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

Madam, a recent Reuters survey of 268 listed Singapore companies showed that 57% reported a year-on-year drop in operating profit margin for the first nine months of 2012. This widespread margin squeeze in at least a decade due to manpower shortage, escalating costs and slow growth is worrying. Nine foreign chambers of commerce had raised concerns against tighter curbs on foreign labour and we have heard increasing talks of companies relocating to other countries in search of better growth prospects. I am concerned about Singapore's ability to maintain its international competitiveness.

Yet the Government has maintained its strong stand to balance manpower needs with economic restructuring and productivity imperative. In support of the restructuring journey, the Government has come up with a slew of measures over the last few years, including the $5.3 billion three-year transition package in this year's Budget, to help companies increase productivity, innovation and capability. It is also actively helping companies to seek growth opportunities overseas in view of local constraints.

Madam, it is clear that Singapore's future hinges on our ability to make the transition to higher quality growth on the back of higher productivity. We have set ourselves the stretch target of increasing productivity by 2%-3% per year over the next decade. Yet, we have seen a 2.6% decline in productivity last year,

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and only 0.8% per year growth between 2000 and 2009.

There is a myriad of Government schemes that purport to drive productivity. I would like to ask the Minister the effectiveness of each of these programmes and how performance is tracked and measured. As the Government is taking a long-term view towards achieving our productivity goal − and the Deputy Prime Minister has explained that it is not equal per year − what are the key milestones set in this long journey? I would like to ask the Minister how we can be sure that our restructuring efforts are bearing fruits and we have set the optimal pace to facilitate transformation. What indicators are the Government tracking to ensure Singapore is not priced out of the market, and remain internationally competitive amidst the restructuring?

In facilitating companies to restructure and to offshore lower productivity parts of their operation, how can we be sure about the fine balance of keeping selected functions in Singapore and reduce the risks of companies relocating the entire operations overseas?

Mdm Chair, one of the groups that will be facing difficulties in light of the current economic restructuring would be Singapore small, medium and even micro-enterprises. Many of these have expanded over the past few years on the back of the easier availability of foreign labour. As it gets more difficult for these SMEs to get foreign manpower, many may face the question of whether they can survive. In this regard, I would like to focus on what we could do to help these SMEs.

The first area I would like to touch on is Singapore's Free Trade Agreements (FTAs). One of Singapore's greatest advantages for businesses operating here is that it has entered into a number of FTAs with various parties. These include individual, multilateral and regional FTAs. A recent example is the European Union and Singapore FTA. I understand that the EU is Singapore's second largest trading partner, accounting for over 11% of our trade. The EU is also our largest foreign investor with more than 9,000 companies that have set up operations here.

Broadly speaking, I think FTAs will be helpful for businesses. The large corporates are very aware of this, and I am sure Singapore's extensive network of FTAs is an important consideration for large corporates wishing to set up here. However, I am wondering to what extent our SMEs are aware of the

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potential opportunities from these FTAs. These potentially mean that there are large foreign markets and opportunities open to them, if they wish to grow. I am hoping MTI can elaborate on what these FTAs have meant for the average SMEs in Singapore, and whether or not there are, indeed, opportunities they can exploit from these.

The second area I wish to deal with is about some of the SMEs in sectors that may be specially affected by the restructuring, including those in food and beverage, retail and construction. All these industries face the issue of labour crunch. This is because most of these industries have a very large proportion of foreign workers doing jobs which the business operators say they find great difficulty in getting Singaporeans to do.

I understand that even in these difficult sectors, there are some success stories. A few companies were featured in The Straits Times last month, saying how they managed to reduce reliance on foreign manpower and employ largely locals now. I am just wondering if these success stories might be shared with other businesses in these sectors. More specifically, it would also be helpful if the Ministry can elaborate on schemes that are tailored to assist businesses in these sectors, to transition from the heavy reliance on manpower. What other steps can the Ministry take to help companies in these industries become aware of these schemes and take them up?

The last area I wish to touch on is really a look at Singapore's future: how can we create an environment that would allow more SMEs to be set up here? I think encouraging youth enterprise is a very important part of this. I have seen a number of youths in our Universities, Polytechnics, ITEs and even Secondary schools come up with interesting and novel products and ideas. I am wondering if there are any schemes available that these youth could take up to pursue their ideas and become entrepreneurs. I am also wondering if there are any steps taken to make youth aware of any such schemes that may be available.

The demographic trend of our ageing population is highlighted in part of the recent Budget. The Budget has two parts: "quality growth" and "an inclusive society." They contain pillars of the Government's economic and social strategies, respectively.

When speaking about the social part of the Budget − an inclusive society − the Budget acknowledges as "key concerns" the issues facing older workers and

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retirees.

I hope the Government will similarly keep older Singaporeans closer to the centre of the economic part of the Budget − for "quality growth".

Singapore should promote our silver industries, which produce goods and services for the elderly, as a key plank of our restructuring, evolving economy. For example, the Budget refers to funds set aside for Collaborative Industry Projects for productivity growth, where industry-wide collaboration provides the scale that individual firms lack. There is also the Partners for Capability Transformation (PACT) Scheme to foster SME collaboration with large enterprises so as to enable capability upgrading and sharing of best practices.

In addition to productivity growth and capability upgrading, which are the objects of these schemes, could we foster similar collaboration to address the economic opportunities presented by an ageing population, first within Singapore, as a testbed to develop robust and innovative silver products and services, before then exporting them to regional markets. China, in particular, is an economy that is expected to age very rapidly, from 100 million seniors, aged 65 and above, in 2010, to 350 million in 2050.

This will benefit both our businesses and our seniors.

In addition to industry collaboration and collaboration between SMEs and large enterprises, we should also foster synergistic collaboration by firms with companies outside their own industries, and by firms with senior citizens themselves as consumers and key stakeholders to offer co-creative solutions to the challenges of an ageing population – such as Japan has been doing with robotics – so that we can focus on solutions in elder care, elder housing and elder living.

We can be both hopeful and realistic that one day, the popular science fiction saying may very well be true in Singapore: "Live long and prosper!"

Mdm Chair, in this year's Budget, the Government has a whole package of incentives for businesses, especially the SMEs and micro-enterprises. Such incentives were drawn up to help them become more productive and innovative and lessen the "pain".

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While all efforts will be made by the businesses to work smarter and with less reliance on manpower, however, it was disappointing that the current Budget did not adequately address the rising costs of doing business. This afternoon, I would like to raise four points.

One, Pro-Enterprise Panel (PEP) to look into cutting unnecessary red tape and promote inter-agency coordination. We appreciate the Government's efforts in strengthening certain productivity incentives, this being one of the four pillars under the Quality Growth Programme. We look forward to receiving more details on how SMEs could take advantage of such incentives. We strongly suggest eliminating red tape and over-regulated policies. Government agencies should put more trust in the business community and reduce heavy compliance costs. I have previously highlighted this in Parliament a few times: if the carrots are hung too high, how can the rabbits eat them? As I said, 胡萝卜挂得那么高，小白兔能吃得到？

This is where the PEP could play a more pro-active role, as I had mentioned in my speech during the Budget debate on 6 March. PEP should also help to look into streamlining regulatory requirements for businesses. The primary focus of these incentives should be on achieving productivity for the industry as a whole as well as for individual firms. The schemes should be easily understood and widely tapped on by as many firms as possible. I suggest that the Government cluster similar schemes together under one package, instead of having companies approach different agencies with different sets of KPI. In fact, my parliamentary colleague, Ms Jessica Tan, had just brought up the same point.

Second, productivity drive needs a more flexible approach. The productivity journey is a marathon run and not a 100-metre dash. It is not practical to expect immediate KPI for productivity, especially within the services sector which is not uniform. Within the F&B industry, achieving productivity varies from fine dining restaurants, fast food eateries, Chinese and Western restaurants, to humble eating houses. Value-add cannot be and should not be the only measurement for productivity. Thus, we sincerely hope the Government would adopt a more flexible approach when it draws up various schemes, taking into consideration the variations that exist.

While we agree that achieving productivity growth is a target that all companies should aspire to achieve, there is no certainty of success. We appeal

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to the Government to be open-minded about this and be prepared to share part of the risk involved.

Third, JTC to provide affordable industrial land for SMEs. Limited land supply continues to drive up land prices, estimated to have increased by more than 60% over the last two years. Take development charge (DC) rates for land as an example. The latest DC rate for commercial use, which kicked in on 1 March this year, was increased by an average of 23.7%, the highest since September 2007. Given this high cost of developing industrial land, private developers are invariably asking for higher rentals with every lease renewal. Operations of small businesses would be greatly disadvantaged and unsustainable if the rentals are punitive.

We appeal to the JTC to make provision for affordable industrial land, especially for those for SMEs which do not fall within JTC's targeted industry clusters. At the same time, we hope that JTC could consider freezing its rents for SMEs over the next three years.

Fourth, on SPRING and IE Singapore helping SMEs to venture overseas. We realise that the productivity effort has to apply to different levels. Firstly, the bosses themselves have to adopt a mindset change. They cannot be a frog in a well, what we call 井底蛙, but need to hop out to see the world. Overseas trips could be useful for these bosses in opening up their minds. That can be the first level in the productivity journey. We may also bring in overseas trainers to help us enact changes in process or in adopting new business models. If the Government could step in to defray these expenses, it would be greatly appreciated.

Due to the high costs of operation in Singapore, some companies will need to move overseas to countries like Malaysia and Indonesia. SMEs, for example, need to understand these markets if they were to relocate. IE Singapore and SPRING could take on a more proactive role to help SMEs go overseas.

The Trade Associations and Chambers (TACs) can help local enterprises make this transformation to productivity-led growth. We, therefore, seek even greater collaboration with Government agencies on this initiative for a truly effective tripartite collaboration. In China, the Chinese Chambers have set up a Shanghai office to effectively assist members in their China ventures. IE Singapore and SPRING have been helpful and we urge the agencies to continue to fund such overseas effort.

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In conclusion, this is a journey that all of us have committed on and we must succeed in this transformation. Business owners, workers and also the Government all need to coordinate and contribute to this transformation. Government agencies have an important role to help the businesses, while the businesses and workers are bound to go through aches and pains in this transformation. We do urge the Government to be more flexible and pro-business in looking after the SMEs, especially the micro-enterprises which are lacking in resources and capability.

There must be enough trust between Government agencies and the business community. The Government should not always insist on playing the role of goalkeeper. Instead, they should play mid-field and help enterprises to strike the goal.

Mdm Chair, as the Deputy Prime Minister puts it, the next 10 years of our restructuring are crucial. Today, I would like to share with the House a few ideas where I believe Singapore can take the lead in our restructuring efforts.

Firstly, I would like to suggest that we maintain a highly diversified industry approach with an emphasis on services. Secondly, I would like to argue that productivity takes time, effort and resources. It requires a change in mindset and education. Lastly, I will again talk a bit about big data and how this can be a game-changer for us.

One, a diversified palate of new growth industries. Singapore's economy is powered by manufacturing, services and infrastructure supply services. I would argue that the future industries we should focus on should emphasise job creation rather than niche areas like animation or biotechnology. Hence, I would agree with the Budget's focus on advanced manufacturing, and I am also excited about JTC's initiative in Advance Re-manufacturing.

Another growth area for us would be in urban services, whether port management, logistics or urban infrastructure. Singaporean SMEs and other infrastructure and service providers should follow Singbridge's example in expanding their businesses overseas, as other emerging markets upgrade their

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infrastructure.

Lastly, we should continue to uphold our high service standards. Hence, I would caution against trying to achieve automated efficiency in everything. There are some things that a machine simply cannot replace. This could be a warm smile, a respectful greeting or a helpful hand. Singapore Airlines has the Singapore Girl who epitomises what it means to give the best in Asian service standards. Our tourism industry simply cannot compete with the best in Asia, if they are forced to survive on too thin a workforce.

Two, productivity and innovation can be managed but it cannot be forced. Despite the many productivity schemes implemented, Singapore's labour productivity growth has been lacklustre since 2010. Some businesses have complained that they are so resource-constrained, they have little bandwidth to focus on productivity initiatives. Also, training workers, acquiring new technology and process streamlining takes time to take effect.

Perhaps, to jumpstart these efforts, MTI could bring in various industry leaders who are examples of high productivity to share their expertise. For example, the Australians are often praised for their high standards of construction. Why not invite them here to share their best practice? I also cite Singapore Business Federation (SBF)'s suggestions to improve productivity through cluster and supply chain development across each industry. For example, retail chains can leverage on shared services from the logistics sector for transport and storage.

Three, big data – the new frontier for innovation and productivity. Digital data is everywhere – in every country, economy, sector, government and organisation. According to a Mckinsey report, 60% of the world's population has mobile phones. Many of us are now using smartphones. As the growth of the Internet economy rises to 8%-10% of Singapore's GDP, it will mean a tremendous amount of data is being created at a scale never seen before. Mining and analysing these big data can open the doors to a new wave of innovation, accelerating productivity and economic growth.

Big data will enable Government agencies to do more with less. For example, Government agencies gather big amounts of data but these are mainly in silos. If this data could be stored in a national registry, shared between agencies, whilst acknowledging our data protection laws, this could reduce the need for a lot of repeat work and drive operational efficiency. Government can use this data to segment our population, customise services based on the

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different segments. For example, we could pinpoint the segments most in need by collecting data on income, healthcare bills, delinquencies or late payments. Using big data can lead to big increases in public sector productivity. For example, the Vancouver police have used analytics to drive the crime rate down by 24%. Similarly, US healthcare experts forecast a $300 billion gain from more effective use of data to help patients make the right decisions for treatment.

Big data can also help companies to create new products and services or help them enhance existing ones. It can also help identify new business models to invest in. For example, banks' payments systems now are being displaced by small start-ups in East London that are using data to link transactions more cheaply. Simply making big data more easily accessible to relevant stakeholders in a timely manner can create tremendous value. Sophisticated analytics can even replace human decision-making with automated algorithms. Many of us in the House would have heard of Watsons.

Global data generated is projected to grow by 40% per annum versus 5% growth in global IT spending. Big data creates value in many ways and Singapore is small and nimble enough to take a leadership position in this. But to do so effectively, we need to address the shortage of analytical and managerial talent necessary to lead this. We need to ensure all stakeholders understand the benefits. We also need to put in place the right infrastructure, incentives and safeguards so as to encourage continued innovation in this field.

Lastly, is anyone exploring the possibility of Singapore being the first country to offer the driverless car?

Allow me now to move on to my next cut on inflation and policy efficiency. Some economists have argued that levies on foreign workers are like a tax on the import of services. It is against free trade and, therefore, bad for Singapore.

Others say businesses that rely on cheap foreign labour receive an implicit subsidy from the Government. The low cost of labour discourages them from upgrading and innovation, and holds down wages for locals doing the same work.

We know the Government does not want an over-reliance on cheap foreign labour. But there are some industries where locals will not fill the gap. These are in lower skilled non-PMET jobs that need to be filled, especially given our

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aggressive growth targets for building new public housing and transport. The National Population and Talent Division (NPTD) has reported that Singapore needs another 150,000 more foreign workers in healthcare, construction and domestic workers due to our ageing population.

Budget 2013 raises foreign worker levies for the fourth time. Will this mean we have to suffer even higher structural inflation caused by rising wages? Wage growth has been higher than productivity growth. This means that higher business cost is either being absorbed by squeezing profit margins or reducing expenses like training budgets. Some may pass on this higher business cost to the consumer, creating yet more inflation. This inflation means workers may demand even higher wages to compensate for their loss in real income. This may bring about a situation where wage and inflation are chasing each other.

Hence, it may be useful to sometimes press the pause button to see if we need to change course, change pace or take a step back. How do we know if the ultimate "survivors" of this restructuring will be the right industries? How do we better prepare Singaporeans to take leadership positions in these new industries? In this single-minded pursuit of restructuring, it is inevitable we may lose some good ideas or good businesses in the process. They say it is short-term pain, long-term gain. But let us hope it is not short-term pain and long-term pain, too!

Mdm Chair, let me first thank Members for their comments and suggestions.

Ms Jessica Tan asked about MTI's strategies to grow the economy amidst global uncertainties and our domestic constraints. Given the weak external environment and the tighter labour situation domestically, we expect a modest 1%-3% growth for Singapore in 2013, and a 3%-4% average growth for the rest of this decade. For a country that has enjoyed twice the rate of growth since 2003, this slowdown will be a significant change.

The slowdown would be most acutely felt in our workforce as our population ages and our citizen workforce shrinks over time. Foreign manpower, as a complement to our Singaporean core, must be managed judiciously. To deal with this slowdown, our companies must restructure and aim for higher productivity. Restructuring is painful, but it is unavoidable.

Both Ms Jessica Tan and Ms Foo Mee Har asked whether we can stay globally competitive amidst our restructuring, and whether Singapore can

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retain its high value-added activities. The outcome of our efforts will, in fact, have a major impact on our future – what the economy will look like, and what kinds of jobs Singaporeans will have. We are, therefore, restructuring to stay more competitive, not less. But to do so successfully, we must carefully pace and calibrate the changes. While we accept a slower growth trajectory, we aim to create quality growth and higher value jobs for Singaporeans.

MTI's strategies for achieving quality growth are, therefore, two-fold: first, to stay open and flexible to tap global and regional opportunities; and second, to restructure the economy so that our companies and workers can achieve higher productivity and sustainability.

Let me first turn to the strategy of staying open.

Ms Jessica Tan asked about our Global-Asia Hub strategy and, in particular, specific high-growth sectors that Singapore companies could focus on here in Singapore as well as when internationalising. The good news is that the Asia growth story is largely intact, and our Global-Asia Hub strategy continues to resonate with global and regional investors. We also see opportunities for Singapore companies seeking to tap Asia's growth and the continuing economic integration of our region. Let me highlight four sectors as examples.

First, the high-value pharmaceutical sector offers high wages and employs more than 5,700 people, where 80% perform skilled jobs. In 2012, the pharmaceutical value-add grew by 14% to S$13 billion. Biologics is one niche area within the industry that has been gaining momentum. The first biologics facility was set up in 2007; we now have eight, including two first-in-Asia biologics manufacturing investments from Novartis and Amgen. Over the next three to five years, the biologics sector will create at least 500 jobs – highly skilled jobs for chemists, microbiologists, biotechnologists, engineers and technicians.

The second sector is baby nutrition and baby care. This is another growing segment, fuelled mainly by the population boom in Asia and the rising middle class. Singapore has become an established hub for commercial and innovative activities in baby nutrition and baby care. The world's top infant nutrition players, like Nestle Nutrition, Danone, Mead Johnson, Abbott Nutrition and Friesland Campina, have all located themselves here. More recently, Proctor & Gamble relocated its global HQ for Baby Care, including its Pampers brand, to Singapore.

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At the other end of the spectrum from infant nutrition is the silver industry. This is a growth segment highlighted by Mr Chen Show Mao. We agree with him that Singapore can serve as a platform for us to test out products and then to replicate this wider afield in Asia. As we know, Asia is ageing and there is a growing demand for products and services for the elderly. Singapore is therefore well placed to tap into this market. In fact, we have local entrepreneurs who are seeking to tap this growing market.

Sofshell, for example, is a local spin-off from the Institute of Materials Research and Engineering. It has pioneered a responsive soft-shell armour that hardens upon sudden impact and dissipates the force. Sofshell has obtained grant funding from A*STAR and SPRING to develop prototypes for elderly hip protectors. When the elderly falls, the armour will become hardened and that will protect the elderly from hip injuries. Sofshell is also working with IE Singapore to establish its manufacturing supply chain as well as its overseas distribution channels. Global companies too are using Singapore to innovate products and services for the silver industry. We have Siemens Medical Instruments' manufacturing and R&D facility here, where it developed and launched its Ace hearing aid. This is the most discreet product in its hearing aid range. And Procter & Gamble (P&G) and the University of Cincinnati have also partnered Singapore Polytechnic to set up the Live Well Collaborative-Singapore project. This non-profit and independent innovation research centre uses consumer insights to co-create products and services with the industry players.

And the fourth area that I would like to highlight is high-end logistics services, to illustrate the big data that Ms Tan Su Shan talked about. High-end logistics services now extend beyond the physical flow of goods. It uses data analytics capabilities to add value to logistics services. Such services rely on strategic planning as well as solutions development to better manage the supply chain in the whole of Asia. The rise in demand for services in Asia has led top global third party logistics players (3PLs ) such as DHL, UPS and Nippon Express to establish their regional or global functions in Singapore. In particular, the world's No. 1 air express and 3PL company DHL has established its global Services Logistics Centre of Excellence here to develop innovative and specialised logistics solutions for its clients worldwide.

Our Singapore logistics companies are also growing. Pacific Integrated Logistics (PIL) Pte Ltd started out as a traditional freight forwarder and is now a fully integrated logistics solutions provider. PIL first established its international

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presence in Shanghai and Suzhou. With IE Singapore's help, PIL ventured into Chengdu, where rapid infrastructural investments have created a strong demand for logistics services. PIL is also well connected to the South East Asian market, and uses Singapore as its headquarters to serve their customers in Malaysia, Indonesia, Thailand, the Philippines and Vietnam. And by the second half of this year, PIL will also be in Myanmar. Singapore will strengthen our value proposition as an open and connected economy, so that we can continue to attract companies like PIL to site their high value-added functions here and expand regionally.

Ms Jessica Tan asked about the types of assistance available to help our companies to internationalise. The Government offers a wide suite of initiatives to holistically support companies in this area. Senior Minister of State Lee Yi Shyan will elaborate in greater detail, but let me touch on financing, something that Ms Jessica Tan raised.

Last year, IE Singapore launched the Political Risk Insurance Scheme (PRIS) to help Singapore-based companies protect their projects and investments from political risks when they internationalise. Political risk insurance is a useful risk mitigation tool and this scheme will help cover up to S$2 billion in overseas investments over the next three years.

This year, we will work with the Asian Development Bank (ADB) and private insurers to expand the ADB's Trade Finance Programme to enhance trade flows for Singapore-based companies. Many companies already benefit from this programme which currently supports over US$1 billion of trade capacity. Given that our companies are exporting to Asia's emerging markets, demand for such trade financing programmes will continue to be high. IE Singapore will release more details of this scheme later.

Mr Vikram Nair asked about the effectiveness in our use of our FTAs. As we know, over the years, we have developed growing trade linkages with a successful network of FTAs. We have FTAs with all our major trading partners and these FTAs improve market access for our companies particularly our SMEs as they expand overseas. In 2012, more than 1,700 companies benefited from our FTAs, and we expect this number to increase as we expand our FTA networks and make them more user-friendly.

Our companies, including our SMEs, also benefit by having tariff savings from our FTA. And in answer to Mr Vikram Nair's query, we have a system by which IE Singapore tracks companies that can benefit from the FTA and make

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sure they have outreach programmes to reach out to these companies as a cluster as well as individually.

We recently concluded the FTA with EU, our second largest trading partner and largest foreign investor. Once the EU-Singapore FTA (EUSFTA) enters into force, the EU will eliminate its tariffs for imports originating from Singapore, over a period of five years. Therefore, exporters of electronics, machinery or chemicals, including our SMEs, will enjoy improved market access into the EU. As the EU has relatively high tariff rates for processed foods, the elimination of tariffs under the EUSFTA will benefit our food manufacturing companies, many of which are SMEs.

Let me now turn to our second strategic thrust and that is to restructure for productivity and for quality growth. We recognise that there are certain downside risks to this strategy and we must be aware of this. For example, in a tight labour market with limited resources, there will, of course, be some opportunities that we may have to forgo. The second downside risk is the risk of rising structural inflation and rising business cost, given the very tight labour market. We are very mindful of all these risks, especially not to allow runaway inflation or a wage-price spiral to gain traction. Therefore, the Wage Credit Scheme which was announced during the Budget Statement will help the companies defray some of these wage increases, and which will then prevent them from being entirely passed on to the consumer.

In addition, we expect the subdued state of the global economy to weigh on overall demand and this may help contain inflation in the near term. But over the long term, productivity improvements arising from our current restructuring should help to prevent higher costs from fuelling strong price increases. The Government has therefore adopted a multi-pronged approach to manage inflation and will continue to watch the developments very closely.

But the key to managing the whole process is to make sure that we continue to pace and calibrate the changes carefully as we restructure. I acknowledge several Members' observations that productivity changes need time and this is precisely how we have structured our strategy.

Our restructuring strategies are also structured for each sector because we know that we cannot have one-size-fits-all. And therefore, we have taken a sectoral approach in developing plans together with the private sector. Over the last three years, in fact, the National Productivity and Continuing Education Council (NPCEC) has worked and endorsed productivity roadmaps for 12

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sectors, including the retail, the food manufacturing, electronics and precision engineering sectors. Roadmaps for the remaining four priority sectors will be endorsed soon. For each sector, we engaged the industry closely to study their productivity challenges before recommending specific initiatives and targets. And even with the roadmaps, we continue to maintain this under regular review, and continue to engage with the industry players to make sure that the roadmaps continue to remain relevant.

Let me give you an example for illustration so that you can understand the comprehensive way in which we go about developing this strategy. This is the Marine and Offshore sector. As you all know, Singapore is a global leader in the Marine and Offshore sector. Our shipyards command 70% of global market share in offshore drilling rigs and conversion of tankers to production vessels. However, we believe that there is still room to improve, particularly in the land and labour productivity as well as to move the sector up the value chain.

Therefore, transforming this sector will take place in several ways. First, we will improve land and labour productivity through automation and enhancing process workflows. An example is Sembcorp Marine's Integrated New Yard which will be ready by the second half of this year. And with the improved logistics, the redesigned workflows and process automation, manpower requirements will be reduced in the long term for this New Yard.

Second, we have worked with the shipyards to strengthen their supplier base. ST Marine, for example, is one of the largest local shipyards involved in shipbuilding and ship repair, and it procures ship repair services from many of its sub-contractors. With SPRING's support, ST Marine partnered two of its sub-contractors, Glenn Marine Services and Comila Marine Services, to adopt a new method of using wet abrasives to remove paint or rust from a ship's surface. This increased efficiency has resulted in time savings of between 5%-10%.

Third, companies are also encouraged to enhance their design and engineering capabilities, which will allow them to differentiate themselves from their global competitors in the long term. Keppel Offshore & Marine Technology Centre presently has a team of 86 researchers who do upstream R&D on new product designs to augment Keppel's design and engineering capabilities.

Finally, we are also tightening the Dependency Ratio Ceiling (DRC) but will phase these changes over five years. This is to ensure the companies have time to adjust. And we will also allow the shipyards to ride the current upturn in the offshore sector and undertake the necessary changes to maintain their

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leadership position in the long run.

Collectively, we believe these restructuring efforts will result in a 4%-6% Compounded Annual Growth Rate (CAGR) in Value Added per worker between 2011 and 2020. But we will continue to monitor the sector's progress because we believe that the Marine and Offshore sector can continue to play a key role in Singapore's economy.

What we have done in the Marine and Offshore sector, we have also systematically done so for the other sectors particularly in the more challenging sectors such as retail and the F&B sectors. And beyond each sector, we will also find cross-cutting methods to strengthen the linkages between our various sectors.

Members have also raised concerns about how SMEs and micro-enterprises could cope with the restructuring. As Members have heard from Deputy Prime Minister Tharman, we pay particular attention to our SMEs, because they are an important part of our economy. They provide good jobs for some 1.3 million Singaporeans.

The Government continues to be committed to help SMEs to go through this difficult transition period, and many of the assistance measures introduced this year, in fact, have been weighted to benefit SMEs more. This was done consciously and deliberately because we want to help our SMEs. Minister of State Teo Ser Luck will elaborate on the measures later on when he talks about the measures to help our SMEs.

Let me now address Mr Teo Siong Seng's point about industrial properties. As I have mentioned several times in this House, JTC remains committed to provide industrial land competitively, compared to our benchmark range of competing locations. We will continue to do so. On PEP, I think this is a useful suggestion. The PEP has been very effective in the past. We will continue to reactivate it to provide leadership within Government agencies and Ministries to cut red tape, and to reduce compliance cost.

Mr Teo Siong Seng also asked us to adopt a more flexible approach in each sector. I hope I have illustrated that with the example of the Marine and Offshore sector. In fact, we do so for the other sectors too.

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Let me just elaborate on our measures to help the SMEs. In fact, we have embarked on this in a deliberate attempt last year. Last April, Minister of State Teo Ser Luck led a committee of representatives from MTI, SPRING, IE Singapore as well as key industry partners to comprehensively review our schemes in helping the SMEs. Arising from this review, we will be implementing eight strategies to help the SMEs. Minister of State Teo Ser Luck will elaborate on them later on. Let me just highlight one of these schemes.

This is the SME Talent Programme, which was earlier announced in the Budget Statement. The aim of this programme is to create a pipeline of local talent for SMEs. Under the programme, SPRING will match over 3,000 promising Polytechnic and ITE students with SMEs over the next five years. Upon graduation, these students will start their careers with SMEs that can offer them good jobs as well as training. We will work through the trade associations and chambers (TACs) for this programme, since they know the industry best and will be able to identify progressive SMEs that can work and absorb these students. We hope that this will attract more local talent to join SMEs and encourage the entrepreneurial spirit in Singapore. The Government will co-fund the programme, which will amount to more than $70 million over five years.

Mdm Chair, let me summarise the key thrusts of our work ahead. First, we must stay open and flexible in order to tap global and regional opportunities that are still opening up around us. Second, we must persevere in our restructuring to achieve higher productivity and quality growth for all Singaporeans.

We all know that there are no quick fixes in addressing our challenges. The path of restructuring will not be easy but the Government is committed to help our companies face the challenges ahead.

Madam, the Government has set aside $16.1 billion to support research, innovation and enterprise for 2011 to 2015. The long-term objective is for Singapore to create high value jobs for Singaporeans supported by a research-intensive innovative, knowledge-based and entrepreneurial economy. A common feedback is that R&D is too high level for our companies, especially SMEs to benefit from. Can MTI share how this

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investment and R&D have benefited our companies and Singapore, especially SMEs and Singaporeans? How successful have these efforts been on the economic impact and commercialisation of R&D and Singapore? In general, do we see a trend for SMEs to invest more in R&D?

Enhancements to the Productivity and Innovation Credit (PIC) scheme in last year's Budget provided support for companies in R&D expenditure and in-house R&D software development. Did SMEs leverage this scheme in their R&D efforts? Is there an increase in investments by SMEs in Singapore on R&D? Have programmes like Growing Enterprise with Technology Upgrade (GET-Up) been successful in supporting in our local enterprises to address the funding, human resource and technology constraints that they face as they innovate? What efforts have been made to seed innovation capacities in our local SMEs – upgrade capabilities as well as acquire IP or technology and gear them for growth?

While there may be programmes to support R&D, fostering R&D capabilities, especially with respect to SMEs is not easy. Effecting significant transformation and innovation is challenging, let alone for an SME. What efforts have been made for collaboration and innovation at the sector level and can trade associations take a leading role in this, as clustering efforts may prove more effective in providing a supportive ecosystem for innovations for SMEs?

Have we been able to also attract top calibre talents in various disciplines to join private sector R&D investments in Singapore, and attract good calibre companies to anchor their operations in Singapore?

I must declare my interest as I work for an IT MNC. Technology can play a key role in not only helping companies improve productivity, but more importantly, compete effectively. In fact, as Thomas Friedman outlined in his book The World is Flat, technology and connectivity have opened up opportunities and to some extent, levelled the playing field for individuals and smaller companies to compete. Today, a start-up can quickly grow and gain significant global presence by leveraging technology. It is a whole new business model and its potential is huge.

SMEs can increase the quality of their products and services, by tapping on the capabilities of ICT. Productivity gains and better insights can also be achieved. As we have seen, broadband connectivity, adoption of mobile and

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smartphone technology and social media have changed the way the businesses engage with the customers. Beyond just online presence, ICT can help businesses cut cost, streamline processes, improve service levels, enhance communication with customers and partners, and can drive more effective distribution of products and services.

Now with cloud services, businesses can leverage technology more effectively, as businesses do not need to invest in infrastructure or resources to support keeping up with the currency of the infrastructures.

Singapore's next generation infocomm infrastructure and global connectivity also provides support for SMEs to operate in this environment. How successful have these programmes been contributing to SMEs' competitiveness in Singapore? Can MTI share with us how SMEs have used these programmes?

Mdm Chair, energy demand in Asia continues to grow on the back of continued economic expansion. This, coupled with the rising cost of raw materials that go towards energy production, such as coal, oil and gas, has led to correspondingly high energy prices, and more demand in ASEAN and the region.

This means rising energy cost for household and businesses, which contributes both to rising living cost as well as higher business cost. This affects the competitiveness of our businesses too. What can Singapore do to ensure that our energy supply remains secure in the region, and to support greater economic competitiveness?

Mdm Chair, I read that Singapore's newest power station GMR Energy is set to change hands. This will take the number of previous owners to well above half a dozen since 2002. I wish to ask the Minister what is the rationale for selling local power plants to private investors, and whether the Government intends to sell their interest or the local power plants to private investors. How will the Government ensure that the cost of energy is kept to the minimal for all Singaporeans?

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I would also like to ask the Minister whether his Ministry can simplify the PIC application processes further, and whether it is feasible for both big and small companies to work together in innovation and raising productivity for the benefits of both parties.

Madam, many Singaporeans worry about rising electricity bills. According to the Singapore energy statistics 2012 released by EMA, the price index for electricity tariffs that applies to households has seen an increase of about 47% from 2005 to 2011.

The current formula for electricity tariff has managed to protect households from wide fluctuations last seen in 2008. However, we have to continue to look for ways to help Singaporean households manage their expenditure on electricity. Since 2000, the Government has liberalised the retail and electricity market in phases, and believes that the competition among the retailers of electricity benefits consumers with greater efficiency and competitive prices.

To date, the household market which accounts for about 25% of the total electricity demand is still not yet contestable. According to EMA, full retail contestability is still under review. The issue was raised in earlier Committees of Supply under MTI. In 2007, the Government indicated that there was a study on an Electricity Vending System (EVS), which will help to reduce administration and business cost. At last year's COS, the response was – to have full retail contestability, there is a need for a system, like the intelligent energy system (IES). I understand phase one of the IES pilot has been completed, and phase two is on with some testing in households in Punggol.

May I ask what is happened to the EVS? Can MTI also give a preliminary assessment of IES, and whether full retail contestability is likely in the near future?

Madam, the power sector is a critical sector for sustaining Singapore's economic growth. Without reliable access to gas and electricity, we will not be able to sustain our standards of living and our industries will not be able to grow.

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As Singapore continues to develop its various industries and the demand for energy grows, it is critical that we plan for the necessary infrastructure to support the growth of these sectors. I understand that the energy sector may be facing a challenge of inadequate workforce. It faces challenges attracting people, especially the younger generation to join the workforce. This may be because of the perceived remote location of the industry players and the perception that the work is not interesting.

Given the tight labour market conditions, does MTI have any plans to ensure that this industry will be able to sustain its manpower demands and the infrastructure developments, such that there is capability to support the growth of the power sector?

Madam, it has been some years since the Government identified clean energy as a key economic growth area. Since 2007, the Government has invested $350 million to fund the development testing and export of clean energy solutions. By 2015, the Government expects clean energy to contribute $1.7 billion to Singapore's GDP and employ around 7,000 people. It is now 2013, how far are we from this target? We have a dozen tidal wind and solar energy MNCs, largely R&D facilities, here but how many sizeable Singapore enterprises have sprung up to export clean energy solutions?

Solar power currently represents just 0.1% of energy generating capacity in Singapore. This is very low, and could be the reason why local enterprises have not taken off. We are too focused on development and testing. Germany is the global leader in solar energy production. The German solar energy industry was enabled not just by R&D but also lessons learnt in system adoption and use, because of the aggressive promotion of the alternative energy market.

Solar energy capabilities are not just about producing and exporting panels. Clean energy solutions require hardware and software integration, with customisation and after-sales services. Without a sizeable local deployment, it will be very difficult for Singapore to export our clean energy solutions expertise. Currently, we only have two small-scale schemes for private companies. One to encourage test bedding in Government facilities, and the other is to offset the capital cost for installation. We need to scale up system adoption and use in the private sector to develop the industry and make the

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market.

I propose that the Government look into three areas. One, fit in tariffs for solar energy producers, and sell the electricity back to the grid on long-term guaranteed contract at slightly marked-up prices. Two, rooftop leasing to encourage building owners to lease out their rooftops to solar energy companies to produce electricity. Three, solar leasing to encourage building owners to rent panels from solar energy companies.

The Government has said that it is not fair to subsidise electricity generation producers. However, the Government provides funding and subsidies in many creative forms to develop promising industries. MTI should study the viability of these schemes and experiment with solar leasing, roof top leasing and FITs.

Mdm Chair, we have heard a lot about new attractions and new developments in our tourism sector over the past year. Our Gardens by the Bay, Resorts World Marine Life Park and the new Mandai River Safari attractions that house our newly arrived pandas are new attractions that add buzz to our tourism sector.

How have Singaporeans and businesses benefitted from this development? Can we expect any more new exciting development in the years ahead for Singapore? Just as in the rest of our sectors, the tourism sector will have to face global economic uncertainty, keen regional competition and labour constraints in the years ahead. Will we be able to maintain our attractiveness as a tourism destination? What are MTI's strategy to ensure that this can be achieved?

Mdm Chair, Singapore has achieved good growth in our tourism sector over the last few years. However, our domestic resource constraints, in particular, manpower could limit the rate at which this important sector can continue to grow. Concerns about manpower availability will heighten following news of a further reduction of the overall dependency ratio ceiling (DRC) in the Services sector. Given both external and domestic constraints, can Singapore continue to remain competitive as a tourism

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destination in the region? Can MTI also update us on how our tourism sector could transform itself further so as to remain competitive?

Madam, the NHB and the NLB have been very active in documenting the history of old Singapore through interviews with people, especially our senior citizens in creating heritage trails as well as in using modern technology like apps to make these rich experiences available to the public. Just to name a few are the Memory Project and the recently established Kampong Glam Heritage Trail and the My Queenstown app.

My concern with such self-guided trails and apps is that it precludes the rewarding experience of engaging face-to-face with the very people who provide these stories. So, in keeping with the theme of this year's Budget of "harnessing the value of older citizens" and to enhance the good work of NHB and NLB, would the Minister consider licensing such seniors who have the inclination and the standards expected as specialised heritage guides where they not only guide visitors onsite but also are paid for their time and contribution.

My suggestion is also in view of the questions raised in this House some months ago concerning tour guides who are not only not licensed but who also gave inaccurate information. By tapping on the full potential of such senior citizens, we would be able to provide tours that are credible and authentic as these tours are based on rich personal experiences which in turn provide for a more exciting experience for visitors.

Specialised guides are not new. In a scheme some years ago, STB tested and licensed qualified Singaporeans as specialised nature guides to provide a more educational and fulfilling experience for visitors of our nature reserves.

I am mindful of the need to protect the work of licensed general tourist guides who might reasonably be concerned that my suggestion might tread on their territory. I will counter that by suggesting that like the nature guides scheme which is limited to specific nature areas, these specialised heritage guides are limited only to their sphere and place of residence. In this way, we can create not only a new quality industry but at the same time a more humane industry where we manifest the importance and pride we place on the inherent value of our people, our places and our relationships with each other.

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Madam, the National Productivity and Continuing Education Council (NPCEC) was set up in 2010, and is responsible for driving the national effort to achieve 2%-3% productivity growth per year over a decade.

However, last year, in spite of various measures, productivity growth was negative for 2012. Can MTI update on the progress of the productivity drive, and whether it is realistic to continue to aim to achieve this 2%-3% productivity improvement target year-on-year?

The main thrust of the productivity drive today, assumes that the tightening of low-skilled foreign manpower and putting higher levies on the unskilled workforce will force companies to transform and of course, hopefully, rely on a more productive and Singapore core of workers.

In doing so, I would like to highlight some potential blind spots which the Ministry could watch out for that may impede the productivity targets that the Ministry aims to achieve.

First, we face a risk of what I call "poach-tivity". "Poach-tivity", a term I borrowed, is the risk that with the tightening of foreign manpower, local workers are poached and wages rise when they are hired by competitors, but not because they have improved productivity or capability. The risk is we see wages rise without any improvement to productivity in this merry-go-round poaching across the industry. This "poach-tivity" will also favour the larger players and cause an extreme shortage of manpower among SMEs which are not able to afford the higher salaries.

An example was cited by a business owner of how an F&B outlet had a number of its local staff poached by its neighbour, a much a larger franchise seeking to expand. The local staff were paid about 30% more and they moved over. I am actually happy that the local staff are paid better, but this will not help the productivity drive.

Second, profit substitution from the property market or "property-vity". A number of businesses realised that it may be more productive to invest in property in Singapore and abroad. In recent times, some businesses have also realised that they can actually make better profit from property investment and rent collection as a landlord rather than transforming their core businesses to

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deliver the bottomline because this can be more tedious. This distracts companies from improving their productivity as their bottomline targets are met from alternative means, that is, the property market.

Can the Ministry comment on the challenges and barriers that it views as important for us to overcome in order to achieve the desired productivity objectives? How do we avoid the situations of "poach-tivity" and "property-vity" from distracting businesses from the productivity agenda?

Madam, many of the efforts under the NPCEC are still driven by the Government. For example, the sectoral productivity roadmaps are top-down plans developed by Government agencies, with some consultation with trade associations and chambers.

There are many companies and trade associations that have good ideas to improve productivity and can do more to help their sectors. Can the Ministry elaborate on some of the ground-up initiatives that it is also seeing and how these can complement the top-down approach in driving productivity?

Madam, if I may also relay a concern that a number of some SMEs have spoken about. They are taken aback by some of the narratives that they have heard in the news and on the ground. Such comments include companies that cannot adapt may have to exit the market. Many SMEs are aware of the Government's direction to improve sectoral productivity, but the pace of change may not be something they can adapt to, especially the small businesses and especially start-ups. Some may have the potential to grow but their progress may be prematurely halted in this whole-of-economy transformation.

Now, moving on to the concerns of social entrepreneurs. If small commercial companies are feeling the pressure of having to boost their productivity significantly, what more of social enterprises? These are companies but they are also businesses that rely on society's goodwill in exchange for business and cost-efficiency. This sector was certainly an area that we promoted in recent years to build our social capital. But if social enterprises start to close in significant numbers, this will also reverse what the Government was trying to achieve in this space.

Madam, the term productivity has become a favourite tagword as we embark on the transformation and restructuring of our economy. The term is used so often but can indeed be quite unclear and may mean different things to different people.

Productivity is the ratio of output versus the resources consumed in the process. It can be measured by a single input resource such as manpower utilisation or for multiple resources. There can also be many different types of productivity measurements depending on the types of resources considered. A customised definition, which may be industry-specific will be helpful.

I am glad to hear the Minister's announcement of a sectoral approach on this. With the proposed centre to assist SMEs, can the Ministry set up specific consultation clinics that can give customised or targeted help and advice to those who require it, in planning improvement for their businesses? Also, can we have some satellite centres in different districts, maybe tagged to the CDCs, WDA or CETs for greater accessibility?

Whilst there have been much focus and emphasis on increasing productivity of the lower and middle level workers, we must also not forget the higher and the upper end as well because this essentially deals with sound management practices, organisation culture as well as mindset change which are important in productivity as well. I hope the Ministry will not lose sight of this group in the messaging and reinforcement.

Thank you. My first cut is on productivity. Mdm Chair, given our tight labour market and land constraints, future economic growth must depend on productivity growth, yet productivity growth was negative in 2012. This is an alarm that we cannot take lightly. Government started the productivity movement a long time ago and some of us may still remember Teamy, the Productivity Bee which was launched in 1982. But between 2000 and 2009, productivity only grew by 0.8% a year. Some people said this was a lost decade. The Finance Minister has also given sobering statistics that our productivity is behind some of the Asian new industrialised economies and the advanced economies. We really need to play catch up now or we will lose in the

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economic rat race.

Productivity is sensitive to economic cycles. As current business cycles are ever shorter and risk ever higher, it will be very tough for the SMEs to have sufficient financial resources to invest long term to raise their productivity. Hence, SMEs need Government's help to achieve the 2%-3% annual productivity growth target by 2020. SMEs are naturally understandable to be very anxious about this target and they have expressed reservations to achieve this target which they think is rather ambitious.

Therefore, can the Minister share with us the new initiatives that MTI is introducing to help companies raise productivity on a sustainable basis?

My second cut is on internationalisation. Mdm Chair, the buzzwords for Singapore going overseas have changed over the years – regionalisation, internationalisation, growing the second wing and so on, and so forth. Business realities too, have changed as many other countries' fortunes grow or decline. But our ambition remains high, that is, Singapore businesses must internationalise if they are to grow.

With the recent announcement of tighter curbs on the foreign labour force, businesses had told us that they are facing an ever sharper labour crunch than before. According to the 2011 and 2012 Internationalisation Survey conducted by IE Singapore, the majority of the companies in Singapore indicated that manpower will be a significant challenge in terms of higher costs of manpower and also the availability of the appropriate talent. This problem will be starker for SMEs which will inevitably feel the impact of the recent adjustments in foreign workers' policy more than the MNCs. But whether they are big or small, for companies keen to internationalise, such a manpower crunch will cost many downstream difficulties in expanding operations overseas.

As businesses contend with slower growth prospects coupled with severe resource constraints, and rising business costs in Singapore, more SMEs are taking a serious look at opportunities overseas. According to a survey by SMEs, a key strategy for SMEs to cope with the rising costs is actually to set up shop outside Singapore. Even as Singapore companies go overseas, we can still try to help them add value to Singapore, perhaps, by having their headquarters or the R&D facilities set up in Singapore. Can the Minister tell us what are the other ways that he is thinking of to ensure that all is not lost, even if we cannot stop

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companies from venturing overseas?

In addition, to succeed commercially overseas, companies need to deploy the right people with the right capabilities to manage these overseas operations. With a tight domestic labour market, it will be increasingly difficult to find suitable people to fill such overseas positions. This may pose additional challenges for companies looking to internationalise. While companies want to expand overseas, they may not be able to find the needed manpower to do so. With tight manpower, how is the Government helping the companies deal with manpower shortage issues that may hinder their overseas operations?

Madam, so far, Parliament has spent a lot of time debating only one part of the productivity equation and that is how companies can emerge as more competitive. And that part that we have rightly debated is cost, which is the bottom part of the productivity. We need to spend some time talking about the numerical part of the equation and that is the demand part. How can companies grow their demand faster than what domestic demand can provide?

In this respect, internationalisation is crucial for SMEs, given our small domestic market. Can the Ministry share if there are any interesting high growth regions or sectors that the companies that want to internationalise should focus on?

Also, will the Government give more help to SMEs in this area, especially given the manpower constraints that they may face domestically? We may want to assist companies to move part of their operators overseas, for example, to the Iskandar development area.

What is the Ministry planning to help escalate the internationalisation process? We could think of things like providing some of them tax status like pioneer tax status. In the past, that was to attract companies into Singapore, and maybe we want to incentivise some of the companies to become pioneers in restructuring and relocating part of their operations overseas. Some form of similar tax incentives may be one way of helping companies to decide to internationalise.

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First, let me thank Members for their comments and ideas, and allow me to elaborate on MTI's plans for the energy, R&D and tourism sectors in support of the transformation that we are seeking at a larger level in our economy.

Let me start with energy which is a critical resource for any economy. It is a key factor of production. Our aim is to strike a balance between energy security, economic competitiveness and environmental sustainability. To that end, we seek to diversify our energy sources, promote a competitive industry and build capabilities so that we can ensure a reliable and competitively-priced energy supply for Singaporean households and businesses.

Mr Vikram Nair has quite rightly observed that Singapore will face greater competition from the region in securing our energy supplies. ASEAN countries are net importers of energy and they accounted for about 20% of the growth in global energy demand in the past five years, which is quite significant.

That share is set to grow, with Southeast Asia's energy demand expected to expand by 80% over the next 25 years. Strong economic growth has fuelled the regional demand for energy, especially natural gas, which accounts for 80% of electricity generated in Singapore. So, it is essential that we diversify our energy sources and options to strengthen our energy security.

Our Liquefied Natural Gas (LNG) terminal, which will commence operations in the second quarter of this year, will broaden our access to fuel sources worldwide, and it will also catalyse opportunities in LNG-related businesses such as trading and bunkering. To ensure that our infrastructure can cater to future needs, we are also building a fourth LNG tank and that will boost our terminal throughput capacity to 9 million metric tonnes per annum (mtpa) and that should come on stream some time in 2015, 2016.

We are also studying possible frameworks for the future import of LNG beyond the first tranche of 3 million metric tonnes per annum (mtpa) which was awarded to BG Group. EMA has concluded its first round of industry consultations last year and will conduct a second round this year to seek views on the proposed supply framework and implementation details.

Mr Gan Thiam Poh asked for the rationale behind the privatisation of the generation companies (gencos). Privatisation has helped to increase competition among the five active today gencos in Singapore. The case Mr Gan mentioned is the sixth which has yet to start actually generating. Privatisation

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and the competition that ensues drive innovation, production efficiency, and ultimately maintain competitive pressure on energy prices to the benefit of consumers. This is not a theoretical construct. We have seen evidence of it in Singapore in practise.

As a result of privatisation and competition, our gencos have progressively switched from oil-fired plants to more efficient natural gas-fired plants. Had we continued to rely on less efficient generation technology, our electricity tariffs today would be at least 15% higher. So, there is a tangible benefit for all Singaporeans arising from this.

In fact, the gencos are continuing their investments in energy efficient technologies. Over the next two years, more than 2,000 MW of new generation capacity will be added to our market. That is about 20% of the current installed capacity. This increased capacity will come from Combined Cycle Gas Turbines (CCGTs), which will further enhance competition and, importantly, the efficiency gains in our electricity market.

We are also progressively increasing competition in the electricity retail market to further help consumers manage their energy costs. In particular, I would like to inform Ms Sylvia Lim and indeed all Members of the House that we will be lowering the contestability threshold in phases for commercial and industrial (C&I) consumers from the current monthly consumption of 10 MWh to 8 MWh on 1 April 2014, and then to 4 MWh on 1 October 2014. In addition, consumers will be allowed to aggregate the electricity demand at different locations in Singapore in order to meet the prevailing consumption threshold.

What does it mean in practical terms? When these measures are implemented in full, it will allow about 70,000 accounts to benefit from increased retail competition in the sale of electricity, up from the current 13,000 accounts.

Let me put it in another way. Our Town Councils will be a key beneficiary – all Town Councils would be able to negotiate for electricity retail packages at competitive market prices for their accounts.

SMEs across all sectors will also benefit. For example, in the wholesale and retail trade sector, the number of companies eligible for contestability will nearly triple from the current 1,600 to around 4,200. These include SMEs like Home-Fix D.I.Y Pte Ltd, who would be able to aggregate demand across their 23 stores islandwide, as well as single location companies like Habitat Coffee,

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which would benefit from the lowering of the contestability threshold to 4 MWh.

We are moving in stages to ensure that the back-end systems can scale up to effectively support the implementation process because we are talking about order of magnitude of increases the accounts that will have to be supported through these enhanced retail contestability measures.

Beyond these initial two phases, we are looking at how we can further expand and indeed cover the entire retail electricity market and open it up to competition, a point that Ms Sylvia Lim has raised. There have been several studies done and part of the reason is because of the question on how much technology should be involved, and whether we should be involved. Ms Lim talked about the intelligent energy system, involvement of smart meters, backend payment systems because some countries have proceeded with technology intensive solutions. Others have taken a more rudimentary approach, just aggregation of accounts and then, they allow that to be contested.

We want to be sure that, first, when we embark on this, we are able to do this in a systematic way and extend to all households because we have 1.2 million households. Second, when we do so, we also have a clear idea of the capacity in the system at the backend. We are working on it. We should be able to share more in due course, in terms of timelines. The reason why the studies are so involved is precisely because of both the technical nature and the scale of the market.

Notwithstanding these efforts, we recognise that energy costs may still be a cause for concern for some households. Our policy is to allow the price of our energy to reflect its true cost and not to subsidise energy consumption, which would be wasteful and unsustainable. Instead, we provide targeted assistance, Members are well aware of this, especially for low- and middle income households through the permanent Utility-Save (U-Save) rebates which announced in last year's Budget. This year's Budget has doubled the U-Save rebates across all categories of HDB households via an additional one-off GST Voucher-U-Save special payment.

To illustrate the impact, what it means is that the total U-Save rebates of $520 for a 1-room HDB household will, on average, cover 15 months worth of electricity bills. In other words, effectively, it is more than fully covered. For a 2-room household, it will be equivalent of 10 months; for a 3-room household, six months; and for a 4-room household, four months. These U-Save rebates are substantial and will go a long way in helping our households cope with

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increases in energy costs, and of course they can respond to the price signal by modifying the electricity consumption behaviour as well.

Looking ahead, a key thrust of our energy strategy is to build capabilities and encourage innovation in the evolving energy sector. As Mr Lim Biow Chuan has pointed out, it is critical that we build up our manpower capacity and capabilities to support the continued growth in the power sector. To that end, EMA is currently working closely with the industry and stakeholders to implement and supplement the recommendations of the Power Sector Manpower Taskforce. This was released earlier this year.

The power sector in Singapore will need around 2,400 technical professionals over the next 10 years. To re-brand the power sector and attract fresh talent, we have worked with industry players and other stakeholders to offer scholarships to students from ITEs, polytechnics and universities. Such scholarships have allowed youths like Nathaniel Tan and Aloysius Lin – both recipients of Senoko Energy's inaugural ITE scholarships – to pursue meaningful career opportunities in the power sector. Over the next 10-15 years, we will need more young Singaporeans like Nathaniel and Aloysius to join their more experienced colleagues, in assuming key technical and leadership positions in the power sector. There is an opportunity and we are trying to encourage more young people to take it seriously and to pursue careers on this quite rewarding sector.

Separately, Mr Yee Jenn Jong has asked about greater support for the adoption of renewable energy in Singapore. Mdm Chair, while we are supportive of efforts to promote renewable energy, firstly, we must note that there are inherent limitations to its applicability to Singapore's circumstances given the current state of technology. Firstly, Singapore is alternative energy disadvantaged because of our size, our climate and our geography which significantly constrain the scope to deploy renewables. The costs of deploying renewable technology systems are still relatively high today compared to energy from the grid. Moreover, these sources are intermittent, variable and, hence, cannot generate base-load electricity reliably.

We do not subsidise the consumption of renewables. Mr Yee has asked, why can we not consider fit-in tariffs like the Germans? In fact, the Germans are actually scaling back their fit-in tariffs now. The reason is simple. They are not scaling back because they have attained their clean energy objectives. What they have realised is that having spent billions of euros, they have found that it is actually an inefficient way of getting the industry or the clean energy sector moving, and in particular, in the context of solar power. What has happened

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instead is that there has been a large scale importation of low-cost photo-voltage cells and the panels from low-cost manufacturers in China.

We have to look at it in context. Subsidising consumption is likely to give us wrong outcomes. What we have chosen to do, however, is to work with the industry upstream, investing in research, development and demonstration (RD&D) projects. This is materially different, although Mr Yee seems to think they are the same. They are not. Because when you invest upstream, we are talking about working on measures to enhance the economic feasibility and liability through technology advancement which will then make its adoption a natural consequence from an economic point of view, as opposed to subsidising consumption which masks the true cost and leads to sub-optimum outcomes.

We are investing in R&D and building capabilities to facilitate the entry of renewables. For example, the Energy Innovation Programme Office (EIPO) supports solar energy research through the Solar Energy Research Institute of Singapore (SERIS) and Energy Research Institute at NTU (ERI@N). In addition, the Solar Capability Scheme (SCS) motivates the private sector to offset part of the capital cost involved in installing solar technologies in energy efficient buildings. The Clean Energy Research and Test-bedding (CERT) programme provides opportunities for Government agencies to partner private companies to develop and test-bed clean energy applications using Government facilities in Singapore.

Mr Yee and others have asked about the examples. There are several examples of companies, local companies as well, moving in this direction. One example is eco-system which is involved in the project on solar powered Park and Charge stations and electric vehicle infrastructure. This is an important part of developing a new idea, to see how we can support the evolution of clean energy applications.

Another example is Daily Life Renewable Energy which works with EMA on the Pulau Ubin micro-grid which we have also worked on as a test-bed on how we can use – it is a test-bed infrastructure, really, on renewable energies in the context of a small micro-grid infrastructure.

These efforts in renewable energy underscore the importance of R&D as an important enabler in our economic transformation. R&D has benefited our

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companies, particularly SMEs, by building up their innovative capabilities. This is a point that many Members have referred to directly and indirectly. R&D helps our SMEs to transform, move up the value chain, and most importantly, seize higher value growth opportunities. We have seen a growth in the number of SMEs involved actively in R&D. Ms Jessica Tan has asked this question. Business expenditure on R&D by SMEs has grown at a Compound Annual Growth Rate (CAGR) of 3% between 2001 and 2011, to reach $551 million in 2011.

Our SMEs also benefit from R&D tie-ups with multi-national corporations through intra-industry collaborations, such as the A*STAR Aerospace Programme, and the Industry Consortium in Industrial Coating and Packaging (ICAP). This is an eco-system within the industry where the big companies and our SMEs work together. By integrating across the R&D value chain, SMEs and MNCs can leverage and build on each others' capabilities.

In the Infocomm Technology (ICT) area, which Ms Jessica Tan highlighted, SMEs are supported by A*STAR's newly established Business Analytics Translational Centre (BATC). BATC builds capabilities in SMEs by involving them in its user-led innovation projects and gearing SMEs for growth. By leveraging on technologies developed from the BATC, SMEs can add analytics solutions to their suite of capabilities that are being offered.

Further, we are committed to enhancing the transfer of technologies to SMEs and providing support for commercialisation. About 70% of A*STAR's licensing deals are executed with SMEs. We have seen an increase in the successful commercialisation of R&D efforts. Today, Exploit Technologies Pte Ltd (ETPL), the commercialisation arm of A*STAR, has granted over 400 licenses for A*STAR technologies with the possibility of more than $500 million of new commercial revenues for licensees. It has also spun off more than 40 start-up companies.

To help our SMEs enhance their competitive edge, A*STAR provides technical advice, technology road-mapping and secondment of A*STAR researchers to SMEs through its GET-Up programme. Since its inception in 2003, GET-Up has helped more than 400 SMEs and over 400 research scientists and engineers (RSEs) have been seconded to more than 240 companies through this programme. Just to give Members one example, PJI Contract, a local company that specialises in industrial flooring, water-proofing and surface protection, it is through GET-Up that PJI Contract was matched to a nano (a titanium dioxide) technology from A*STAR, which it licensed and developed into new products, such as the Delta Nano Hygiene spray. Over 10% of its sales revenue in 2012

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can be attributed to the GET-Up programme under this specific initiative.

We are also introducing the Technology Adoption Programme (TAP) to make technology enhancement more accessible to companies, particularly SMEs. A point that Ms Jessica Tan and other Members have stressed. Through this $51 million programme managed by A*STAR, we will introduce a team of experienced intermediaries to link companies up with the solution providers from the public and private sectors which can best meet their productivity needs. In the picture on the top left is Mr Seow Yit Yuee. He is 57 years old and he is an example of the kind of intermediaries we are talking about. He has worked in EDB for nine years and A*STAR for 20 years, and he has a rich technical knowledge as well as a deep understanding of industry needs. In the last three years, he engaged over 250 companies to address their technology needs, and this resulted in more than 180 collaborative projects.

Intermediaries like Mr Seow will work with A*STAR's Research Institutes, SPRING's SME Centres, as well as Productivity Centres and Centres of Innovation to facilitate this engagement. We aim to help companies achieve more than 1,000 technology adoptions over three years. This will be done through customisation, technology transfer, training and deployment of various technologies, including ICT, RFID and robotics. Where there are no suitable technological solutions for our companies, technology developers in A*STAR and our tertiary institutions will aim to identify and translate at least 20 novel technologies to be employed and applied in our companies over the next three years.

We will pilot this programme in six sectors. It is a question of which sectors and how we would apply them. Specifically, they are in Construction, Food Manufacturing, Precision Engineering, Marine, Aerospace and Retail. These have good potential to harness technology to enhance productivity. Companies in these sectors can use the Productivity and Innovation Credit (PIC) Scheme to offset their costs of adopting the technologies. In FY 2011, over 500 SMEs claimed PIC for R&D that they have undertaken, up from about 430 in FY 2010. The total PIC expenditure by SMEs in 2011 was about $183 million. So, there is momentum. Of course, we can do more and that is why we are embarking on this Technology Adoption Programme (TAP) effort. I want to assure Ms Jessica Tan and all Members of our resolve to continue supporting our SMEs through their business transformation and R&D journey.

R&D also catalyses new growth areas. For example, Singapore is seeing more personal care companies, such as P&G, L'Oreal and Amore Pacific, collaborating with A*STAR to conduct R&D in Singapore. With their focus on

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customised solutions for Asian consumers, they also help to strengthen Singapore's positioning in the regional personal care industry.

Recently, I also announced our efforts in developing our satellite industry through the Office for Space Technology and Industry (OSTIn). In this regard, this year's Budget, as Deputy Prime Minister Tharman has announced, has established a $90-million Satellite Industry Development Fund. Part of this Fund will support public-private partnerships in R&D to build up our satellite capabilities. For example, NUS and NTU have established their own space-related R&D programmes, which have attracted industry collaborations that could be the nucleus of a new knowledge-intensive industry in our economy.

As more companies anchor their R&D facilities here, they also create high-value jobs for Singaporeans. For example, in the energy and maritime sectors, Lloyd's Register announced the establishment of a Group Technology Centre in Singapore with an investment of $35 million. The centre is expected to employ 150 full-time staff performing technical research within five years. Our total, in terms of gross expenditure on R&D (GERD) in 2011, reached a high of $7.4 billion or 2.3% of GDP. And importantly, I think this goes to the point that Ms Jessica Tan raised; the business component of it was two-thirds. Two-thirds of this spend was from the business community. So, I think it demonstrates that we are able to capitalise, elicit and commensurate an appropriate response from the business community from this R&D initiative. Our total R&D manpower, including researchers, postgraduate students, technicians and support staff, grew by 4% from 43,000 in 2010 to nearly 45,000 in 2011.

A*STAR will support such growth by continuing its strategy of developing local research talent, for example, through its A*STAR Science Award for the Polytechnics. The award provides Polytechnic students with an avenue to pursue their interest in science, and to encourage them to pursue a career in R&D. Ms Chua Pei Qi was a recipient of this inaugural award in 2012. She is a final year student at the School of Engineering in Nanyang Polytechnic and has a particular interest in green technology.

Finally, let me address Members' questions on the tourism sector. Tourism is one example of an industry vertical where we seek economic and business transformation to achieve quality growth.

Last year, we saw the introduction of several new products such as the Giant Panda Forest, Marine Life Park and best-in-class cruise ships calling at the new Marina Bay Cruise Centre. These have strengthened our value proposition

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as a vibrant and attractive tourist destination – 14.4 million tourists visited us in 2012, accounting for a record level of tourism receipts of $23 billion. Over a five-year period since 2008, tourism receipts have grown at a compounded annual rate of 10.4%, and visitor arrivals at 9.2%.

STB forecasts 2013 tourism receipts to be in the range of $23.5 billion to $24.5 billion, an increase of about 2.2% to 6.5% from 2012 depending on which point of the range you look at, and visitor arrivals of about 14.8 million to 15.5 million, an increase of 2.8% to 7.6%.

Looking ahead, our visitor arrivals cannot continue to grow indefinitely and sustainably at the rates we have seen in recent years. Dr Lim Wee Kiak has pointed out that regional competition for the tourism pie is intensifying. Domestically, our land and manpower constraints mean we need to find new ways to do more with less. The next phase of tourism growth would thus have to come from increasing the yield through visitor spend, rather than just visitor numbers. This transformation and change is timely because, externally, the expected rise in Asian tourism over the coming years presents a window of opportunity for us to attract discerning travellers who seek out differentiated and value-added experiences.

Internally, we have the essential building blocks in place to continue maintaining our edge as a premier tourist destination. Taking our workforce as an example, Mr Seah Kian Peng would be pleased to know that the STB, Sentosa Development Corporation (SDC) and WDA have been working jointly to raise the capabilities of Singaporeans so that they can take on the higher value jobs generated by our tourism developments over the years. Through initiatives such as Sentosa's Train and Raise (STAR) programme, Singaporeans like 29-year-old Noorzabidah Bte Buang have been able to pick up new skills like budgeting and human resources management, and rise through the ranks to assume greater responsibilities that realise their potential.

Our local companies are also well-poised to benefit from this transformation. Lighting company SMM Pte Ltd is a case in point. As part of the 2012 Singapore Grand Prix, SMM worked with STB and international lighting consultants to implement a lighting solution and develop a poster mesh that preserved the Old Supreme Court's iconic façade amidst construction works. This is a first for Singapore with interesting future application possibilities for the company. As we push for quality, yield-driven growth, we can expect more of such opportunities for our SMEs to partner world-class players and

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eventually come into their own.

What we need now, Madam, in the tourism sector, is strong content, especially in business and leisure events. Such "software" is hard to replicate and will help differentiate Singapore from our competitors, who might be catching up in terms of hardware, infrastructure and even volume. Strong content also helps to maximise the value we can derive from our current infrastructure.

In that regard, we will strengthen our "software" through new, large-scale lifestyle events. We will continue to work closely with the industry to facilitate content curation and delivery. Take Singapore's growing visual art landscape as an example. Today, the privately organised Art Stage Singapore is one of Singapore's highest profile contemporary art fairs. To augment the impact of this event, STB worked closely with industry to catalyse and co-locate other visual arts events around Art Stage. The inaugural Art Week in January 2013 recorded high footfall, strong sales and good international media coverage. The success of Art Week demonstrates the potential of building a spectrum of lifestyle offerings around a marquee event. STB will continue to complement the industry's efforts to introduce other large-scale innovations.

STB is also committed to fostering innovation and test-bedding of new ideas which might be smaller in scale. So, to this end, STB will establish a new Kickstart Fund with an initial funding of S$5 million to support start-up type lifestyle concepts with strong tourism potential and scalability. This includes pop-up entertainment, dining, retail or arts events, as some examples. The scheme will also provide entrepreneurs access to business advice from experienced mentors from the industry. Over time, this scheme can help catalyse the development of compelling lifestyle concepts here, and they can add to the software that will enhance our cityscape. STB will announce the details and call for applications soon.

Even as we seek out and anchor higher value tourism products here, we will also help companies and workers move up the value chain and benefit from such growth opportunities. One example is our 2,000-strong tourist guiding industry. Today, the industry comprises mostly Singaporean guides from a diversity of backgrounds and with a variety of interests. Many like Ms Tare Lee Yong and Mr Sng Soon Huat, provide general guiding services in Singapore's vernacular languages. Other guides offer more niche services. For example, Mdm Geraldene Lowe-Ismail has been conducting heritage walking tours around Singapore. And Geraldene offers tourists a mix of historical tidbits, infused with her own personal memories. I think that is the kind of tour guides

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that Ms Faizah Jamal was talking about.

As we push for quality, yield-driven growth, opportunities abound for our tourist guides to create unique itineraries for discerning travellers who are willing to spend more for customised or bespoke experiences.

This entails more targeted training, as Ms Faizah Jamal has alluded to. STB is fully committed to working with the industry on such capability development efforts, and I would encourage all stakeholders to highlight to STB any skills gaps that need redress. In the specific examples that Ms Faizah Jamal highlighted on NLB and NHB, for example, the tourist guides that are licensed today are, in general, providing a guiding service to the tourists who come to Singapore. If there are specific niche areas which are run by statutory boards, I think the most productive way to take the conversation forward is to see how those statutory boards can work with STB to allow these niche tourist guides to develop and provide the relevant service. STB's primary interest is to ensure that the guides are well trained, maintain a high quality, because they also receive compensation. I think if there are niche areas, then I think these are specific statutory board discussions that need to take place.

We will study further Ms Faizah Jamal's specific suggestion of licensing and accreditation of niche tours according to tourist guides' residency areas or specific focal point. Singaporeans today already enjoy a natural advantage in guiding given our deeper and more nuanced understanding of our heritage, history and tourism offerings. We want to enhance our capabilities in this important area, but I also want to stress that we want to be careful not to unnecessarily constrain the industry with onerous regulatory or certification-type requirements. We need to find a balance because there are also a lot of excitement and interest in the voluntary aspects, and we need to preserve that enthusiasm and vigour in this space.

Other segments of the tourism sector are also keen to enhance productivity and move up the value chain, and we will support them in this journey.

Hotels are evolving their business and operating models, using technology and new management methods. For example, Fullerton Hotel worked with STB to refine its multi-skilling initiative. The scheme prepared Mr Daanish Louis Chandrasegran, a security officer, to also help with F&B services. Daanish Louis has benefited from his expanded role and skills. The hotel has also benefited

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from the productivity gains.

Beyond the hotel industry, travel agents are also raising their game. The National Association of Travel Agents Singapore (NATAS) has been working with WDA on an accreditation framework for the travel agent sector. This framework enhances the professional standards of travel management practices. I look forward to NATAS launching the framework later this week.

Mdm Chair, if I can conclude, I have highlighted MTI's efforts in three areas – ensuring secure and competitively priced energy; leveraging on R&D to promote innovation and productivity, especially among our SMEs; and seeking high yield in the tourism sector through differentiated products and experiences. These are essential elements in support of our larger overall effort to raise productivity, attain quality growth and achieve economic transformation. We look forward to the support of all stakeholders in this important endeavour.

Madam, I too like to thank the Members who have spoken on productivity and internationalisation. They are two related topics and a key determinant to the success of our restructuring.

Assoc Prof Fatimah Lateef highlighted that the concept of productivity differs between sectors. Yes, it is true that different sectors measure productivity in ways that make more sense to them. This is why the National Productivity and Continuing Education Council adopted a sectoral approach towards driving productivity growth. Consulting closely with the respective trade associations and chambers, we developed customised productivity roadmaps to tackle the different challenges that each sector faces. We also complement macro level measurements with sector specific indicators.

Likewise, our public outreach effort is also tailored to specific sector. For instance, under the "Way to Go" national productivity campaign, we highlight stories of best practices in different industries. Many Members would have read some of the stories in The Business Times and Lianhe Zaobao in the year-long education and outreach campaign.

Mr Sam Tan and Mr Zaqy Mohamad asked about the progress of these productivity efforts. Year to year, headline productivity numbers fluctuate. In 2010, our productivity shot up by 11.1%. In 2012, it declined by 2.6%. Productivity measures are sensitive to economic cycles. A sharp drop in product prices can, for instance, mask the improvement made in labour productivity. In

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the long run, however, the value added per worker ought to rise, reflecting rising productivity. The Government remains therefore fully committed to helping our industries achieve long-term and sustainable productivity growth.

Sector by sector, we are implementing customised productivity roadmaps systematically. In the retail industry, for instance, 200 retailers have undertaken productivity and services upgrading projects. Two hundred CEOs and productivity managers have participated in training, and 14,000 retail workers took classes at different levels offered by WDA. Clearly, a lot more retailers and retail professionals can benefit from these programmes, and we have the capacity to train them.

Besides reaching out to more, SPRING will also go deeper. It will introduce more in-depth projects designed to help integrate the supply chain and promote wider adoption of technology, such as integrated point-of-sale systems and inventory management systems. Embracing technology at the industry level will bring about a larger quantum of productivity improvements.

At the firm level, we also have committed $180 million in grants to about 10,000 companies. Among them, 90% were SMEs. Again, we have the capacity to fund more firm level projects and we want more firms to step forward.

At the national level, we have committed about $1 billion from the National Productivity Fund to support the many sectoral plans and horizontal programmes. One new initiative we are introducing is the Collaborative Industry Projects (CIPs). We will extend the collaborative industry projects to six more industry verticals led by SPRING, including food services, retail, food manufacturing, furniture manufacturing, printing and packaging, and textile and fashion. The objective of these CIPs is to help achieve a step change in the productivity of a large group of companies by encouraging them to work together in areas that bring them the benefits of integration and economies of scale.

To give an example, SMEs in the F&B sector can reduce their manpower requirements by aggregating demand and collectively outsourcing their food preparations to suppliers. They could also pool logistic assets, such as warehouses and delivery trucks, to benefit from economies of scale. Hopefully, CIPs can also bring about greater integration in the supply chain and reduce wastage and inefficiency. CIPs could also potentially see new players and modify industry structure in the longer term.

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We will commit $90 million for such projects over the next three years in the six sectors led by SPRING and will roll out the first call for projects in the second half of this year. Mdm Chair, may I speak in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.]  Beyond the sectoral level, we also need individual companies to initiate change on the ground. As our restructuring efforts gather pace, more companies now recognise the importance of productivity and innovation as the only way to achieve quality growth.

We will continue to work closely with companies for productivity improvements across all sectors. We urge more to come forward and tap the programmes available to help them enhance and develop higher value capabilities. In order to make the shift towards productivity-driven growth, companies will increasingly need to re-examine their growth strategy and fundamental business models, and to contemplate new ways of creating value that they have not done before. In short, they need to move out of their comfort zones and cannot stay unchanged.

It will not be an easy and straightforward road as businesses have to make difficult adjustments. We also recognise that businesses have many other concerns on their minds. Time is needed to introduce productivity improvements and for them to bear fruit. The Government is committed to supporting businesses, especially our SMEs, during this transition period.

There are those who have managed this transition well. Consider the example of Freshening Industries, an SME manufacturer of hygiene wipes. This SME started in 1994, with humble beginnings, and it grew steadily through its pursuit of quality and development of customised products for each client. Freshening Industries now exports to more than 33 countries and supplies more than 5,000 restaurants, major airlines and global hotel chains. The distribution channel has increased to more than 35 countries.

Freshening Industries' success can be attributed to the company offering tailor-made services and customised products developed according to their customers' needs. The company has also been pro-active in its pursuit to improve productivity, tapping into the incentives provided by the Government. Freshening Industries embarked on its productivity journey in 2010, with the help from a productivity consultant at an Enterprise Development Centre (EDC). It started with an initial productivity assessment through the IMPACT benchmarking tool, moved on to adopting the 5S methodology for workplace

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organisation before implementing other improvements like Business Intelligence and Customer Relationship Management software. Managers at each level were trained to upgrade their leadership skills to guide the effort.

All these improvements were supported by the programmes from SPRING and the Employment and Employability Institute (e2i). The costs were also claimable under the Productivity and Innovation Credit (PIC). Results have been tangible. An increase in productivity of more than 10% helped it cope with the tight labour market and rising business costs.

Freshening Industries is a typical SME, which faces similar challenges and difficulties with the rest. We hope their successful transformation will inspire many others to do the same. The restructuring process may not be easy, but there are those who have done it. As the saying goes – when there is a will, there is a way. Let us work together.

(In English): Mdm Chair, as I alluded to earlier, everything being equal, rising sales of a company will also raise productivity. This is important because many productivity discussions focus on labour productivity and omit revenue generation and value creation, just like Mr Inderjit Singh has highlighted.

Internationalisation is very crucial in raising a company's productivity. Singapore firms need to look beyond our small domestic market and tap into new regional demands. The BreadTalk group started as a one-shop company in the year 2000. Today, the group has over 700 outlets under eight brands in 15 countries. BreadTalk has tackled productivity challenge from all angles. It has creatively differentiated itself through product innovation and has continually revamped its business model. It has evolved from a one shop to many chains, one brand to eight brands, in-shop baking to central kitchen and a local company to a regional player. These efforts have helped BreadTalk to grow its revenues and profits. By expanding boldly into new overseas markets, BreadTalk has enhanced its competitiveness and enjoyed economies of scale. BreadTalk now has more resources to invest in technology and do product development. It enjoys strong brand recognition internationally.

Soon, BreadTalk will open its new international headquarters building at Paya Lebar. By then, it will create more skilled and high-paying jobs for Singaporeans, in areas such as regional HQ management, product

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development, training and logistics and so on.

From the above example, it is clear that, at some point, our SMEs must transcend our small domestic market to realise their next stage of growth. Singapore is fortunate in that we are at the centre of growth in Asia, just as Minister Lim has highlighted earlier. China has a rising middle class of around 300 million, while India has 160 million. Consumer demand is also growing in the ASEAN economies with their youthful demographics. Our SMEs are indeed well placed to take advantage of these opportunities at our door step.

Further away are emerging markets, such as those in Latin America, Africa, the Middle East, Russia, Central and South Asia, offering some niche opportunities for our export businesses. Though less well known, Singapore businesses are already trading with, or investing in some of these economies. With the right strategy, our firms will find niche opportunities in these markets.

Ms Jessica Tan, Mr Teo Siong Seng and Mr Inderjit Singh will be glad to know that in 2012, IE Singapore assisted over 15,500 companies in their internationalisation drive, and supported 6,000 companies through its incentive programmes. IE Singapore also launched the Global Company Partnership (GCP) to help companies internationalise by providing support in four key areas, that is, capability building, manpower development, market access and financing.

To help SMEs accelerate their pace of internationalisation, IE Singapore is launching an $18 million Market Readiness Assistance (MRA) programme. MRA can be applied to individual company or trade associations. For individual companies, IE Singapore will co-fund up to 50% of the eligible costs associated with foreign market assessment and market entry, including legal advice, tax advisory and consultancy services, up to a maximum of $20,000 per company per year. IE Singapore will launch this programme on 1 April and expects to benefit up to 1,000 companies. For trade associations and chambers, IE Singapore will co-fund the cost of hiring in-market agents to seek out overseas business opportunities for the association members.

In addition, IE Singapore will continue to organise iAdvisory seminars and clinics for companies seeking new markets or overseas growths. These seminars will cover topics, such as issues related to tax regulations, restructuring and relocation.

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Mr Sam Tan asked how the Government can help internationalising companies cope with manpower constraints. Under the Global Company Partnership (GCP) programme, IE Singapore will be setting aside $20 million to help businesses address three critical manpower challenges: attracting talent, developing talent, and establishing an international manpower strategy.

Under the programme, IE Singapore will provide more overseas training opportunities and scholarships for local undergraduates to prepare them for international careers, match young talents to internationalising companies, and help key company executives acquire international HR expertise. Hopefully, our firms will learn to recruit, develop and retain talents suited for regional and cross-cultural operations.

Mdm Chair, companies can raise productivity in many ways. Fundamentally, they have to find ways to raise revenues and reduce costs. Mr Zaqy Mohamad warned against "poach-tivity" and "property-vity". We agree that in the long term, these are not viable strategies. By putting off much needed productivity improvements, companies will eventually face a crunch again. Raising productivity is the only means to achieve sustainable growth. We discussed some examples of successful SMEs doing so. Their experiences show that it requires commitment and great efforts but it is possible.

Many SMEs have told me they understand the need to change and restructure. The question now is not why and what, but how. As we endeavour to create the most conducive support system for change, let us work together on the "hows" by gleaning best practices from other industries and markets, by brainstorming individually and collectively. I believe we can do it. In fact, we must succeed in order to arrive at the next phase of quality growth.

Thank you, Madam. In Mandarin, please.

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(In Mandarin): [Please refer to Vernacular Speech.]  A recent survey by IE Singapore found that 75% of SMEs have presence in South East Asia and about 30% in China. Our SMEs have also presence in other emerging markets, such as India and the Middle East. We can see from here that our SMEs are highly vibrant and malleable.

Our economy is becoming more mature and economic growth will slow down in the future, meaning the growth in domestic market will also be limited. With further tightening of the foreign labour policy, we should do more to help SMEs internationalise, raise their awareness of international competition and improve their business management skills.

To help SMEs to stay competitive in the local as well as the international arena, MTI has announced that SPRING and IE Singapore has undertaken a SME Review to understand how the government can better help the SME sector cope with the new operating environment and the international competition. Just now I heard some announcements in Senior Minister of State Lee Yi Shyan's speech. I hope MTI can continue to help our SMEs.

With further reduction in Dependency Ratio Ceiling, both Association of Small and Medium Enterprises (ASME) and the Singapore Business Federation (SBF) have publicly mentioned that it will affect the business operation of their members.

Minister Lim Swee Say has also said that the companies must undergo economic restructuring. It must get the pace right. Too slow and Singapore would lose its competitiveness; both economic growth and growth in employment opportunities will slow down, wages will also stagnate. On the other hand, if we move too fast, companies may close down. He further added that companies must take the next three years to transform and productivity is the key to ensure sustainable business and economic growth. I agree with his view that transformation and restructuring need to be done in gradual steps. We do not want a situation where wages go ahead of productivity, leading to the recession faced by Singapore in the 1980s.

In view of these, I would like to ask what outcomes does the SME Review seek to achieve, given that many of our SMEs will have to undergo business restructuring and transformation.

When SPRING and IE Singapore conducted the SME Review, have they consulted family businesses and micro-enterprises to make sure that the SME

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Review is inclusive and relevant to these small and medium enterprises?

There has been a lot of help announced in this Budget. However, one common feedback is that SMEs found it difficult to access the Government's schemes or found it hard to understand the wide range of help available. A recent study of 521 companies conducted by SCCCI and NTU revealed that about 78% of the companies surveyed said that excessive documentation required during the application process for the various schemes was their greatest challenge.

I would like to ask the Minister whether we can improve on this. For example, can the Government allocate more resources to the EDCs to help SMEs tide over this difficult period?

Mdm Chair, the business environment is challenging and the Government has, over the years unveiled many comprehensive and generous support measures to assist existing SMEs, and encourage entrepreneurs and innovators. However, many businesspeople that I have spoken to, although being happy with these measures, still find it difficult to properly leverage on all these schemes and incorporate them into their business model, and there are still many who may not actually know about the multiplicity of such schemes. Also, many business owners and aspiring business owners are still unsure about where they can obtain help for their businesses when they need them.

To the Government's credit, the Government has supported the setting up of many programmes, such as the Enterprise Development Centres and similar programmes such as the SME Infocomm Resource Centres, which aim to help SMEs grow and improve their efficiency. I would, however, propose that the Government further refines and expands on these programmes to make these centres truly comprehensive and one-stop and, therefore, more accessible and effective. Such SME-centric centres can become even more efficient and targeted in their approaches, and are found in many other jurisdictions, such as Hong Kong, Penang and the EU. These centres should also complement existing EDC functions which serve to guide and promote entrepreneurship and innovation amongst our citizens of all ages in their working life.

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I also urge the Ministry to do more in terms of outreach, not just to our existing SMEs, but also to the smaller SMEs or micro-enterprises which, although small, are still numerous in our high street economy. Aside from media initiatives, perhaps a more directed and targeted approach to engage small businesses should be developed.

Madam, many of the Government's productivity assistance schemes focus on helping SMEs improve productivity within their companies. But in order to raise productivity on a larger scale within industries, the Government should look into funding and building more common infrastructure and systems that SMEs can tap. These large scale systems are often beyond the ability of individual SMEs to develop on their own.

An example of such a system is the National Electronic Health Records (NEHR) developed by MOH. This is not only used by hospitals, but in the pipeline, also many private GP clinics, to share patient information and increase the efficiency and accuracy of diagnoses.

Next, the Government is one of the biggest buyers of goods and services from SMEs. It can better support companies as they strive to increase productivity, through the way tender requirement specifications are structured. For example, Government tender requirements for the development and maintenance of enterprise IT systems sometimes specify that vendors' personnel must work on-site, when some roles can be run from offsite using secure remote access, saving travelling time. Providing more flexibility in tender specifications for companies to innovate can result in not only improved productivity but can also reduce costs for the Government.

And lastly, the Government should provide more incentives to help SMEs recruit local staff and talent. This is at the top of many SMEs' wish list for Budget 2013, according to an ASME survey. I had earlier proposed a New Hire Wage Credit that will pay for a quarter of the salaries of new Singaporean hires for half a year, provided they have been unemployed or out of the workforce for at least four months. I hope the Government will seriously consider this proposal because I believe it can help SMEs attract more Singaporeans and reduce reliance on foreign workers.

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Mdm Chair, SMEs are an important part of our business landscape. They account for more than 90% of our enterprises, contribute to more than half of our GDP and employ more than half of our workforce.

However, it is not easy to start a new business or to be an SME owner in Singapore today. Besides having to find the right business model operating under intense competition and working under tight labour constraints, there is also a need to comply with our tax laws.

Many SMEs do not have professional staff to handle tax matters, which are usually dealt with by business owners or an accounting staff cum book-keeper. The Government needs to help SMEs minimise their compliance costs even as we ensure they pay their fair share of taxes in corporate tax, income tax and GST. What plans does the Government have to reach out to these new business owners and SMEs, to raise their awareness about their tax compliance requirements?

Madam, to enhance the local business eco-system, we suggest that the Government invests an amount of up to $500 million on micro and small set-ups through investment instruments, such as equities, for near break-even stages and loans for seed stages. For the past decades, Singapore's economy had grown through a heavy emphasis on foreign direct investment. We need to make a significant push for locally driven growth which is necessary to diversify the economy and the job market. In a high fixed cost living environment like Singapore, where our HDB flats and CPF constitute a large amount of our savings, Singaporeans may find it inhibitive to be risk-taking entrepreneurs. An existing agency should be tasked with a new agenda to manage the fund and invest prudently with the mandate to grow innovative ideas. Existing schemes, such as the SPRING's Start-up Enterprise Development Scheme, may not be adequately geared towards the intended outcome because of too many unimportant rigid rules. A start-up does not necessarily need to move from the seed to the revenue and profit-generating stage. At any moment, the fund manager should be able to add value by providing merger and acquisition opportunities or advise that the entities be liquidated. An agency with an overview of a wide range of industries, such as

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IE Singapore or EDB, should be tasked to take up the role.

Test-bedding space and flexible business space may not be accessible to idea generators and micro-entrepreneurs. Special spaces may be required to support short-term businesses to accommodate a diversified mix of business activities ranging from retail, light manufacturing, storage and commercial. The most relevant Government organ to lead this task will be the Jurong Town Corporation (JTC).The agency should leverage on its inhouse expertise to create convenient and affordable business and mix-style spaces, allowing small-scale tests of unique business models. Each company may also use the venue for test-bedding of ideas for up to three years. Sustainable businesses can then graduate into the market. Incentives that build up manpower capabilities to direct funding and grants extended to subsidise the growth of industries should be carefully considered. Could the Government instead re-invest the money in schemes and provide productivity of businesses? The schemes should allow employees to upgrade their professional skill sets. The Government can provide financial certification support for financiers' audit and accounting certification support for accountants and the same time should apply to other professionals in the engineering and service sectors.

Subsidising undergraduate fees by examination may no longer be sufficient to maintain a competitive labour force. We propose that the Government should provide preferential rate loans to prospective post-graduates to pursue an advanced degree so as to enhance the competitiveness of our manufacturing and financial workforce globally. Qualifiable degrees should have specialised Masters in engineering and science.

Madam, the service economy is increasingly important to Singapore. Excluding financial and insurance, the service sector had 135,000 enterprises and employed 1.35 million workers in 2010.

The 2012 SME Development Survey highlighted that 50% more service sector SMEs found bank financing a challenge compared to the previous year. This is despite the availability of Government-backed loans through financial institutions. The survey also found more SMEs facing cash flow and liquidity problems.

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Service sector SMEs generally require working capital financing, such as supplier invoice financing, working capital term loans and factoring. They are generally asset light with little collaterals. Financial institutions are cautious and tend to make unsecured lending only to bigger mid-sized SMEs. With the Basel III minimum adequacy requirement, banks are likely to tighten loans to smaller and riskier SMEs.

Government lending to SMEs has been implemented in countries such as USA, South Korea and Malaysia, to address market failure in working capital financing loans to SMEs. A Government-led SME bank will be useful for the following:

(1) SMEs with track record of less than three years. SMEs have highlighted that banks generally offer financing to SMEs with more than three years of track record.

(2) SMEs with small scale operations. Financial institutions tend to focus on mid-sized enterprises.

(3) SMEs with intangible assets. Many knowledge or technology-based companies have intangible intellectual properties which banks are unable to assess. I understand there were previously Government-backed unsecured loans to start-ups through the now defunct Keppel-Tat Lee Bank called TechFinancing. Is the Government supporting more of such schemes?

To alleviate concern that the SME bank will crowd out private sector lenders, the SME bank can be a lender of last resort to the under-served small SMEs. Alternatively, the Government can form tighter partnerships with existing financial institutions to serve this market.

Madam, as we restructure our economy to keep pace with changes, we also seek new areas of potential to create growth industries for the future. Deputy Prime Minister Tharman's announcement on the expansion of PACT (Partnerships for Capability Transformation) beyond the manufacturing sector is, indeed, a very welcomed one. I would like to suggest that beyond capability building and productivity,

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there is the potential for new opportunities and even creation of new growth industries.

Besides sharing best practices, I hope PACT can lead our SMEs to co-create solutions, conduct R&D and apply the power of business analytics with MNCs or industry partners. There is now unparalleled demand for new products and services brought about by global and regional trends of urbanisation, hyper-connectivity and the rising wave of middle class consumers. New solutions and innovations have the potential to spark off nascent industries. As plans to extend manufacturing into robotics, 3D printing and satellite industries take shape, how can our Singapore SMEs be part of this new growth?

I hope the Ministry of Trade and Industry can elaborate on how PACT will advance the collaborative advantage for our SMEs. For instance, are there any specific industries targeted by this programme as it broadens beyond manufacturing? How will such collaborations involve trade associations and business chambers? For micro-SMEs, will there be a chance for them to band together for additional clout? If there should be substantial R&D investments, how will the risks be shared between SMEs and MNCs? Are there prospects for marketing the co-developed product or services internationally?

To this end, I have observed how Korean SMEs often join forces together to seek out new markets and opportunities overseas. This is also how Japanese SMEs tap on each other's strengths to penetrate markets abroad. While I am very cheered by the Senior Minister of State Lee's announcement earlier, may I suggest that IE Singapore look into how it can better support SMEs in this area? In addition to the overseas business trips and the additional initiatives mentioned by Senior Minister of State Lee, can IE Singapore also work out something to ensure that the SMEs will benefit from the presence of a dedicated business representative to market the SMEs' business objectives and products overseas?

Next, SME Talent Programme. Last Friday, Deputy Prime Minister Tharman highlighted how, and I quote, "age discrimination leaves older workers vulnerable". I am deeply heartened by our Government's acknowledgement of the difficulties our mature Singaporean workers face in finding jobs.

In my maiden speech in 2011, I gave the example of how a resident in Bukit Gombak, in his 50s, who was back then an ex-General Manager of an MNC,

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managed to find work with our help after some months of searching. He was hired eventually by a local SME in the marine industry to be their Service Manager. The company tapped on his extensive experience to help them engage their MNC clients.

So, our mature PMEs are, indeed, a very valuable human capital that the SMEs can better tap on. To this end, I would like to urge MTI to consider extending the SME Talent Programme to PMEs 40 years old and above. Why limit the programme to only the school leavers? Our mature PMEs can also provide a boost to our SMEs as we look to develop a stronger base of globally competitive Singapore enterprises.

As our life span grows longer, the "60s" is our new "40s". Our workforce has become more educated and exposed to global trends and changes. These mature workers have stood the tests of economic restructuring in the past − many of them have come through the oil crisis, financial recessions in the 80s and 90s, and also the Asian financial crisis. So, extending the SME Talent Programme to mature Singaporean workers will certainly give them a pipeline of opportunity to join our SMEs, and allow them to stay in the workforce longer and contribute with their skills and life experience.

(In Mandarin): [Please refer to Vernacular Speech.] Last Friday, Deputy Prime Minister Tharman, in his conclusion of the Budget debate, highlighted how age discrimination leaves older workers vulnerable. I am deeply heartened by our Government's acknowledgement of the difficulties our mature workers face in finding jobs. There has always been quite a number of older residents coming to the Meet-the-People Session seeking help in securing work.

In my maiden speech in 2011, I gave the example of how a resident in his 50s and an ex-General Manager of an MNC managed to find work with our help after some months of searching. He was hired by a local SME in the marine industry to be their Service Manager. The company tapped on his extensive experience to help them deal with their MNC clients. Why is SPRING's SME Talent Programme only limited to the school leavers?

WDA has set the foundation for PMETs to move across industries. There are many courses promoting "T-shaped" competency which equip participants with a broad knowledge of horizontal skills, such as management, finance and business operations. Mature PMETs will benefit from such training and gain the ability to move into adjacent growth areas or new industries more easily.

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Due to technology and the globalised economy, constant and rapid changes are now the new normal. As life-span grows longer, "60s" are the new "40s". Our workforce has become more educated and exposed to global trends and changes. These mature workers have stood the test of economic restructuring. Many of them have also come through the oil crises, financial recessions in the 1980s and 1990s, and the Asian contagion.

If we hire them, we can ensure that these valuable skills and experience can be passed on to the next generation. More importantly, to help mature workers stay employable, we need to keep them in the job market as long as possible, for instance, paid temporary internship is one way for mature workers to move into a new skill or industry. Such programmes will also allow workers to try new jobs while gaining experience and education. Likewise, extending the SME Talent Programme to mature workers will give them a pipeline of opportunity of joining our SMEs and stay in the workforce longer.

Madam, I declare my interest in this topic as the President of the Consumers' Association of Singapore (CASE). For the past few years, complaints against time-share companies have always ranked amongst the top in the complaints list of CASE. In 2011, there were 1,458 cases against time-share related companies. Last year, the figure rose to 1,870 cases.

CASE has nothing against the legitimate sale of time-share related holiday products. For some time-share companies, we have not received any complaints at all. However, what we object to is the manner in which the sales were conducted. Consumers frequently complained that they were subject to high pressure sales tactics. After many hours of persuasion, they were pressured into paying a large deposit to buy a time-share product. Sometimes, the product is also described as a membership in a travel club or holiday club. Consumers were not told of the permanent annual maintenance cost involved in buying the time-share membership. There were also complaints that consumers face difficulties booking the holiday facilities. Now, if consumers were to try to cancel the contract, they were not allowed to do so. They cannot get back their deposits and they were threatened with law suits for non-payment of the annual maintenance cost.

Recently, CASE recorded more cases where companies represent to consumers that they can sell the time-share membership on their behalf. To aggravate the problem, not only do they pay for a time-share product, they also pay again to these companies to try to sell their time-share product. CASE is

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appealing to the Government to do more to protect consumers from unscrupulous businesses. We urge MTI to amend the Consumer Protection (Fair Trading) Act (CPFTA) to disallow time-share companies or similar kind of businesses from collecting deposits from consumers until the expiry of the cooling-off period. Sellers of such products should also be mandated to provide full disclosure of the annual cost of membership and other expenses before the contract is signed.

Mdm Chair, first, let me thank all the Members for raising concerns and issues, and also suggestions for the SME sector. I am quite glad to know that there is so much interest and because of that, they came up with some good suggestions to some of the problems that SME faces. We could consider them. I will try to address some of the issues brought up and also the suggestions as far as I can. If I cannot, Members can ask supplementary questions later.

Our SMEs definitely face challenges now – labour crunch and economic uncertainties. SMEs form about 90% of the registered entities in Singapore. They come in different forms, shapes and sizes. Some relatively large, most are medium to small to micro-enterprises. Because of that, the challenges are great. When we implement schemes and programmes, sometimes one size does not fit all. You need to customise, not only based on the size of the company and the different phases of the business cycle that they are in, but also the sector and industry that they are in.

Nevertheless, we will do our best. As Members know, in the Budget that was announced by Deputy Prime Minister Tharman, two-thirds of the $5.3 billion Transition Support Programme is expected to go to our SMEs. That is a huge chunk of it that we will put in. But the question will be how we allocate the funds and the budget so that these are effectively used by the SMEs and truly benefit them.

I am fully aware of the need to help them and help our SMEs succeed, even to survive in these difficult times in the economic uncertainties. SPRING and IE Singapore have been working hard over the years to look at the different schemes, rolling out the different programmes to help our SMEs. I have commissioned a review of all the SME programmes and strategies moving

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forward. It revolves around a few key outcomes, some strategies and key thrusts. Summarising them all, it revolves around three numbers: "2-3-8". Very auspicious. Two outcomes, three broad thrusts and eight strategies.

Many Members asked about this review: what is the outcome of it? What do you get out of it? What kind of new programmes? I am heartened to say that many of the business sectors came forward. Trade associations like SBF, their SME committee, Chinese Chamber of Commerce, ASME and other trade associations have given very good suggestions. In fact, many of the suggestions even went to Ministry of Finance and they helped to provide some of the measures and programmes that were rolled out. I thank them all for working with us to strategise strategies for the SMEs.

Let me share with Members the two outcomes for SMEs – these are the two key objectives. First, we want a productive, vibrant and strong SME sector. With that, you create good jobs. And that is the second outcome. We want good quality jobs for our Singaporeans and workers.

To do so, we will focus on helping SMEs along three broad thrusts. Basically, for any company to work, you need to look at the revenue, the top line, that is the cost component, or how you manage the cost, and make it more productive. Make the money work for you and then you look at the bottom line.

First, the top line. We have to tap on opportunities for growth. Second, drive productivity; make sure it is efficient and effective. The money that works for you gives you that kind of return that you need to sustain your business. The Government plays its role, thirdly, to provide a conducive business environment for the SMEs.

We want our SMEs to do well domestically and we also want them to grow overseas. So, there comes the first thrust – to grow them overseas and globally as well. But we want to be able to create the opportunities, and get SMEs to identify and exploit those opportunities.

First is to collaborate. This collaboration will have to be supported by partnerships, and we call this scheme Partnerships for Capability Transformation (PACT). This was requested by Ms Low Yen Ling.

PACT currently supports large enterprises in qualifying advanced manufacturing parts and processes from Singapore-based suppliers. Many of the SMEs are suppliers to MNCs and big companies. They are a network of

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suppliers. The Government will now expand PACT to include non-manufacturing sectors and a wider range of activities that involve collaborations between large enterprises and SMEs. As long as they are suppliers, and they circle around the bigger enterprises, they can work together to collaborate. Grants from EDB and SPRING will now be available to both large enterprises and SMEs to facilitate these collaborations. Many Members have mentioned that.

First, large enterprises could transfer their knowledge and share best practices to SMEs in the course of supplier sourcing. Whether it is supplier sourcing, outsourcing practices and operations, they collaborate together. This will help SMEs improve their productivity. Many a time, it is either the core of it which is the large enterprise that the suppliers supply to that comes up with some state-of-the-art thinking or more advanced way of doing certain things in product development, logistics or operations, in order to be more competitive, and the supplier benefits from there. We want that to be collaborative, so there is a programme to help them partner.

For example, local department store Metro embarked on a Mobile POS & Supplier Integration Project to upgrade its productivity. Nine of Metro's SME suppliers were also upgraded as they had to build their competencies to integrate with Metro's system. That helps to automate or computerise some of the processes between the suppliers and big companies – in this case, Metro. The processes will be more seamless and automated. That helps in the productivity drive for the small enterprises.

Another form of collaboration is for SMEs to come together to develop and test innovative new solutions with large enterprises. Some Members have asked how we put in IT for the different smaller enterprises. It can be driven by these large enterprises to help the small enterprises to computerise.

One example would be the recent tie-up between local medical technology firm AWAK Technologies and US medical giant Baxter International to develop and commercialise a wearable artificial kidney. Through these partnerships and collaborations, our SMEs can grow and their capabilities will be strengthened and widened. This is important, because as they collaborate, opportunities are vast. When the suppliers and SMEs develop that kind of capabilities, some of them can be exported. Some of these capabilities can go overseas.

Senior Minister of State Lee mentioned about the Market Readiness Accessibility (MRA) overseas. A few Members asked how can large and small

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companies come together to form consortiums and look for opportunities overseas. This is how it works.

We cannot look at the schemes by themselves. Let us say you want the big and small companies to come together. It can be done under PACT, come together and collaborate, and tap on the scheme of Market Readiness Accessibility (MRA), develop the agent's or market representative's network. So two schemes together; the companies develop an opportunity as a whole, and they compete overseas. When the schemes are combined together, many companies will benefit. No one scheme can work alone. If you integrate them, they will give a greater benefit.

We also have schemes where we try to develop our promising local enterprises to go overseas – that is under the Global Company Partnership. We handhold them to look at where are the opportunities. Some individual companies can be identified as "Star Players" and they can grow their footprints and networks overseas, market their products and services overseas. This is where IE Singapore will customise some of their approaches and help them to go overseas.

Under the second thrust – productivity, innovation and capability upgrading, we will look at the cost component. How can it drive productivity improvements within the company? Re-look at their business model, operating model, and make sure that the cost they are investing within the company will give the returns that they need, and to make sure that the money works for them.

Under the second thrust of this SME review, we enhance support for SMEs in productivity, innovation and capability upgrading. To advance beyond that, the Government will continue to support companies in capability upgrading. Last year, more than 560 companies benefited from capability upgrading projects supported by SPRING and IDA. More SMEs can now tap on the PIC bonus and vouchers. For micro-enterprises, the PIC vouchers will be absolutely suitable and relevant. These are smaller scale in terms of the amount, $5,000. On top of that, with the PIC bonus, they receive a return to their investment in assets and equipment that help them in productivity.

Very importantly, within the cost component of the enterprise will be manpower and talent. Many Members have spoken about this. Right now, with the labour crunch, both at the mid- to lower levels, how do SMEs find these talents? We are especially concerned about the managerial and supervisory levels. We have suggested that we can continue the education of our SME

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workers to provide a pipeline for our SMEs. So SMEs can continue to upgrade their current SME workers through re-skilling and upgrading their knowledge.

To enhance the human capital of SMEs, SPRING will also offer a suite of assistance to help SMEs groom their business leaders. For example, the Advanced Management Programme co-funds courses for SME CEOs through executive MBAs and executive development courses. This is where the bosses go back to school to learn strategic planning and run their business more efficiently.

To strengthen SMEs' middle management, the Management Development Scholarship (MDS) co-funds scholarships for promising executives, currently in the SMEs, to pursue MBAs and part-time degrees. Support is also available from WDA and MOM for older workers to upgrade their skills.

Many Members were also interested in the SME Talent scheme. The SME Talent scheme is to make sure that there is a strong and deep collaboration between the ITEs and polytechnics with the SME sector. Many of the graduating students or students in these institutions may not have that kind of interest to join the SME sector. They may not feel that it gives them that kind of career path that is clear, and it does not give them stability. On the contrary, the SME sector would provide them that opportunity to be entrepreneurial, and also to broaden their experience in business.

I have had a dialogue with Polytechnic students. When I explained to them the SMEs' appeal, they did not see that side of the drawing power of the SMEs. For example, if the talents fit into the SMEs, many of these SMEs will consider these talents as rare talents in their companies, unlike in big companies where they draw in a group of them. Whatever opportunities to go overseas, set up subsidiaries, venture abroad, and do market assessment, the opportunities will be given to that talent. That exposes the person tremendously, broadens the horizons tremendously for the business sector, and to run the company. Not only will you perform certain functions that you have been trained in, or you have studied for and got your diploma or ITE certificate from, you are going to broaden it. If you are an Accounting graduate from a Polytechnic or you studied Accounting in ITE, you go into a SME, you are not only going to do finance or accounting, but you get the chance to do sales, marketing, operations, IT and all functions across the board.

When I talk to SME bosses, they are definitely most welcoming for these talents to experience all of it. It is always difficult for SMEs to draw talents and

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they want to retain them. So, we roll out this SME Talent scheme to fit as many of the talents as possible into the SME sector, to encourage our local graduates and talents to venture out with the SMEs, to be able to grow and broaden their horizons within that sector. That will strengthen our SME sector as a whole. That is where we try to target as many of the Polytechnic graduates as possible.

The SME Talent scheme will be made available for students in every single year at the ITE or Polytechnic. It is not just the graduating year, but it is also from the entry year, second year and third year. It depends on the courses and how keen they are. Allowances and training will all be paid for.

The Germans have the apprenticeship programme. All of us would know that there is a scholarship programme that is quite widely available in Singapore. The SME Talent scheme positions between the apprenticeship as well as the scholarship programme. It gives the assurance of a job; it pays for you even when you are studying; and at least you will have not just an internship, but traineeship during the holidays as you will be working in the SMEs.

Ms Low Yen Ling has mentioned about the golden years of workers; "60" becomes "40". We truly believe that. We want everyone to be actively ageing and contributing to the economy. There are many of the current schemes in this area as well. One of the schemes is the Business Advisory Programme. The Business Advisory Programme facilitates the process for the very experienced – maybe you are working in the MNC or in another function – but you want to make a mid-career switch. Through the Business Advisory Programme, we will match you with an SME for you to provide certain advisory roles in the SMEs, before you can be employed full time. If you can find the right chemistry and right company, and the company finds that you are the right and appropriate person, they can do the match up. Immediately, you will be employed permanently. The Business Advisory Programme is one programme that the mid-career switch individual or executive can consider.

Let me come to the question on productivity. Mrs Lina Chiam's question on plant and machinery: the PIC Bonus announced at Budget allows companies to receive up to $15,000 in cash over three years. That is on top of the tax deductions they already enjoy from productivity investments that qualify for PIC grants.

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I encourage SMEs to tap on other kinds of programmes as well. It is not just PIC Bonus. SMEs really have to relook at their business model and see what kinds of schemes that are suitable for them. They should not just look at one scheme or two.

The Wage Credit Scheme, for example, cannot be looked at in isolation. The Wage Credit Scheme should be looked at from the productivity angle as well. How productive can they be; have they hit certain indicators within the company before you want to talk about increasing pay and putting the Wage Credit in place. There is only three years that you can work on. So, there is a lot of urgency.

A combination of schemes gives you the most benefit. We want to encourage SMEs to tap on them. The Government can only do so much because the SMEs have the domain knowledge to know what they need. That is where we need the SMEs to come forward to look at and review their own model.

We also encourage SMEs to tap on the Collaborative Industry Projects (CIPs) programme which will help the sector as a whole to improve productivity through shared services and other innovative solutions. One of the initiatives under IDA's iSPRINT is to drive CIPs for infocomm technology solutions.

With iSPRINT funding, for example, Bugis Street Development implemented an integrated Point of Sale, Inventory Control and Cashless Payment system for 800 retail shops at Bugis Street. This allowed the retailers to decrease the cost of technology adoption due to economies of scale while improving productivity and customer service at the same time.

I believe the Member Mr Gerald Giam had mentioned about putting in IT as a whole. This is one programme where they can come together, have an industry focus. For a lot of the projects to be successful, you need a very proactive trade association to take the lead, or a cluster of companies coming together to drive it and say that "we can do some of these things and centralise them". We have experimented with centralised kitchens. There have also been centralised logistics services.

Many of the outsourcing services make these things possible. Collaborative efforts, where they all achieve economies of scale. This is extremely important for the micro enterprises, such as the heartland stores in the community. They can actually come together; perhaps some stores can come together and look at procurement; some stores come together and look at joint promotions. There

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are many of these activities that are possible. I will come in later to roll out the SME Centres that will help network and bring together some of these projects to make them possible; to work with the businesses and make these collaborations possible. Mdm Chairman, let me speak in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.]  The main thrust of the SME Review surrounds three numbers: "2-3-8". It seeks to achieve two outcomes, focus on three areas and involves eight strategies. This is very important because this can help the development of the SME sector. We hope to create a pro-business environment for the SMEs.

Mr Yee Jenn Jong and Mrs Lina Chiam asked about financing support for SMEs and start-ups. Currently, the financial institutions in Singapore have already catered substantially to the financing needs of our SMEs. Many financial institutions have dedicated SME lending units, and offer a variety of banking facilities customised for them. Based on the MAS' Annual SME Financing Survey 2012, as at June 2012, the financial institutions' stock of total outstanding SME loans was $64.5 billion, which is a very substantive sum. The financial institutions' extensive global networks enable them to support SMEs much better than by a Government-run SME bank. For example, if they were to set up a business in China, this private financial institution will be able to help them better. A Government-run SME bank can only offer financing in Singapore and cannot provide a wide network owned by private institutions.

In addition, SPRING works closely with 14 Participating Financial Institutions to provide financing support to such SMEs through the risk-sharing of loans made to SMEs. These programmes include the Loan Insurance Scheme (LIS) and LIS+ that provide loans for working capital and trade financing, the Local Enterprise Finance Scheme (LEFS) that provides loans for the purchase of equipment and assets as well as a Micro Loan Programme for micro-enterprises with 10 or fewer employees. Such Government financing support helps good SMEs, which may not have built up strong track record as yet, to pursue worthwhile but possibly higher risk projects.

For entrepreneurs and innovative start-ups, SPRING also provides financing through initiatives, such as the SPRING Start-up Enterprise Development Scheme (SPRING SEEDS), which is an equity-based co-financing scheme.

Mr Liang Eng Hwa, Mr Ong Teng Koon and Dr Chia Shi-Lu were concerned about how we can reach out to our SMEs. I will address this with the last two

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strategies under the SME Review. The strategies are represented by the acronym "UP", as it represents progress for our SMEs and Singapore.

We will upgrade our five Enterprise Development Centres at ASME, SMF, SCCCI, SMCCI and SICCI into the SME Centres. These one-stop SME Centres will allow better outreach, education and engagement of our SMEs, and will become the focal points for business networking and for all Government agencies to reach out with their SME assistance programmes.

We have received positive feedback on the satellite centre set up by ASME in North East CDC. We will, therefore, work through the various industry associations to set up more satellite SME Centres in areas with a high concentration of SMEs.

We have received feedback that some SMEs have found it difficult to understand the schemes available to them. SPRING has undertaken a streamlining exercise for their schemes to address the feedback. The various programmes which SPRING used to offer will be streamlined into one Capability Development Grant (CDG), which supports SMEs in productivity improvement and capability development. SPRING has also simplified and standardised its application forms to just two pages. In the past, it was 11 pages. At the same time, SPRING will be introducing a new online grant portal to reduce paperwork for businesses. The CDG will take effect from 1 April 2013. In brief, SMEs can now look forward to assistance in five easy-to-remember broad categories – toolkit, voucher, grant, tax incentive and loan.

SPRING will be providing more details on each of these recommendations. Based on our recommendations under the SME Review, our SMEs can do it, and the Government will seek to amplify their capabilities. This way, we can all head upwards towards a better future.

I would like to reply to Mr Teo Siong Seng's comment on PEP. PEP is a very important institution that helps to streamline the processes. Mr Teo has said that if the carrot was hung too high, then the little rabbit will not be able to grab it. I do not know who hang up the carrot. The carrot is usually planted on the ground. I can inform Mr Teo that we will not set the threshold too high. We will plant the carrot on the ground so that the rabbit can get it easily without jumping about.

(In English): We have also not forgotten our drive to create the greater culture to do start-ups and also to create that risk-taking culture within our

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young to step out of the comfort zone and to start up their own businesses and take ownership. It is important because as SMEs, in meeting the challenges in business, some may be successful, others may not be. We constantly need renewal of the business sector. New enterprises need to be injected and need to grow and we need new products as well.

Whenever there are entrepreneurship projects, we will do our best to support and, hopefully, there can be a spark of brilliance somewhere where the products and services become global. And we can produce global champions and regional champions in our business sector.

Mr Inderjit Singh and Mr Vikram Nair had asked how we can develop start-ups and the entrepreneurial spirit in our youth. Developing innovative start-ups will remain an important focus, even as a part of this economic restructuring. I have cited many of the helps that the start-ups can tap on. In Action Community for Entrepreneurship (ACE) – where I am chairman – we have grants that are given out. The grants used to have an age limit of 26 years and below. We have since opened up to benefit as many start-ups as possible, and it has no age limit. It does not have to be technologically focused. As long as you have a good idea, you are competitive and you have a differentiation, we will be there to give you the grants as best as we can, to as many start-ups as possible.

For entrepreneurship culture, it has to go beyond the grant. We have to build an eco-system and a conducive environment for people to want to start business. The business sector must be exciting enough and the consumer market in Singapore has to be exciting enough to be able to build businesses. We need passionate individuals. We need to inculcate that even when they are younger. This year, ACE has rolled out a programme where entrepreneurs adopt schools. The entrepreneurs can adopt their old schools and they get involved in entrepreneurship education within the school. We are piloting with a few schools and we have seen very good feedback from entrepreneurs who were involved. They actually go into the classes to teach about risk-taking and the students get attached to the entrepreneurs themselves.

For the start-ups that are already in place, one example is the Start-Up Launch Pad. We provide the facilities. One very famous location is Ayer Rajah Block 71. That has now become sort of a test-bedding centre for new products, in fact, for the start-ups, too. They are jointly initiated by JTC and MDA in 2011. Besides the tangible assistance from the space provided, Block 71 also provides intangible synergies by creating a vibrant start-up community for networking and collaboration. The networking and collaboration for the start-ups, to me, are the first and primarily most important. In business, it is about your network

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– who you know, what you know and where are the business opportunities. Mentorship is a focus. And also developing platforms where we link venture capitalists to the start-ups so that they can get their series A funding, they get a second series funding to be injected into their business, for new capital.

On cultivating young entrepreneurs, as I mentioned, we start them young. We go into the schools and also into the Universities as well. Universities and Polytechnics have incubators. These incubators encourage students to start their business and they incubate for a period of time and, hopefully, they graduate into the marketplace. Some of them during the incubation period already went into the marketplace to test demand for their products and services, and they can continue to refine and tweak the best they can. They have mentors to help them as they do trial and error.

But this is not a rosy picture. For any start-ups, the probability is that more than half may not succeed. That is one thing that we have to teach our young, which is that if they embark on the journey of entrepreneurship, it is about learning about failures and not always wealth and successes. They learn about failures, but come back stronger and more resilient; try again. And that is where we should be coming from and that is the best educational value of entrepreneurship.

Mr Lim Biow Chuan has asked MTI to review regulations on time-share products. The main legislation protecting consumers against errant timeshare companies today is the Consumer Protection (Fair Trading) Act, or CPFTA. Under the CPFTA, CASE may obtain injunction orders against errant traders for unfair practices, such as misleading claims and pressure selling, while consumers themselves may take civil action against them. Besides the CPFTA, the Police can also take action against fraudulent timeshare companies under the Penal Code.

I announced at MTI's COS last year that we will review the CPFTA. Since then, we have sought inputs from CASE and completed a study of overseas legislations in this industry to come up with a series of proposed amendments. These would include disallowing the collection of deposits during the cooling-off period, and requiring sellers to provide key information on the contract before the consumer signs it.

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Madam, the Government remains fully committed to support our SMEs in the restructuring. The transition will not be easy during this economic uncertainty. I continue to urge our companies to take advantage of the assistance that the Government has implemented and work together towards achieving quality growth. Enterprises of any types can come forward, look at the schemes and their business models, and continuously review what exactly is most suitable for them to be able to get stronger. While we encourage companies to be on the productivity movement, we can understand that some companies still face constraints and they feel that they need to take a much longer time. However, they have to take the first step. If they are willing to take the first step, the schemes will always be there to help them.

Mr Zaqy Mohamad mentioned about social enterprises. I want to assure him that social enterprises are included because they are treated as enterprises as a whole. As they are registered as an enterprise, they can still tap on the schemes. Social enterprise is one of the hardest organisations to run because it is an enterprise with a social cause. But, first and foremost, their business model must be viable and sustainable. If they are commercially viable, they will then be able to earn that kind of return to sustain themselves to meet their social mission, and that is very difficult. But we treat social enterprises as an enterprise itself, and they can continue to tap on the scheme as well.

Lastly, let me encourage companies to continue to look at the different schemes. I know the schemes out there are quite massive. But we hope, within this year itself, to roll out as many SME centres as we can. Currently, the plan is for about five SME Centres as a hub and satellite centres as spokes. These satellite centres will be within the community while the big SME Centre will be a one-stop shop that will be initiated and developed by the Trade Associations.

Some Members have asked for the centres to be situated or located within their constituencies. Ms Jessica Tan, Mr Sitoh Yih Pin and Assoc Prof Fatimah Lateef have mentioned that they would like some of the SME Centres to be located there. We will study it, and I think there is a possibility that an office or a satellite centre can be situated there. We will work with the Trade Associations to do that. I think it is important for the community, the business sector and the Government to all work together in these difficult times, in this transitioning process, as the economy restructures, and we will go through that every step of the way in this journey.

Mr S Iswaran : Madam, I thank the Member for his questions. The number in terms of the Clean Energy Programme or the clean technology that he sought is that $1.82 billion has been achieved versus the target of $1.7 billion. In terms of employment, we are also on track to achieve the targets that we have talked about.

On the Member's point on feed-in tariffs (FITs) and, in general, consumption subsidies, I am not sure how the analogy with high-speed infrastructure compares. But let me put it this way. First, on the Germans' experience, I think he used this phrase "a leader in the space". Actually, what the experience in Germany shows is that when they had FITs, yes, the adoption of solar technology in usage was widespread, but it did not succeed in bringing down the cost of solar panels in Germany, and neither did it enhance the productivity and the technology of German companies. What they ended up doing was that many of the panels that were brought in were coming from China, and so on. That is one of the reasons why they had a rethink on how they have to do this. Because when you have a certain amount of funds there, you have to ask yourself, where it is best deployed to achieve your clean energy objective.

I am not sure why the Member doubts the value of upstream investments, because that, in fact, will yield the most durable outcomes. If you invest correctly in the technology upfront, and you are able to bring it closer, if not too great parity, then it would naturally become a technology that would be adopted by industry and consumers alike, because the economic logic would

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be something quite compelling.