Effectiveness of Productivity Schemes to Encourage Companies to Invest in Innovation and R&D

The Second Minister for Trade and Industry (Mr S Iswaran)(for the Minister for Trade and Industry): Madam, there are various Government schemes to support our companies' innovation journey. SPRING offers the Innovation and Capability Voucher (ICV) scheme which provides support to SMEs for consultancy services and the implementation of integrated productivity solutions. Since 2012, SPRING has awarded around $65 million to our SMEs through 13,000 ICVs.

Another example is A*STAR's Technology Adoption Programme (TAP), which was launched in July 2013. Under TAP, teams of advisors link SMEs with providers of technological solutions, or work with public research institutions to develop innovative solutions for adoption. So far, A*STAR has engaged more than 6,000 companies and more than 1,200 companies have implemented technology solutions under the support of TAP.

For companies that are pursuing more advanced innovation projects, assistance is also available from SPRING's Capability Development Grant (CDG), which co-funds up to 70% of qualifying costs. This grant covers a broad range of productivity improvement areas, such as enhancements to workflow processes and technology innovations. In 2014, SPRING assisted more than 1,000 companies under CDG and provided over $100 million in funding support.

In addition, the Productivity and Innovation Credit (PIC) scheme provides tax deductions and cash payouts to help defray the cost of a broad range of investments along the innovation value chain, from simple purchases of IT and automation equipment to more complex R&D projects to acquire new knowledge and create novel products. In the Year of Assessment 2014, 54,000 companies made PIC claims.

To develop Singapore's innovation capabilities, SPRING set up seven Centres of Innovation (COIs) in our public research institutes and polytechnics. These cover specific industry sectors, in Electronics, Environment and Water Technology, Marine and Offshore Technology, Food Innovation, Supply Chain Management, Precision Engineering, and

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Materials. The COIs provide technical consultation and facilities to support our companies in developing and prototyping innovative products.

The results from these efforts have been encouraging. In the 2014 SME Development Survey conducted by the DP Information Group, 75% of the SMEs reported that they were planning to implement innovation in their companies. R&D investments by local SMEs have also increased. In 2012, local SMEs spent nearly $550 million on R&D activities. This is a 70% increase in R&D expenditure, compared to 10 years ago when local SMEs spent around $320 million.

I thank the Minister for sharing the very comprehensive range of initiatives. I have two quick supplementary questions, Madam. First, given the progress we are making in R&D, what is the R&D spend in Singapore as a percentage of GDP? Is there a target that our country aspires to? Second, based on the feedback on the ground from SMEs, they find that the hurdle to qualify for R&D support is quite high. Usually, they think it requires breakthrough technology or major breakthroughs, and their R&D is mainly on a more incremental basis. So, I would like to ask whether there is scope for R&D to be defined in a broader sense so that more companies can qualify and focus on the innovative part of the productivity journey.

Madam, I thank the Member for the questions. First, on R&D spending: if Members recall, our R&D spend through the national initiatives is around $16 billion over a five-year period. That was in the last cycle, which is from 2011 to 2015. That would average out to about $3 billion or so a year, which, in very broad terms, is about 1% of GDP. This is public R&D funding. The target is to try and attract at least $1-$2 of matching private sector R&D to that. That gives you a sense of the broad scope and that would, more or less, be in line with what is achieved in different countries, but there are variations according to the nature of their economy and the capacity of their private sector.

For the second point on R&D, I think the Member's point is that SMEs may be deterred because they think R&D means going for major breakthrough technologies as opposed to more incremental solutions which might be relevant to their operations. That is a very good point. That is, indeed, why, in the range of measures that we have talked about, it is not just about going for major R&D ventures to achieve the kind of breakthroughs the Member referred to, but also for companies to be able to adopt simple technologies to their operations. For example, A*STAR works on creating a bunch of turnkey solutions which are plug-and-play, for example, in the area of Radio Frequency Identification (RFID) tagging, where this can help in supply chain management, warehouse stock-taking and so on. For many companies, this is a simple plug-and-play solution. With the RFID tags coming down, this is something that the companies can adopt with a relatively small investment.

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We look at the whole range and the idea is to allow companies to come in and to make it as easy as possible for our SMEs to come and adopt technology for precisely the reason that the Member mentioned, which is, that technology can be used at any stage of development of a company.