chairmanship for 2018, we have a chance at positioning ASEAN for a more seamless economic region, as well as strengthening a focus on innovation and the digital economy.

What is MTI's reading of ASEAN's potential? And how are we working with ASEAN member states to unlock this potential to benefit Singapore and Singaporeans?

Potential of ASEAN's Trade

Miss Cheryl Chan Wei Ling (Fengshan): Mr Chairman, since 1993, the ASEAN countries have grown their total trade from US$400 billion to US$2.5 trillion. Looking at the figures, this economic growth is impressive and the poverty rate amongst our neighbouring countries has been declining.

When ASEAN Vision 2020 was established, one of the key objectives was to enhance economic growth and deepen intra-regional trade ties with the free movement of people, goods, services and investment capital in ASEAN. As it stands, the ASEAN intra-regional trade is still weak. While Singapore is one of the most open economies in ASEAN, our trade with other ASEAN states is just about a quarter of our total trade.

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

In a world that is becoming more protectionist and mercantilist, there is all the more reason for ASEAN to accelerate economic integration. Can the Minister share what are some of the challenges to this integration?

Based on conventional wisdom, it is likely that having an open, competitive and integrated ASEAN implies better chances of new industries to establish in our part of the world. If this outcome is within reach, how then can our workers tap upon this opportunity to expand their working scope and skills?

Comprehensive and Progressive Agreement for Trans-Pacific Partnership

Assoc Prof Randolph Tan (Nominated Member): Sir, trade is the lifeblood of the Singapore economy. Events of recent years showed that we cannot take for granted the expansion of free trade because the world would not see a reversal. MTI's continued vigilance to remove barriers as Singapore businesses have to access overseas markets is worth lauding. In particular, recent efforts on this Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a major achievement. I have three questions.

First, I strongly support the achievement of CPTPP. I think it is a significant development to add to the current positive momentum seen in Singapore's trade prospects. Set against the setback posed earlier by the decision of the US to withdraw from the Trans-Pacific Partnership (TPP), this is a remarkable turnaround that will further strengthen Singapore's reputation as a progressive partner in the movement to promote global free trade. Modified agreement is also significant because it demonstrated progress which should not have been possible without a deep engagement throughout the original TPP process. I would like to ask the Minister what the prospects are for promoting such an approach in other areas of multilateral trade negotiations.

Second, the deep engagement by our trade negotiators will now have to be translated into tangible footholds by our businesses looking for internationalisation opportunities. In particular, SMEs still faced significant challenges when competing beyond Singapore, especially if they were not set up with such potential strategies in mind in the first place. How different would the prospects of CPTPP be for SMEs? And has the engagement process that enabled the transition from the failed TPP agreement to the revised CPTPP throw up specific opportunities which we can prepare SMEs for?

Finally, my third question is about linking the CPTPP prospects early to the direction of industry transformation set out in the ITM. For companies looking to take advantage of opportunities to internationalise, it is important for them to develop capacity along the trajectory to match the broader direction of changes occurring under the ITMs. Is this potential for making such a linkage between free trade agreement (FTA) negotiations in general and the CPTPP, in particular, actively pursued as part of the ITM strategy?

The Chairman: Dr Tan Wu Meng, you have two cuts. You can take both cuts together.

Role of Free Trade Agreements

Dr Tan Wu Meng (Jurong): Mr Chairman, the global consensus on free trade is not quite what it used to be. In some Western economies, FTAs are being viewed negatively. We have seen the recent political mood in the US regarding TPP. Some politicians in the US have even proposed that existing long-standing FTAs like the North American Free Trade Agreement (NAFTA) should be renegotiated.

Given this shifting environment, can the Minister share the Government’s perspective on FTAs in this emerging new normal of global politics? What are Singapore's options, and what are Singapore’s trade priorities? For example, what balance of bilateral FTAs and regional FTAs should we be aspiring for? Likewise, what are the prospects for further World Trade Organization (WTO) deals in this new environment?

And even as we hope for the best of outcomes around the world, what fallback strategies are we building into our trade links to maximise Singapore's manoeuvring room in the event of an unfortunate trade war between any of the major economies?

Keeping Singapore Competitive

Mr Chairman, some of my Clementi residents have worked in regional markets in ASEAN, or they have counterparts from other ASEAN countries whom they meet through the course of work.

My young residents speak of the growing economic buzz in ASEAN, the energy and dynamism, especially in the major cities. Also, a certain hunger and will to succeed among young people in the youthful populations of our neighbouring countries.

This growth and buzz pose opportunities for Singaporeans to forge partnerships, find new business partners and new business opportunities. But some Singaporean friends are also worried about whether our businesses can keep up. They worry about business overheads and the cost structure in our domestic Singapore economy. For example, some have mentioned land costs and rental overheads. These are issues that I have spoken about during the Budget Debate and I mentioned a few possible alternative models for approaching land rental and land cost allocation.

More broadly, what is MTI's strategy to help Singapore and Singapore companies remain competitive to support economic growth sustainably in the years ahead to create opportunities for Singapore and Singaporeans from all walks of life?

Managing Industrial Land Costs

Mr Leon Perera (Non-Constituency Member): Mr Chairman, Sir, developing a vibrant manufacturing sector is important for our economy. In addition to multinational corporations (MNCs), we need to ensure the success of local startups and Singapore SMEs in manufacturing, as these may, with supportive policies, be more likely to keep Singapore as a centre of gravity.

Senior Minister of State Mr Koh Poh Koon recently shared data on rental costs in reply to my Parliamentary Question (PQ). The percentage of rental out of total costs may not be high now, but it may rise if technology replaces manpower in the future, as may happen with the advent of artificial intelligence (AI) and robotics. Industrial rentals have also seen volatility in the past. And Singapore does not have low land cost zones on the outskirts as other global cities may have.

Will MTI consider setting a target for industrial rental inflation to stay in line with the consumer price index (CPI) and adjust policies accordingly? Will MTI also thoroughly benchmark industrial rentals in other cities with big manufacturing startup sectors and manufacturing SME sectors and publish the findings?

The Chairman: Mr Henry Kwek, you can take both cuts together.

Differentiated Policy Support

Mr Kwek Hian Chuan Henry: The recently released Annual Economic Survey showed improved economic performance in 2017. However, there was variation among sectors in performance and outlook.

Can the Government provide a broad overview of how the various industries are doing in terms of performance and outlook? Which sectors have high growth potential, and which are the ones that require significant transformation and restructuring? It is important that we set the appropriate aspirations for various sectors. Also, how is the Government supporting the different industries to deal with their unique circumstances? In our ITMs, have we been able to bespoke our policies for various industries?

Moving forward, will we be able to have greater policy differentiation, for example, in terms of manpower policy, than what we have today? If so, can the Government provide examples?

Update on Industry Transformation Maps (ITMs)

The ITMs are the cornerstone of our restructuring efforts. Since 2015, we have rolled out most ITMs. Can the Government provide a comprehensive update on our restructuring efforts? Can the Government also share some of the early successes of restructuring? Which sector has achieved rapid restructuring and which sectors have been lagging? And what is the main reason for the differing restructuring speed? Specifically, I would like to ask the Government for an update on the Lifestyle ITM.

Having said that, I would caution everybody against measuring our restructuring success using solely output economic indicators, such as value-add productivity change. This is because it will take a few years, sometimes three to four years, for outcomes of new strategies to show up in output statistics. So, using solely output statistics now to gauge the success is not wise.

As such, can the Government also share more on specific initiatives, which are more input indicators rather than economic output indicators, that are designed to aid restructuring?

The Chairman: Mr Teo Ser Luck, you also have two cuts, can you take them together?

Mr Teo Ser Luck (Pasir Ris-Punggol): I have three cuts. So, I can take them together?

The Chairman: Oh, three cuts. Yes.

Enterprise Singapore

Mr Teo Ser Luck: Yes. Mr Chairman, forming ESG has been good news for the business sector, and many TACs and businesses have called for a single agency to focus on supporting local businesses. We have nearly 200,000 SMEs and they are at different stages of growth, ranging from startups to micro-enterprises, medium- to large-sized companies. It will not be easy and impossible to assist all of them.

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The first principle of business is to be self-reliant and build a business that is commercially viable that there is demand for your products or services. Companies should actually manage your expectations when it comes to grants and schemes and expectation of a single agency like ESG. Competitiveness is as important as self-sufficiency and both form the essence of what we call the first principles. We have to find a position of not too little and not too much, and that should form the approach; a middle way for economic planners and companies.

This middle way between extravagance and want implies a view of the balance sheet that looks for long-term profitability rather than short-term success. And it should be closely linked to the idea of self-sufficiency. ESG should then play a facilitating role to help kickstart ventures, support international growth as a focus, and develop capabilities for the companies and strengthen them to compete. It should be less about grants than the need to change for the enterprise to scale and grow. These are what will really help the companies.

Could the Minister share what ESG would do for enterprises at different growth stages and also ideas on internationalising Singapore's SMEs?

Enterprise Development Grant

The Government has been assisting companies, especially SMEs, at their different stages of development through grants and schemes. And with ESG, many of these grants and schemes will be integrated into one single grant. However, this has also caused uncertainty as to whether the different types of grants that cover different gaps will actually be covered by a single grant. For example, there are different grants that are available today, such as the automation grant under CDG. The aim is to automate processes but there are issues as well.

The data has shown that equipment manufacturers made up the majority of the payments. So, could the Minister share how SMEs have actually benefited from this grant and how SMEs from other areas have also benefited from this grant, and whether productivity in these respective companies has actually increased?

There is also a grey area where equipment manufacturers could potentially push for more sales and use the grant to upsell their equipment. So, these are the processes that should be tightened. Hopefully, with the setting up of EDG, and integrating it with the different grants of CDG and GCP is a step in the right direction to be more stringent in the process of tightening this.

Submission of claims has also been an issue for some. Submission of claim for a grant can only be made after a project is completed. We would like to request that it will be helpful to some of the SMEs that once the grant is approved, that there will be an initial advance payment to the SMEs to help them. However, if the project cannot be seen through to completion by the SMEs, a penalty could be considered to be in place, if they fail to meet the required milestones.

So, integrating all the grants into a single grant for ease of access and application is the step in the right direction. We believe that this will develop the capabilities of the companies better and more effectively. Along with the grant portal, and ESG as the administrator, we believe that this will help streamline many of the processes. Could the Minister elaborate how such integration could benefit companies and review examples of how it could help?

Partnerships for Capability Transformation (PACT)

Many large companies or MNCs, both foreign and local, have set up their base in Singapore. And this not only provides jobs but opportunities to grow our local SMEs through partnership with the large companies. And since the setup of PACT, there have been examples of such partnerships in the areas of innovation, capability, upgrading and knowledge transfer. Most importantly, the scheme provides long-term business opportunities for the SMEs with the larger companies.

I believe that the programme can still expand and be enhanced to support more partnerships across different sectors. But these sectors have to be selective. Not all sectors you could actually enhance and some partnerships cannot be forced. Some of these large companies can also help the SMEs, not just by providing volume of business but consultancy, for example, in digital marketing or branding. And such public relations branding and digital marketing are somehow knowledge that is lacking in many of our SMEs. It is not in the area of just volumes of business, but it is in the area of services, too. It is good to know that the different partnership schemes will now be streamlined and integrated into one.

Could the Minister share with us how PACT has been performing so far and how would the integration benefit the companies in future?

Business Succession Planning

Mr Leon Perera: Mr Chairman, Sir, one consequence of an ageing society is that many family businesses face the challenge of business succession planning. And it is a challenge, since some entrepreneurs do not have children or professional employees who would want to take over, or they may have successors in mind but those successors are not yet able enough to take over.

In reply to a previous PQ, MTI confirmed that a number of schemes exist that can be used to support consulting to facilitate the business succession planning process. I would like to suggest that MTI's economic agencies make it a condition, or an advantage, in applying for the grant, for the award of all grants for strategy development initiatives, like the CDG, Market Readiness Assistance (MRA) and Innovation and Capability Voucher (ICV), for example, to the effect that the SME should involve "next-tier" managers within their company, not only the senior management team, in working on the consulting project, so that those next tier leaders can get exposure and training.

This will nudge SMEs to pay more attention to grooming the next tier in their companies. Finally, I declare that I am the Chief Executive Officer (CEO) of a research consultancy that does work in this and other fields.

Strengthening Business Capabilities

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

(In Mandarin): [Please refer to Vernacular Speech.] This year’s Budget affirms the important role of TACs in driving industry transformation and upgrading. Besides initiating the establishment of the Trade Association Hub, the Singapore Chinese Chamber of Commerce and Industry (SCCCI) also set up the Trade Association Committee (TACOM) led by the business community.

The business community welcomes the many assistance schemes rolled out in this year’s Budget to help in uplifting the capability of enterprises. Last year, our productivity growth was 4.5%, the highest figure achieved since 2010. However, businesses are concerned, compared to large enterprises, how much have SMEs contributed to productivity growth. Just how effective have local SMEs been in upgrading themselves?

In this year's Budget, the Government has introduced a new assistance scheme, the PSG. This is very different from the PIC and ICV schemes that businesses were familiar with. Basically, after approval, PSG will support 70% of the company’s productivity investment and expenses, while the company will only need to bear 30% of the total costs. What is good about PSG is that when companies have identified a suitable productivity upgrading project, they could apply immediately. This is different from PIC’s tax deduction option at year-end. Moreover, from 1 April this year, businesses could apply directly for PSG through the Business Grants Portal set up last year. This is extremely convenient.

The Budget also announced that IE Singapore’s GCP grant and SPRING Singapore’s CDG would be combined under an all-new EDG. This is a good move! Moving forward, one integrated scheme could help enterprises to improve internal capabilities as well as to internationalise. At the same time, enterprises look forward with great anticipation to the newly set up ESG, hoping that it could achieve an outcome of 1+1 equals more than two. Besides helping enterprises to improve their competitiveness and internationalise, services provided by ESG should include coordinating manpower resources and improving technology adoption.

In addition, to further support firms to internationalise, with effect from year of assessment (YA) 2019, the Double Tax Deduction for Internationalisation (DTDI) will be enhanced, with the amount of expenses that can qualify for the DTDI without prior approval being raised from $100,000 to $150,000. This would make it easier and faster for firms to apply. Businesses also welcome the launch of the ASEAN Leadership Programme. ASEAN countries have always been the key overseas markets for local businesses. This programme would be very helpful in enabling local entrepreneurs and senior management to better understand market trends.

The Budget has also included the PACT scheme, the aim being to encourage partnership or collaboration among companies. One way is to let big companies help smaller enterprises improve their capability. Hopefully, local enterprises could tap on this scheme to nurture a mutually cooperative business culture and develop regional ventures together.

However, some businesses have expressed concern about certain new measures. For instance, with effect from next year, the Government will implement a new carbon tax to encourage reducing carbon emissions. Although businesses realise that Singapore aims to become an even more liveable and sustainable city, and that we need to protect the environment, they are concerned about the impact on their costs. Moreover, as their industry counterparts abroad do not need to be taxed in this way, local enterprises could become less competitive. We are, nevertheless, glad to know that the Government has also committed that, in the first five years of introducing the carbon tax, revenue collected would go towards giving more grants and support to companies to enhance energy efficiency and reduce emissions.

I have also received feedback from some startup companies. They hope that even if profits were to be generated in the first five years of setting up the company, corporate income tax should be waived, enabling them to plough back the revenue into operations and carry out the initial phase of development without a hitch.

Over the past few years, the role of industry associations in industry transformation has received sound affirmation from everyone. The Government has already announced the ITMs. Moving forward, trade associations will continue to strive hard towards the implementation! As an example, under the enhanced Local Enterprise and Association Development (LEAD) programme, the Singapore Food Manufacturers' Association (SFMA) has already set in motion a series of industry development projects for the benefit of its members. May I ask the Minister how the enhanced LEAD programme has been faring? Will other industry associations also benefit from LEAD?

I noticed that this year’s Budget did not give specific mention to the SME Centres. I wonder what role the SME Centres, previously set up by SPRING Singapore, are expected to perform as we move ahead.

Finally, I would like to stress that although many micro-enterprises and SMEs operate mainly in the domestic market, they do possess a very strong resolve to upgrade themselves. Even if they do not expand overseas, they have a strong social function in creating employment opportunities, and I hope the Government would not ignore them.

The Government can do even more to create a more favourable business environment for micro-enterprises and SMEs. Notwithstanding their small size, this could enable them to become small but exquisite, small but nimble, small but beautiful, and small yet highly competitive. Eventually, SMEs must continue to learn ceaselessly and develop capabilities. Only then can they benefit from the Government assistance schemes. I sincerely believe that if businesses pursue excellence and strive for perfection, marshal our resources and talent, they can then find the niche for survival and development within this ever-changing marketplace!

PACT and Infrastructure Office

Mr Low Thia Khiang: Chairman, Sir, the PACT scheme has been operating since 2010. It has been enhanced and extended a number of times to cover more sectors and co-innovation activities. The scheme seeks to support collaboration between large corporations and local SMEs. This is a worthy aim. The question is how successful has the PACT scheme been? What should be defined as success? How do we measure the success?

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In my view, as this scheme is oriented towards a win-win partnership between large corporations and SMEs, with the aim of transforming the capabilities of SMEs, the crux of the success lies in whether the SMEs gained in a transformative manner. In answer to past PQs, some figures have been given by the Minister. By mid-2016, over 700 SMEs and 130 projects had benefited from PACT since 2010. But how many of these SMEs saw their capability transformed? What metrics does the Ministry use to measure the transformation?

In a 2014 article published on SPRING Singapore's website, the article looked at how Keppel Shipyard joined PACT to improve the capabilities of its SME vendors and contractors. Keppel Shipyard gave the example of using PACT to develop a semi-automated system to reduce the operating costs of blasting, cutting wastage by 20% and manpower by 15%. This fell short of the target for cutting manpower by 30%, and Keppel Shipyard said continuous funding from PACT was needed to achieve success. But this so-called success was defined in terms of productivity gains from the view of a large corporation and nothing was said about the capabilities of the SMEs and whether these were transformed.

Capability transformation of SMEs should be directed towards their empowerment to seize regional and international opportunities, rather than to be limited to serve the needs of large corporations based in Singapore. To this end, it would be good to know the profile of the large corporations benefiting from PACT to date, whether these are largely Government-Linked Companies (GLCs) or MNCs, and whether more could be done to link up local SMEs to international supply chains through PACT.

Mr Chairman, Sir, next, the setting up of the Infrastructure Office to seize the opportunities being opened up by the One Belt One Road Initiative is timely. I would like to know what are the plan and scope of the Infrastructure Office and whether the office will bring together local and international companies across the supply chain to seize the opportunities being opened up by the One Belt One Road Initiative.

Infrastructure Office

Er Dr Lee Bee Wah (Nee Soon): Sir, before I proceed, I would like to declare that I am a professional engineer. During the Budget, the Minister announced that an Infrastructure Office will be set up. This is to help Singapore firms to tap on infrastructure opportunities in Asia, including China's Belt and Road Initiative (BRI). I would like to ask the Minister: who will this Infrastructure Office serve? Government-linked companies? Temasek-linked companies like Surbana-Jurong? Or private sector? How will local consultants and contractors benefit?

I strongly believe that the Government should do more to develop local companies in the construction sector so that we can benefit from the booming infrastructure projects in the region. One of the ways to do this is to help our local companies to build track records. If there are no track records, how to go overseas? Give them a helping hand, groom local consultants and contractors and give them opportunities to participate in large Government-led projects in Singapore.

In this aspect, it is very disappointing. Contractors tell me that some of the prequalifications called for Government projects are so onerous that none of the local contractors or consultants can qualify. In cases like that, has the Government thought of how to involve the local companies instead of just having them as smaller players down the value chain? This puts local contractors at a disadvantage. They may possess the skills, capabilities and willingness to invest, but due to their lack of a track record, they have difficulties in venturing abroad. Some had done better and become subcontractors of MNCs and doing work overseas.

If the Government is serious about helping the local companies, I am sure you can find out more information from members of the Singapore Contractors Association. I had an earful when I met up with them recently.

I am pleased to note that the Government plans to strengthen its funding support through the PACT scheme. This is to encourage firms to forge regional collaborations and internationalisation. I hope that through this scheme and the Infrastructure Office, there can be greater encouragement and fostering of deeper partnerships between Government agencies, major companies in Singapore's construction industry, and contractors from the smaller companies, so that everyone gets a share of the pie. Ultimately, this will result in an overall increase in quality and reputation in our construction sector.

Furthermore, to encourage more construction companies to internationalise, there are a number of possible solutions to make this option more accessible and appealing. One way is to help our companies to understand the tax regime of foreign countries that they are interested in. Taxation in foreign countries can be quite complicated. As we know, most Singaporeans are law-abiding. They are very afraid of running into problems in foreign countries. And many companies also do not have deep pockets and cannot afford to go through the steep learning curve.

May I also suggest to our Ministries to actively negotiate with their counterparts to streamline and make the application of work permits less onerous, so more Singaporean PMETs can work overseas?

Opportunities Abroad for Local Companies

Mr Sitoh Yih Pin (Potong Pasir): Sir, I declare that I am a practising accountant and I have clients that include SMEs. Mr Chairman, Singapore has a comparatively small domestic market that is extremely competitive. As such, for our local companies and businesses, especially our SMEs, to be able to achieve sustainable growth, they need to take advantage of external opportunities.

There has been a great push by the Government on internationalisation and the opportunities abroad that Singapore companies can take advantage of. However, many SMEs in Singapore face financial and manpower constraints to do so. This is understandable. If an SME is to venture abroad, there is a lot of groundwork or "homework" that needs to be done first. For example, before breaking into a new market, they will need to undertake market research, navigate the business and regulatory environment and make the necessary investments in order to put themselves in the best possible position to succeed. These are the challenges our SMEs face even when an opportunity to venture abroad arises.

In the premises, I invite the Minister to share with us on the following: (a) the specific efforts and measures our Government and its economic agencies have taken to help Singapore companies tap on opportunities to break into new markets overseas; (b) an update on the progress of these efforts and measures; and (c) how Singapore companies have benefited from these.

The Chairman: Mr Sakitiandi, you can take both cuts together.

Help for SMES to Internationalise

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mr Chairman, going overseas will mean facing many challenges for the SMEs. Because of their size, they are more sensitive to the uncertainties and the risks of going international. Many of these companies were initially set up without plans to go abroad. So, from paid capital, manpower, marketing and branding and perhaps even the operations and logistics were principally set with focus on the local market. They are thus not prepared for the task overseas. It is just one thing when they get the grants and the guidance from the Government agencies to go international. It is another challenge to get them mentally prepared and build up their confidence to branch out overseas.

To venture into a different market where the language, cultural and religious preferences are different, not to mention taxes are different, not to mention the work ethos, the social and political infrastructure and legal systems, invariably, it takes a much, much longer time for something to develop, especially when you have to put applications through to the Government Ministries.

Yet, internationalisation is necessary if an SME wants to grow. But apart from all the support from the Government, there needs to be a mindset shift among our SME entrepreneurs. Can I ask if the Minister can give some outline of the assistance in the pipeline to help our SMEs in this area? Maybe one suggestion is to set up a dedicated sectoral-based mentorship platform, either online-based or otherwise, for successful SME owners who have ventured abroad to share processes and motivate other SMEs beyond the existing PIC efforts. The more efforts or channels we have, the better.

Help for Domestically-focused SMEs

Chairman, we have often heard of various Government schemes to help our SMEs. And these range from various grants to other assistance schemes. Yet, not all SMEs are ready to internationalise. Some of their key concerns include the size of their business capital and their stomach to take risks when going abroad. Their logistics and manpower may also not be up to speed to go international. Others are still grappling with issues, such as productivity and technological disruption.

With the merger of SPRING Singapore and IE Singapore, can the Minister share how these domestically oriented companies will be helped? Will such companies still receive support for essential upgrading efforts? For instance, maybe more help can be targeted for heartland SMEs and help for merchant associations to disseminate the wide range of complex programmes that are already available to help them overcome future challenges or maybe something akin to the Pioneer Generation Ambassador (PGA) programme on the ground but for businesses.

The Chairman: Mr Lee Yi Shyan, not present. Ms Chia Yong Yong.

Research and Innovation

Ms Chia Yong Yong (Nominated Member): Sir, we thank the Government for the measures in pushing research and development (R&D) in Singapore. We all recognise the importance. And as in any investment, there should be proper returns. I have previously spoken on the need for us to track our R&D outcomes, monitor the impact, as well as to think of better ways in which we can improve. So, this cut, Sir, will focus on a few issues.

Firstly, the need to better track R&D outcomes. Governments around the world have found ways to do so. For example, the US maintains the Interagency Edison (iEdison), which is a unified electronic data system used by more than 30 US federal funding agencies. iEdison receives, stores, tracks, sorts, monitors and generates reports of inventions and patents that have resulted from awards, extramural grant or contract funding.

Germany applies an internal rule that innovation programmes with a total budget exceeding €50 million have to be evaluated shortly after the end of a programme or, at latest, every five years, and that will be ex-post evaluation. For newly designed programmes, or in the case of a prolongation of an existing programme, an ex-ante evaluation will assess the rationale of public intervention, formulate a range of objectives and suitable instruments, and assess the impact of Government-owned intervention. Evaluations are carried out solely by external organisations that are selected through a call for tenders. And elsewhere in other places like the United Kingdom (UK), Hong Kong and so on, third parties have been commissioned to undertake evaluation of R&D investments.

In addition, we need to have more upstream measures to better R&D decisions and downstream measures to facilitate tech transfer and IP commercialisation. Some of the useful practices in other countries include the use of patent analytics and landscaping which are aimed at informing policy discussions, strategic research planning and technology transfer.

For example, if you take a look at what Taiwan has done, they have the Industrial Technology Research Institute (ITRI) and it actively developed strategic mapping of IP and patent analytics. It institutionalised IP mapping along its R&D process where researchers are required to do IP mapping or landscape mapping before they embark on an R&D project. The benefits of that are obvious. We need to know what is already there and do not reinvent the wheel. Also, the institute conforms new inventions to the industry's needs through IP mapping, along with patent review procedures to strengthen quality and practicability.

ITRI has won awards at R&D 100 Award each year since 2005 and they have built a sizeable portfolio of more than 20,000 patents, the quality of which could be evidenced in their successful patent lawsuits against Samsung in 2009 and out-licensing deals to major companies like Mitsui. I believe that, in Singapore, the Intellectual Property Office of Singapore (IPOS) is also building up its capability for patent landscaping and investigations.

In China, researchers are able to work for companies that buy their research for up to three years while maintaining their positions at the institute where they did the research. This is to incentivise researchers to conduct R&D with a view to commercial application instead of merely academic application. Hopefully, this will also, if we adopt it here, allow us to have a more market-driven and more market-sensitive research.

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The Korean government has also been working directly with 30 universities and public research institutes to assess commercial applications of their patents and there are more than 3,000 in all. This has resulted in approximately 50 inventions that are transferred to relevant industries, generating a total of US$3.8 million in royalties.

There is much that Singapore can do in learning from different countries. There are many proactive efforts going on, so I would like to ask for clarification from the Government in a few areas.

How does the Government categorise the different areas of R&D and what are these categories? In respect of each category, what are the indicators used to track our returns on R&D investments? What are the commercialisation rates of our technology transfer offices? What is the total spending on R&D in the last decade? What are the productivity improvement rates in relevant industries benefiting from such R&D over the last decade?

Excluding researchers, what are the employment numbers that have been generated in Singapore, for Singapore industries, as a result of R&D outcomes over the last decade for what we have spent? How has Singaporean researchers progressed and benefited from collaborations with external researchers, again, over the last decade? What is the social economic impact that has been achieved by R&D investments and, specifically, in which industries, sectors and for which groups of persons? What are the practices in place to ensure better economic outcomes from our R&D investments?

From my questions, I am sure it is clear that I am driving at not just economic but also socioeconomic impact. I hope that when the Government sets out key performance indicators (KPIs) as well as measurables, we would take those into consideration. In addition, there should be also greater duties on the part of institutions receiving grants to cooperate with the Government by furnishing information and by giving data, so that we are able to build the necessary landscaping.

Translation of R&D Efforts

Ms Foo Mee Har (West Coast): The development of Singapore's R&D and innovation capabilities has been a key economic strategy for Singapore. A series of plans had been implemented over the last three decades to position Singapore as an innovation-driven, knowledge-based economy. Investments in R&D have been significant and sustained, increasing steadily from S$2 billion under the 1991 five-year National Technology Plan to S$19 billion under the Research, Innovation and Enterprise (RIE) 2020 Plan. Singapore continues to maintain public sector R&D spending at 1% of GDP annually.

With Singapore's investments in R&D rooted in the need to upgrade and strengthen the competitiveness and growth of the economy, it is critical that such investments translate into tangible economic outcomes and impact.

Although public-sector research at our universities and the Agency for Science, Technology and Research (A*STAR) institutes has grown in intensity and excellence, it is less clear how these national research capabilities have translated into business innovation that will yield economic competitiveness. There have been various measures, including this Budget, aimed at translating our public sector research efforts into commercially viable applications. I would like to ask the Minister to provide an update on the impact of such measures to catalyse growth and innovation, and the strategy going forward.

MNCs seem to dominate many R&D-intensive industry clusters, such as electronics, pharmaceuticals and biomedical sciences. It is critical that we institute a framework for the transfer of capabilities and expertise from MNCs to the local ecosystem, while creating good jobs in the local economy. Furthermore, MNCs, large local companies (LLCs), SMEs as well as startups have different needs and capacities for engaging in R&D and research output. We, therefore, must foster a flexible partnership ecosystem that caters to companies’ diverse circumstances such that all types of enterprises in Singapore may benefit from R&D.

With innovation at the centre of Singapore’s next phase of economic development, the urgency of investments in R&D to deliver value and support industry transformation efforts is more critical than ever. There should be clear KPIs set for research projects to measure how they contribute to value creation in terms of economic and societal outcomes for Singaporeans. I would like to ask the Minister what mechanisms have been put in place to measure value creation and how we have fared so far.

Open Electricity Market

Mr Charles Chong (Punggol East): Mr Chairman, it was announced in October last year that the Government will be launching the Open Electricity Market (OEM) this April. This is a positive move as it will allow households and businesses the ability to buy electricity from a retailer which has price plans which best meet their demand.

While OEM will initially operate in Jurong during the soft launch phase, it was also announced that this would be extended to the rest of Singapore in the second half of 2018. While I support the opening up of the electricity market, I am concerned that consumers may be faced with numerous price plans and permutations, and this may get very confusing for them. We need to put in safeguards to ensure that Singaporeans are no worse-off with the OEM than they were when there was no choice.

I would like to ask the Minister what steps the Government is intending to take to educate Singaporeans on the choices of how best they can choose a price plan for their electricity needs. The OEM is something which will be very new to the vast majority of Singaporeans and we need to be able to give Singaporeans the confidence that this is a move that will benefit them.

More generally, would the Minister be able to provide any updates on the soft launch of the OEM in Jurong, and also let us know what consumers can expect when the OEM eventually rolls out?

Commercial Rental in the Heartlands

Mr Chen Show Mao (Aljunied): Sir, we learn from the Ministry that rental costs generally make up a small share of total business costs for SMEs in Singapore, accounting for 8% or less in most services sectors. In some sectors, it is higher, substantially higher. Retail rentals make up 30% of total business costs for SMEs in the retail sector in Singapore. Presumably, in the food and beverage (F&B) services sector, rentals also account for a substantial portion of business costs for SMEs.

Commercial rentals have decreased over the last few years. As the Ministry said, on the back of a decline in rentals, only 13% of some 2,500 SME respondents in a survey cited high rental costs as one of the top business concerns in 2017. Looked at conversely, for these particular SMEs, high rental costs remain a challenge even in an environment of falling rentals. It would not be far-fetched to think that in this minority of SMEs that remain most concerned about high rentals, many are in the retail and F&B services sectors.

Sir, retail and food are among the most important services we find in our heartlands. These businesses have a special importance in shaping our living environment and contributing to our quality of life. Innovation in their service offerings and business processes bring benefits that are felt immediately by the community. Can we encourage that? Could the Ministry consider targeted assistance, for example, rental rebates directed at qualifying startups and SMEs in retail and food services, so as to bring added diversity and vibrancy to our heartlands?

Support for SMEs

Ms Foo Mee Har: Chairman, even as I often speak up to champion more support for SMEs, I would like to acknowledge the significant efforts on the part of the Government and call on SMEs to seize the support provided to transform their businesses.

A slew of programmes has been launched over successive Budgets in the last few years to help SMEs. Some are very generous indeed, such as PIC and WCS. This year, we continue to see more Budget measures targeted at SMEs. A long list – Corporate Income Tax Rebate (CITR), EDG, DTDI, OIP, PSG, SME Digital Tech Hub, tax reduction for IP registration and the list goes on.

So, I am making the point that the Government is really making an effort. The Government is also making the effort to make structural change in its lead agencies, to merge SPRING Singapore and IE Singapore to form a dedicated agency for enterprise development – ESG. This is with the aim of providing better support to industries and enterprises in their new phase of growth to build capabilities, innovate and go international.

The Government efforts have born fruits. I am heartened to see many traditional businesses transform as they tap on Government schemes and embrace new technology, automate, innovate and internationalise.

Let me share an example of one food company which did it. Despite being a 40-year-old business, the transformation journey started about five years ago when the attractive PIC provided great incentives for them to upgrade their kitchen equipment. The company received support from SPRING Singapore to automate their kitchen processes, while JTC provided the much-needed central kitchen space to consolidate eight sub-scale kitchens operating across Singapore. With a more efficient operation, the company has reinvented itself and seen unprecedented growth. With automation, they are now better able to keep long service senior staff as manual work is kept to a minimal. The modernisation of their business has also enabled them to attract an amazing team of younger leaders passionate about inventing new food products, opening new retail outlets and striking new partnerships to capture more market share.

I would like to call on more SMEs to join the journey of this food company. The Government schemes can always be better, but there are many programmes already out there that can make a difference to your business.

Helping SMEs

Mr Ang Hin Kee (Ang Mo Kio): Mr Chairman, amid the major shifts spelt out during the Budget Statement, the Minister for Finance announced a slew of initiatives to support our SMEs overcome near-term challenges and to ride on future opportunities. Grant applications are also streamlined so that SMEs can better tap on Government assistance.

Some employees, especially those in the SMEs, are worried that they will be replaced with automation or when the company goes through transformation, and they may no longer be needed at the workplace. From our experience in the Labour Movement, there are some encouraging stories and some learnings.

For example, SMEs in the retail industry were encouraged to adopt technology and make use of Government funding. Through the facilitation help of our team in U SME in the Labour Movement, some of the retailers in the SME sectors have adopted radio-frequency identification (RFID) in their retail outlets. Previously, staff need to manually do stocktaking but, with RFID, they could just use the scanner to find out the stock numbers easily. So, Mr Chairman, it is with "right" technology rather than "high" technology that helped ease our SMEs and their workers into adopting transformation at the workplace.

Through such interactions and others that we had, it is clear that some of the SMEs and workers are still tentative in adopting more automation. The Labour Movement is thus concerned with the readiness of our workers in the SME side to adopt and adapt to the new technology that is forthcoming.

To this end, we are committed to partner the Ministry to be one of the ground enablers to extend assistance to SMEs on available schemes and to strengthen the readiness of our workforce, especially those on the SME side. Our familiarity with the workers has also proven to be invaluable when it comes to helping them adapt to the transformation that is occurring.

Support is already readily available to help businesses which wish to innovate and adopt technology. For example, SMEs can address their manpower and hiring needs through various programmes, such as the Earn and Learn programme, Professional Conversion Programmes and the new Career Trial programme.

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One key challenge that remains for SMEs is how to make sense of the coming ITMs in the various sectors that have been announced. How do they navigate through all the new initiatives and identify what is relevant to plug their current gaps? How do they, as bosses, help their workers to be digitally ready, especially among the older workers?

I would like to seek the Ministry's assessment of the readiness of our SMEs to take part in the various ITMs. Have we been effective in ensuring that workers in SMEs are geared up to uplift their employability and readiness to adopt technology? Finally, what strategies will be in place to ensure that pervasive transformations will take place among our SMEs and their workers?

Local Enterprise and Association Development (LEAD)

Mr Teo Ser Luck: The LEAD programme has provided resources for many TACs to upgrade their secretariat services and general services, as well as implementing several different schemes for the Government and the Ministry.

TACs are an integral part of transforming the different sectors. To me, they are actually the catalysts for things, like the ITMs, to effect the change in the sector itself. Although the membership base of many of these TACs is not representative of the entire sector, most of the major companies, I believe, are members of these sectoral or general trade associations. But we need to make sure that whatever schemes that the trade associations implement and the LEAD grants that are given to trade associations are effectively used and allocated. We have to make sure that the KPIs set for them are at the level where the impact is felt at the sector level and also at the enterprise level. However, they will need greater support as well from the Ministry, especially when we have the ITMs coming on board for so many different sectors.

With the ESG coming into place, with the integration of SPRING Singapore and IE Singapore, could I ask the Minister to share how successful LEAD has been and, under ESG as the administrator, how they can continue to work effectively for the trade associations as well as the chambers?

Taking Advantage of Tech Disruption

Mr Sitoh Yih Pin: Mr Speaker, technological disruptions in our economy are one of the hottest topics in the forefront of everyone's mind.

In the manufacturing sector, the advent of new technology is challenging traditional manufacturing processes. Manufacturing companies, especially the SMEs, sometimes struggle to stay competitive and relevant in the face of technological advances in their processes. However, instead of fearing change, we should encourage our SMEs to take advantage of the opportunity to grow by embarking on innovation and the adoption of technology.

The question, however, is how can we help them to do so? We are all aware that the Government has many schemes in place to help SMEs in this area. These include broad-based technology adoption to the granting of financial support. However, in the face of a wide array of options in Government support, on top of the overwhelming breadth of technology options available, many companies just simply do not know where to start.

Many SMEs also do not have a good sense of where their internal processes stand in terms of readiness and suitability to adopt smart technologies and processes to begin this transformation process. As a result, some can get disillusioned and disappointed. They need help.

In the premises, I invite the Minister to share with us (a) on any plans to assist companies to navigate the large set of options in support schemes and technology offerings; and (b) on any plans to help companies better understand what they lack in terms of technological capacity and the steps they can take to remedy this.

Competitive Manufacturing Sector

Miss Cheryl Chan Wei Ling: Mr Chairman, according to the January 2018 figures released by EDB, Singapore's overall manufacturing output in 2017 rose by 10.1% and posted its best performance since 2010. This was largely driven by the chemicals, electronics and precision engineering cluster sectors. While having a rosy manufacturing performance is something we can cheer about, the concern will always be how long this cycle will last.

I note that the electronics sector is likely to continue performing, given the strong external demand for semi-conductors and computer peripherals, but there are other sectors that we would have to review, like the transport, engineering and biomedical clusters, that continue to be on the decline for several quarters.

In the early 2000s, the Government made a big push for biomedical and life sciences in Singapore. Soon after, we expanded and attracted companies to begin their manufacturing activities here. As with every industry and business segment, the landscape evolves with time. Look at the biomedical cluster today. The current decline in the cluster is not because the biomedical sector is becoming a sunset industry. Rather, the drag was from pharmaceutical manufacturing, which is volatile, while biomedical devices manufacturing is thriving and remains attractive.

The question is how does MTI review the diversity of business segments within each cluster and ensure an optimal balance in business portfolio within the cluster to support local employment over time? This is fundamental to our long-term strategy and, possibly, the lever that is most impactful to our ITMs. Does MTI continue to review these businesses after they are established or have insights as to how the businesses are managing to meet future new challenges, say, within each five-year period?

Why is such a review necessary? The impact on business continuity these days is no longer confined to business readiness but their ability to respond and foresee potential threats.

Given shorter business cycles, the rise of technology disruptions and potential political sanctions, the possibility of businesses being displaced is higher. As a result, it will be difficult to have an executable ITM framework if the fundamentals are not firmly plugged in. I know the ITM needs to be a living document, one that allows elements within the industry to be added, changed and adapted to new landscapes. On the other hand, it will be difficult to scale up and have effective transformation throughout each industry cluster should there be a need for the base framework to be adjusted constantly.

The Committee on the Future Economy (CFE) recommended that Singapore continue to build a globally competitive manufacturing sector and retain manufacturing at around 20% of GDP over the medium term. In today’s context, most industry cycles are cyclical in nature, including the emerging technologies, which themselves are volatile. Can the Minister share on how the Government plans to support this recommendation?

On the same note that I have made earlier, the need to understand the industries better also has a bearing on how well-prepared our workers are for future industry evolvement. Unless we have more clarity on the longer strategic plan about the type of industry sectors in Singapore that we plan to pursue, we may end up in frequent pursuit of roles playing catching up.

While we can entice companies to set up shop in Singapore, our workforce needs to be ready with the necessary capabilities in good time. Further, how can our workers effectively transform and switch from one industry to another over a short period? Given the changes to multiple industries, how is the Government ensuring that workers can continue to possess the right skills in order to keep doing their jobs or take up new jobs that will be created?

I hope MTI will consider the points raised and share the strategic plans for Singapore’s industries.

The Chairman: Mr Lee Yi Shyan, not present. Mr Charles Chong.

Startup Landscape

Mr Charles Chong: Mr Chairman, we have been building up our startup landscape in Singapore for some time now, and our drive to attract the best startup talent to Singapore is slowly paying off.

At last year's Committee of Supply (COS), MTI announced initiatives to enhance the startup scene, including the unification of Government support schemes for startups under the Startup SG umbrella, as well as the streamlining of the EntrePass Scheme to allow us to attract more talent. In August, it was announced that SPRING Singapore and Workforce Singapore (WSG) would set aside $2.8 million to groom the next generation of startups in supply chain and logistics and develop related talent and capabilities in SMEs. Then, in November, the Monetary Authority of Singapore (MAS) announced the establishment of a financial technology (fintech) innovative hub in the heart of the Central Business District (CBD) known as 80 Robinson Road (80RR)Fintechhubsg. This is intended to cater for the increasing number of startups in the fintech scene, and MAS reported that we now have more than 400 fintech startups in Singapore.

So, there has been observable progress in what we are doing for startups. Tech startups operate in a wide range of industries and generally look at how technology can help us work smarter and more quickly. The pace in startups is normally very quick and it is well-known that the majority of startups will fail. Yet, many still enter the startup world with grand plans on how they can change people's lives for the better.

What is probably a sad truth of this ecosystem is that there are likely to be failed startups which actually have very good ideas. And if they had done things slightly differently, they really could have made a difference to the people's lives with their products.

It is undoubtedly a tall order, but is there any way that we can help to identify and support these sorts of startups with good ideas but which have failed for reasons other than having a poor product? For Singapore to thrive in the startup space and for us to attract the best startups, we need to continually keep our pencils sharp and be relentless in seeking new ways to keep Singapore front of the minds of startup founders when they are looking for places to establish their businesses.

We have made progress in these endeavours and I would like to ask the Minister if there is more in the works which will make us even more competitive and which will help us support and attract startups. Has there been any feedback on the initiatives which were announced and rolled out last year and what is the Government's assessment on the success of these initiatives to date?

The Chairman: Mr Azmoon Ahmad, not here. Mr Yee Chia Hsing. You have two cuts, please take both cuts together.

Assistance to Displaced PMETs

Mr Yee Chia Hsing: Chairman, I would like to ask how the Government is helping PMETs who have been displaced or wish to move into growth sectors identified by the Government. Many displaced PMETs were previously working in mid-level management, which is particularly susceptible to cost cutting as advances in technology have allowed for easier coordination of work tasks. For example, previously, a company might need more mid-level managers to disseminate information and coordinate work tasks. But now, with platforms, such as Whatsapp, a single manager is able to instantaneously disseminate the information to the rest of the workers.

Many PMETs who find themselves displaced became drivers for Grab or Uber. While our unemployment figures remain relatively low, with the resident unemployment rate of 3.1%, the figure masks under-employment where a PMET with many years of work experience ends up as a Grab or Uber driver.

Sir, I am also concerned that many such displaced PMETs are sole breadwinners in the households and they cannot afford to be out of work to attend full-time skills upgrading courses. Would the Ministry elaborate what are the schemes available to help such PMETs?

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

Helping Companies to Go Regional

The ITMs emphasise the importance of our companies seeking out opportunities in the region. Last year, many of our ASEAN neighbours have GDP growth rates which are higher than the 3.6% reported in Singapore. The Philippines, Vietnam and Myanmar reported 6.7%, 6.3% and 7.7% GDP growth rates respectively. Closer to home, Malaysia and Indonesia reported 6% and 5.1% respectively.

Sir, with a small population, plus a small market size, Singapore companies must move abroad if they want to grow bigger to reap economies of scale. However, going regional is not without risks. Very often, we hear of Singapore companies, which have done well at home, only to lose money when they venture out. To take advantage of the growth in regional economies, our Singapore companies will need to acquire a deeper knowledge of regional markets, not just of foreign rules and regulations, but also industry-specific knowledge, as well as important information, such as the reputation of potential business partners.

As such, I would like to ask how MTI is equipping our Singapore companies with the relevant market knowledge.

Consumer Protection

Mr Lim Biow Chuan (Mountbatten): Mr Chairman, Sir, I declare my interest in speaking on this topic as the President of the Consumers' Association of Singapore.

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Two years ago, during the COS debate on consumer protection, I spoke on the need to ensure that consumers are protected when making purchase transactions online. Our research shows that there are several companies, like Amazon, Microsoft and Shoppee, which provide for an arbitration clause in their online standard terms and conditions. This means that consumers who buy online would have to agree to the arbitration clause when transacting with these companies. These consumers will have no negotiating power to ask for the arbitration clause to be removed.

For many of these consumers, their transaction values are usually of a quantum well within the limit of $10,000. If they have a dispute with the online vendor of the products which cannot be resolved through mediation, their usual recourse is to apply to SCT to adjudicate their dispute.

However, when we checked with SCT, we were told that SCT would not hear the claim by consumers because of the arbitration clause, unless both parties agree. Thus, consumers with small claims below $10,000 and who have disputes with the online companies, are unable to seek redress through SCT because of the arbitration clause.

For example, if a consumer buys a surface laptop through the Microsoft website and for some reason they have a dispute, they would not be able to seek recourse through SCT because of their arbitration clause. Likewise, if they were to shop at Shoppee and buy a Nintendo set or earpiece or another laptop, they also will not be able to seek redress through SCT because of the arbitration clause.

In the Second Reading of the SCT Bill in 1984, the then Second Minister for Law and Home Affairs Prof S Jayakumar said: "The primary purpose of this Bill is to provide for a speedy and inexpensive machinery to handle small claims arising from disputes between consumers and suppliers."

I humbly submit that the rationale for SCT still holds true today and is valid. Since the Minister for Law has said that the SCT Act will be amended, I would urge MTI to work with MinLaw to ensure that this jurisdiction of the SCT cannot be ousted by arbitration clause if the value of the dispute is less than $10,000 or within the jurisdiction of SCT. Otherwise, this will make a mockery of the rationale for the SCT if the jurisdiction of SCT can be easily ousted simply by inserting an arbitration clause.

It is also timely for MTI to review the entire framework and to consider more legislation to provide protection for consumers in respect of online transactions. There would have been several media reports which suggest that more and more consumers are buying online. However, in the online transactions, consumers are all disadvantaged because of the lack of bargaining power in negotiating the standard terms and conditions of trade. For example, we understand that it is common for low-cost carriers operating out of Singapore to use pre-ticked boxes when transacting with consumers. A recent case in mind involving a premium carrier is that of Singapore Airlines (SIA) which had a pre-ticked box for auto inclusion of travel insurance.

In the EU, companies cannot infer consumer’s consent for additional payments by using such pre-ticked boxes and must obtain the express consent of consumers. So, I urge MTI to consider similar subsidiary legislation to the same effect.

The Chairman: Minister Lim Hng Kiang.

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

Mr Yee Chia Hsing asked about the outlook for the global economy in 2018 and the implications for the Singapore economy. The global economy ended on a firm note in 2017, posting the broadest growth since 2010, according to the International Monetary Fund (IMF). We expect global economic growth to pick up slightly in 2018, partly on the back of improved growth prospects in the US due to the recently approved tax reforms. However, as compared to 2017, growth in most of Singapore’s key final demand markets, such as the Eurozone, China, the Newly Industrialising Economies and ASEAN-5, is projected to moderate or remain unchanged. At the same time, while global macroeconomic risks have receded to some extent since the end of 2017, there remain some downside risks to global growth.

First, there remain concerns over protectionist actions, which could disrupt global trade and economic growth if they translate into trade barriers.

Second, the US' economic recovery is in a relatively mature stage of the cycle. An upside surprise in inflation could lead to a faster-than-expected normalisation of US monetary policy, with consequent impact on the US and the global economy.

Against this backdrop, Singapore’s economic growth is likely to moderate in 2018, but still remain firm. Specifically, MTI expects the Singapore economy to grow by 1.5% to 3.5% in 2018, with growth likely to come in slightly above the middle of the forecast range.

We expect the performance of our sectors to vary. The manufacturing sector, alongside externally-oriented services sectors, such as finance and insurance, transportation and storage, and wholesale trade, are likely to sustain growth due to firm external demand. Growth is also expected to broaden to domestically-oriented services sectors like retail and food services as consumer sentiments improve in tandem with the ongoing recovery in the labour market. However, the performance of the construction sector and the marine and offshore engineering industry is likely to remain lacklustre due to weak operating conditions. We are experiencing three major global shifts.

First, rapid technological change. Innovation cycles have shortened, and new technologies are disrupting many sectors.

Second, global value chains are changing, as major trading partners promote in-sourcing and move up the manufacturing value chain. In the US, the Trump administration has highlighted its plans to boost its manufacturing sector. China has embarked on a "Made in China 2025" initiative, and India has its "Make in India" initiative, too.

Third, there is a shift in global economic weight towards Asia. We are witnessing the rise of China, India and Southeast Asia with a growing middle class, increased urbanisation, and infrastructure development efforts, such as the BRI.

To strengthen our competitive edge, we must, therefore, continue to strengthen our linkages, innovate and deepen our capabilities to prevent being displaced by the global shifts that I mentioned just now. Looking ahead, we recognise two major drivers of economic success – internationalisation and innovation.

Dr Tan Wu Meng asked about our trade priorities and whether our pursuit of FTAs is still relevant in the current global economic climate. As a small country with an open economy, connectivity is core to Singapore’s survival and prosperity. Having free and open markets is critical for Singapore’s development. It is by staying open to trade, people and ideas that we can participate in global growth and build the deep capabilities needed for our people and companies to access new markets, on-board cutting-edge technologies and create good jobs. Singapore, therefore, remains committed to the multilateral and rules-based trading system.

Over the years, we have built depth and breadth in our international linkages. We have an extensive network of 22 implemented FTAs and Economic Partnership Agreements with 33 trading partners. Our FTAs have helped our companies benefit from tariff savings of over S$1.1 billion in 2016. To illustrate with an example, plastics product manufacturer Singa Plastics Ltd has taken advantage of several of our FTAs, such as the ASEAN Trade in Goods Agreement, the ASEAN-Korea FTA, as well as the Singapore-Australia FTA, to grow its business and maintain competitive pricing for its exports into these countries. The company’s exports have increased by close to 30% since it began using these FTAs. As Singa Plastics also exports to France, Germany and Greece, it is keenly awaiting the ratification of the EU-Singapore FTA (EUSFTA).

We will continue to enhance our connectivity by strengthening connections with existing trading partners as well as forging new connections with emerging markets. We will continue to work with the European Commission to expedite the ratification of the EUSFTA.

We review our FTAs from time to time, and upgrade them to ensure that they remain relevant and useful to our businesses. There is, for example, the ongoing negotiations with China to review and upgrade the China-Singapore FTA. The upgrade looks to deepen bilateral benefits by enhancing areas, such as investment provisions, trade facilitation, rules of origin, and improved market access for Singapore businesses, especially in the services sectors.

We are expanding Singapore's connectivity by joining regional FTAs, such as CPTPP, which will be signed next week, and the ongoing Regional Comprehensive Economic Partnership (RCEP). Singapore is also negotiating FTAs with major regional blocs, such as the Eurasian Economic Union and the Pacific Alliance.

Assoc Prof Randolph Tan observed that more should be done to promote the opportunities of CPTPP to our SMEs. Our pursuit of FTAs is for the benefit of our companies and their workers. We will continue to work with the Singapore Business Federation (SBF) and TACs on outreach efforts to help our companies, in particular, our SMEs. These efforts include company outreach sessions, FTA training courses, and even one-on-one sessions to follow up on specific concerns or opportunities which companies are keen on.

Mr Henry Kwek and Ms Sun Xueling asked about the Government’s plans to help Singapore companies take advantage of the shift in global economic focus towards Asia. Indeed, Asia's growth brings about many opportunities, with rising consumption as well as demand for infrastructure in Asia offering significant export and investment opportunities for Singapore-based companies.

We are working with China on commercially meaningful areas in its BRI. BRI has the potential to foster regional cooperation, enhance connectivity and accelerate infrastructure development across Asia. Singapore companies are well-placed to tap on BRI opportunities. For instance, Singapore and China have recognised our strong complementarities and are jointly developing the China-Singapore (Chongqing) Connectivity Initiative Southern Transport Corridor (CCI-STC), which aims to improve connectivity between western China and Southeast Asia. Three Singapore companies – Pacific International Lines (PIL), PSA International and YCH Group – have entered into two joint ventures with Chongqing companies to steer the development of the STC projects.

We are also collaborating with the Government of Andhra Pradesh in India to develop the state’s new capital city of Amaravati, as well as to promote greater economic collaboration with Andhra Pradesh. In 2017, Ascendas-Singbridge and SembCorp Development formed a Singapore Consortium to master-develop the commercial core of Amaravati, together with its government. Since then, our companies have been actively exploring smart city urban solution opportunities in Amaravati.

Closer to home, ASEAN has strong potential as a market. We are strengthening our engagements with ASEAN through both regional economic integration as well as bilateral initiatives with the ASEAN countries.

Miss Cheryl Chan, Mr Henry Kwek, Mr Low Thia Khiang and Ms Sun Xueling asked about our plans to work with other ASEAN member states to unlock ASEAN's potential to benefit Singapore and Singaporeans.

As a region, ASEAN is making good progress in deepening economic integration under AEC. The prospects are good. ASEAN is currently the sixth largest economy in the world and enjoy a steady growth rate of 5%. By 2030, ASEAN has the potential to become the fourth largest single market in the world after China, the US and the EU.

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Despite the rising nationalistic tendencies and anti-trade sentiments elsewhere in the world, ASEAN has stayed on course in its trajectory of regional economic integration. ASEAN is also navigating the rapid pace of technological change and digital disruption.

For businesses seeking to enter or expand their presence in ASEAN markets and beyond, AEC, since its realisation in 2015, has lowered entry barriers, reduced transaction costs, widened choices for consumers and generated job opportunities in the region. Take, for instance, Trends Home Electrical. The company started out as a single home appliance shop in 1998. Today, their products are carried by over 450 retailers in Singapore, Malaysia, Indonesia and Thailand. It has been using the ASEAN Trade in Goods Agreement since 2015 for its products to enjoy tariff savings and has experienced a close to 15% increase in exports since then. Trends Home Electrical plans to continue innovating, upgrading its capabilities and further expand into Southeast Asia to capture the growth opportunities there.

At this juncture, Mr Chairman, I would like to clarify on Mr Low Thia Khiang's comment that while AEC was established by the end of 2015, but ASEAN failed to achieve one-fifth of the 506 measures and had deferred them for 10 years to 2025. It is true that ASEAN did not quite achieve all 506 measures in 2015. We achieved about 80% of them. But we have not neglected the rest. We continue to track, monitor and work on the rest of the measures, and I am happy to report that, to date, 88% of the AEC measures have been implemented. So, we are not deferring them to 2025. And, this year, as part of Singapore's ASEAN Chairmanship, we are pursuing an ASEAN agreement on e-commerce to help our businesses expand and leverage the e-commerce market potential in Southeast Asia.

The ASEAN e-commerce scene is still at its infancy, with some companies finding it confusing to navigate the varying e-commerce regulations in various ASEAN countries. This agreement that we are aiming to sign this year will streamline some of these regulations so that aspiring entrepreneurs and SMEs can market their products and services regionally with greater ease and make it safer to send and receive electronic payments. With this agreement, companies like Coldwear, a local winter wear and travel accessories retailer, can expect to use e-commerce solutions to expand into the ASEAN region more easily. Coldwear has successfully entered the Indonesian market and plans to venture into the wider ASEAN markets, including the Philippines, Thailand and Vietnam.

Mr Chairman, our strategy of engaging ASEAN will also take place at the bilateral level. We will press on with our suite of bilateral initiatives to deepen our economic linkages and help our companies take advantage of the opportunities in our neighbouring ASEAN countries. We will intensify our engagements with our long-term partners, such as Malaysia and Indonesia. New collaborations, such as the High Speed Rail and the Rapid Transit System will enhance bilateral connectivity, business links and people-to-people exchanges between Singapore and Malaysia. ESG will continue to explore areas of synergies in Indonesia. The Kendal Industrial Park in Central Java, a joint venture between SembCorp Development and an Indonesian company, is one example. We hope to be able to facilitate more of such partnerships in future. We will also continue to extend our reach into other ASEAN countries, such as Myanmar and Vietnam, where our companies have strong and sustained interests.

Mr Chairman, the second major driver of our economic success is innovation. With shifting factors of production now favouring technology-intensive economies, Singapore’s focus on innovation and technology puts us in a position of strength to transform our installed base, capture new investments and create new solutions for the market.

Our strengths in innovation and technology have been developed through consistent R&D efforts over the years, which have raised Singapore’s global competitiveness and enabled many of our sectors to move up the value chain. Beyond R&D, we are also making a strong, committed push towards building innovation networks and partnerships to link up companies across major innovation hubs. This is a reflection of the nature of innovation in a digital age, and the importance of cross-market perspectives for businesses to reap new opportunities.

The Global Innovation Alliance (GIA) was launched last year and seeks to strengthen Singapore’s connections to major innovation hubs around the world. It creates more opportunities for our students, entrepreneurs and businesses to gain overseas experience, connect and collaborate with their overseas counterparts.

The connections facilitated under GIA will allow ideas and talents to cross-fertilise across different innovation hubs and provide access to interact with and identify local partners for collaboration. This injects vibrancy into our local innovation ecosystem and bolsters our value proposition as a springboard for foreign companies to come and testbed new ideas here before expanding into the region.

A key component of GIA is to create a network of Innovation Launchpads around the world. We recognise that our Institutes of Higher Learning (IHLs), companies and agencies have already established their own networks abroad. GIA seeks to integrate them into a single network that companies can readily tap on to launch their innovations into the relevant markets. My colleagues will share further on the progress of our R&D efforts and GIA initiative later on.

We will also take advantage of our ASEAN Chairmanship to work on an ASEAN Innovation Network (AIN). The intent is to strengthen the networks among the innovation ecosystems in ASEAN. This will further enable our companies to expand abroad and help them to better respond to demands from the increasingly sophisticated and growing consumer base in our region.

Mr Chairman, this focus on internationalisation and innovation is part of our larger industry transformation efforts. We announced the S$4.5 billion Industry Transformation Programme in Budget 2016, recognising that each sector is different and that transformation, coordinated at the sector level, can deliver more targeted results. In this vein, we introduced the ITMs. The ITMs are designed to keep our industries competitive and generate growth for Singapore. Each ITM takes into account the unique circumstances of the sector and customises efforts through the four key pillars of innovation, productivity, jobs and skills, and internationalisation.

We have launched 22 ITMs to date, and I am happy to inform Mr Liang Eng Hwa that we would have rolled out all 23 ITMs by end of this month. Moving forward, we will continue to refine the ITMs, together with our partners, working closely with all stakeholders, including companies, TACs, unions and workers. My colleagues will also elaborate further on the progress of our ITMs and our restructuring efforts.

Dr Tan Wu Meng asked about our strategy to help our companies remain competitive and support sustained growth, especially given our overheads and cost structure. Along the same vein, Mr Leon Perera asked about the Government's approach to keeping industrial land costs competitive. The Government monitors business costs closely to ensure that we remain competitive.

In 2017, the overall Unit Labour Cost (ULC) for the economy fell by 0.3%, moderating from the 2% increase in 2016. However, there were differences across the different sectors. While manufacturing ULC declined by 8% on the back of strong productivity gains, ULC for some services sectors, such as the accommodation and food services sector, rose by 2% as wage growth outpaced productivity growth.

The overall ULC is likely to see a modest increase this year. Wages are expected to rise amidst a gradual recovery in the labour market. The key, therefore, for companies to manage their labour costs and have sustainable wage growth for Singaporeans, is to have continued productivity growth.

For companies in the manufacturing sector, rental costs constitute a relatively small proportion of business costs, and are usually less than 2% on average. We have, nonetheless, taken measures to ensure that industrial land costs remain competitive.

First of all, JTC Corporation benchmarks its land prices internationally to ensure that they are competitive.

Second, the Government releases land for private-sector industrial developments through a half-yearly Industrial Government Land Sales Programme to ensure that there is sufficient land and industrial space to meet demand and to support our economic growth, as well as to maintain the stability of the industrial property market. With an increase in the supply of land and industrial space, the industrial price index has decreased by 16.6% from its peak in 2014, while the industrial rental index has declined by 13.4% from its peak in 2014.

Third, we have also made public the statistics on industrial space prices, rents, as well as occupancy rates to improve transparency and help companies make informed decisions.

We must continue to take bold strides to seize opportunities to innovate and not let our domestic constraints of a tightening labour market and scarcity of land to hold us back.

Mr Chairman, we have put in place initiatives to ensure that our companies remain competitive and are well-poised to tap into growth areas and take up future challenges posed by the global economy. Coupled with the positive growth forecast in the year ahead, I would like to encourage our companies to take advantage of the firm global economic prospects to persevere on their transformation and growth journey.

We welcome companies to be actively engaged in our efforts as we work to expand Singapore's economic space through building and deepening linkages, and establishing innovation networks to foster relationships and create opportunities. Over the next decade, our collective efforts should enable us to grow by 2% to 3% per year on average. This is how we can work together to create an economy that can offer sustainable wage growth and good jobs for all Singaporeans.

The Chairman: Minister Iswaran.

The Minister for Trade and Industry (Industry) (Mr S Iswaran): Mr Chairman, I thank the Chairman of the Government Parliamentary Committee (GPC) for Finance and Trade and Industry, Mr Liang Eng Hwa, and all Members for their comments and suggestions on our economic transformation.

Singapore’s economy grew by 3.6% in real terms last year, higher than the 2.4% growth in 2016. This can be attributed in large part to the global economic recovery. However, our tripartite partners’ transformation efforts have also made a valuable contribution by enabling our enterprises and workers to benefit from new economic trends.

Aggregate data, like GDP growth, give us a feel for the overall economy and its direction, but they do not tell us the whole story, especially the unevenness in the economic terrain. The pace and success of transformation vary according to the context of a particular sector or enterprise. And this variation is due to different capabilities, external demand conditions and even different levels of aspiration.

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Our efforts to transform the economy must recognise this diversity of circumstances and needs. And our strategies must also be nimble and adapt with the times. That is why we are making changes to Government policies and programmes, and even to the way that we are organised. Let me elaborate.

As Mr Henry Kwek has noted, although our overall economic performance has improved, the outcome varies across sectors. There are several reasons for this. Mr Chairman, may I have your permission to display some slides?

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

Mr S Iswaran: Thank you. First, our sectors face a spectrum of external demand conditions. Within the manufacturing sector, on the one hand, the electronics cluster saw strong an annualised real value-added (VA) growth of 24.4% per annum (pa) between 2015 and 2017, boosted by robust demand for semiconductors to be used in smartphones and vehicles. On the other hand, the real VA of the Transport Engineering cluster contracted by 12.2% pa over the same period, due to the fall in demand for the marine and offshore segment.

Secondly, we see more success in sectors which are better able to tap on external growth opportunities. For example, between 2015 and 2017, the real VA of externally-oriented sectors grew by 3.6% pa, compared to 0.7% pa for domestically-oriented sectors.

Third, even among the domestically-oriented sectors, their ability to reduce manpower-intensity and raise productivity has varied. The real VA of retail trade and food services have grown over the past two years by 2.7% pa and 1.2% pa respectively. However, retail trade’s growth has been much more productivity-driven, with VA per worker rising at 3.3% pa, unlike the decline of 1.9% pa in food services. Using VA per actual hour worked shows better productivity performance for both sectors, but an even wider gap between the two.

Given this variation, the ITMs aim to address each sector’s particular combination of challenges and circumstances. For example, the ITMs' support our externally-oriented sectors’ growth and aspirations for market leadership, through the development of high-value capabilities.

A case in point is the Logistics ITM which is led by EDB, which envisages strong growth with a Compound Annual Growth Rate (CAGR) of 5% between 2015 and 2020, leading to a nominal VA of $8.3 billion in 2020, and the creation of 2,000 new PMET jobs between 2015 and 2020. To achieve this, the ITM advocates the development of specialised logistics handling capabilities.

If I can illustrate, Tee Hai Chem provides specialised logistics services for chemical and pharmaceutical products. Over the years, it has become a market leader, even supporting MNCs in their overseas operations. SPRING Singapore's programmes have helped the company develop these specialised capabilities, enhance its information technology (IT) and human resource (HR) systems, and upgrade its workers' skills. As a result, the company has grown by nearly 13% pa between 2012 and 2016 and created more than 60 good jobs.

For other sectors, the focus is on improving productivity and becoming less manpower-intensive. One example is the accommodation sector, which has achieved notable success over the last two years. The sector has seen strong real VA growth of 4.2% pa and even stronger productivity growth of 5.2% in terms of real VA per actual hour worked.

Recently, the Singapore Tourism Board (STB) reported record international visitor arrivals and tourism receipts for a second straight year in 2017. Our hotels, which are a significant part of the accommodation sector, can continue to benefit from Asia’s growing outbound travel only if they can boost productivity and lessen their manpower reliance, while maintaining service quality.

Grand Park City Hall is an example of how this can be done. I recently visited the hotel which has tapped on STB’s support to adopt manpower-saving technologies. It is also part of a new regulatory sandbox with the Ministry of Home Affairs (MHA) and STB that will pilot the use of facial recognition technologies for a seamless check-in process. Staff can thus be cross deployed to better meet guests' needs in other areas and also learn new skills in the process. Altogether, the hotel is targeting a reduction in manning ratio of about 17% while enabling its employees to do more value-added jobs.

We are also working on opportunities that cut across multiple sectors and ITMs. For example, the growing demand for infrastructure in ASEAN and developing Asia offers significant opportunities that span several industries, including financial services, professional services, precision engineering and construction.

Last year, we introduced the Internationalisation Finance Scheme for Non-Recourse (IFS Non-Recourse) financing scheme. The aim was to help more SMEs participate in regional infrastructure projects, with risk-sharing between the Government and banks for loans that are secured on the project’s cash flow rather than the SME’s assets. This was based on feedback from the industry and an effort to help our SMEs participate in this larger opportunity.

The Infrastructure Office, which Mr Low Thia Kiang and Er Dr Lee Bee Wah referred to, is a continuation of this effort. Identifying and structuring infrastructure projects and finding the right partners to finance and execute them remain a challenge both in ASEAN and developing Asia. Hence, the Infrastructure Office aims to: (a) build a deeper understanding of the pipeline of infrastructure projects in the region; (b) promote collaboration between foreign and local enterprises from the entire infrastructure value chain; and (c) facilitate the structuring, financing and execution of Asian infrastructure projects.

The Infrastructure Office will work closely with private sector players – which is the point that Er Dr Lee Bee Wah raised – in the infrastructure ecosystem, supported by Government agencies like ESG, EDB, MAS and the Professional Services Programme Office. In short, the aim is really to bring together the different players in the infrastructure ecosystem that we have in Singapore – from the public sector, private sector, from the large companies to the small companies, those who do professional services, those who do financial services and those who can execute projects, so that we can bring our capabilities together to address this opportunity as a group.

Er Dr Lee Bee Wah also had some comments on Government contracts, and I hope she has filed cuts in the MND COS because MND will be better placed to answer that point on construction contracts.

As a whole, our ITMs are inclusive in their design. Not quite bespoke in the way that Mr Henry Kwek talked about it, but the ITMs aim to address the diverse needs of industries and enterprises.

But there is a limit to how many of the over 200,000 enterprises that Government agencies can directly engage. That is why we have stressed the importance of partnerships with TACs, unions and other stakeholders, because they can play an important role to propagate the transformation message and broaden the reach of the ITMs.

While competition is the natural instinct of companies, enterprises can also support one another to succeed in transformation. Currently, EDB and SPRING Singapore support collaborations between large organisations and local SMEs through the PACT programmes. The aim is to allow for knowledge transfer from the bigger companies to the SMEs to support them, for capability development targeted at the SMEs and the test-bedding of innovative solutions.

On Mr Low Thia Kiang and Mr Teo Ser Luck’s query, to date, EDB and SPRING Singapore have supported about 180 projects, which have resulted in about 1,000 partnerships. But the important point that Mr Low Thia Khiang makes is that it is also about how it has made a difference for SMEs. It is hard to quantify this because some of the impact is qualitative, in terms of capability, but let me use an example.

That is the partnership between Onn Wah Precision Engineering, a local precision machining supplier, and Schlumberger’s Singapore Well Testing Centre. That partnership was to develop high precision machining for oil and gas production instrumentation. This has created a new business opportunity for the company that now accounts for a substantial portion of Onn Wah's total revenue.

If you take the retail space, the Dairy Farm Group worked with more than 320 SME suppliers to streamline their inventory and supply chain management. The SME suppliers were better able to track product movements and respond to changes in demand and enjoyed productivity improvements of up to six times in terms of the number of deliveries.

So, in short, the overarching emphasis is to deliver benefits to our SMEs in terms of productivity improvement, new capabilities that might, in turn, lead to greater opportunities, the deeper links with their principals and, ultimately, leverage on all of these to go international.

In view of these good outcomes, we have allocated $100 million over the next three years for an integrated PACT Programme, in other words, we are bringing the EDB and SPRING Singapore programmes together to support these and more forms of collaboration among enterprises to work and grow together in capability and business development. So, what sort of programmes will they support?

First, in addition to what I have described between the big companies and the SMEs, it is projects amongst SMEs and startups, which will now also qualify for support under the integrated PACT Programme.

Second, the scope of PACT will be expanded to include sourcing for services providers, as well as to promote the early adoption of new technologies among local enterprises.

And third, based on feedback from many SMEs on the value of collective branding, resource pooling and venturing overseas together, PACT will also support such strategic alliances to move into new business areas in both domestic and overseas markets.

So, in other words, it aims to help SMEs complement one another as a group as they venture into new areas, whether it is in Singapore or internationally. Mr Thomas Chua acknowledged that the PACT programme has, indeed, benefited SMEs and that there is a good track record in terms of the outcomes.

Like our clusters or sectors, our enterprise landscape is also quite variegated. Micro and small enterprises account for a significant majority, with medium and large enterprises comprising 4% and 1% respectively of the total enterprise base. Yet, if you look at their share of value add, that has quite the inverse pattern, which is not surprising but it tells us that, on the one hand, we are playing a large numbers game, but with a relatively modest value-add impact and, on the other end of the spectrum, the numbers are few but the value-add impact is significant. The resources and capabilities also vary considerably across this broad enterprise spectrum.

Therefore, ESG will tailor its programmes to the needs of the different types of enterprises, bringing together the capability building and internationalisation functions of SPRING Singapore and IE Singapore.

Mr Teo Ser Luck asked how ESG will support companies at different growth stages. First, ESG will create a more conducive environment for startups by combining SPRING Singapore's Startup SG initiatives and IE Singapore’s international networks. Beyond mentorship and funding, startups increasingly need to internationalise a lot earlier in their development in order to gain access to new markets and also acquire complementary capabilities.

Evercomm is a startup that provides end-to-end energy management solutions to help its clients optimise their energy consumption. SPRING Singapore provided the company with the Startup SG competitive grant to commercialise its technology, and it also facilitated R&D collaborations with MNCs and foreign players. Evercomm also tapped on IE Singapore’s networks to navigate overseas markets. Today, the company operates in both Singapore and Taiwan. Looking ahead, ESG will help Evercomm explore new technology collaborations with partners in Israel, Germany and the US, whilst helping the company expand into the Asia Pacific region. Senior Minister of State Koh Poh Koon will be able to elaborate further on the broader developments that we have in the startup space in Singapore.

Secondly, for companies that are scaling up, ESG will provide support in key areas of capability development. As pointed out by Mr Saktiandi Supaat, many SMEs still require assistance for essential upgrading before they venture overseas. ESG will work through TACs and industry partners to support them. This includes the SME Centres, which Mr Thomas Chua referred to, which will continue to be a very important channel for ESG’s SME engagement.

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ESG will also use the new Productivity Solutions Grant (PSG) to support the adoption of pre-scoped solutions so that the broad base of SMEs can use them to improve their operational efficiency and productivity. Senior Minister of State Sim Ann will be elaborating on these points.

Access to financing is also critical for long-term growth. ESG will continue SPRING Singapore and IE Singapore’s partnership with our financial institutions to meet the working capital and growth financing needs of viable SMEs, and to facilitate access to credit lines and insurance cover for trade and projects in overseas markets.

In addition, I am pleased to announce that ESG will extend the pilot Venture Debt Programme (VDP) by three years till March 2021. The VDP enables local high-growth enterprises to finance their expansion plans with less equity dilution. Seventeen companies from quite diverse sectors have benefited from the programme since its launch in October 2015.

Thirdly, ESG will support companies to seize overseas opportunities to grow through several internationalisation initiatives. The importance of internationalisation is borne out by a survey of Singapore's investments abroad by the Department of Statistics from 2006 to 2016, which shows that income from our companies’ direct investment abroad grew by 6.1% pa, higher than the 5.1% pa growth in profits from their operations in Singapore. Looking ahead, one must expect that this differential growth will continue, given the nature and pace of opportunities in the region around us.

ESG will also enhance IE Singapore’s network of Overseas Centres to help Singapore companies navigate the business and regulatory environment in overseas markets, gain market insights and access to networks with local partners.

The Market Readiness Assistance (MRA) scheme helps companies defray the costs of foraying into new markets. We raised the grant support from 50% of qualifying expenses to 70% from 1 April 2015 to 31 March 2018. Mr Saktiandi Supaat and Mr Sitoh Yih Pin would be pleased to note that we will extend this higher grant quantum for a further two years till 31 March 2020.

As Mr Saktiandi Supaat has observed, to be successful, our SMEs must have the people to navigate different languages and cultures, as well as social, political and legal systems which are quite divergent. The ASEAN Leadership Programme will help equip Singapore business leaders with a deeper understanding of Southeast Asian markets, and the skillsets to lead business expansions in the region. Senior Parliamentary Secretary Low Yen Ling will elaborate on this and other related programmes to develop manpower capabilities.

Ultimately, for our companies to scale up to the next level of growth, capability development, innovation and internationalisation are deeply intertwined. We see this with companies like Jing King Technology Pte Ltd (JK Tech), that has established itself in chip cards and subscriber identity module (SIM) cards globally. To expand their business, the company has been exploring R&D in biometrics, electronic payments and data security. They have built a dedicated R&D team in Singapore, while seeking new opportunities in Vietnam, the Philippines, Indonesia and Thailand. Throughout this journey, they have tapped on Government support, including SPRING Singapore’s CDG as well as IE Singapore’s GCP scheme.

To better support companies like JK Tech scale up, we will consolidate the CDG and GCP into the EDG in the fourth quarter of this year. Mr Liang Eng Hwa and Mr Teo Ser Luck have asked how this will benefit companies. I think Mr Teo Ser Luck already knows the answers because he was navigating this terrain when he was in MTI. Nevertheless, EDG will give companies the flexibility to bundle internal upgrading activities, domestic projects and international expansion plans in one application. In other words, you are able to, in a more flexible and integrated way, plan and seek out Government help for your business strategy.

Even as we pursue these internationalisation and growth strategies, I agree with Mr Leon Perera that succession planning is an important issue for SMEs, especially the family-owned businesses. In this regard, as Mr Perera has already highlighted, there are several resources that SMEs can tap on. This includes information on succession planning and key issues to look out for on SPRING Singapore's SME Portal. They can also use the new EDG to engage consultants to help develop the succession plans and address strategic priorities and leadership gaps. They can also strengthen their leadership pipeline through leadership and management courses which are available under SkillsFuture Singapore.

But I do want to stress because I think Mr Leon Perera made the point about whether succession planning can be a condition for some of the Government schemes. I think that may tilt the balance because whilst we can encourage it, we can urge companies to think about this seriously, ultimately, the business owners have to take ownership. They have to decide and prioritise that succession planning is something that is of high priority and then undertake specific steps to put that in place. So, we have the tool kit, we have the general messaging and the entire gamut of stakeholders, whether it is our trade associations, consultants or Government department officers, they will impart the message. But we have to leave it to the business owners to ultimately make the choices and execute and act on it.

Let me turn to R&D because Ms Chia Yong Yong and Ms Foo Mee Har have asked about our R&D strategies and progress. R&D is integral to Singapore’s development and competitiveness. As Ms Chia Yong Yong has emphasised, this is a long-term endeavour that requires not just thoughtful planning but also perseverance through cycles, because the outcomes may not always be apparent. But we need to stay the course.

Under the RIE2020 Plan, we have made several shifts to harness technology and innovation to meet our national needs and to drive the next phase of economic growth. We invest about 1% of our GDP in RIE, which is comparable to the public spending of other small research-intensive economies. We focus on four domains: (a) advanced manufacturing and engineering; (b) health and biomedical sciences; (c) urban solutions and sustainability and (d) services and digital economy.

In all of these domains, there is both a national or broader social benefit possibility as well as an economic benefit possibility. I do not think the two work at cross purposes. In many cases, in fact, they converge.

The Government's investment in R&D has catalysed Business Expenditure on R&D (BERD) of $50.6 billion from 2006 to 2016. It is a growth rate of 6%. Both foreign and, increasingly, local companies have recognised Singapore's R&D value proposition and taken steps to deepen their R&D capabilities. This has also led to the creation of good jobs, with the number of Research Scientists and Engineers (RSEs) increasing from 22,000 in 2006 to more than 35,000 in 2016.

The point that Ms Chia Yong Yong raised was beyond RSEs, what sort of jobs are being created. When I describe some of the ecosystem outcomes that we have achieved, it might give you a sense of it although it is difficult to have a direct correlation measurement of the exact outcomes beyond the direct job creation an R&D project may result in.

Singapore's research efforts and outcomes are also acknowledged internationally and by global innovation reports. The Bloomberg Innovation Index has ranked Singapore as the third most innovative economy in the world. It takes into account outcome indicators, such as patent activity, high-tech density, productivity and manufacturing value-add.

We are also nurturing public-private R&D partnerships to yield both social and economic benefits. Let me use our work in skin research to illustrate. The Skin Research Institute of Singapore (SRIS) is a collaboration between A*STAR, the National Skin Centre and Nanyang Technological University (NTU) to build R&D capabilities that can address common medical conditions like eczema, diabetic skin ulcers and tumours. Such R&D capabilities can also yield economic benefits.

For example, the Ikeda Group, a local SME, has developed novel skincare products using A*STAR’s patented polymeric carrier technology. The technology allows active ingredients in the skincare serum to be loaded in individual carriers for greater effectiveness. Ikeda launched its new range of serums under the Irén brand in Singapore in December last year and plans to also export it.

More broadly, R&D boosts the innovation capacity and competitiveness of sectors. Singapore's excellence in skin research has been instrumental in anchoring global industry leaders like P&G, L’Oreal and Amore Pacific. These MNCs have established skin and hair research labs in Biopolis, which has contributed to the growth of innovation partners, such as ingredients suppliers and contract research organisations (CROs), including university spinoffs, driving the robust and organic expansion of the Consumer Care sector.

More broadly, A*STAR offers different avenues of support for enterprises with differing needs. Ms Chia Yong Yong cited several overseas examples of the modalities. I think this slide helps to illustrate the way we are going about it. This includes, firstly, direct engagement with companies through operations and technology road-mapping or project-specific collaboration agreements.

Second, it can include platforms, like Tech Depot, that offer plug-and-play solutions which address substantially the needs of SMEs which may not have the capacity to undertake bespoke R&D but they are able to adopt broader R&D and technology outcomes.

Third, the secondment of researchers to companies under T-Up to conduct R&D and also to develop new products and processes. This is a very successful programme by A*STAR where our researchers are actually seconded out to companies to work in these companies. In a not insignificant number of cases, the companies end up hiring them, taking them on full-time. That is a flow of talent that we are quite happy to encourage and support.

And finally, licensing arrangements under the Headstart programme where collaborating companies can tap on royalty-free, exclusive IP from A*STAR for the first 36 months. We are always happy to learn and adapt practices from other jurisdictions in terms of best practices. Indeed, A*STAR and NRF continue to do this on an active basis.

To punch above our weight and position Singapore as the Global-Asia node of technology, innovation and enterprise, we must have our finger on the pulse of global trends and ensure that our institutions are ready to respond to emerging opportunities. That is why A*STAR is proactively transforming itself to stay at the forefront of science and technology trends, help enterprises capture opportunities and attain higher levels of R&D outcomes and aspirations over the long term.

Over the past two decades, A*STAR has nurtured a strong base of capabilities to support the innovation capacity of our industries. Between 2011 and 2016, A*STAR worked on more than 12,000 industry projects, attracting more than $2 billion in research investments from companies through joint collaborations and other open innovation platforms.

In addition, with favourable licensing terms for local enterprises and the introduction of simplified licensing processes in 2013, the cumulative adoption of A*STAR licences has more than doubled from 191 in 2014 to 422 in 2016.

In general, I think we are going in the right direction. But more can be done and today's research and innovation landscape in Singapore and around the world is vastly different from that a decade ago. We must expect that it will continue to evolve. So, we are encouraging our firms to be more innovative and transform. Equally, we want our public sector agencies to also become nimbler and be better partners to enterprises on their innovation and transformation journey.

A*STAR aims to be more agile and flexible in the way it is able to harness research talent and funds to develop capabilities and skills at the leading edge and then transfer these technologies to industries in an even more efficacious manner than in the past.

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A*STAR will do so primarily through a mechanism they call programmes that will bring together multidisciplinary teams from various institutions in Singapore in order to solve complex problems. Increasingly, many of the problems are of a multidisciplinary nature. You need not just someone from an engineering domain. You may need mathematicians, biologists and so on. This sort of structure is flexible and is able to draw on the talent that is needed in order to start addressing the more complex problems.

An example of this is A*STAR's AI Initiative. They call it A*STAR AI. It was launched recently in collaboration with the universities and industry. One of the solutions developed by the cross-disciplinary team under A*STAR AI is an automated real-time fault detection tool for predictive maintenance. This system has already been adopted by a few companies in the engineering and transportation sectors. A*STAR will elaborate further on its transformation process in due course.

Our universities are also undertaking more industry relevant research, the importance of which Ms Foo Mee Har emphasised. Beyond the examples I have shared of the linkages between A*STAR and industry, the Ministry of Education's (MOE's) framework for the allocation of research funding to autonomous universities also takes into account industry collaboration, such as the number of industry projects and the amount of industry co-funding for R&D. As a result of this industry alignment, we have seen an increase in the number of licence agreements between the universities and industry, from about 20 in 2010 to 95 in 2016. It is on the uptick and we are seeing more of this happening. Funding models that are being used by NRF and the broader Research, Innovation and Enterprise Council (RIEC) system encourage more of these interagency collaborations together with the private sector.

International collaborations also help us to stay abreast of global research and industry developments. The Campus for Research Excellence and Technological Enterprise (CREATE) brings together local and international researchers from diverse backgrounds to work on areas of strategic interest. This helps with knowledge transfer, capability-building and cross-fertilisation of ideas.

One other initiative that is taking us closer to the vision of becoming a Global-Asia node of technology, innovation and enterprise is GIA, something that the Finance Minister talked about, and many Members would already have heard about. The aim is to create linkages with global startup hubs, to help entrepreneurs and students gain access to the global innovation network and work with like-minded companies. GIA is now present in San Francisco, Jakarta, Bangkok and Beijing. Members would notice that several or the majority of these are Asian cities. That is not by accident. It is actually a deliberate effort on our part to develop a deeper innovation network in Asia and also within ASEAN.

The aim at the end of the day is to serve as an in-market entry point for Singapore entities to connect with the business and innovation community in these cities. Over the next four years, GIA will expand its reach across ASEAN and to other startup hubs around the world.

Let me now turn to the topic of energy. Around the world, we know that countries are taking active steps to reduce their reliance on fossil fuels and meet their climate change targets. Against this backdrop, it is also in the interest of our companies to become more energy-efficient and reduce their carbon footprint. Mr Thomas Chua's understandable concerns about the impact of the carbon tax on businesses should be mitigated to some extent by the fact that we are starting with a lower uniform rate of $5 per tonne of emissions from 2019 to 2023, and we are focusing on the large emitters. This will help all businesses adjust to the new system and encourage them to reduce emissions. We will closely monitor our economic competitiveness, international climate change developments, and the progress in meeting our emissions abatement goals, and factor these into any future reviews of the carbon tax.

Meanwhile, we will also set aside funds from 2019 to enhance support for companies, including SMEs and power generation companies, to improve their energy efficiency. As the Minister for Finance has stated, we are prepared to spend more than the expected carbon tax revenue of nearly $1 billion in the initial five years to support worthwhile projects that deliver the required emissions abatement.

Besides promoting energy efficiency on the demand side, we are also adapting policies on the supply side to better serve the needs of businesses and households. For example, the Energy Market Authority (EMA) has progressively liberalised the retail electricity market to allow more consumers the flexibility of choosing an electricity retailer and price plan that best meet their needs. We have steadily lowered the threshold for contestability to the present average monthly electricity consumption of at least 2,000 kWh. To date, about 50%, or about 49,000 accounts, of businesses that are eligible for contestability have switched to buying electricity from a retailer of their choice.

Mr Charles Chong has asked what consumers can expect from market liberalisation. The OEM will allow the remaining small businesses and households the same flexibility that I have just described. OEM will commence in Jurong on 1 April, with about 120,000 households and small businesses. These consumers will receive a notification letter and information booklet from EMA in the next few weeks, which will explain how they can benefit from greater choice and flexibility in their electricity purchases. Retailers are also expected to start marketing to Jurong consumers towards the end of March.

Mr Charles Chong is correct in expressing some concerns about whether consumers will be inundated with marketing materials. EMA has been working closely with the retailers to have a Code of Conduct, if you will, in terms of how they can market their products and to minimise the kind of confusion or stress that may be caused at the consumer end. There will be an online platform which can help consumers to easily compare the standard price plans offered by different retailers. That is another aid for consumer decision-making. And those who prefer to stay with Singapore Power (SP) on the regulated tariff can continue to do so and they will be no worse-off. So, in other words, you also have a "do-nothing" option and things will just carry on as per normal.

This soft launch in Jurong will allow EMA, SP Group and retailers to gather feedback and finetune processes, before we continue extending the OEM to the remaining 1.3 million accounts, mostly households, in the second half of 2018.

So, Chairman, if I can summarise, the new economic opportunities and challenges that I have outlined also call for new approaches. Everyone needs to transform, but no two transformation journeys are the same. Each company and sector must find its own path, based on its unique circumstances. The Government will provide resources and support for companies to develop their capabilities, to innovate and to internationalise, no matter what their starting point is.

The need to transform applies not just to individuals, enterprises and industries, but equally to Government agencies. We have not shied away from reinventing ourselves, both in terms of organisational structures and processes, for example, in the formation of ESG and some of the work that A*STAR is undertaking, and also in relation to our policies and programmes. We are changing, consolidating or adapting our programmes to new requirements in the market.

We believe, ultimately, it will take the collective effort of all stakeholders for this transformation to succeed. We also believe that if all of us come together, with all hands on deck, we can position ourselves well to achieve sustainable growth and opportunities for all.

The Chairman: Senior Minister of State Sim Ann.

The Senior Minister of State for Trade and Industry (Ms Sim Ann): Mr Chairman, over the past year, I have had the opportunity to meet and listen to many SME business leaders. They see the world changing around them and know the urgency of transformation. Many have pointed out that opportunities abound. First, consumer markets in the region are growing, and there is much goodwill towards Singaporean brands and products. Second, technology has enabled new business models to flourish and sharpen businesses' competitive edges.

I believe SMEs want to know what concrete steps they can take to seize these opportunities and remain relevant and competitive. The Government knows that it can be daunting to try new business strategies. This is why we, and our many partners, have committed to working with our SMEs throughout their transformation journeys.

The formation of ESG is a natural progression, born of the recognition that capability-building, innovation and internationalisation are increasingly intertwined. Minister for Industry Iswaran has already spoken on how ESG will combine the expertise, resources and networks of SPRING Singapore and IE Singapore to build on their good work.

Mr Teo Ser Luck raised the question many SMEs have on their minds: how exactly will ESG and EDG affect the Government's support for their businesses? The new EDG will support companies of all sizes in their growth journeys. We will extend the enhanced grant support of up to 70% for SMEs for another two years, instead of reverting to 50%. EDG is one grant, with a single application process, combining SPRING Singapore's CDG and IE Singapore's GCP scheme. It will give more holistic assistance to companies who can make use of the same grant to upgrade, innovate or venture overseas, or any combination of these strategies. This, in turn, encourages companies to think holistically about their own growth strategies.

I thank Ms Foo Mee Har for illustrating how a business can work with multiple agencies to modernise itself. Let me share one more example. Castlery has worked together with both SPRING Singapore and IE Singapore for capability building and internationalisation. At home, Castlery built up its internal capabilities by developing a warehouse management system with the help of SPRING Singapore. This system optimised Castlery’s warehouse space and inventory management, resulting in a significant increase in inventory capacity and sales per worker. This allowed Castlery to scale its operations quickly as it expanded overseas. In venturing abroad, Castlery tapped on IE Singapore's support and network of business contacts to quickly penetrate the market in Australia. The two agencies’ support and grants have helped Castlery achieve faster growing sales and the launch of its flagship store in Sydney in July last year, its first overseas. And there are many other companies that have benefited in a similar manner from SPRING Singapore and IE Singapore’s support.

With the establishment of ESG in April 2018, enterprises like Castlery will have a single key point of contact at ESG rather than working with SPRING Singapore and IE Singapore separately. Enterprises will be able to discuss their growth strategies with ESG to determine the best grants and programmes for their stage of growth.

EDG can support solutions of a very complex nature. For businesses that want simpler solutions for improving productivity, pre-scoped productivity solutions are a tried and tested way to achieve quick results.

Over the past few years, our businesses have benefited from various grants supporting basic productivity upgrading, such as SPRING Singapore’s ICV. Now, as businesses enter the next phase of transformation, they may require more substantial investments. PSG, announced by the Minster for Finance, will offer pre-scoped solutions developed in conjunction with industries’ lead agencies. Mr Liang Eng Hwa asked how it will improve support. PSG will support the adoption of IT solutions and equipment aligned to the ITM strategies.

One example of an industry-specific solution that will be supported under PSG is the Digital Ordering and Payment System. ENBU, a Japanese restaurant in Suntec City, adopted a version of this system with support from SPRING Singapore. The solution combines both Tabsquare’s e-menu solution with PayPal's payment solution. Customers have the freedom to order and pay without delay. There is no need to wait for staff to serve them. If customers have concerns about entering their payment details on an unfamiliar device, they can also complete the payment on their own phones. For ENBU, the system has reduced cash handling, and increased productivity and efficiency. The solution has also freed ENBU’s staff to better serve customers’ needs.

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We hope to see more companies adopt similar solutions to enhance their productivity. To enable them to do so, we will continue to simplify the overall grant landscape. PSG will start with a simplified application process and by streamlining at least three pre-scoped grants: SPRING Singapore's ICV, the National Parks Board’s Landscape Productivity Grant (LPG), and the Infocomm and Media Development Authority’s (IMDA's) support for pre-scoped solutions under the SMEs Go Digital Programme.

The Government will provide up to 70% funding support for PSG to help companies committed to transformation. To better support businesses with heavier investments for longer time commitments, the grant caps have also been raised and customised for each industry.

PSG will be one of the grants on the Business Grants Portal (BGP). Ms Foo Mee Har and Mr Teo Ser Luck asked how we can continue making it simpler for business to learn about assistance schemes and transact with the Government. BGP represents one way that the Government has been responding to these calls.

Rather than approaching multiple agencies on their grants, a company only needs to fill in its project information on BGP's shorter, simpler online forms, and the relevant agency will process the application. Because the BGP stores and pre-populates basic information like a company’s details, forms can be filled more quickly. As a result, BGP has been very well-received by companies since its launch in January 2017, and nine out of 10 indicated that they were satisfied with the portal.

Another way the Government has been making Government transactions more business-friendly is LicenceOne. Launched in 2016, LicenceOne is an online portal that helps businesses comply with regulations through simplified licence application processes. LicenceOne's e-Advisor feature will shortlist relevant licences based on applicants' business needs and intent. I am encouraged by the feedback from businesses. Nine out of 10 surveyed indicated that the portal is easy to use, and that they would recommend LicenceOne as the go-to place for licensing-related matters.

We hope that these initiatives will simplify transaction processes for businesses with the Government, an especially pertinent point in the business environment, where time is money. Presently, BGP hosts six grants across five agencies, and LicenceOne has 118 licences from 20 agencies. More grants and licences will be added to BGP and LicenceOne respectively over time. The Government will continue to look out for ways to make these processes more business-friendly.

I thank Mr Ang Hin Kee for covering the many initiatives to help our SMEs and signalling the Labour Movement's willingness to partner the Government as a ground enabler for the manpower initiatives that Senior Parliamentary Secretary Low Yen Ling will be elaborating on later.

When it comes to supporting our enterprises, the Government does not act alone. Our TACs are also key partners of our business community in industry transformation. TACs have deep knowledge of their industry and are well-placed to address key issues facing the industry. They help their members adapt to changes in the business environment, stay ahead of the curve, and make inroads into overseas markets. They also act as a bridge between the Government and businesses, enhancing collaborations and expanding reach.

We have seen TACs within and across industries step up and work together to support our enterprises. The Minister for Finance has mentioned the Logistics Alliance and SCCCI's Trade Association Hub (TA Hub). These initiatives facilitate the cross-pollination of ideas and help advance common interests.

In particular, the physical infrastructure of the TA Hub creates chances for TACs to interact informally, building a stronger TAC community based on mutual support and collaboration. That six more TACs have decided to join the 25 already in the TA Hub since its launch in November 2017 is testament that our TACs believe in the value of co-location, cooperation and collaboration.

As Mr Teo Ser Luck and Mr Thomas Chua have observed, our TACs are excellent multipliers and catalysts for industry transformation. The Government will continue to support our TACs to do so. The LEAD Programme is SPRING Singapore and IE Singapore’s flagship grant for TACs to drive industry initiatives, focusing on areas, such as internationalisation, technology and infrastructure, and business collaborations. In the past two years alone, LEAD has supported some 50 TAC-led projects, impacting more than 8,500 companies. LEAD was launched in 2005, and we have continually reviewed the scheme to improve our support to TACs. Last year, LEAD was not only expanded to support a larger base of TACs, but the maximum support level was also increased from 70% to 90% to support multi-TAC high-impact projects, both within and across sectors.

There are other programmes administered by various agencies that have similar objectives and funding support to TACs. TACs may be confused by the parallel programmes with some overlaps in areas, such as eligibility criteria, supportable activities scope, and funding support levels.

We are, therefore, introducing a consolidated LEAD programme which will be enhanced to support a wider range of TAC-led projects. Grants to TACs, such as SPRING Singapore's LEAD+ and TAC-led Collaborative Industry Projects, as well as STB’s Association Development Fund, will come under the consolidated LEAD. In addition, LEAD will support place management initiatives, by funding TAC-led projects under the Urban Redevelopment Authority's (URA's) pilot Business Improvement District (BID) scheme.

With consolidated LEAD support, TACs can spearhead holistic upgrading strategies that combine capability development with place management. ESG will work closely with URA and STB to ensure TACs can more easily understand and access the support to enable them in their industry transformation efforts.

The Government and TACs have strengthened the support system in place for SMEs to transform and grow. The time is ripe for SMEs to step up in the journey of transformation. There are SMEs which have taken the initiative to transform themselves, to laudable results. As Mr Liang Eng Hwa has noted, it has been a year since the launch of the Lifestyle cluster ITMs and there has been good traction for their strategies. Let me elaborate.

Mr Henry Kwek has asked for examples on specific initiatives to help industries in transformation and restructuring. To grow the top line, the Government and its key partners implement ITM strategies to help companies innovate and access new market segments.

Our SMEs have, from time to time, asked how they can access the benefits of our investments in technology and scientific research. Minister Iswaran mentioned that the Centres of Innovation are key multipliers for our ITMs. The Centres of Innovation set up by SPRING Singapore in partnership with selected polytechnics and research institutes, harness their laboratory facilities, skilled manpower and considerable networks to develop innovative technological solutions for SMEs.

One of our Centres of Innovation, the Food Innovation and Resource Centre (FIRC) at Singapore Polytechnic, supports food manufacturers in developing innovative new products. NuHoney is a local company that first started working with FIRC on product development in 2011. After four years of R&D, it successfully launched its product, a carbonated honey beverage made with no added sugar. The product won the Singapore Institute of Food Science and Technology’s Food Product Award for Innovation in 2015. I am happy to hear that NuHoney can also be found on shop shelves in the Philippines, Brunei and the Republic of Korea. NuHoney is already back to working with FIRC to develop new variants, with the export potential in mind.

ITM strategies are also tailored to address industry pain points. For the Lifestyle cluster, manpower initiatives are developed in close consultation with the industries.

We hear feedback from the food services, retail and hotel industries that the human touch is indispensable. To them, good service is a point of pride. We agree. This is why the Skills Frameworks for each of these feature delivery of good service and improvement of customer experience as key skills in customer-serving roles.

Some Lifestyle cluster companies may equate being productive and manpower-lean with poorer service. This need not be the case. By applying good design, it is possible to make processes more efficient while making customers happier. For example, Shangri-La Hotel embarked on an optimisation exercise supported by STB. It found that there were several inefficiencies in the operations of its Horizon Club lounge on the Executive Floor. Staff had to walk to opposite ends of the building or go up and down floors to get to the kitchen and storage rooms, leading to unnecessary delays. In the retrofit, Shangri-La sited the kitchen and storage areas next to the lounge and introduced self-service options that were designed to enhance guests' experiences. At the self-service bar, featuring a wide range of wines and spirits, guests can try their hand at mixing their own cocktails according to the provided recipes, or even invent one of their own. The lounge, once heavily-reliant on staff, achieved manhour savings of up to 45%, and its staff have welcomed the convenience of centralisation. With the self-service options, and faster service from staff who can be more attentive to guests' needs, the retrofitted Horizon Club has been very well-received.

Productive technologies also mean that staff spend less time on routine or tedious tasks, and more time providing better service to customers. For example, Tourego is a homegrown company that developed the world's first mobile tourist tax refund solution. With the Tourego app, visitors can have their tax refund tickets issued and stored in-app and no longer need to keep paper tickets. For retailers, staff do not have to manually take down tourists' personal details, saving time and manpower. To make Tourego possible, STB worked with Tourego and the Inland Revenue Authority of Singapore (IRAS) to ensure it obtained the necessary licences, and MTI's Pro-Enterprise Panel facilitated cooperation with Government agencies to ensure Tourego's solution complemented existing systems. To date, over 150 retail outlets benefit from the use of Tourego.

Innovation and design will continue to be vital tools for companies and remain a cornerstone in the development of brands in the Lifestyle industries. It is our hope that more of our brands will become household names and fly our flag overseas. There is no lack of energy, ideas or passion among existing or aspiring Singapore brand owners.

In food, we have established names like BreadTalk, Old Chang Kee, Jumbo Group and Peach Garden. Companies are diversifying and creating new products and offerings. Foodgnostic, through its retail brand Old Seng Choong, sells traditional festive treats with a twist.

In fashion, which faces intense competition from both global and local brands, we do not just have Charles & Keith. With your permission, Sir, may I ask the Clerks to distribute the Singapore Fashion Black Book. Members can find it on their seats. Produced by the DesignSingapore Council in collaboration with Singaporean tastemaker Daniel Boey, the book showcases the diversity and depth of Singapore design. There are brands like In Good Company with its women's wear and accessories, Carrie K's premium artisan-crafted jewellery, and Ling Wu’s exotic skin bags and accessories. Design is everywhere. The Singapore Fashion Black Book was also created in partnership with Commune, a homegrown furniture design and lifestyle company that sells sophisticated pieces for the modern home.

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We must continue creating opportunities for our local companies and talent. We are building the platforms to support Singapore’s growing ecosystem of lifestyle brands and our wellspring of design talent. Design Orchard, jointly developed by STB, SPRING Singapore and JTC, will open by the end of this year. As a retail showcase featuring local brands, it will increase the presence of local designers along Orchard Road. As an incubation space, it will provide holistic support to local designers in capability development and internationalisation. Sixty local brands will be housed at the retail showcase, which will host monthly events for Design Orchard's visitors to get to know our local brands and designers.

Design Orchard will complement the ground-up efforts of our community, such as Carolyn Kan’s KEEPERS. Currently housed in the National Design Centre, KEEPERS curates homegrown lifestyle brands and tells the story of Singapore talent. Sir, in Mandarin, please.

(In Mandarin): [Please refer to Vernacular Speech.] Economic transformation is a long-haul journey which requires the participation of all our enterprises. While it is important to ensure the successful transformation of large enterprises, we must not overlook the other smaller enterprises. Such SMEs may be of smaller scale, but they have a significant presence due to their large numbers. After all, many of these SMEs and micro-enterprises provide essential services for our citizens' daily life, such as those in the food and retail industry. The most direct way to enable our citizens on the ground to feel the impact of economic transformation is to support these SMEs and micro-enterprises to transform and upgrade, so that they can provide new and better consumer experiences for the public.

Heartland shops are probably the most representative form of micro-enterprises. There are more than 14,000 Housing and Development Board (HDB) shops in Singapore’s 15 town centres and 110 neighbourhood centres. These heartland enterprises can be said to be unique to Singapore and are deeply linked to our HDB culture.

The rise of the digital economy continues to disrupt many businesses’ operating environments, including those of the micro-enterprises. Though many heartland shops still maintain a loyal base of customers who prefer the traditional way that heartland enterprises operate, younger customers have a different set of expectations in terms of the goods and services, and even the mode of communication and payment. They are also experts at online shopping and enjoy the convenience of items delivered right to their doorsteps. How our heartland enterprises can, with their small footprints, transform to attract younger customers while serving their more traditional customers will be key to their continued success.

Mr Chen Show Mao brought up the importance of diversity and vibrancy in our heartlands and suggested rental rebates as a potential approach. The Government closely monitors the property markets to ensure the stability and sustainability of rentals for businesses over the medium to long term.

To ensure that our HDB Neighbourhood Centres and precincts remain vibrant places for residents and businesses alike, HDB has adopted the following measures. When planning commercial spaces, HDB would take into consideration the number of residents and future development plans. In addition, when assessing bids for HDB shops, HDB would not only consider the rent which the bidder is willing to pay, but also the quality of the bidder's business concept. Furthermore, HDB’s Revitalisation of Shops Scheme provides funding for merchant associations to upgrade their shopping environment and carry out promotional events to attract crowds.

Many of the micro-enterprises have banded together to form various trade associations. The Federation of Merchants' Associations, Singapore (FMAS) is a collection of these associations and currently represents 41 merchants' and hawkers' associations. I am happy to see FMAS taking the lead in efforts to inject more vibrancy and drive productivity upgrading in our heartlands. One example is working with various Government agencies to develop pilot precinct development plans for Bedok and Ang Mo Kio to revitalise the area.

Its efforts are supported by SPRING Singapore through a LEAD project, which includes funding for a consultancy study and secondment of a public officer to FMAS. This example shows the Government's commitment in supporting TACs which have the resolve to transform, and working hand-in-hand with them to help enterprises to improve productivity, innovate, internationalise and upgrade skills. After all, there are over 200,000 enterprises in Singapore and the majority is made up of SMEs and micro-enterprises. It is not sufficient to solely depend on the Government’s one-on-one efforts to send the message of transformation to every single enterprise. TACs can amplify the reach of the Government's transformation efforts, and working closely with the TACs is a key component to successful industry transformation. The Government welcomes more TACs to work with us and get more enterprises to join us on this transformation journey.

(In English): Transformation does not have to be daunting. The Government has transformed itself and made it easier for our SMEs to take charge of their own upgrading and internationalisation. Together with our partners, we have created an environment for SMEs to seize the opportunities that the future economy presents.

To my fellow Members, if you are approached for help about how enterprises can benefit from the Government schemes, I want to reassure you that, at every step of an SME's journey, there is support. For SMEs seeking easy-to-digest solutions, they can check the SME Portal, access the BGP, or approach any of the 12 SME Centres island-wide for free business advice. For SMEs looking for more complex support, they can look to grants like the EDG or start a discussion with ESG. Throughout this, TACs will continue to spearhead initiatives that enhance the competitiveness and relevance of their industries. For those enterprises that have benefited from the Government’s and TACs' support, I urge you to share your experience with your business community and help spread the culture of mutual help.

For enterprises that are not already a member of a TAC, I encourage you to join one. If you are, I encourage you to consider stepping up to take a leadership role. And if you are already a TAC leader, I would like to thank you for your service and encourage you to continue working with partners to bring transformation to your industry.

Together, we can build a strong business ecosystem that will benefit all workers and enterprises in Singapore and allow us to remain relevant and competitive in the future economy.

The Chairman: Senior Minister of State Koh Poh Koon.

The Senior Minister of State for Trade and Industry (Dr Koh Poh Koon): Technological advancements have had a profound impact on our industries and businesses. Although change can be disruptive, it presents many opportunities. Some companies have already moved to transform their businesses and are today enjoying the fruits of transformation.

We want to help more companies seize these opportunities. The Government is ready to support them with initiatives customised to each sector. Some sectors I would like to highlight are the manufacturing and wholesale trade sectors. 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 shown to hon Members.]

Dr Koh Poh Koon: Thank you, Sir. Let me address the questions from Mr Sitoh Yih Pin and Miss Cheryl Chan on what the Government is doing to build a globally-competitive manufacturing sector.

Manufacturing remains an important pillar of Singapore’s economy. The sector accounts for around 20% of our GDP and around 14% of our total employment. Today, we have a diversified portfolio of high value-added manufacturing industries. Our products are exported to many markets globally. In 2017, Singapore’s manufacturing sector saw strong growth, and the sector continued to expand at a robust pace in January 2018.

However, the global manufacturing landscape is evolving. We are witnessing rapid technological developments in areas, such as robotics and the industrial Internet-of-Things (IoT). This presents two opportunities.

One, it is to establish Singapore as a globally-competitive advanced manufacturing hub. This will help attract strategic investments and anchor our position in global value chains.

Two, it is for our companies to gain a competitive advantage by prioritising three areas: (a) undertaking innovation; (b) adopting technologies, and (c) preparing their workers to thrive in tomorrow’s workforce.

I would like to explain the rest of these three points in greater detail in Mandarin. Sir, may I now speak in Mandarin, please.

(In Mandarin): [Please refer to Vernacular Speech.] In my English speech, I said that we must prioritise three things to achieve a competitive advantage. One, undertaking innovation; two, adopting technologies; and three, preparing workers to thrive in tomorrow's workplace.

First, innovation. Innovation is key to differentiating oneself from the competition. This can take the form of creating new products, finding business opportunities, and developing efficient means to optimise resources. Some manufacturing subsectors, such as precision engineering (PE), are already seeing the need for innovation. In 2016, PE companies invested 50% more in R&D, compared to the previous year. This is commendable.

One of the ways that SMEs can improve their innovation capacity is by tapping on A*STAR's Growing Enterprises through Technology Upgrade (GET-Up) initiative, which offers Operation and Technology Roadmapping (OTR).

Through OTR, SMEs can get A*STAR's guidance to customise a long-term growth strategy to realise new product or service offerings. The OTR provides SMEs with business strategies to assess consumer demand, challenges and potential markets. As of November 2017, A*STAR has engaged over 300 companies through OTR.

Plasmotech is one of these companies. It originally focused on manufacturing connectors and capacitors for the electronics industry. Through OTR, it has discovered opportunities in the automotive market. It invested around $1.7 million in equipment and infrastructure, hired a team of engineers to develop automotive components and entered new markets in 2016. Its sales have increased 20% year-on-year. We hope that more companies will see the value of innovation and enjoy similar benefits.

To extend the reach of OTR, A*STAR will work through lead Government agencies and TACs to launch consortium-style OTRs. This will bring together companies within the same sub-sector to chart out technology roadmaps for shared problem statements. Participating companies can then build on these shared roadmaps as base templates to further customise solutions for their needs. This arrangement allows more companies to leverage shared resources, such as industry experts and technology developers.

The first consortium-style OTR will bring together 16 food manufacturing companies, including Kee Song Group and Phoon Huat Pte Ltd, to identify common technology areas to improve productivity. These include shopfloor control systems and shelf-life monitoring solutions to reduce food waste.

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Second, adoption of technologies. Besides improving innovation capacity, SMEs can adopt manufacturing technologies to optimise their processes and resources. This ensures that companies remain competitive and can benefit from upturns in external demand, as demonstrated by the strong productivity growth in the electronics and precision engineering clusters in 2017. In those clusters, real value-added per worker grew by 35% and 15% respectively.

To facilitate the adoption of technologies, we have put in place various support schemes. For companies considering the deployment of large-scale automation to improve productivity, SPRING Singapore offers the Automation Support Package (ASP) comprising grant, tax and loan incentives to offset costs.

One local company which has tapped on the ASP is Lingjack, a manufacturer of firefighting equipment. Lingjack previously depended on manual labour for almost 90% of its manufacturing processes. Through ASP, the company introduced new equipment to automate functions, such as polishing, welding and leak testing. As a result, Lingjack improved its manufacturing efficiency by almost 40% and is looking to expand its production capacity. It is also looking to manufacture higher value-added goods and is targeting an increase in revenue by up to 20% this year.

Companies which are looking for ready technology solutions can access the Tech Depot, jointly created by A*STAR, IMDA and SPRING Singapore. This is an online repository of plug-and-play productivity solutions which can be found on SPRING Singapore's SME Portal. The solutions cover areas, such as inventory and asset tracking and supply chain management. Since its launch in April last year, 45 solutions have been made available and more than 1,000 companies have adopted solutions from Tech Depot.

Third, prepare the workers. Even as companies review their strategies and plans, they should transform with their workers in mind. We strongly encourage companies to proactively prepare their workers for the changes ahead.

Univac, a precision engineering large local enterprise (LLE) that manufactures medical devices and life science consumables, is one such company. Univac not only embarked on transforming its business, but is also equipping its employees for the changes. Mr Yim Kong Ming, 59, is a Senior Quality Engineer with the company. His job used to be very manual, requiring significant time and effort for data collection.

Today, as Univac incorporates software applications in its processes, data collection is increasingly automated and seamless. These ongoing changes allow its workers to be redeployed to higher value-added tasks, such as data analysis. To prepare its employees for the changes, Univac assembled a team to provide training in the new software and technologies. The team also provides on-the-job support during the implementation phase to ensure that the engineers and technicians are competent and confident in operating the software.

Kong Ming appreciates how the digital transformation has made his job less laborious. Instead of having to manually collect the data, he has easy access to it on his digital devices. He can focus more on data analysis and problem resolution.

(In English): Over time, as our companies continue to improve their innovation capacity, adopt technologies and prepare their workforce, we will build up a strong local manufacturing base to support our vision of being an advanced manufacturing hub.

While I have spoken about the many schemes available to support companies, I understand that some companies are unsure how and where to begin their transformation journey. And this is a point Mr Sitoh Yih Pin raised earlier. As a first step, companies can use EDB's Singapore Smart Industry Readiness Index (SSIRI). This tool will help companies to self-diagnose the future-readiness of their organisational processes, technology usage and workforce skills. It is designed to be used by companies of all sizes in all sectors to determine how they may implement "smart" manufacturing operations. I encourage companies to sign up for the SSIRI workshops conducted by EDB to find out more. I will also speak more about the SSIRI later this month at the IoT Asia Conference 2018.

I would now like to speak about the Government’s efforts to maintain Singapore’s competitiveness as a global trade hub. Today, wholesale trade is a key contributor to Singapore’s economy, accounting for about 16% of GDP. However, the wholesale trade sector is lesser known to many Singaporeans. Most have the misperception that it involves working in warehouses. Actually, it is far from that. It is one of our economy’s largest and most diverse sectors, comprising more than 35,000 firms engaging in Business-to-Business (B2B) transactions for a wide range of goods, ranging from household goods and consumer electronics to food items and commodities. The sector is also external-facing, with over 80% of sales derived from international trade. This international aspect puts the wholesale trade sector in a prime position for growth over the next decade.

Across Asia, rapid population growth and rising consumerism are expected to fuel regional demand for goods like food, fuel and smart devices. To help local enterprises unlock these opportunities, the Government has worked to deepen our trade connections with ASEAN.

In September 2017, the Singapore Logistics Association (SLA) and Global eTrade Services (GeTS) launched "hive", a regional B2B trade facilitation platform. "Hive" supports companies in meeting cross-border trade compliance requirements for over 50 customs authorities in ASEAN and around the world. This allows companies to enjoy greater process efficiencies and seamless clearance, since "hive" will be linked to Singapore Customs. Preliminary response has been encouraging. In a mere five months, over 2,300 companies have joined the platform, with close to 4,000 transactions completed.

Yet, we must be prepared for how technological advancements, such as blockchain technology and data analytics, could revolutionise the way global trade is conducted in the coming years.

To help strengthen our trade ecosystem, we will establish the Trade Infrastructure Development Fund (TIDF) this year. This new fund, TIDF, will be offered as a grant to support companies which are looking to develop B2B e-marketplaces and innovative trade solutions. TIDF will also support initiatives to create a wider spectrum of financial value-added service offerings. These efforts will help support our wholesale trade companies to scale up and become more productive and innovative.

Sir, even as our industries and companies transform and seize the opportunities, we want our people to benefit from the good jobs that will be created. Senior Parliamentary Secretary Low Yen Ling will speak in greater detail about how our people can thrive in this new environment.

Much of my speech has focused on transforming and rejuvenating existing industries to future-proof Singapore’s economy. I would now like to address another part of the equation and, that is, how the Government is working to nurture startups as catalysts of growth.

The Chairman: Order. May I move the extension, please.

Debate in Committee of Supply resumed.

Dr Koh Poh Koon: Thank you, Sir. Mr Charles Chong asked about the Government’s efforts to build up our startup landscape. Startups play an important role in our economy. They help to boost Singapore’s economic competitiveness through innovative ideas and disruption of existing industries, thus contributing to sector development and transformation.

In recent years, we have seen good growth in the number, contribution and quality of our startups. The total number of startups in Singapore grew from 22,000 in 2003 to 43,000 in 2016. They contributed $7.7 billion, or 1.9% of GDP in 2016. In particular, the number of tech startups increased from 2,800 to 4,300 in the same period, employing about 24,000 workers in 2016.

Startups in Singapore are also attracting a good level of investor interest and funding. In January 2018, local logistics startup Ninja Van raised over US$87 million in its Series C funding round, while late last year, homegrown gaming company Razer raised US$528 million in its initial public offering in Hong Kong.

These success stories are certainly not one-off. In Singapore, the venture funding activity and deal flows have multiplied significantly from 80 deals worth US$136.4 million in 2012, to 174 deals worth US$1.37 billion in 2017.

These developments reflect the growing quality and potential of startups here. This shows that our moves to distinguish Singapore’s startup scene through establishing a strong brand identity, strengthening our talent attraction efforts, and enhancing funding support are bearing fruit.

"Startup SG" was launched in March 2017 as a single brand identity to showcase Singapore’s startup ecosystem to the world. It also unified the Government's startup support schemes, making it easier for entrepreneurs to apply for support.

SPRING Singapore leveraged the Startup SG brand to organise the inaugural Startup SG competition, SLINGSHOT@SWITCH, in September 2017. The competition attracted more than 900 teams from over 30 countries. Media coverage of the competition and the Startup SG brand was extensive and helped to increase global mindshare of Singapore as a startup hub.

Second, to improve Singapore's attractiveness to global entrepreneurial talent, we enhanced the EntrePass scheme’s entry and renewal criteria in August 2017. Since then, the number of applications has more than doubled. This is an encouraging development. Given Singapore’s small size, we need to remain open to promising global entrepreneurial talent who can contribute to the vibrancy of our startup scene. This will help to seed future growth and good local jobs. In 2016, foreign startups generated a total of 9,800 local jobs. As a percentage share of the total employment generated by foreign startups, local jobs took up 54%, which constitutes an increase from 50% in 2012.

In one example, after Dr Bert Grobben's application for the EntrePass was supported in 2015, he incorporated a startup here called Budding Innovations. His company specialises in commercialisation of technology by working with companies to develop go-to-market strategies. Budding Innovations has since created five local jobs, of which three are PMETs.

Third, to strengthen funding support, we raised the cap and proportion of the Government’s co-investment funding share under Startup SG Equity last year. This aims to catalyse private sector investment into promising Singapore-based technology startups with IP and global market potential.

Building on this, SPRING Singapore appointed nine co-investment partners last month with the goal of further catalysing over $200 million into more deep tech startups in the growth sectors of Advanced Manufacturing and Engineering, Health and Biomedical Sciences, and Urban Solutions and Sustainability.

Beyond funding, the deep tech startups will stand to benefit from the resources and know-how provided by those various co-investment partners, which had been chosen for their expertise in the respective sectors. This includes help with technology translation, prototyping and manufacturing facilities, and strategic networks for development and commercialisation, thus working to shorten the startups’ learning curves and improving their chances of success.

To scale up, startups should seek out-growth opportunities, both locally and abroad. Startups can tap on partner networks which we have put into place. Last year, the Government worked closely with partners like the Action Community for Entrepreneurship (ACE) to strengthen startups’ access to smart financing and global networks. This included supporting the launch of ACE International Centre, which provides a landing pad for global startups and helps local startups to scale up and internationalise.

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JTC has also developed LaunchPads at one-north and Jurong Innovation District (JID), which offer a range of spaces for startups to operate in and testbed their ideas. More importantly, LaunchPads serve as hubs to connect entrepreneurs with accelerators, incubators, venture capitalists and fellow entrepreneurs in related fields. This creates opportunities for knowledge sharing, collaboration and growth. At JTC LaunchPad@JID, JTC will work with partners to provide a one-stop prototyping centre where deep tech startups can leverage shared equipment for small batch production.

SPRING Singapore will also be launching the Startup SG (SSG) Network later this year. The SSG Network will be a one-stop database of information, as well as an e-community of startups and ecosystem players. This will support networking and facilitate business matching for startups.

With the establishment of ESG in April this year, startups will be able to leverage ESG’s international network of offices and in-market partners to scale up and expand into new overseas markets. ESG will advise startups on capability development and internationalisation, while providing them with integrated support through the schemes that were previously under SPRING Singapore and IE Singapore.

As the Minister for Industry, Mr S Iswaran, had earlier highlighted that the Government is adapting to better serve the needs of industry in Singapore’s new economic environment. As part of this, the Government will restructure the Competition Commission of Singapore (CCS) in April 2018 to take over SPRING Singapore's current role as the administering agency for the Consumer Protection (Fair Trading) Act (CPFTA). Besides the CPFTA, CCS will continue its current mandate of administering the Competition Act. To reflect its new role, CCS will be renamed the Competition and Consumer Commission of Singapore (CCCS).

I would now like to address Mr Lim Biow Chuan's question about consumer protection for online transactions, specifically his suggestions to restrict the use of mandatory arbitration clauses in standard terms and conditions and pre-ticked boxes for additional goods and services.

The CPFTA protects consumers against errant retailers who engage in unfair trading practices, regardless of whether these transactions take place online or offline. The Act provides for civil actions to be taken by consumers and by specified bodies against retailers that persist in unfair trading practices.

The Government adopts a balanced approach of supporting a pro-enterprise environment, while at the same time protecting consumers. In line with the principle of the freedom of contract, businesses are free to enter into consumer contracts, as long as it is mutually agreed to by the contracting parties.

Businesses and consumers should be alert to the clauses and conditions of any contract they enter into, including the fine print. Consumers should also take steps to protect themselves before making their purchases. This could include checking reviews on the reputation of retailers as well as their refund policies and mechanisms. Practices, such as using small print to conceal or mislead consumers on a material fact in relation to the transaction, can be considered as unfair practices under CPFTA.

We note Mr Lim Biow Chuan's suggestions on arbitration clauses and pre-ticked boxes. The Government will study them and take them into account when we next review the relevant consumer protection legislations. We will continue to monitor the situation and take appropriate actions, if necessary.

As I have elaborated in my speech, the Government has in place extensive support structures and initiatives to support our SMEs and startups on their transformation journey. What remains is for companies to step up and make the right investments today to seize new growth opportunities not just for themselves, but also for a better future for all of us.

The Chairman: Senior Parliamentary Secretary.

The Senior Parliamentary Secretary to the Ministers for Trade and Industry (Ms Low Yen Ling): Chairman, Minister Lim Hng Kiang, Minister Iswaran, Senior Minister of State Sim Ann and Senior Minister of State Koh Poh Koon have spoken about how our economy has to transform.

We face global trends, such as the shift in economic weight towards Asia and the emergence of new technologies. What does this mean for our people, Singaporeans? With these changes come opportunities. All of us, whether as students, employees and business owners, need to constantly learn, constantly adapt, and constantly embrace new skills and knowledge all the time. As the Government, we will strive to enable our people for the future, especially through (a) the deepening of relevant skills; and (b) the nurturing of global market expertise.

Mr Liang Eng Hwa, Mr Yee Chia Hsing and Miss Cheryl Chan talked about the importance of continuous skills upgrading in today’s evolving economic landscape. I agree that our people need to be enabled with the relevant skills for jobs today and in the future.

That is why it is absolutely crucial for every Singaporean to make lifelong learning a way of life. We are fostering this cultural change through initiatives, such as the national SkillsFuture movement as well as the Adapt and Grow programme. While we recognise that continuing education and training may not be easy due to many competing demands on our time, it is a necessary investment so that we can stay ahead for the future.

The changing economic landscape means that for some people, mid-career switches have become necessary. The types of jobs available may be different as some sectors undergo restructuring. For those looking to make a career switch into a different sector, the Government has developed a suite of Professional Conversion Programmes (PCPs) under the Adapt and Grow initiative. The PCPs are career conversion programmes which help mid-career jobseekers, including PMETs, to reskill and move into new occupations and sectors.

In July 2017, the Ministry of Manpower (MOM) identified five priority sectors with strong potential for PMET job creation. They are Healthcare, Infocomm and Media, Wholesale Trade, Professional Services and Financial Services. In partnership with Workforce Singapore (WSG), our economic agencies are working closely with companies as well as TACs to train and place local PMETs in these sectors.

Members have just heard from Senior Minister of State Koh Poh Koon talk about the Wholesale Trade sector. I will also use this sector as an example. In the Wholesale Trade sector, IE Singapore, Singapore Management University, International Chamber of Commerce Academy and WSG jointly developed a PCP called International Trading PCP. This provides training for the fundamental skills and knowledge of international trade, such as digital marketing, procurement, supply chain management and logistics. In the past one year, the programme has successfully placed close to 70 PMETs with trading companies since the launch of this programme in July 2017. So, it has been about seven to eight months.

Mr Kenny Ang is amongst those who has benefited from the International Trading PCP. After having worked in the Food Services sector for about seven years, Mr Ang was keen to make a career switch. Despite his lack of experience in Wholesale Trade, he was able, through the PCP, to pick up the relevant skills and knowledge that are needed. Mr Ang has since found employment with Raduga Pte Ltd, a distributor of mobility solutions and mobile phones. He manages the company's marketing campaigns and branding projects with regional partners.

The International Trading PCP is but only one of the many PCPs available. MOM will be giving further updates on the Adapt and Grow initiative. Chairman, please allow me to continue in Mandarin, please.

(In Mandarin): [Please refer to Vernacular Speech.] Just a while ago, I talked about the PCP and how it has helped more mature workers to make a mid-career switch by learning new skills to handle new jobs.

As we develop more training programmes, it is crucial to ensure that these programmes meet industry needs. Therefore, during the process of developing the ITMs, the Government has worked closely with employers, TACs, as well as trade unions, to identify the skills required in the relevant industries, and incorporate these skills into the skills framework of various industries. When an individual and company develops a training programme, everything becomes clear once they refer to the skills framework. To date, the skills frameworks for 16 industries have been launched. We have also launched the Workforce Skills Qualifications (WSQ) framework for 31 technical skills and competencies, and nine generic skills and competencies.

As we push for industry transformation and skills upgrading, employers are our most critical partners. One example is Hewlett Packard (HP) Singapore, which has actively groomed local talent through programmes, such as the learning platform "Brain Candy" and other graduate programmes. These training initiatives in new fields, like 3D printing and data analytics, enable their employees to keep up with changes in the industry and cope with new jobs and new demands. In response to the SkillsFuture Programme, HP recently introduced 20 employees as Growth Mindset Ambassadors under an inhouse initiative. These ambassadors will be tasked with promoting lifelong learning throughout the organisation.

The Government urges more employers to promote training for their workers and encourage workers to upgrade their skills, just like HP Singapore. With the rapid development of new technologies, every company has to keep pace with the changes in disruptive technologies, and ensure their employees continue to grow, so that their company continues to grow as well. It is often said that a hardworking employee is a good employee. Similarly, employers who encourage employees to work hard and learn are also good employers. Companies that take training seriously and reward employees accordingly will also be able to attract and retain good workers.

Ultimately, if employees are equipped with industry-relevant skills that enhance their productivity and support the growth of the company, employers also stand to benefit. Hence, promoting skills upgrading amongst employees is the ultimate key to maintaining the long-term competitiveness of businesses.

(In English): My colleagues have highlighted the need for companies to venture beyond our shores, especially to the rest of Asia. A lack of familiarity with overseas markets is often cited by companies as the biggest obstacle to internationalisation. I agree with Mr Yee Chia Hsing that our enterprises and our people need to develop greater global market expertise to capture Asia's potential.

The Government is committed to helping Singaporeans build up international networks and cross-cultural awareness through market immersion and overseas training programmes. These programmes are targeted at individuals across a range of ages and levels of experience, from our young students to our current and future business leaders.

For our students, we have the SkillsFuture Young Talent Programme (YTP). YTP provides our students with opportunities for overseas internships and work-study programmes in the fast-growing Asian markets, including Southeast Asia. YTP is open to students in universities, polytechnics and the Institute of Technical Education (ITE). I am pleased to report that over 5,000 students have benefited from YTP to date. And over the next three years, another 3,000 students can look forward to being sent out under this initiative.

On behalf of MTI, I would like to thank our industry partners and our post-secondary educational institutions (PSEIs) that have grown the YTP to this scale since its launch in 2012. Many students speak of their enriching experiences. With your permission, Mr Chairman, may I display a photo.

The Chairman: Yes. [A photo was shown to hon Members.]

Ms Low Yen Ling: This is ITE College Central's Ms Lim Siying. Last December, Siying spent a stint working at Big C Supercenter in Lamphun, Thailand. During her stint with the hypermart operator, Siying led a group of 18 trainees and managed the inventory, labelling and a promotional campaign for the cosmetics section. Siying shared with us that this exposure has sparked her interest in the different Southeast Asian markets. She observed that the different Southeast Asian markets have diverse leadership and business styles.

She shared that the stint has also broadened her horizons and led her to make many friends overseas. And she is quite sure that whether she works for a company or if she becomes a business owner, these friendships with many different nationalities will serve her very well throughout her lifetime. And that is the impact we hope to make via YTP. Thus, YTP not only offers students valuable opportunities for cross-cultural learning, they also learn to venture out of their comfort zones and build networks in today's increasingly interconnected world. So, that is for students.

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How about our current and future business leaders? Our current and future business leaders are able to tap on SkillsFuture Leadership Development Initiative (LDI) to enhance their growth and international exposure to key overseas markets.

In his Budget Statement, the Minister for Finance announced the launch of the new ASEAN Leadership Programme under the LDI. Earlier, Minister Iswaran also spoke about the LDI ASEAN Leadership Programme. The ASEAN Leadership Programme offers opportunities for business leaders, current and future, to gain overseas market immersion and training that are vital for the development of their global market expertise.

As our Singapore companies expand throughout ASEAN and beyond, it is crucial that we have a pipeline of talent ready to lead and support these efforts. The ASEAN Leadership Programme will focus on creating a vibrant pool of business leaders who understand the unique business environments and cultures of Southeast Asian markets. These countries offer significant growth opportunities for our companies, especially as ASEAN continues to integrate.

The ASEAN region is an important one. ASEAN’s GDP is expected to grow 5.2% annually from 2018 to 2020. By 2030, ASEAN could become the fourth largest single market in the world, after China, the US and the EU. With more than 600 million people, and a middle class that is expected to increase from 38 million households in 2015 to 161 million middle-class households in 2030, ASEAN has lots of promise and untapped potential.

In the second half of this year, the ASEAN Leadership Programme will be launched by ESG and its partner, the Human Capital Leadership Institute. Besides the knowledge of business cultures and leadership styles in key Southeast Asian markets, the ASEAN Leadership Programme will also arm participants with the chance to go in-market to learn from as well as to network with both private and public sector leaders.

This not only helps our business leaders better navigate the region and capture the emerging trends, it extends the connections and growth into new markets. The ASEAN Leadership Programme is expected to support more than 100 Singaporean participants over the next three years.

In conclusion, the Government is deeply committed to enabling Singaporeans with the skills and knowledge to stay relevant. However, we cannot do this alone. We need employers, TACs, unions, PSEIs and training providers to all work closely together to empower our people.

On the individual level, we each has to take responsibility for our future by embracing lifelong learning. Only then, can we capture new potential; only then, can we grow in step with the changes; and only then, can we rise to overcome the new demands of tomorrow. Thank you and, on behalf of the MTI team, I want to wish everyone a happy Chap Go Meh, the 15th day of the Chinese New Year.

The Chairman: Mr Liang Eng Hwa, would you like to withdraw the amendment?

Mr Liang Eng Hwa: Thank you, Mr Chairman, it looks like the more than two hours of download have cleared all our doubts and there are no clarifications from us. It leaves me to thank Minister Lim Hng Kiang and let us congratulate him on the successful conclusion of the CPTPP or the TPP-11. I also thank Minister Iswaran, Senior Minister of State Sim Ann, Senior Minister of State Koh Poh Koon and Senior Parliamentary Secretary Low Yen Ling for their very comprehensive replies to our cuts. I also want to thank all the Members who stayed till the end of the session, really testing the adjournment time limit. With that, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $977,755,000 for Head V ordered to stand part of the Main Estimates.

The sum of $5,181,486,800 for Head V ordered to stand part of the Development Estimates.