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

Madam, the Trans-Pacific Partnership (TPP) is an ambitious Free Trade Agreement (FTA) involving 12 Asia-Pacific countries, including the US and Japan. The scope goes beyond removing tariffs to tackling broader environmental, labour and intellectual property rights issues. The IP rights chapter in the TPP has raised much concern among negotiating countries. The US proposals reportedly seek a much more stringent level of IP protection than the WTO standards or even the US-Singapore FTA. They are said to strongly favour American industries and big corporations.

There are worries that the TPP may extend the scope of pharmaceutical patents and delay the sale of generic drugs. This could raise prices of pharmaceuticals in TPP member countries, including Singapore.

Can I ask the Minister: would the TPP directly or indirectly cause an increase in the price of medical drugs in Singapore? Will our patients have to wait longer to obtain affordable, life-saving generic medicines? And what are the concrete steps our negotiators are taking to protect our national interests in this area?

As a major trading nation, it is important for Singapore to be part of the TPP. However, I hope the Minister can assure us that the strategic and macroeconomic benefits of the TPP to businesses will not come at the expense of ordinary Singaporeans. Thank you.

Madam, Singapore concluded negotiations with the European Union on an FTA in December 2012. At the same time, ASEAN is in the process of building up the ASEAN Economic

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Community. Around 80% of tariff reductions have been achieved to date ahead of the 2015 deadline.

As we know, the EU and ASEAN were negotiating an FTA between them back in 2007, but talks were suspended. Economic differences between the two regions and within ASEAN were too great. Both parties have indicated that they will resume negotiations when the time is right. Indeed, as ASEAN becomes more integrated as a result of the ASEAN Economic Community, the time may soon be ripe again for FTA negotiations as a bloc.

But Singapore's current situation with its FTAs invokes the situation which economists call the "spaghetti bowl effect", where an intertwined mass of FTAs creates a complicated web of rules that could lead to discriminatory trade policy in the Asian region. Singapore is also a negotiating partner in the Trans-Pacific Partnership. All these may complicate the prospects for negotiating future FTAs involving ASEAN as a bloc.

The Singapore People's Party believes that Singapore should prioritise ASEAN as a bloc, and work towards negotiating FTAs as a bloc. This is because in the larger scheme of things, the Singapore market is too small for the major economies to be interested in doing business with us forever. The US, for instance, is arguably more interested in their current FTA negotiations with the EU and with Japan.

Could I ask what the Government's current stance is, with regard to potential bloc-to-bloc FTAs like the EU-ASEAN FTA?

Singaporeans have always been top performers in math and science competitions, but have yet to produce top scientists to challenge the frontiers of basic research. The integration between basic research and application-based engineering know-how is required. We have been pursuing R&D by way of foreign direct investments. We facilitate investments globally for the best technology, but all this remains in the hands of our investors. Our SMEs continue to struggle with low productivity.

Technology will become even more ubiquitous. For example, are we using technology to manage healthcare costs the right way? That is not only a

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healthcare problem. This is economics at play. Some time ago, we proposed a central database of medical records for Singapore for this reason. How do we enable our SMEs to solve some of these questions?

Our biomedical industry growth looks exactly the same as those in other industries – greater production, more sales, more acquisitions. This cannot be the way to succeed. We need to actively participate in scientific breakthroughs. If we can be at the centre of medical breakthroughs, we will attract investments from MNCs and we will naturally be the centre for medical services. Otherwise, we have to compete only on cost. We think, already, our healthcare workers are frustrated with low wages.

This calls for a new economic growth model, geared towards basic research and frontiers of science; one that focuses on new technology development, not just the acquisition of it. We do not want just to facilitate research – we want to be leaders in that field. From a practical point of view, we need big operational changes. A*STAR should step up its role as a developmental agency. Its KPIs should be prioritised.

We will also need to work with institutions to have a broader understanding of cross-industry opportunities. How do we enable digital healthcare services to support the optimisation of resources? The principle is how these issues can be transformed into opportunities for our people.

We must avoid being the Asian version of a Geneva or a Luxembourg. We cannot only be a financial gateway for Asia because we will never be able to compete if the Chinese renminbi takes over as the international currency one day. China will not prioritise Singapore over Shanghai or Hong Kong.

Madam, some members of the public have asked about the outcomes that demonstrate the economic benefits of making R&D investments.

According to the National Survey of R&D 2012, between 1990 and 2012, the money spent by the public sector on R&D grew about ten-fold while businesses' spending on R&D increased fourteen-fold. In the same period, the number of

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research scientists and engineers also increased seven-fold.

Can MTI describe how businesses, especially local SMEs and Singaporeans, have benefited from these R&D investments?

Block 71 at Ayer Rajah Crescent is home to 100 startups. National Research Foundation (NRF) has been supporting this initiative and generously topping up investment by accredited incubators by putting up $5 for every one dollar investment, up to a maximum of $500,000. The Tech startup sector, being an extremely competitive space, Government policies can make a big difference.

I would like to ask the Minister if NRF will continue to support startups financially.

On to my second cut. At the opening of the liquefied natural gas (LNG) terminal last month, Prime Minister Lee shared that Singapore will continue to explore new energy options, such as solar energy, which is renewable, clean and reduces our reliance on imported fuels. The Prime Minister also said that the Government is keen to learn more about solar, in order to be ready to deploy it on a larger scale, as the technology becomes cheaper and more competitive.

As I understand it, the cost of solar has decreased in recent years. From 2008 to 2012, the global average price of solar photovoltaic (PV) modules dropped by about 80%, due to a variety of factors, including solar technology advancements and global manufacturing overcapacity.

Given these developments, what is the Government doing to capitalise on the declining price trend and facilitate the adoption of solar energy? In addition to the environmental benefits, could the Minister also share how the Government's efforts will benefit Singaporeans and businesses?

Singapore imports almost all its energy needs and hence will always be subjected to supply risks as well as fluctuations in energy prices.

Over the years, the Government has instituted various policy measures, such as the building of LNG terminals, opening up of energy markets to commercial companies, initiated a wholesale electricity market with spot bidding to enhance energy resilience as well as competitiveness. Last week, the

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Government further announced the building of a second LNG terminal.

Our energy market landscape fosters competition to prevent abnormal profits and provide better services to consumers and businesses. It is also important that we look for alternative energy sources as back-up. In the recent dry spell which also affected our neighbouring country, NEWater and sea water desalination have proven to be good alternatives and add to our water resilience. I would like to ask the Minister where are we in terms of energy diversifications and in harnessing other alternatives like solar power?

Recently, the retail electricity market has been liberalised with the aim to promote efficient supply of competitively-priced electricity. How has this liberalisation in the retail electricity market benefited consumers at large? I would also like to ask the Minister for an update on when we would introduce direct electricity imports.

Mdm Chairperson, many companies have raised concerns about the rising cost of doing business in Singapore, and energy is a significant cost component. Last year, MTI announced that the electricity retail market will be further liberalised this year by lowering the threshold for retail contestability. This will allow smaller consumers to pick their own electricity retailers. Businesses will also be allowed to aggregate demands across different locations to meet the contestability threshold. I would like to ask about the response thus far from the industry and consumers to this initiative. How will consumers benefit from this retail contestability initiative?

Mdm Chair, at the official opening of the River Safari last week, Prime Minister Lee said that Singapore needs to be more imaginative about drawing visitors to its shores and refreshing attractions to give tourists an unforgettable experience. He also mentioned that the Government is looking at how to equip workers with the skills, knowledge and courtesies to do well in the tourism sector as well as helping the sector deal with the manpower crunch in Singapore.

We live in an age where there is intensifying competition for tourists. There is a very large variety of destinations to choose from in Asia itself where larger countries with longer histories offer tourists a larger variety of experiences that

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Singapore cannot.

Against this backdrop, what is the outlook for Singapore's tourism sector in 2014? Are there any interesting developments Singapore can look forward to over the next few years? In the face of intensifying global competition for the tourism pie, is MTI taking any steps to assist tourism stakeholders in Singapore to raise their capabilities and deal with issues such as the manpower crunch?

Mdm Chairperson, first, let me thank Members for their comments and for raising very pertinent issues.

First, let me set out the backdrop. The Singapore economy has performed well despite the very recent global financial crisis. If you look at the last five years, between 2008 and 2013, our economy grew by 5.2% annually.

This economic growth has lifted the incomes of Singaporeans. Real median wages among citizens have increased by about 9% in the five years to 2013. This is higher than the income growth in a number of countries, such as Switzerland, Germany and the UK. This tells us that our efforts to restructure the economy, by moving up the value chain and into new growth sectors, are benefiting Singaporeans.

Our economy grew 4.1% in 2013, supported by strong growth in finance, insurance, and wholesale and retail trade. Our manufacturing sector also expanded at a faster pace, on the back of strong growth in transport engineering and electronics.

Ms Jessica Tan asked how our economy would perform this year. She is right in pointing out the downside risks from monetary tightening in the US, and the economic restructuring in China. The persistent tightness in Singapore's labour market could also weigh on growth in some labour-intensive, domestically-oriented sectors.

Nonetheless, we expect the global economic outlook to improve modestly, supported by the gradual recovery of the US and the Eurozone markets, as well as continued resilience in key ASEAN economies. Against this backdrop, we expect Singapore's economy to grow steadily by 2% to 4% this year.

Ms Jessica Tan also asked about MTI's measures to help businesses cope with rising costs. Our economy is now entering a new phase of development, where our cost structure is higher as our economy matures. We have to cope with this adjustment, as we cannot expect to have a First-World economy with

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Third-World costs.

To grow sustainably, we need to improve productivity by growing our topline and managing costs. Many of our companies understand this and are already transforming to respond to this new reality.

We will support our companies by continuing to expand our economic space overseas. Our companies can capitalise on growth opportunities overseas, particularly in our neighbourhood in the ASEAN region, by leveraging on our network of Free Trade Agreements (FTAs).

Mr Gerald Giam is concerned that Singapore's interests may not be adequately protected as we negotiate with other countries participating in the Trans-Pacific Partnership. Let me assure Mr Giam that Singapore and Singaporeans are at the heart of our FTA negotiations. We proactively consult other Government agencies as well as relevant stakeholders to ensure that Singaporeans benefit from our FTAs with other countries. Our approach to the TPP is no different.

More specifically, Mr Gerald Giam also asked about the trade-off between a strong Intellectual Property (IP) regime versus healthcare cost through generic drugs. A strong IP regime is a critical enabler for Research and Development, and, in fact, our strong IP regime is an important factor why we have succeeded in building up a significant biomedical sciences sector over the last 15 years.

At the same time, keeping drugs affordable for Singaporeans is a very important consideration. Therefore, MTI will work with MOH and other Government agencies to make sure we are able to strike the right balance in our TPP negotiations.

Mrs Lina Chiam alluded to a "spaghetti bowl" problem created by overlapping FTAs. Our approach to FTAs has been explained several times. We are committed to multilateral trading systems like the World Trade Organization (WTO). But at the same time, we see regional and bilateral FTAs as being important because they complement the multilateral approach. They allow like-minded and progressive trade partners to move ahead and liberalise earlier.

Mrs Chiam refers to the EU-ASEAN bloc-to-bloc FTA negotiations. As she mentioned in her speech "this negotiation was initiated in 2007, and after two

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to three years did not get anywhere". That is the reason why the EU decided to change tack and reverted to a EU-Singapore FTA, and we successfully concluded that in December 2012. The EU is now in the process of negotiating with Vietnam and Malaysia. This approach of EU negotiating with individual ASEAN countries and then, later, putting it together into a regional agreement is very similar to the process that Japan undertook in negotiating with ASEAN. So, it is not unusual for countries, regional blocs like EU, to do so on a country-to-country basis and then put it together later on in a regional bloc.

But the key point I want to make is that in our FTAs, we try to open market access for our companies. Overall, Singapore benefits from the network of FTAs that we have negotiated. We have, indeed, capitalised on these FTA agreements to strengthen our position as a key trading, investment and services hub. Our companies appreciate this and are working with IE Singapore, as well as our trade associations and chambers, to fully utilise our extensive FTA network for preferential market access.

Mdm Chair, in addition to strengthening our trade linkages, we will continue to restructure our economy and to help companies transform the way they operate. Deputy Prime Minister Tharman outlined how we can keep our economy vibrant and create good jobs for Singaporeans.

Let me delve one level deeper and explain our specific strategies for the four broad clusters of our economy, namely, the manufacturing, financial and business services, exportable services and domestic services sectors.

First, let me talk about manufacturing. This sector remains a key growth engine for our economy, providing more than half a million jobs and contributing about a fifth of our GDP last year. In recent years, key manufacturing sectors continued to deliver topline growth even as our cost base increased.

Ms Jessica Tan asked if we remain attractive as a manufacturing hub, given keen regional competition.

The prospects for our manufacturing sector remain bright. Singapore is plugged into the regional manufacturing supply chain and our companies stand to benefit from the growth of manufacturing in China, India and ASEAN. This is only possible because we are continually moving existing clusters up the value chain and have established a competitive niche at the higher end of this value

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chain.

To maintain our competitive advantage in manufacturing, we will continue to sharpen our industry development strategies. First, we will leverage on the strengths that we have built up in traditional sectors, like Precision Engineering, to upgrade and move into adjacent industries, such as Aerospace and Medical Technology (Medtech). In a similar way, in the petrochemicals sector, we have moved into specialty chemicals; in the biomedical sciences sector, into biologics; and in the electronics semiconductor sector, into the fabless segment.

Second, we will invest in R&D to deepen our manufacturing capabilities. We are already tapping on cutting-edge technologies to upgrade existing activities and open up new growth opportunities in manufacturing. Through the $500 million Future of Manufacturing initiative, EDB and A*STAR are helping businesses to develop and adopt such technologies. For example, EDB has worked with GlaxoSmithKline to pilot new technologies like enzymatic and continuous processing techniques. These have enabled the company to reduce its resource requirements, lower its physical footprint and shorten its manufacturing lead time.

Third, we will build up industry capabilities by leveraging on our Institutes of Higher Learning. For example, EDB is supporting the Nanyang Additive Manufacturing Centre, which is a $30 million research facility at NTU equipped with the latest 3D printers capable of printing metal objects and even human tissue. The centre will work closely with businesses through R&D projects to develop new commercial applications for additive manufacturing.

SPRING is also supporting our SMEs to adopt new technologies. Take Lintech Engineering, for example, it has implemented a robotic welding system to automate its oil and gas repair jobs. The effect has been quite dramatic – Lintech has increased its productivity by up to three times and is now better equipped to expand its business. MTI will develop more of such partnerships to build up industry capabilities and expand our talent pool.

Ms Jessica Tan has highlighted manpower constraints as a key issue for the manufacturing sector. EDB is working with industries' stakeholders to develop a pipeline of multi-skilled engineering talent to support the growth of manufacturing. Through initiatives like the Precision Engineering Vocational Continuing Education and Training programme, EDB is grooming a pool of 2,800 master craftsmen to take on higher value, more complex manufacturing operations and leadership responsibilities. This will help the industry recognise

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and reward craftsmen who build up their skills and experience.

Mdm Chairperson, the profile and nature of jobs in manufacturing will change as we restructure and upgrade. Future manufacturing jobs will be highly skilled, multidisciplinary and have high potential for career growth. They will be different from the jobs today. There will be a need for data analytics professionals, supply chain experts, industrial engineers, designers, business managers, and software programmers. In addition, future jobs will require individuals who can integrate multiple skillsets, such as technical knowledge, systems thinking and industry application. Therefore, I strongly urge Singaporeans to look at the prospects of our manufacturing scene. Good jobs are being created and they should take full advantage of these jobs.

Ms Jessica Tan asked about the services clusters with the highest potential for growth and our plans to help companies leverage on these opportunities. Let me address her questions as I go through our strategies for the various service clusters.

I will begin with financial and business services, which provide close to 700,000 jobs and accounted for 28% of our GDP last year. MAS is developing the financial sector by enhancing our strengths in areas, such as trade finance, foreign exchange trading and wealth management. MAS is also working with the industry to build capabilities that facilitate trade and investment in renminbi.

MTI will complement MAS' effort by growing our business services sector. The sector has seen strong growth over the past few years, with the likes of Proctor and Gamble, IBM and other multinationals setting up their regional and even global HQs here.

Ms Jessica Tan asked if Singapore remains an attractive location for MNCs in view of our rising cost. Multinationals sink roots here because we are an attractive Global-Asia Hub for their industry leaders. We are a leading global city with a solid foundation in connectivity, skilled labour, sound governance and liveability, and these help us to compete for new investments.

We will build on these strengths to continue growing our business services cluster. We will also work with MNCs to groom Singaporean leaders from within their ranks, in functions such as business development, sales and marketing, brand management, talent management and supply chain management.

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At the same time, we need to remain open to global talent as they bring perspectives and deep in-market knowledge that are necessary for keeping our cluster innovative and relevant to global markets.

I will now turn to our exportable services cluster, which covers wholesale trade, transportation and storage, and information and communications. Together, these provide about 650,000 jobs and contributed about a quarter of our GDP last year.

We will continue to strengthen existing clusters, such as commodities trading. Singapore is now one of the top commodities trading hub in Asia, with over 400 global trading companies across the energy, metals, minerals and agri-commodities clusters. In 2012, the trading community here generated about $16 billion in local business spending which, in turn, yielded spillover benefits to the rest of our economy, especially in business services.

We will continue to build on our solid foundation and pursue new sectors with strategic growth potential, such as the precious metals cluster.

However, we will need to move quickly, as competition in exportable services is growing. Shanghai, for example, has established a Free Trade Zone which attracted over $140 billion in trade in 2013 – the first year of its initiation.

We are working with businesses to enter new, higher value services clusters that play to the strengths of our workforce. One example is infrastructure services. Asia alone will need more than $10 trillion of infrastructure investments between 2010 and 2020. Singapore is well-positioned to serve the strong demand in Asia with our strengths in urban solutions. Hyflux, for example, has signed a deal valued at over $500 million to build a sea-water desalination plant in the Dahej Special Economic Zone in Gujarat, India.

We will help our businesses access opportunities in this sector by increasing the number of bankable infrastructure projects, through collaboration with multilateral agencies like the Asian Development Bank and World Bank. We will also catalyse deal-making for Singapore companies by organising roundtables where industry stakeholders can discuss infrastructure projects in detail, such as the inaugural Asia Singapore Infrastructure Roundtable held in October last year.

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We will help Singaporeans embark on careers in infrastructure services. For example, IE Singapore is working with our tertiary institutions to initiate an Infrastructure Development Programme to equip our undergraduates with the inter-disciplinary skills needed by the industry. As a first step, IE has also launched an Infrastructure Development Internship programme in collaboration with NUS and nine industry partners.

EDB will also be helping Singaporean professionals develop deep expertise in project development through an executive education programme known as ALPINE – the Asia Leaders Programme in Infrastructure Excellence. This course will be conducted by SMU and the Lee Kuan Yew School of Public Policy. EDB will announce the details soon.

Another exportable service sector that we are developing is in the information and communications cluster. We will capitalise on our established base of business HQs, infocomm infrastructure and research capabilities to grow this sector and, in particular, the data analytics segment. With falling costs of collecting and analysing data, companies across a range of industries are increasingly looking to use "big data" to improve on how they serve their customers and, indeed, anticipate their needs. We will build up a pipeline of talent to support the growth of this sector. EDB, for example, is working with stakeholders to grow a pool of 2,500 data analysts by 2017.

The last economic cluster that we are continuing to support is the domestic services sector. The demand for domestic services, such as healthcare, F&B and retail, will increase in tandem with the increase in our population.

The key to sustainable growth in these clusters is to raise productivity and innovate our product offerings. We have embarked on several productivity roadmaps to foster such transformation, but the journey has not been easy for many, especially our SMEs.

However, we need to press on and stay the course in our restructuring efforts. Senior Minister of State Lee Yi Shyan and Minister of State Teo Ser Luck will elaborate on how MTI will continue to support our businesses in doing so.

Mdm Chairperson, the growth areas which I have outlined will provide many jobs with good wage growth potential. MTI, MOM and MOE are working together to prepare Singaporeans for these jobs. We will also enhance

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upgrading and employment support for Singaporean workers as we continue to restructure the economy.

Through these efforts, we will ensure that Singaporeans continue to benefit from our economic growth. The journey ahead will not be easy but we need to stay the course. Our economic growth strategies will enable us to capture the new opportunities in our region and translate them into better jobs for Singaporeans.

Minister Iswaran will now respond to the cuts raised on energy, R&D and tourism.

Mdm Chairperson, Minister Lim has painted an overarching picture of Singapore's economic landscape. Now, let me elaborate on the opportunities and initiatives specific to R&D, tourism and energy, and address Members' queries in that context.

R&D is an important enabler in our economic ecosystem. It allows our companies to expand their business opportunities, manage their costs and create good jobs for Singaporeans.

We have committed a significant amount of resources, $16.1 billion from FY2011 to FY2015, towards this national R&D effort. This commitment has also catalysed – and this is important - complementary business investment in R&D. In 2012, the private sector invested almost $1.60 in R&D for every dollar from the public sector. In the same year, Singapore businesses increased their R&D expenditure by 16% to $1.3 billion. The overall rate of private sector R&D investment, as demonstrated by this data, is comparable to that of other economies, such as the United Kingdom, France and Germany.

Our investments in technology have strengthened existing clusters, such as precision engineering. A*STAR has established a Nanoimprint Foundry where our research institutes and participating companies collaborate to design special plastics and surfaces for commercial use. For example, Nanoveu, an

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SME, has used these materials in products like EyeFly 3D, a screen protector filter which turns smartphone screens into 3D displays. Since its launch, Nanoveu has sold more than 10,000 pieces of EyeFly 3D and continues to attract local and overseas interest.

R&D also enables our businesses to apply their existing capabilities to adjacent industries. One good example is precision engineering company, Meiban. It started as an injection moulder in the consumer electronics sector, and has since successfully branched out to design and manufacture biomedical devices. Through A*STAR's marine and offshore programme, Meiban has also developed Southeast Asia's longest deep-hole drilling machine. Meiban now undertakes diverse, high-value projects which have added to its topline.

Mr Ong Teng Koon has asked how SMEs benefit from our R&D effort and I think Mrs Lina Chiam was also referring to that obliquely. The answer: the R&D effort has assisted our SMEs in several ways that have enhanced their competitiveness.

First, SMEs need manpower to develop and execute an R&D plan. The Get-Up, which stands for Growing Enterprises through Technology Upgrade programme, serves this purpose and was set up for that reason. This inter-agency initiative – led by A*STAR but it also involves EDB, IE Singapore and SPRING Singapore – has benefited over 400 SMEs in sectors, such as electronics, chemicals and biomedical sciences, with the secondment of 460 A*STAR researchers.

Second, SMEs need time to translate technology and intellectual property (IP) into commercialised products and services. Under the new "Headstart" programme that A*STAR has launched, all local SMEs who collaborate with A*STAR will enjoy 18 months of royalty-free and exclusive IP licences for IP arising from the collaboration.

Third, SMEs need technology to be accessible. That is the goal of the Technology Adoption Programme (TAP), which was launched last year. And under this programme, teams of A*STAR intermediaries link SMEs with solution providers to customise and implement technology solutions, as well as conduct training for such technology adoption.

About 200 SMEs in the construction, food manufacturing, aerospace, marine, precision engineering and retail sectors have benefited so far. And to foster networking and even more TAP collaborations, A*STAR is organising its

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inaugural "SME Day" next month involving businesses, A*STAR research institutes and technology providers.

One participating company is Feinmetall, which designs and manufactures equipment for the semiconductor industry. Using A*STAR's pictorial recognition technology, Snap2Tell, customers can now scan logos of Feinmetall equipment and access updated instruction manuals immediately instead of relying on hardcopies.

There is scope for us to do more. Hence, A*STAR will expand TAP to the food services, healthcare, logistics and infocomm-media sectors. With this expansion, more companies will be able to leverage on technology to raise productivity and realise more business opportunities.

[Deputy Speaker (Mr Seah Kian Peng) in the Chair]

Our R&D effort has also enhanced Singapore's appeal as a competitive investment location and vibrant technology hub. More MNCs are coming to our shores to collaborate with our local research institutes and technology companies.

This, in turn, has created a diverse range of employment opportunities for Singaporeans. The number of research scientists and engineers in Singapore has grown at a compounded annual rate of 7% over the last 10 years to about 30,000 in 2012. Seventy percent of these research scientists and engineers are locals.

L'Oreal, Danone, Nestle and Abbott are some of the MNCs that have expanded their R&D investments in Singapore. Over the last four years, more than 200 R&D jobs have been created in the food and nutrition sector alone. Mr Lau Jun Jie, who is 35 years old, is an example. He is part of Abbott's sensory analysis department, applying his training and experience to the development of food products.

So, Mrs Lina Chiam should be assured the R&D effort is broad-based. It works with not just MNCs; there are specific programmes that are geared towards our SMEs. It has also created good jobs and opportunities for our businesses.

Sir, let me now turn to the tourism sector. Last year, we welcomed 15.5 million tourists, 7% more than in 2012. These tourists spent $23.5 billion, 2%

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more than the year before. These figures are encouraging, and they were achieved despite business travellers scaling back on spending due to a relatively uncertain economic climate.

STB expects companies to remain cautious in their business travel expenditure in 2014. Mr Vikram Nair asked about the outlook for 2014. STB has forecast visitor arrivals to grow to between 16.3 million and 16.8 million. This is an increase of between 5% and 8% from last year, and tourism receipts to be in the range of $23.8 to $24.6 billion, which is a 2% to 5% increase.

STB will continue to pursue quality tourism growth, by focusing on visitor experience and driving tourist spend. Given our land and manpower constraints, we need to creatively achieve more with less, and invest in both tourism hardware and software.

We start from a position of relative strength, having progressively augmented our tourism assets. Just last week, Prime Minister Lee officially opened the River Safari. Soon, the Sports Hub and the National Art Gallery will be ready.

We will complement such tourism hardware with distinctive content and programming. This will help to differentiate us from competitors and enhance the value derived from existing assets.

Lifestyle events are a good example. Our tourism calendar and capabilities are strengthened by international sporting events like the F1 Singapore Grand Prix, and, from this year, the Women's Tennis Association (WTA) Championship. If you are wondering who that young lady is between Serena Williams and Li Na, she is an RGS tennis player. Her name is Maxine Ng. I think her T-shirt says "Strong is Beautiful". Complementary entertainment and business events maximise the tourism and international branding benefits for Singapore. The experience we have gained from hosting such marquee projects also boosts Singaporeans' event management capabilities.

We maintain our standing as a top global venue for the Meetings, Incentives, Conventions and Exhibitions (MICE) sector. This has enabled Singapore to grow a pipeline of quality MICE events which will draw high-spending business travellers. This includes, for the first time in Asia, and as part of the inaugural Singapore Design Week, Maison & Objet Asia, which will be held alongside one of our top tradeshows, the International Furniture Fair Singapore. Over the next few years, the World Confederation of Physical

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Therapy, and the International Society of Magnetic Resonance in Medicine, will also hold their meetings in Singapore for the first time.

Smaller scale, ground-up innovations also make for a vibrant tourism landscape. Last year, we launched the Kickstart Fund to support and test-bed novel ideas with good tourism potential and scalability. The response has been good and STB has received a variety of ideas.

One example is "The Inside Job", which will commence its interactive walking tour combining elements of live theatre and adventure. Participants will be taken through precincts, such as Marina Bay and neighbourhoods, where they will encounter in-character actors.

In general, I would encourage all who have exciting and interesting tourism ideas to come forward and jointly develop them with STB.

There are also opportunities to innovate and deliver superior service, despite the manpower constraints that Mr Vikram Nair and other Members have highlighted.

For example, STB and IDA recently concluded a call-for-collaboration for the use of self check-in technology in hotels. So far, about 60 of our hotels have expressed interest. With such technology, hotels can better anticipate the arrival timings and check-in habits of business travellers and other guests. They can then tailor their services and stagger their staffing to provide the best check-in experience for their valued guests, every time. It will also allow hotels to re-deploy manpower to other high-touch customer-facing functions. In other words, they can focus on services that would really matter to their customers.

Travel agents have also been raising their productivity. Last year, I spoke about the National Association of Travel Agents Singapore's (NATAS) skills accreditation framework that aims to raise the capabilities and professionalism of the travel agents industry. Since March 2013, almost 200 individuals have participated in the scheme and about 60 more are undergoing assessment.

Mr Lim Biow Chuan has pointed out that travel agents also need to better protect the interests of consumers. Today, there are about 1,200 travel agents providing a range of services like coach tickets and travel packages. STB licenses them under the Travel Agents Act and Regulations. One of the

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requirements is that TAs must have a minimum capital requirement of $100,000 to ensure that these operators are bona fide.

The incidence of sudden or distressed closures of large travel agents like Five Stars Tours is relatively uncommon. In the past decade, only one other large travel agency closed abruptly and that was in 2006. To some extent, this is unavoidable because travel agencies, like any other business, are subject to risk and business failure. Under such circumstances, customers can usually make claims under travel insurance, or seek redress through the Small Claims Tribunal.

I fully accept Mr Lim's point that customers should be protected and we should look for more ways to do so. Mr Lim has suggested various other ideas to protect consumers' deposits, including compulsory insurance and a compensation fund. STB will study these proposals, as well as the consumer protection practices in other countries, to assess what more can be done in our context. In doing so, I think it is important that we remember that there is a need to balance the protection of consumers' legitimate interests against any additional regulation, and its impact on business cost and, ultimately, the cost to consumers.

On the manpower front, our training institutes like Singapore Hotel and Tourism Education Centre (SHATEC) and our Polytechnics have been working with STB and the industry to review their pre-employment training in light of evolving industry needs.

These industry stakeholders are also keenly aware of the aspirations of young Singaporeans, and the need to offer structured career pathways that can attract and reward those who wish to make tourism their career. One example is Mr Kung Teong Wah, who is 43 years old and graduated from SHATEC more than 20 years ago. He has risen through the ranks to now become the Executive Assistant Manager of Holiday Inn Singapore Atrium.

Our collective efforts to enhance Singapore's tourism hardware, software, manpower capabilities and service quality will have a sustained and positive impact on our quality tourism strategy.

Sir, let me now turn to the energy sector. Our aim is to strike a balance between energy security, economic competitiveness and environmental sustainability. We seek to do so by pricing energy right, avoiding consumption subsidies and fostering a competitive energy market for the benefit of

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businesses and households.

As I announced last year, Energy Market Authority (EMA) has sought to promote more competition in the electricity retail market through the Increased Retail Contestability initiative.

Dr Lim Wee Kiak and Mr Liang Eng Hwa have asked how such measures will benefit consumers. Currently, only about 8,000 large consumers who use more than 10 megawatt-hours (MWh) per month can choose to purchase electricity from electricity retailers through negotiated contracts. This is the contestable segment of our market.

This threshold will be lowered to 8 MWh from 1 April, and then to 4 MWh from 1 October this year. In total, this will allow 15,000 more consumers to choose their electricity retailer and sign on to packages that best suit their needs.

So, who does this specifically benefit? With this change, 15 Town Councils have already signed up for contestability under this initiative. In fact, this was a point that Mr Zaqy Mohamad raised in last year's COS as well. As a result of the 15 Town Councils signing up, I understand that they will collectively enjoy a reduction of at least 10% of the regulated tariff, which works out to an estimated $640,000 in monthly savings.

Companies, especially SMEs, across all sectors will also benefit. They can now aggregate their demand across various locations to meet the lower threshold and choose a retailer who offers the most competitive pricing. Several firms from various sectors, like SMD Manufacturing and Kleen Pak Products, F&B outlets like the Song Fa chain of restaurants, and logistics firms like Huationg, have already done so and they will enjoy cost savings ranging from 3% to 12%.

EMA is studying how to further expand the contestable segment of the market over the next few years to include all consumers, including households. In doing so, EMA will also have to ensure that there are adequate system safeguards even as more businesses and households benefit from greater retail contestability.

We will also continue to provide progressive and targeted assistance to low- and middle-income households through the Utility-Save (U-Save) special payment and quarterly U-Save rebates. This is announced by the Finance Minister in the Budget Statement. For the majority of Singaporeans who live in

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3- and 4-room flats, the rebates will offset around two to three months' worth of utilities, or three to six months' worth of electricity bills.

Energy security is another key priority as we import almost all our energy. Singapore's energy security was given a significant boost when our first LNG terminal on Jurong Island commenced operations in May last year. This allows us to import natural gas from around the world. To meet future demand in a secure manner, we will develop a second LNG terminal to diversify our LNG infrastructure.

And we continue to explore other energy options. Mr Liang Eng Hwa has asked for an update on electricity imports. We are studying how electricity imports can add to our energy mix without compromising the stability and security of our system. EMA is developing the proposed regulatory framework and will be seeking further industry feedback by the end of the year.

We will also do more to encourage the use of renewable energy. This will help reduce our reliance on imported fuel and our carbon footprint.

Among the various renewable energy options, solar has the greatest potential for wider deployment in Singapore. As a principle, rather than subsidise consumption, we have supported R&D and encouraged the market to adopt economically viable forms of renewable energy.

As Mr Ong Teng Koon has noted, recent global developments suggest that solar energy has become more cost-competitive. As a result, we plan to raise the adoption of solar power in our system to 350 Mega-Watt-peak (MWp) by 2020. This is about 5% of 2020 peak electricity demand, a significant increase from the present 15 MWp of installed capacity today.

EDB will work with key Government agencies to aggregate demand for solar deployment across Government buildings and spaces. This "SolarNova" programme will also catalyse the growth of the clean-energy sector and create opportunities for Singapore businesses, such as Sunseap, PV World and SolarGy.

As renewable energy sources like solar are intermittent in nature, EMA is reviewing its regulations to ensure our system remains stable, even with greater adoption of renewables. EMA will continue to work with industry to refine the regulatory framework.

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We will also support the use of renewables by continuing to test-bed innovative energy technologies and business models. An example is the deployment of floating photovoltaics on reservoirs to overcome land constraints. In addition, the inter-agency Energy Innovation Programme Office is funding research into technologies to allow the integration of intermittent generation sources into our electricity grid. These initiatives not only create business opportunities for our clean-tech ecosystem but also good jobs for Singaporeans.

Sir, over the next 10 years, we need around 2,400 technical professionals for the energy sector. These are good jobs and we will continue to equip Singaporeans with the skills to fill such jobs.

Ms Katelyn Ng, 25 years old, and Mr Ridhuan Abdullah, 39 years old, are two of the growing pool of Singaporeans who have chosen careers in the energy sector. Ms Katelyn Ng joined Singapore LNG Corporation over two years ago on its Graduate Development Programme. She helped set up the LNG terminal's laboratory and now oversees its operations. Mr Ridhuan Bin Abdullah is a Polytechnic graduate who made a mid-career switch to join Tuas Power. He has since progressed from a Technical Officer to an Assistant Shift Manager at Tuas' $2 billion Tembusu Multi-Utilities Complex. We want to encourage more Singaporeans to embark on a promising career in the energy sector.

Sir, I have outlined my Ministry's and our agencies' major initiatives in R&D, tourism and the energy sector for this year and beyond. These and other measures that MTI, MOM and MOE will be outlining will help us to continue transforming our economy, enable our businesses to seize growth opportunities and create good jobs for Singaporeans.

Mr Chairman, I agree with the Government's push towards higher productivity to ensure sustainable economic growth. The National Productivity and Continuing Education Council (NPCEC) was set up in 2010 to drive national productivity. However, productivity growth numbers have been fluctuating. Furthermore, productivity growth has been weak in recent years. Could MTI share the reasons for this and what are we doing to

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ensure we raise national productivity?

We have also seen the Government roll out multiple initiatives to help companies improve productivity. There is a need to ensure that implementation is on track. Could MTI update Members on the number of companies that have implemented productivity projects and the benefits they have reaped, apart from the one that was just mentioned by the Minister?

Each sector has its own unique set of challenges in driving productivity. I am glad to note that the NPCEC has implemented customised solutions for specific sectors. What else is the NPCEC doing to help companies within and across sectors?

Sir, productivity has not improved in the past several years. This is worrying as Singapore's competitors are not standing still but are improving. Even if we have a lead to begin with, then it would be narrowed. Productivity is critical to our long-term standard of living and improved wages.

In the initial period of foreign manpower tightening, I believe that the response from many companies was to clamour for a return to the status quo of easy access. When that did not happen, companies basically responded in two ways. For those who knew what to do, they rolled up their sleeves and started in earnest to adapt and change. And I believe that many of these are probably now claiming PIC grants.

But money itself is not a sufficient solution. For those who do not know what to do, they see themselves in an increasing state of quiet desperation, and some close shop and die.

It is clear that while curtailing over-reliance on foreign manpower is a necessary step toward encouraging productivity improvement, it is not a sufficient measure. Just because firms do not have easy access to foreign labour does not mean that they naturally know what to do. Processes, job designs, technology, skills, mindsets, culture, must change.

I, therefore, ask for MTI's assessment of the state of know-how of our companies, big and small, in terms of conceiving and implementing productivity improvement measures. What is being done to help companies

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acquire know-how in this area, especially for companies that are finding it a struggle, and what more can be done to encourage them to, indeed, take concrete efforts to do so? Also, is there a sufficient pool of productivity improvement consultants in Singapore that they can draw upon? If not, how could such a pool be built up?

Mr Chairman, many Members of this House have spoken about the problems of escalating prices and rents in industrial and commercial properties.

I would like to ask MTI to share details on the supply of new industrial space projected for the next three years, and whether this supply will ease the pressure on commercial property prices and rentals, in the same way that we have seen pressures ease in the residential market. It is critical that the Government retains some strategic levers to influence the market and ensure that Singapore remains competitive and businesses remain sustainable.

It may be time to review the policies on industrial Government land sales. Instead of relying solely on bid prices, qualitative factors, such as economic contribution and quality of jobs created, as well as purpose of development, whether it is for investment or owner-occupation, should all be taken into consideration.

The Government needs to step up its efforts to help effect the necessary structural change needed for more productive land use. They should increase the supply of next-generation industrial facilities that help companies achieve economies of scale and reduce business costs. Developments like JTC Food Hub that provide shared facilities, supported with a full suite of logistics services, can transform industries.

In fact, the competitiveness of selected industries, such as aerospace, biomedical sciences and food manufacturing, can be boosted with specialised land and space for the industry clusters, as seen in recent JTC developments. We should aspire to lead in this area, turning our land constraints to a unique advantage with innovative features.

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With signs of recovery in the global economy and in preparation for the ASEAN Economic Community in 2015, we should also help more companies seize growth opportunities overseas. I would like to ask the Minister to elaborate on support schemes available to help SMEs go international. What help is available to support them to pool their set-up costs collectively and jump-start their operations overseas?

Mr Chairman, given the small domestic market in Singapore, we have seen many of our home-bred companies expand overseas and seek new areas of growth. It is a logical strategy for local companies, given the circumstances, and many have, indeed, done well in the regional locations. Successful local brands that come to mind are CapitaLand, BreadTalk, Hyflux, SembCorp and so on, which have, in a way, carried our flag high.

Our aim is to develop more globally competitive companies that are rooted in Singapore and thereby expand our economic space. The Government has been very helpful in directly assisting companies through agencies based in overseas locations, such as IE Singapore, EDB, STB, MAS and Overseas Singaporeans Unit. In addition, there are available schemes, such as Global Company Partnership (GCP) and Market Readiness Assistance (MRA), to assist local companies venturing overseas.

Beyond that, as the Minister has said earlier, the Government has also helped open access through the FTAs. Here, I want to compliment the good work done by IE Singapore. I have received very positive feedback from businesses on how IE Singapore has been a great help to Singapore companies, especially those stationed in Chinese cities. The officers there have solid ground knowledge and insights as well as the necessary contacts and connections to the local business and regulatory establishment. Many of the officers will often go the extra mile to help companies to link up with the right business partners and cutting short the learning curve.

Given the labour constraints in Singapore and our effort to promote internationalisation of our companies, I would like to ask the Minister what are some of the high-growth markets that companies can expand into and how is MTI working with companies to make inroads there. Also, I would like to find out from the Minister what are the common challenges faced by companies going global. What more and how differently can MTI work with the private

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sector to address these challenges?

Mr Teo Siong Seng (Nominated Member) (In Mandarin): [Please refer to Vernacular Speech.] Mdm Speaker, Members of Parliament, good afternoon to all. I am the Immediate Past President of the Singapore Chinese Chamber of Commerce & Industry and the Managing Director of Pacific International Lines. The key points of my speech today are how to determine the value-add and productivity of business, and how to preserve traditional businesses and help them to grow.

A number of SCCCI's pre-Budget wish-lists, based on our Survey findings, have found responses in this year's Budget, especially in the fine-tuning of schemes like the Productivity & Innovation Credit (PIC) and the Innovation & Capability Voucher (ICV), to assist local enterprises in improving their productivity and alleviating their cash flow pressures. However, some small business owners told me that the Government assistance schemes mainly benefit profitable companies and of a certain size. The requirements for most of these assistance schemes are unattainable by micro-enterprises. Moreover, their most pressing needs remain unsolved, especially with regard to escalating rentals and manpower shortage. These are problems mostly encountered by traditional businesses, neighbourhood shops, hawker centres, food processing, timber, glass, F&B and the services sector in general.

How can we change the predicament faced by these small businesses at root source? I have long thought about this. To this very day, the Government has been the prime mover of Singapore's economic development, steering Singapore towards the path of industrial upgrading and transformation. Some high value-added and high-technology industries would be well taken care of – receiving all kinds of preferential treatment for land allocation, tax holidays, financing and application of high-tech solutions. On the contrary, assistance provided to the SMEs and traditional businesses is very peripheral and many assistance schemes come with a slew of conditions, making them almost impossible for SMEs, especially micro-enterprises, to enjoy.

Recently, Prime Minister Lee Hsien Loong said this in an interview, in Mandarin, with the Chinese weekly magazine, New Century: "In balancing the two needs, to be competitive as well as to take care of the people, Singapore needs to do somewhat more to tilt towards the latter. As competition gets fiercer, the middle- and lower-income will need more attention. If you go too much towards competitiveness, you lose that cohesion and sense of being

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Singaporeans together." Thus, I would like to understand how MTI determines that a particular industry belongs to the high value-added category, or how the productivity of a particular industry is evaluated. Based on current calculations, some high value-added industries will have very preferential treatment in doing business, but those deemed low value-added, especially those belonging to traditional businesses, would never become high value-added no matter how hard they try to upgrade and innovate. A slab of bean curd, a bowl of bak kut teh, one plate of char kway teow and one ang ku kueh can never be equated to a computer chip in terms of value. However, in terms of social acceptance and cohesion, such traditional businesses can never be weighed by monetary considerations.

Similarly, how does the Government measure a company's productivity? If we were to measure based on unit value of production, certain small workshops from the services sector would find it difficult to continue improving their efficiency. For example, while small printing outfits specialised in printing name cards, invitations, signs and advertisements can make use of computer software, they are unable to take advantage of mechanisation and high-tech solutions due to the customised nature of the business and because they deal in small quantities. Although their productivity is not high, businessmen and working people still require these timely services.

According to the Government agencies' current calculations, some small enterprises are "doomed" to belong to the low value-added industries. Although these industries may not be as prominent in economic performance, they provide the means of livelihood for many families. Many old and established businesses have helped to raise two or three generations of Singaporeans; they can be said to symbolise the original flavours of Singapore, and have become an integral part of Singapore culture. They are still struggling to survive. Thus, I feel that MTI should look after the needs of the SMEs and micro-enterprises when they draw up industrial policies. This is not only my personal view, but represents the voice of many SMEs in Singapore.

The most classic example is that some qualifying conditions attached to the PIC prevent many micro-enterprises from leveraging on the cash payout portion of the PIC. PIC has a prerequisite where companies need to have at least three local CPF-paying employees. Some family-operated businesses are unable to qualify and they are unable to recruit workers. Because of their low profit margins, they are also unable to fully enjoy the cap of 400% for enhanced tax deductions. Most SMEs are strapped for cash. The PIC cash payout, ICV and PIC Bonus are all most helpful to them, but this all depends if they qualify in the

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first place.

Ninety percent of Singapore's local enterprises are SMEs. Owing to the existence of these SMEs, MNCs can operate in Singapore's business environment with ease. SMEs also provide a wide range of services and help Singapore to gain its stature of being a liveable city. The services sector accounts for a large number of these SMEs. According to the World Economic Forum Global Competitiveness Report 2013-2014, out of 148 countries and regions, Singapore ranked number two for three consecutive years; but in the area of Business Sophistication, the ranking dropped from number 14 to number 17 this year, and the Innovation level also went down one notch from number eight to number nine. Business sophistication and innovation levels have dipped, reminding us that we ought to pay more attention to SMEs' survival and growth.

Social stability can only be achieved if people can meet their basic needs in life and in their work, especially among blue-collar workers and workers in the services sector. If SMEs and micro-enterprises have the prospects of growth, young people can be attracted to join them and the call to improve productivity becomes more of a reality than a theoretical notion. This is also related to policy planning concerning education, manpower, business costs and business infrastructure.

As I mentioned in the Budget Debate for 2011, Government assistance schemes are like carrots hanging high. If they are hung up too high, the SMEs cannot consume them. I mentioned this again in November 2012 and the problem was raised for a third time during the 2013 Budget Debate. Later, the Minister said that there are carrots everywhere on the ground for SMEs to pick up and eat, and even provided a telephone number for SMEs to call if the rabbits are keen to eat the carrots. We called this telephone number and the receptionist took down the contact, promising that a consultant would contact us. Actually, the Government does provide many carrots; however, they are not strewn on the ground but hung on trees. Big rabbits have no problem accessing the carrots, but the small rabbits that are jumping around still cannot eat a single carrot.

Having said that, I would still urge the Government to set up a coordinating agency focusing on SME matters. Currently, the SME Centre@SCCCI is putting all its efforts into promoting the Government assistance schemes. However, we keep running into problems during the implementation process because of the need to coordinate with multiple agencies. Moreover, dealing with one Government agency would not be effective because Government departments

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need to work within their own boundaries. In fact, many of our civil servants are very effective "goalkeepers" for the Government.

The Chamber can only be a channel for communication and a feedback channel. Businessmen still require a decision-making organisation with an in-depth understanding of SMEs' operations and which can set and promote policies based on SMEs' perspectives and coordinate with other agencies to take care of the needs of SMEs and micro-enterprises. This recommendation has been raised time and again, but I wish to raise it once again to help local enterprises.

Budget 2014 will be set in motion and I earnestly hope that this beautifully presented Budget could bring sufficient benefits to more small business owners.

Sir, there is growing empirical evidence that points to corporate social responsibility (CSR) making a significant positive contribution to national competitiveness.

Countries like Denmark, Sweden and the United Kingdom promote their homegrown companies overseas through leveraging on CSR as a selling point. CSR becomes a quality assurance of best and responsible practices at a time where values matter just as much as value.

The European Commission defines CSR as "the responsibility of enterprises for their impacts on society". To fully meet their social responsibility, enterprises "should have in place a process to integrate social, environmental, ethical human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders".

We should consciously use CSR as a strategic differentiator and as a key competitiveness instrument in the economic arena. This leverages on Singapore's brand reputation as a country with a strong anti-corruption stance, high performance standards, and ethical leadership.

However, we will need a national policy on CSR to catalyse the growth and development of CSR here. The national policy can be the roadmap, a framework, by which CSR can grow and develop to enhance Singapore's export competitiveness.

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We need to be cognisant of the growing CSR movement in the advanced economies and globally, and how that will impact upon us.

With the development of global norms and guidelines on responsible business conduct, such as the UN Global Compact and ISO 26000 Guidance Standard, CSR – if not appropriately managed – could, in time, operate as a non-tariff trade impediment and eat into Singapore's export competitiveness.

I urge the Government, which has been a promoter and practitioner of CSR, to consider developing a national policy for CSR.

Mr Chairman, instead of making a speech, I decided to refer the Minister for Trade and Industry to the speech that I made during the Budget Debate. It was specifically covering the issues businesses face in the restructuring efforts that we are putting in place. If we listened to the tone of debate in this House and the speeches that have been made, many of the Members of Parliament, whether elected or nominated, who come from the business world have one tone, which is quite different from some of the Members of Parliament who may not have the business experience. The tone is that the rate of restructuring that we desire is hurting many companies.

So, I really hope that the Minister for Trade and Industry, together with the Finance Minister, can relook at the rate. There is no doubt that we need to make productivity improvements and future growth needs to be productivity-driven. But the rate at which we are doing is going to hurt many companies that could have made it in a bit of a longer term. They can be hurt so badly that they would not even cross the hurdle and end up folding. As I mentioned during my speech, we are going to end up in a situation where companies fold and jobs would be lost, and I think the situation could be very serious.

During the debate, I had spoken about a few things. I want to, again, highlight "cost". Immediately after I made the speech about the cost of doing business and cost of living, the Economist Intelligence Unit (EIU) report came out and Singapore was ranked as the most expensive city in the world. If there is a measure of cost of doing business, I think we would also end up as one of

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the highest cost in the world right now.

The situation is such that cost has gone too high. If we can address the cost issue, I think we would have worried less about the types of payment that we have to make in PIC and many other grants that we are making. In fact, if you look at the rate of productivity improvement that companies have made, it is not so impressive in the last three years, simply because any improvements that they made have been lost in the cost increases that came about in the last couple of years. Let us say, if we failed to address the issue of cost, the productivity drive that we are trying to achieve will be a lost cause.

Many Members have also raised issues about JTC and the Government's land divestment policies. I urge the Minister, this time, to rethink about JTC's share drop of 18% to 3% of the rental market. It has been a big change and I think, at 18% to 20% share, we could have some influence on the rentals – I am not saying that you set low prices – we could maybe put in controls like having companies to graduate from a JTC rented factory that has a lower cost after a certain number of years. But if we do not even have an opportunity for companies to start in low-cost facilities, they will never get started. So, I hope that we can reverse the policy that we have already made in this area.

I have one specific suggestion to make on the PIC. It is an excellent scheme. I think the companies which are tapping on it are benefiting. Many small companies, as we heard from Members, cannot access this; they have problems. In addition to the six areas, innovation is key. And I think innovation does not have to be innovation in a product or service. Innovation can come also in a business model or business process improvement. If we can add this as one of the initiatives that companies take to be eligible for grants, I think that will help many companies. In fact, many of the small companies that Mr Teo talked about need business process re-engineering for them to be able to survive in this environment. If we can tweak the system a bit, I hope that we can include this as one of the measures that companies are eligible for.

Mr Chairman, MTI and SPRING launched the SME Workgroup last year. I was fortunate to have the benefit of being involved in some of the dialogues. I found it a valuable process where we not only get to share with the SMEs, but also to make them better aware of the scope of the various schemes. This is useful for those harder-to-reach groups, as I have mentioned in my Budget speech, to look into how they can adopt the PIC or PIC+. During the Budget debate, I had also covered at length how the smaller SMEs may be an insulated group, and why we may need to take a more hands-on approach to try to aggregate demand and drive productivity collectively across groupings or supply chains. The SME dialogues, therefore, offer an opportunity to reach out to the small business communities and this will complement the SME satellites that were established across Singapore to reach out to the SMEs. I commend SPRING and MTI for this initiative.

I would like to ask the Minister on the progress of the SME Workgroup to date and what are some of the issues that the SMEs have raised through this process. Based on these concerns, what policy changes can we accept that are aimed at supporting SMEs through the economic restructuring process, and what role will the SME Workgroup play in the review and the execution of these policies?

Mr Chairman, let me continue to my next cut on managing rising business costs for SMEs.

Many other Members have spoken at length about this. However, the challenging business environment has also meant that there is concern whether the micro-SMEs and traditional businesses will go out of business in this new transformed economy that we are going for. In fact, overall, the challenging environment of slow economic growth and rising business costs remains a concern for many SMEs. Labour tightening has meant higher wage expectations to attract local talent while increased foreign worker levies and rising rentals have impacted the competitiveness of many businesses.

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Personally, I support the increase in CPF contributions for our workers, especially the seniors, but this would also add to the cost factors.

With such high cost, I fear that Singapore may lose its competitiveness. We have done well in keeping corporate taxes and higher-tier income taxes low, but there are also many cost levers that have also gone up in recent years which the Government needs to do better to keep in check. My Budget Debate speech touched on the setting up of a Cost Competitiveness Review Committee, as was proposed by the Member, Mr Inderjit Singh. I hope that the Ministry can seriously consider this in an effort to improve our cost competitiveness as a Business Hub and address many Singaporeans' concerns on cost of living and affordability. We need more concrete strategies and initiatives to manage our high-cost environment. More needs to be done to also address public fears that they will not be able to retire comfortably or whether they can still afford to live in Singapore. Thus, it is about time we do a holistic view of all direct and indirect contributions to business and living costs in Singapore. I hope we can take a consultative approach, with inputs from business associations and consumers, and make these findings and recommendations public and have a review panel that is inclusive.

For the short term, how can the Government help SMEs manage business costs better, especially in aspects, such as rental cost, which is driven by market forces and Singapore's land scarcity? Given the scarcity of land, what can we do better to manage rental cost for our commercial, industrial and retail sectors?

But specific to the retail sector, many have raised concerns that a number of landlords charge a percentage of revenue income, in addition to base rent. This percentage is set based on the ability to access a company's point of sale system to maximise rent charges depending on how successful your business is. This practice dampens entrepreneurship because the entrepreneur is effectively working for the landlord, especially when landlords take the share of revenue without having invested into the business. There is also a lack of transparency on what percentage each retailer is charged, even within the same location. I would like to propose that we establish a more transparent rental benchmark for the retail sector. For such a benchmark to be useful, it should include what various landlords charge, in terms of base rent, plus the percentage range of the revenue income wherever this is practised. What I hope is for businesses to be given a fairer, more transparent view of the rental landscape here in Singapore, and I believe that transparencies should go both ways between retailers and the landlords, and not just one way, as it is today.

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Sir, I want to speak on a very real issue that is affecting businesses here, similar to what Mr Inderjit Singh and Mr Zaqy said just now. I am going to reiterate more or less the same points. Rental is today one of the biggest cost items. Rental has risen at rates which no industry has grown over the past decade. JTC offers affordable property for rentals which help the businesses. But with the JTC and other landlords moving their assets to REITs, whose sole motive is to enhance the returns for REIT holders, the increase in rental has been their only objective. With the limited land supply, rents have been soaring, making businesses unviable over the decade. Every business has grown and given almost all or more of their gains from growth to their landlords as rent, literally working for the landlords. I would like to question if it is worthy to emulate the practice of REITs in a land-scare country like ours. Are REITs sustainable? Or should I ask, should businesses be sustainable if REITs are, indeed, a necessity?

Another issue is regarding landlords. With no check on unfair practices by landlords, and complete access to tenants' sales by landlords, we are providing the landlords an infinite ability to increase the rents, thereby making the tenants work for the profitability of the landlords only. As an example, food retail space rents have a variable component linked to traffic. With the closing of the Budget Terminal, and the traffic moving to Terminal 2, rents have increased suddenly. Is it fair to equate the Budget Terminal passenger purchasing power with other terminals and seeking higher rentals? Is there a mechanism to rationalise or put a check on what yield a landlord is justified to ask?

SMEs have borne much pain from a tight labour market and continuously higher industrial and commercial rents.

Supporting SMEs is vital to lift productivity across a huge swathe of our economy. In Germany and Switzerland, SMEs are celebrated as drivers of exports and economic growth. Some of their mid-sized companies have world-class capabilities and are global leaders in their fields. We should aim to help some of our home-grown companies become global leaders.

First, I echo the concerns of Members who have called for attention on industrial and commercial rents. We have already lost the ability to manage rental costs, having ceded buildings that the Government once controlled to

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REITS, which now dominate the market. In commercial retail, REITS, with their huge collective hold on the market, can force up prices, sometimes steeply, with each renewal. I call on the Government to look at intervention measures, including having more industrial space of its own, to set desired rental benchmarks and to provide checks on the rental practices of REITs in the malls, as some Members have mentioned earlier.

Next, on financing. MLPs have provided 3,500 loans to small companies over the last two years. Even with the Government's increased risk share, banks may still not be willing to lend to start-ups with short track records. MTI had said it does not monitor the success rate of loan applications for MLPs. I hope SPRING can work with banks to raise the awareness of MLPs and other schemes, and monitor the success rate of applications. It could intervene should banks be found to remain unduly cautious.

There are also many SME schemes administered by different Government agencies. The range of schemes is daunting and often difficult for the "小白兔" or little rabbit type of small companies Mr Teo Siong Seng just spoke about, to take up.

I am concerned that some schemes are too prescriptive. My colleague, Mr Giam, had, in his Budget speech, cited the example under IPG, where IDA pre-qualifies vendors for sectoral solutions under iSPRINT.

SMEs may be limited to these vendors if they want a fuss-free way to tap on IPG funds. SMEs sometimes know what solution they want. A pre-qualified list may restrict the development of new innovative solutions.

I declare that I had used grants from various agencies previously. Other than PIC, I have found the rest challenging in terms of application, approval wait time, making claims and writing of reports.

Perhaps, we can learn from the PIC. PIC benefited from much publicity. Can we "push" schemes to SMEs by requiring the completion of a simple questionnaire in the annual filing to ACRA? This questionnaire could ask about planned investments in training, software, automation and so on that are not receiving scheme support. Based on these responses, forms for the relevant schemes or SME Centre officers could be despatched to the companies.

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Sir, I have spoken about how many SMEs have been under immense pressure from the economic restructuring during my Budget Debate speech on Tuesday. As the reality of curbs on foreign manpower, tight local labour market and rising operational cost sets in, businesses can only look to innovation and increases in productivity for a way out. I would agree with the hon Member Mr Teo Siong Seng about small and micro businesses. These businesses, especially those owned or run by people who tend to be older and have little education, are most squeezed and they are very much in need of help. Many of them work from dawn to dusk and because they had low education, they do not have the free time, the energy and the know-how to transform, and they are also not clear how the Government can help them. I had illustrated this with an example in my Budget Debate speech on Tuesday.

As we transform, we cannot leave them behind. Hence, with the plethora of programmes available, I would like to ask how the Ministry intends to hand hold and link up these SMEs, especially the small and micro businesses, through the transformation – for example, helping them with horizon scanning of suitable innovations, technologies, best practices, hand holding them through the implementation of these improvements and helping them to develop new niche areas and move into growth industries.

In terms of effective outreach, could the Ministry proactively translate material and training courses into different languages, for example, in our Mother Tongues – Chinese, Malay and Tamil – so that many non-English speaking bosses and employees can better understand and make use of the help available? I understand that one Continuing Education and Training (CET) Centre, the Human Capital Singapore, has received warm responses from non-English speaking business owners who attended its classes where the Chinese versions of these courses were rolled out. These owners would otherwise not have been able to benefit or to understand what the Government has for them.

I was also told that there was an observable change in attitude and a greater understanding in acceptance of the Government's intention because of the training. Perhaps, similarly, the CETs and MTI could work with self-help groups, such as MENDAKI, to reach out to these CET centres to develop their courses in different languages so that some of these entrepreneurial communities – these

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micro and small businesses – can benefit from the schemes that we have.

Finally, for those who tried very hard but eventually could not sustain their businesses, would the Ministry consider an employment guarantee programme, similar to the European Youth Guarantee programme, for the displaced SME owners and employees so as to minimise their pain and structural unemployment. We already have many good programmes and funding in place, so this programme is merely an additional and a synergistic step of ensuring that these displaced workers and owners will not be left in the lurch.

The timeshare industry is known for its hard-sell tactics and scams associated with it. It accounts for one of the top 10

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industries with the most number of complaints made with CASE for three consecutive years from 2011 to 2013.

Sir, errant timeshare companies must be brought to task or stopped from operating here because they will scam the victims over and over again. One of their modus operandi includes getting another company to contact existing timeshare customers to offer assistance to terminate, sell, rent or dispose of their existing contracts for a fee. More often than not, these customers will fall victim to another scam and end up poorer instead. Some of these errant companies move part of their operations overseas which makes local scrutiny and enforcement difficult. Some of these operations are just outright scams haunting victims and authorities – catch me if you can!

Singaporeans are avid travellers. Customers of timeshare companies are not out to make a quick buck. I urge the Minister to look into tightening the regulation to prevent such black sheep companies and their affiliates from scamming victims here with impunity.

Come 1 April 2014, the Amendments to the Consumer Protection (Fair Trading) Act will give consumers greater protection for timeshare and long-term holiday products. Would the Minister also consider further regulations to cover existing timeshare customers so as to give them a course for redress? Currently, such customers can only file their complaints with CASE or take legal action against the timeshare companies on their own accord and costs. The Small Claims Tribunal does not handle disputes regarding timeshare agreements, according to the CASE website.

Mr Chairman, may I have your permission to display some slides on the LED screens later on in my speech. May I also add my thanks to the various Members who have spoken on the various issues regarding our economic restructuring.

Minister Lim Hng Kiang has highlighted the need to stay on course in our economic restructuring. We need to press on with our productivity efforts. Companies need to transform and evolve themselves with business models commensurate with Singapore's cost structure. Many need to find new markets here and overseas to grow their profits.

Mr Heng Chee How and Dr Lim Wee Kiak asked about the progress of our productivity drive. Since 2010, our national productivity growth has averaged

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2.7% per year. This is within our target of 2% to 3% per year. However, the growth was front-loaded due to the strong cyclical recovery in 2010, and became weaker subsequently.

At the sectoral level, some sectors are doing better than the national average. Precision engineering and transport engineering, for instance, saw good productivity growth. Sectors which performed below the national average included construction. These sectors added manpower faster than they could raise output.

Our goal, therefore, is to help the leading sectors grow even more, and the laggards to catch up. Productivity improvement is a long-term undertaking. This is nearly an inside-out process. To do so, we have taken a sectoral and broad-based approach.

Since 2010, the National Productivity and Continuing Education Council (NPCEC) has been working with the industry to develop and implement sector-specific productivity roadmaps. Fifteen roadmaps out of 16 priority sectors have been endorsed. These roadmaps seek to build capabilities and address weaknesses in the sectors' eco-systems. We also have productivity consultants to help companies acquire the know-how to implement productivity initiatives. To date, 17,000 companies have benefited.

To complement the NPCEC initiatives, we also have broad-based enablers, such as the Productivity and Innovation Credit (PIC). PIC has helped about 40% of active companies in 2013. This was discussed extensively by DPM Tharman in his round-up speech.

Mr Chairman, may I now speak in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] Mr Teo Siong Seng asked what determines the value-add and productivity of sectors or firm. He also asked how we can help to develop our traditional sectors. Traditional sectors like food services and food manufacturing are, in fact, our NPCEC priority sectors. The Singapore Food Manufacturers' Association, SPRING and the NPCEC are working hand-in-hand to raise the sector's productivity and capabilities, while helping companies and workers retain precious traditional skills.

To put it simply, productivity is defined as value-add per worker. To increase value-add, a company has to increase its operating profit, or EBITDA,

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and workers' wages. In even simpler terms, it means the more profitable a company is, the more productive it can be.

Of course, the price of a piece of beancurd cannot be compared to a computer chip. But I know of many famous local hawkers who have made a name for themselves using their own unique recipes and thereby attracting a steady stream of customers every day. From the fried Hokkien mee at Upper Changi Road, to the frog leg porridge at Geylang, to the bak kut teh at Balestier Road, and to the Hainanese chicken rice at Thomson Road. Because their business is good, they charge more for their food and they make a higher profit. As a result, their productivity is higher than their peers. And this is what they call the high price, high profit and high productivity – the three high "Ps" – in the traditional food industry.

Apart from these examples, there are others that have embraced productivity. Many local companies have started out as food retailers but later moved into food manufacturing. For instance, Bengawan Solo, which has come a long way from the days of making traditional ang ku kueh by hand to automating the process; BreadTalk used to make bread by hand and now has a central kitchen; Tee Yih Jia, no longer makes roti prata by hand and has instead gone the automation route. These companies' foresight and ability to seek out and analyse opportunities have brought them much success and enabled them to enjoy a stable growth for years.

Let me take Polar Puffs and Cakes as an example. It used to be a traditional cafe and how many pieces it could sell depended on how fast the chefs could make them, and also the number of customers patronising its cafe.

To grow such a business model, there are only two ways – open more outlets, and hire more kitchen staff. However, this is the traditional way. Many people are, in fact, doing it, but this is certainly not the most profitable way. In the 1980s, Polar changed its business model. Instead of relying on manual production, they set up a central kitchen and gradually established its supply chain and sales outlets. Since then, its growth was no longer restricted by their small shop front and the number of staff it had. It then opened up a path for healthy and stable growth.

Today, Polar Cafe is partnering a number of petrol kiosks. They are looking for more development opportunities in the B2B space. They are now exploring

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the possibilities of supplying to airlines, catering companies, chain restaurants, hotels as well as local and overseas supermarkets. If their expansion plans come to fruition, they expect to achieve 30% sales growth in three years. To expand their ability to do so, they have purchased new machineries to produce consistently delicious pastries.

Over the past few days, many Members had raised the issue of high rental cost. Polar is a good example of how a company has changed with the times and adopted a different business model enabling it to move past the reliance on shop front and staff to increase its top line. Competition is stiff in the F&B industry. So, the operators have to be innovative, and there are many examples of successful innovations in the sector.

We all are familiar with vending machines. Everywhere in the world, especially in places with high human traffic, vending machines are readily available, selling 24 hours a day potato chips, hamburgers and fresh vegetables. In Singapore, we notice that there are more and more vending machines. This is a picture of my colleague buying a packet of steaming hot fried beehoon from the vending machine at 2 o'clock in the morning. She said it tasted delicious. More importantly, with vending machines, people working at the airport, hospitals, hotels, factories and students staying at the University hostels have another way of purchasing food as and when they wish. On the other hand, companies providing this 24/7 service need not worry about the high rental cost and the difficulty in employing night shift staff.

(In English): Mdm Chairperson, businesses can adopt technology to improve their existing processes in a number of ways. The example of RedRing Wanton Mee shows that even traditional business can upgrade. RedRing Wanton Mee invested in a Japanese noodle cooker to ensure noodles are consistently cooked at the right temperature and duration.

Like their counterparts in the food sector, other SMEs have also adopted technology to achieve higher productivity. Let me illustrate with some examples associated with smart devices. More and more intelligence is now built into personal items, such as mobile phones, backpacks and even clothing. Increasingly, the things we use will be able to communicate and talk to each other.

For instance, pest management companies are installing smart pest traps. Workers are deployed to collect and dispose of pests only after the pests have been caught. Likewise, smart sensors installed at construction worksites send

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site vibration and other safety data to control rooms. For FOSTA, this eliminated 90% of the manpower previously required to manually inspect sites on schedule.

A*STAR also developed the smart fence system. Advanced optical fibre sensors are planted at regular intervals on fences. They detect intrusions far more accurately than other similar systems around the world. Today, these smart fences protect our airports, SBS Transit's bus depots, as well as the North-East Line (NEL) train depot. Smart fence reduces the need for security patrols. Existing security officers can be deployed in control room to monitor more fences with far greater accuracy.

To support companies in adopting technological solutions like this, A*STAR launched the $51 million Technology Adoption Programme (TAP). Mrs Lina Chiam may be pleased to learn that TAP benefits many sectors, including Construction, Food Services, Retail, Precision Engineering and Logistics. Our companies must, therefore, find new and imaginative ways to compete. Technology adoption clearly offers us a way forward.

One challenge SMEs face is their small-scale operation and this has been pointed out by many Members. To help SMEs reduce upfront capital investments and save on ongoing operating costs, JTC will custom-build a new generation of industrial space with shared facilities as a key feature.

Ms Foo Mee Har will be pleased to learn that companies operating in JTC's new Food Hub, for instance, can utilise a shared integrated cold room warehouse while tenants in JTC's new Surface Engineering Hub can benefit from a centralised wastewater treatment plant. Such shared services will help companies save up to half a million dollars collectively on upfront capital expenditure and enjoy 10%-20% off their long-term operating costs.

Some shared services take a non-physical form. For logistics companies operating out of JTC's upcoming Integrated Logistics Hub, the shared IT management system will enable companies to schedule and monitor the flow of container movements within the depot, cutting down drivers' waiting time.

This year, JTC will be rolling out more than 10 such customised industrial facilities. Other sectors that will benefit from such facilities include general manufacturing, electronics and medical technology.

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Competition is often cited in surveys as one of SMEs' key challenges in the face of growth. For some, competition brings out the best in them.

If I tell you that a start-up in Singapore was growing at 20%-30% month-on-month, would you have guessed that all they did was to sell everyday products, such as toothbrushes, shampoos and detergents? This company is RedMart, a wholly online grocer.

RedMart's success lies in its ability to meet the needs of this target market and consistently fulfil delivery orders. Its integrated supply chain allows it to do so. From inventory management to delivery, it maximises productivity. Being online also means it avoids the common challenges its competitors face, such as high commercial rentals and manpower constraints.

Being wholly online, RedMart can understand its customers better than its competitors. Because every order is tracked, analysed and compiled, it can establish patterns and preferences of its consumers' purchases. RedMart's business model is based on knowledge and intelligence, and data analytics is a new competitive tool for the company.

Assoc Prof Eugene Tan suggested that companies could leverage Corporate Social Responsibility (CSR) as a business and branding strategy. In my opinion, we welcome and encourage companies to undertake meaningful CSRs in the areas they have passion for.

I would not, though, hard-wire a company's CSR programme with its business or branding strategy and expect business benefits from such linkages.

But having said that, we believe branding of our firms' products and services is important. To help companies define their branding strategy, SPRING's Capability Development Grant is a well-established programme that offers funding support for companies to develop their brands.

We have also discussed earlier how raising sales is a sure way to raise productivity. For ready Singapore companies, developing overseas markets is a logical and integral part of their productivity strategy. For some, designing products for the global market has actually been their growth strategy since day one.

Started seven years ago by two brothers, Ryan and Reuben Lee, then 29 and 32, the company makes pocket-size X-mini Capsule Speakers to go with

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today's many smart devices. In fact, I have one sample here. This must be a third or fourth generation now. So, you open up, it looks like this. If you close it, it is very small. You can link it with a 3.5 mm cable, and it doubles up as a speaker as well as microphone for teleconferencing. It also has blue-tooth connection for remote music enjoyment.

From day one, X-mini recognised that the company's fortune lies in the global market. This was why they launched their first product in Western Europe. X-mini sells a range of X-mini speakers to over 80 countries. Such sales make up 95% of their revenue of S$32 million – it is not bad for a very young startup by 30-year-olds. X-mini overcame stiff competition by differentiating itself. It promised quality through its "made-in-Singapore" branding, invested in R&D to grow its product line and also, of course, launched a very slick and targeted marketing campaign in the various markets.

As Mr Liang Eng Hwa and Ms Foo Mee Har have pointed out, a company's internationalisation journey is not without challenges. And this, we agree. In fact, our agencies offer a comprehensive suite of support programmes by focusing on three areas: (a) expanding our overseas networks or connectivity; (b) partnering our companies in their growth; and (c) grooming a pipeline of global-ready talent.

First, to help companies gain market access and knowledge, we are increasing our overseas and global connectivity. We have a network of 20 FTAs that have helped to open new markets for our companies. This is complemented by 41 Investment Guarantee Agreements (IGAs) that provide companies with greater confidence and legal certainty when investing overseas. MTI will continue to pursue more of such agreements.

In terms of in-market assistance, companies can leverage IE Singapore's network of 38 overseas centres globally, from Africa to the Americas, Middle East to East Asia. These overseas centres, together with the network of Singapore companies overseas, form a natural and powerful source of market insights for our companies seeking opportunities and partnerships. Even in newer markets like Myanmar and Ghana, the two latest countries where IE Singapore opened up new overseas centres, IE Singapore has engaged about 100 companies last year alone.

Second, we will continue to partner our companies in their growth. In 2013, IE Singapore assisted over 26,000 companies, of which 85% are SMEs. There is scope to do even more. Going forward, we will set aside $25 million to enhance

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IE Singapore's programmes to better cater to companies at different stages of growth. The enhancements are expected to benefit 200 companies over the next two years.

For companies which are rapidly expanding, securing financing is often a challenge. We will, therefore, double the maximum loan quantum under the Internationalisation Finance Scheme (IFS) from S$15 million to S$30 million to support companies.

For companies which are looking to enter new markets and learn from overseas partners, we will enhance our Global Company Partnership (GCP). We will increase our support for pilot and test-bedding projects from 50% to up to 70%. Companies can tap on this to test out the viability of their products and solutions in new markets.

In addition, we will expand our support for market attachments to include companies sending their staff overseas to acquire new business capabilities or technologies. Companies can tap on this to develop their manpower resources and at the same time gain new strengths. We will extend up to 50% funding support.

For startups which are looking to broaden their overseas connections, we will introduce the Market Access Incubation Programme (MAIP) to provide up to 70% funding support for participation in overseas missions and fairs organised by approved incubators.

Together, I am confident that these enhancements will help more companies expand into new markets.

Lastly, we are helping companies to tap on local talent for their overseas operations, as this is pivotal to the success of their internationalisation plans.

In my travels, I often meet globally-oriented Singaporeans. Consider our two intrepid youngsters: Esther Yap, 28, and Denise Lim, 27, for example. I met Esther in Ghana last year and learnt that she is working as a Marketing Manager of a beverage distributor and has been living there for three years since she graduated from NTU. As for Denise, she quit her job as a management consultant to set up a restaurant in Guatemala and was recently featured in Channel NewsAsia's Business Warriors. Denise and Esther show that our

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youths are bold and dare to step out of their comfort zones.

Our youths have the potential to spearhead the overseas expansion of our companies. IE Singapore's Young Talent Programme (YTP) will support our local schools and companies to identify and groom a pipeline of talent. Since its launch last year, 11 undergraduate scholarships have been awarded and about 500 undergraduates have received support for overseas immersion. I am encouraged by our youths' enthusiasm and their readiness to learn. This augurs well for our companies seeking local talent to chart their overseas growth.

Mr Chairman, the most fundamental way to secure our social and economic well-being is through productivity improvement. Productivity improvement itself is hard work. There is no short cut. It is a long-term endeavour and requires commitment. With imagination and determination, and our companies in the driver's seat, we can, together, restructure our economy and transform our companies. Engraved on every X-mini speaker is the company's motto: "Sound beyond size". Is this not the spirit of enterprise and the spirit of the SMEs?

With your permission, Mr Chairman, I have asked the Clerk to place booklets detailing our SME schemes on the Members' seats. I have also included an FAQ questionnaire because of the various questions raised about SMEs accessing the schemes.

Several Members have spoken about SMEs and how restructuring has affected them. I thank all of them for the comments and suggestions. And, Mr Chairman, I agree with you that small is beautiful and we are here to help these SMEs to make them more beautiful through restructuring.

The restructuring effort is tedious and difficult. However, if you change your mindset, it may just get easier. They can tap on the schemes we have to start this journey of restructuring.

We started the process a few years ago with the objective of achieving a productive, competitive and vibrant SME sector. However, it is not an easy journey. I know that restructuring has been painful for some businesses. A clothing retailer told me that high rental costs have forced him out of business or move to a smaller office, and his profit margin is shrinking with the increase in foreign worker levy. Another SME in the precision engineering sector is relocating part of its business to Thailand and Iskandar Malaysia due to the

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rising costs.

All said, I have also noted that the SME sector has continued to grow at a relatively steady pace, with a net formation of about 14,000 new SMEs each year from 2010 to 2012.

Easing up on restructuring would not help our businesses in the long run. What we want to do is to strengthen them, not weaken them. And as our domestic economy continues to mature, our cost base will increase accordingly. At the same time, our competitors will not stop innovating and moving up the value chain. If we continue with a business-as-usual mindset, these competitors will overtake us. It is not just another country or another city but, even within an industry, SMEs against SMEs, you will see the differentiation. This will erode the competitive advantage that we have worked so hard to build. Change is never easy but it is necessary.

Most of the SMEs that I have spoken to understand this and they have already started to restructure or they are trying to figure out what they need to do to restructure. Surveys have shown that more SMEs are measuring their productivity improvements and many have taken up the various Government schemes. Mr Teo Siong Seng will be glad to know that most of these are also available to SMEs, including micro enterprises, even if it is below three employees.

For example, more companies have made PIC claims. There were 45,000 PIC claimants in 2012, which is a 25% increase from 2011. More than three-quarters of these claimants were small and micro enterprises. And the PIC scheme is not just meant for larger companies. Micro-enterprises qualify for the tax deduction. Only the cash payout option requires businesses to have at least three local employees. So, over 16,000 micro-enterprises have claimed for PIC. And, in fact, micro-enterprises have shown the greatest rate of increase amongst these claimants, increasing by over 40% since 2011. Let me also address Mr Teo's question in Chinese.

(In Mandarin): [Please refer to Vernacular Speech.] Small and micro businesses are very important to us. Mr Teo Siong Seng says they are part of our culture, and I agree with him. Some of these micro businesses have a long history. Not only do they contribute to our economy, they are also a part of our lives. I personally grew up in the community and I patronise these businesses daily, such as visiting the coffeeshops to have breakfast. I am sure many of you have similar experiences. And because of this, it is important for

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us to help these micro businesses, encourage them to change in order to survive. The best way to help them is to guide them.

I would like to emphasise that all these SME packages and assistance schemes, or what we call "carrots", are available everywhere. "Carrots" actually grow on the ground, I do not know who hung them up on trees. But regardless of whether the "carrots" grow on trees or on the ground, the important point is that we must guide these small businesses, that is, these "rabbits", to eat the "carrots".

"Carrots" come in big and small sizes. The small "rabbits" do not have to compete with the big "rabbits" for big "carrots". If they eat the big ones, they may suffer from indigestion, so it may be better for small "rabbits" to eat in moderation.

Mr Teo also talked about small "rabbits" which hop around looking for carrots. I think it is not a bad thing that they are hopping around. They may be feeling energetic after eating the "carrots" and hopping around is a good form of exercise that will help them grow. The most important thing is that we are able to guide these rabbits to the right location, so that they get to eat the carrots.

Previously, I gave out phone numbers; this time, I will be giving out brochures with addresses and there are 11 of them in all. These SME Centres will provide assistance, particularly the consultants at the centres, who will lead and guide them. There are many packages now. These micro businesses need to better understand the information so that they can make changes. Most importantly, they must be determined, for determination is required for change to happen. Only then will they have a chance to survive. So, everyone must allow these small rabbits to develop slowly. We want to give these micro businesses a chance to grow and provide them with assistance. We cannot just give them the carrots. Instead, we should also help them find the carrots and this is the most important point. Give them the chance to be bigger and stronger SMEs.

(In English): Mr Teo Siong Seng also spoke about an SME coordinating agency. As the SME sector is diverse, it is not easy for one agency to look after all the SME issues. As Members can tell, we have so many questions this year for the SME sector. They cover a wide range of areas. I can assure you that there is close collaboration amongst Government agencies to understand SME issues and develop solutions to help the sector. SPRING, as an agency, is always there

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on a day-to-day basis to help the SMEs.

We have also set up an SME Workgroup to look at the strategic measures and initiatives. The SME Workgroup was set up last September to consolidate our efforts to reach out and engage the SMEs and help them provide feedback and provide recommendations to different Ministries to look at what are the SME assistance strategies and schemes that can be implemented. The Workgroup comprises industry leaders from trade associations and chambers, relevant Government agencies, as well as several Members who are present here today.

Mr Zaqy Mohamad and Mr Vikram Nair have asked for an update on the progress of the Workgroup. The Workgroup and our partners, such as the SME Centres and Trade Associations and Chambers, have been actively reaching out to the businesses in their neighbourhoods. Over the last six months, we have reached out to more than 7,500 SMEs. Let me thank all the Workgroup members and our partners for their hard work.

At these outreach sessions, SMEs have asked questions about various Government schemes. Most are technical questions which can be answered easily, such as queries about the application process for the Innovation and Capability Voucher (ICV), or questions about the types of investments that are claimable under the PIC scheme. For cases which require more detailed advice, the Advisors would link the businesses up with the SME Centres.

The Advisors have also received feedback that the SMEs are hoping for more assistance to cope with restructuring. The Workgroup has consolidated all the feedback, developed recommendations and shared them with the relevant Government agencies. Some of those recommendations have also been adopted in this year's Budget.

As Deputy Prime Minister Tharman announced in his Budget Statement, the PIC scheme will be extended for another three years up to 2018. He also introduced the PIC+ scheme for SMEs, which raises the PIC expenditure cap by 50%, or up to $600,000, for each of the six qualifying activities.

We will continue to engage SMEs through the Workgroup to understand their concerns and needs, and we will also keep close tabs on industry feedback and calibrate the pace of restructuring to better support SMEs. The Workgroup is a long-term committee; it does not stop its work with a recommendation. It continues to engage and provide recommendations to the different Ministries.

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So, I want to assure the Member that we will continue to monitor, take suggestions and give those recommendations to the different agencies.

Let me now address Ms Tin Pei Ling and Mr Heng Chee How's questions in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] Ms Tin Pei Ling and Mr Heng Chee How have asked what the Government can do to help SMEs who do not know how to improve their productivity or how to access our Government schemes.

SPRING and the SME Centres conduct outreach sessions in English, Mandarin, Malay and even dialects, and their information brochures are available in these languages.

We are working closely with the trade associations and SME Centres to reach out to individual SMEs. We now have a total of 11 SME Centres, including satellite centres in each of the five Community Development Councils (CDCs).

Across the SME Centres, there are about 60 business advisors. They provide SMEs with information on Government assistance schemes and business advice. The business advisers at our ethnic chambers can do so in their respective languages. These business advisers will even visit the SME offices and shops to observe their business operations and offer customised advice.

Collectively, our SME Centres have assisted over 20,000 SMEs in 2013, 25% more than in 2012.

We have also made our schemes more accessible. Last year, SPRING shortened and standardised its application forms for their Capability Development Grant from 11 to two pages. Next month, they will launch the online SPRING Grant Portal to make grant applications faster and easier for businesses.

The booklet that I have distributed contains the key schemes available to address the main SME needs at various stages of their business development. This booklet will be distributed to SMEs through all the trade associations and chambers, as well as the SME Centres. I welcome Members' feedback to help

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us make this booklet better and simpler to use.

(In English): Mr Inderjit Singh and Mr Zaqy Mohamed have also asked what the Government will do to help SMEs find suitable workers and cope with rising manpower costs, given our tight labour market.

Last year, we launched the SME Talent Programme to attract more young talents to work in SMEs. We believe that if you can attract talents into SMEs, change and restructuring may be able to speed up and mindsets may change.

SPRING and its partner trade associations match these students from Polytechnics and ITEs with SMEs, and encourage SMEs to develop exciting career paths for them. Since the launch last year, over the last few months, we have made close to 100 successful matches. There are a lot more matches to go. There are a lot more applicants, both from students and from SMEs.

The Government has also been encouraging businesses to enhance their processes and adopt technology to optimise their manpower. We have adopted these suggestions by the SME Committee and SME Workgroup to enhance the ICV scheme beyond procuring consultancy services. Each SME can now use two ICV vouchers, out of their maximum of eight vouchers, to implement solutions. This means the two vouchers can be used to purchase equipment or implement software applications. It need not go through consultancy services. But we believe SMEs still need consultancy services because they may need new ideas and plug some gaps that they may not be able to see after having been in business for too long.

Mr Inderjit Singh mentioned that business process change should be recognised as innovation and to be included. I can assure Members, it is included. Business processes can change in many ways – for example, the procurement process, the stocktake or sales process. There are many different ways to change processes. We believe that if the SMEs are willing to make that change and prove the productivity level increases, it will be included. Thus, the schemes are there for them to use – big and small ones. It just depends on the scale and size of the change, as well as the enterprise itself.

Mr Zaqy Mohamad and Ms Foo Mee Har have asked about what the Government is doing to help businesses cope with rising land and space costs.

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Singapore is land scarce and our land prices and rents reflect this. The retail rental index published by URA has grown at an average of 1.1% per annum over the last four years. Over the same period, rents for multiple-user factory space have increased at an average of 10.3% per annum. However, the increase for the whole of 2013 was at a lower 3.5%, which indicates some signs of moderation.

Rents for space are likely to moderate in the medium term as the Government has released a significant amount of land. Over the next three years, about 145,000 sqm of new shop space will be completed each year. This is more than double the average annual demand in the last three years. Over the same period, an average of 500,000 sqm of multiple-user factory space will come on-stream each year. This is almost double the average annual space demand for such space in the last three years.

We have also released small land parcels with shorter tenures as more affordable options for SMEs. As Members know, for industrial land, when we roll out, we also will build on some of these lands for clustering the space for industry needs. We will also build some of these as factories that are customised for particular industries. Ms Foo has mentioned about the aerospace industry. We are going into the food industry as well. That helps the SMEs and we make sure that it is customised for their needs. For some, it may also mean a change in their process in order to fit into some of these factories. As Members know, we have rolled out the small footprint standard factories. Those have had a very warm response from SMEs. We will roll out a similar type of factories that is customised to the needs of the industry. We believe that this is the path towards land intensification and building up the productivity level.

Mr Inderjit Singh and Mr Dhinakaran have also asked specifically about the impact of real estate investment trusts, or REITs. We note that REITs are not the leading players in the rental space market because they currently only own about 13% and 16% of retail and industrial rental space respectively. Like any other landlord, they have to compete in the rental market to attract tenants and cannot charge excessive rents.

Some REITs buy conveniently located properties, such as those near MRT stations. And they also usually invest in asset enhancements and national marketing efforts which have helped to increase foot traffic to their malls, and raised the revenues of some of the retailers. So, these mall owners usually

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charge higher rents.

Nevertheless, let me assure Members that we will continue to monitor this rental market. We know it has come up as an issue. Many Members have raised it. We will monitor it and we will intervene if we see evidence of collusion or abuse of market dominance by any player, including REITs.

Some SMEs have shared that they face significant rental spikes when their tenancies are renewed. The Government supports fair practices. To help businesses make more informed decisions about the rental market, the SME Workgroup has suggested that the Government share more rental information. Mr Zaqy Mohamad has also mentioned rental benchmark transparency. MTI and URA have taken this feedback on board and we are looking into publishing more comprehensive shop rental data later this year to make rental pricing more transparent.

Mr Chairman, let me now address Mr Yee Jenn Jong's question on how we will help SMEs expand and grow.

The SME Committee and the Singapore Business Federation have also shared about the urgent need for SMEs to revitalise their appetite for growth. The Government will encourage more private sector financing and facilitate internationalisation. Several initiatives have also been outlined in this year's Budget speech.

Under Phase II of the Co-Investment Programme, the Government has set aside Government capital for two new funds to provide SMEs with both equity financing and debt financing options. The SME Co-Investment Fund II will make direct equity investments into companies, alongside other private equity investors. The SME Mezzanine Growth Fund will provide a hybrid debt-equity financing option for SMEs that do not wish to dilute their equity. And the funds will be managed by Heliconia Capital Management Pte Ltd.

It also announced the enhancement of the Micro-Loan Programme (MLP) to support smaller businesses and startups. Mr Yee has also mentioned this. Young businesses face difficulty securing working capital loans as they lack business track record and collateral. We will increase the Government's risk-share from 50% to 70% for MLP loans to firms that have been registered for less than three years. This, we hope, will increase the incentives for banks to lend to them. But we will work with the banks and look at how else we can reach out to

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these SMEs or startups to help them access the loans as well.

Senior Minister of State Lee Yi Shyan had earlier also shared IE Singapore's plans to help SMEs venture overseas through enhancements to the Global Company Partnership (GCP) and Market Readiness Assistance (MRA).

In addition, IE Singapore's new Market Access Incubation Programme (MAIP) will help smaller SMEs and start-ups internationalise. It will support up to 70% of costs, such as airfare, accommodation, registration fees and booth set-up costs, when they participate in overseas events by approved incubators. These incubators will help to identify potential overseas markets, offer mentorship support and provide seed funding.

Taken together, our various programmes provide comprehensive help for all SMEs. The challenge is to create more awareness among SMEs and guide them to access these schemes and to implement them.

Let me give this example. The company is called Aftershock PC Pte Ltd, a company that builds customised gaming laptops. Aftershock PC started as a small operation with three employees and now has 11.

It sought assistance from one of our SME Centres. The business adviser visited the company. The adviser realised that the SME needed more manpower and introduced it to the SME Talent Programme which I mentioned earlier. Through the programme, it was matched with Mr Kwan Suan Qing. With SPRING's support, it is co-sponsoring his final year in Singapore Polytechnic, after which he will join it as a full-time staff.

The adviser also recommended for Aftershock PC to automate its ordering process. Aftershock adopted the idea and it tapped on the PIC to invest in a platform for customers to order its products online. This has made the orders more accurate and less labour intensive. With Government support, businesses are better placed to restructure and transform. The scheme has helped to provide product innovation – the way the sales process is done. With the business process re-designed, that increased the revenue stream. It also helps in covering talent gaps in the company.

We are trying to help as many businesses as we can but businesses must help themselves first. Nonetheless, some firms will find themselves in non-viable business lines. Ms Tin Pei Ling has asked about our support for these

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displaced SME owners and staff.

Unlike Europe which faces structural unemployment, Singapore is in a full employment situation. Thus, we have focused our efforts on helping SME owners and employees move to new, higher value sectors. The Government has a range of schemes to help firms do this as well.

The Government also supports training programmes, such as those conducted by e2i, to help workers acquire new skills and do higher value-add job in new industry sectors. MOM will elaborate on these training schemes and other forms of support provided for displaced workers.

Let me just say that the vibrancy of an economy is not just dependent on the existing SMEs but also new SMEs as well. Entrepreneurship is a big and major pillar for any vibrant economy because it keeps the economy sustainable and at the same time re-energises the business sector. We want to encourage people – young people, old people – regardless of age to embrace entrepreneurship, take risks and come up with new ideas.

We would like to grow Singapore into an Entrepreneurship Hub. The Government set up ACE (Action Community for Entrepreneurship) 11 years ago. The mission of ACE is to develop an entrepreneurial culture and a pro-enterprise environment. ACE and SPRING together provide access to funding, mentorship and infrastructure support.

As Members know, since I took over ACE, one of the first things I changed was the ACE Startups Grant. It used to have an age limit. Today, there is no more age limit. The ACE Startups Grant provides first-time entrepreneurs with tax exemptions and funding support, matching $7 for every $3 raised by entrepreneurs for up to $50,000. There are other schemes. SPRING's Start-up Enterprise Development Scheme (SEEDS) co-invests with third-party investors in promising startups. With this support, the number of active startups in Singapore has grown by almost 60% in the past seven years.

I would like to share with Members an example of Ms Ee Poh Luan. She is a successful example of someone who made entrepreneurship a second career. Luan worked for 20 years in the communications sector before deciding to follow her passion in cooking. She signed up for two stints as a kitchen intern in different restaurants and then decided to become an entrepreneur. She was awarded the ACE Startups Grant and was also assigned a mentor to help her develop her business model. Since the start of last year, Luan has been

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operating her gourmet food truck – the Kerbside Gourmet. This mobile kitchen is also a social enterprise. Luan channels a part of her profits to feed low-income families.

It is not just about getting grants. More importantly, it is the networking and the mentorship that come along with it. We offer this mentorship not just for grant awardees, but also to those who are interested to set up. We try to do the match between mentors and mentees.

Mr Chen Show Mao has asked about support for older Singaporeans interested in entrepreneurship. We want to encourage older entrepreneurs or seniors to embark on entrepreneurship. We do not discriminate against age, nor the nature of business – whether tech or non-tech.

We can all be inspired by 69-year-old Ms Shelley Siu, who founded The Singapore Shawl, in 2003. The company designs shawls that feature Singapore's culture and makes them from eco-friendly products. Besides Singapore, the shawls are sold overseas in the US, UK and France. Ms Siu said that her reason for starting the business was to give back to her community. She hires local women, mostly senior citizens or those who are in need, to work in the stores or as seamstresses. Ms Siu did not require any Government support to start her business, but others may need help. For those who need help, we encourage them to approach ACE and SPRING to find out more about the help schemes.

As Members would know, I am also trying to let ACE be led by the private sector. I believe that in doing so, it would keep the entrepreneurship scene and landscape a lot more vibrant. This is aligned with the recommendation in the Entrepreneurship Review Committee's report, which was completed this year.

Another significant recommendation was for the Government to provide more physical space to incubate startups. I am happy to share that JTC will be developing new incubation spaces, more than what we have today with the famous Block 71 at JTC's one-north.

This builds on the success of the original start-up hub at Block 71. Block 71 has drawn global attention to our entrepreneurial culture. Earlier this year, it was covered in the Economist magazine, which featured the opportunities for startups to interact and work together. Block 71 currently houses 23 incubators,

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startups and 1,000 entrepreneurs from the infocomms and media cluster. This compact seven-storey block provides a collaborative environment for like-minded entrepreneurs.

Being sited with fellow startups and potential investors meant that discussions happened quickly. Deals can be made, capital investments are made and they can pitch ideas at any point in time. We want to be able to provide that platform, a larger one, for more people to be involved and, in turn, set up a culture, the spirit and an ecosystem for entrepreneurs.

By the end of this year, JTC will open two more blocks as part of an incubation cluster called JTC LaunchPad@one-north. This is adjacent to Block 71; so, we will have Blocks 73 and 79, and these will nurture the growth of startups and incubators in promising industries. The expansion will double the current community at one-north to 500 startups and 2,000 entrepreneurs, and provide more common spaces for startups to interact, share ideas and make deals. As Members can see from the layout, there will be Blocks 71, 73, 79 and there will be community space, cafes, bistros and eateries for them to mix. Hopefully, we can create our own mini-Silicon Valley.

If there is sufficient demand, the Government will consider creating more startup clusters around Singapore in the future.

We will discuss more details of JTC LaunchPad@one-north later this month.

Let me move on to the issue of consumer protection. MTI recently announced changes to the time-share regulations that will take effect in April this year. These changes will expand the regulation's coverage to cover relevant products, such as holiday club memberships. They will also prevent companies from collecting a deposit from consumers during the five-day cooling-off period, and ensure that consumers have all the relevant information needed when making purchases.

Mr Png Eng Huat has asked about the recourse available to consumers who have already purchased timeshares and think that they have been scammed. Unfortunately, the regulations only apply to new contracts, and do not cover existing contracts. For clear cases of cheating, the party should make a police report. I urge consumers to consult the Consumers Association of Singapore (CASE) if they need advice.

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While we cannot enforce the regulations retroactively, we can do more to ensure that our consumers' interests are not adversely affected. CASE will reach out more to consumers to educate them on their rights to reduce future cases of cheating. I believe CASE is continuing to monitor how badly the consumers are affected and how many cases of complaints they receive each day.

In conclusion, the Government will continue to help SMEs enhance their productivity and develop new capabilities. We will also continue to cultivate a climate of entrepreneurship in Singapore. SMEs and entrepreneurs must also take the lead and embrace the restructuring process. We are seeing progress but there is more to do. SMEs in countries like Germany constantly upgrade themselves so that they can become market leaders in their respective niches. It will take time, but we will move along in this journey together with our SMEs.

Today, many home-grown brands are already household names. Most Singaporeans know Jumbo Seafood and Eu Yan Sang. Other SMEs have achieved recognition overseas. Crystal Jade is popular in Hong Kong and OSIM has a strong reputation in China. These SMEs make us proud, and the Government will support more SMEs as they work to reach such heights. With effort, I am confident that SMEs will continue to grow and create good jobs and better jobs for Singaporeans.

Mr Chairman, I would like to ask the Minister about the policies on Industrial Government Land Sales. MSF has set the precedent of evaluating bidders for childcare centres not based on just price bids, but qualitative factors. To address some of the cost pressures that the businesses have been talking about in terms of getting industrial land, I would like to ask the Minister if he would consider also a formula, other than bid price, to include qualitative factors, such as economic contributions, jobs created and the purpose of the development, whether it is for investment or owner-occupation. I would like to ask whether these qualitative factors can also go into the Government land sales programme.

In fact, we do so. For big plots of land, as well as for SMEs seeking renewals of their leases, we have a dialogue with them. To qualify for renewal of their tenancies, they have to demonstrate value-add, types of jobs created and the linkages to the cluster, that is, whether they add value to the competitiveness of the cluster or the sub-clusters, before we renew the lease.

For the plain vanilla flatted factory type, we would just release it, sometimes with planning conditions, for example, floor loading, so that it caters for certain types of industries. We leave it to the market.

I would like to ask the Minister, given that our GDP is subject to global cycles, would he consider a more relevant measurement of productivity, perhaps, a sector-based one or Total Factor Productivity (TFP)?

That is what we are doing under the NPCEC. We have a sectoral plan. We have a dialogue with the players, and we work out what are the appropriate and most relevant productivity measures for that sector. We do so for the hotel sector, the food manufacturers' association sector and so on. We do that at the sectoral level.

We will reveal the details later.

I believe Minister of State Mr Teo Ser Luck mentioned just now the company formation rate of about 14,000. I would like to ask are we monitoring the rate of companies folding up. I have heard recently that the rate has also increased, especially in some sectors that are very dependent on rental. Entrepreneurs are such that they see opportunities but many of them come in and may not last long, particularly in the F&B and the retail sector. Many of our entrepreneurs try in that area. So, I am a bit concerned about the rate of failure and bankruptcy. In addition to formation, are we monitoring closures also?

I would like to assure Mr Inderjit Singh that we are measuring that. In fact, the SME Workgroup meets very often with the retailers or the retail associations to measure the closure. I do not have the exact numbers right now, but the last seen trend is that it is not increasing at a very high rate, even for the F&B sector. We are monitoring it.

It may also be because there are new entrants. There are a lot more new entrants into the sector. We are not seeing fewer entrepreneurs. In fact, we are seeing quite a vibrant entrepreneurship landscape today in the different sectors, such as the services sector. If you look at some of the shopping malls, you can see that sometimes there is change-over but you do not really see vacant space.

Thank you, Sir, I would just like to ask, since the Ministry does track businesses and, in this case, entrepreneurs that may have folded or that have closed, may I just ask, overall, for these entrepreneurs and businesses, do they get re-allocated into other industries, or do they find a way back in, or are they just being displaced permanently and be kept in limbo?

To answer Ms Tin, they have various scenarios. Some of them change their business model, others just close up and go back to corporate life; and sometimes they become a second-time entrepreneur. It really depends on the situation and on the entrepreneurs themselves. The closure rate itself has not been climbing; the trend has been very steady. We are monitoring that very closely. If there is any prevailing trend coming out in prominence, we will track and see what is the issue there.

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