SPEECH BY MR S ISWARAN, MINISTER FOR TRADE AND INDUSTRY (INDUSTRY), DURING THE COMMITTEE OF SUPPLY DEBATE UNDER HEAD V (MINISTRY OF TRADE AND INDUSTRY) ON FRIDAY, 3 MARCH 2017
“Building capabilities to seize opportunities today and into the future”
FOCUS ON FUNDAMENTALS IN THE FACE OF UNCERTAINTY
1. Thank you Madam Chair. I would like to thank all the Members who had spoken on the MTI debate so far. At the debate on the Budget Statement, I emphasised that we need to gear up our economy and enterprises so that they can seize the significant opportunities presented by the growth of Asia and the rise of the middle class here. Let me now elaborate on the work of MTI and our economic agencies towards that objective.
2. Our backdrop is, as many Members have observed, a confluence of political, economic and technological trends that is quite unparalleled in recent times. As many Members have emphasized, anti-globalisation and protectionist sentiments appear to be gaining momentum in the US and Europe. Global trade and production patterns are changing, and value chains are being reconfigured. Technological advances are disrupting business models and changing the nature of jobs.
3. It is increasingly harder to anticipate which sector, enterprise model or job type will be the next to see a major transformation. For example, the impact today of Uber, the sharing economy, and fintech was not fully appreciated even as recently as 5 years ago. We expect more industries to be “Uberised”; but we can’t be sure which ones, when and to what extent.
4. Given such uncertainty, the most durable strategy is to focus on the fundamentals that will keep Singapore relevant to the world and its needs. That is why the CFE has emphasised two basic points: Openness and Capability. Strengthening these fundamentals is the surest way to prepare Singapore for the future.
5. Minister Lim has already explained how Singapore must remain connected to the world and open to trade, investments and talent, despite contrarian trends in some parts of the world. Minister Lim has explained how we are doing this.
6. Secondly, it is also important for our people to deepen their skills, and companies to transform by building capabilities for higher levels of productivity, innovation, and internationalisation. I will elaborate on this aspect.
ITMS ARE KEY MECHANISMS TO BUILD CAPABILITIES AND TRANSFORM SECTORS
7. The Industry Transformation Maps (ITMs) are a key mechanism to build enterprise capabilities and transform sectors. Ms Sun Xueling suggested deeper engagements with corporates. Mr Leon Perera enquired how we could involve the private sector more. I will use the Food Manufacturing ITM, which was launched in November last year, as an example to address these questions and suggestions.
8. Madam Chair, may I have your permission to show some slides.
9. The ITMs (i) integrate Government policies and initiatives, and (ii) promote collaboration among industry stakeholders to achieve transformation and growth through productivity, skills development, innovation and internationalisation.
10. SPRING, the lead agency for Food Manufacturing, works with other government agencies and industry stakeholders to develop the ITM. The goal is to develop Singapore into Asia’s leading food and nutrition hub, and there are quantitative targets to galvanise stakeholders’ efforts to realise this goal. The aim is to grow our Food Manufacturing sector’s VA by 6.5% p.a., overseas income by 8% p.a., and productivity by 4.5% p.a., by 2020. These are, as Members would acknowledge, quite ambitious targets, especially when we compare with other sectors.
11. 98% of the almost 850 food manufacturing enterprises in Singapore are SMEs. Hence, SMEs have been actively involved in the development of the ITM which also aims to address their needs. For example, many SMEs find the cost of R&D and technology adoption prohibitive because they lack scale.
12. Therefore, one component of the ITM is to build a network of shared infrastructure to increase productivity, and create co-innovation opportunities.
13. One such shared resource is the High Pressure Processing (HPP) tolling facility. Food in its final packaging is subjected to high levels of pressure to extend shelf life. The smallest of such machines costs about $800,000 which is not cost-effective for an SME to purchase for its exclusive use. For example, a typical small juice company with an annual production volume of 40,000L would need the machine for only 4 days in a year. Therefore, SPRING will be investing at least $1.5m in a HPP machine. This machine will be located in Jurong, where there is a concentration of food manufacturing companies, and be ready by the fourth quarter of this year. Food manufacturers will be able to use the machine on a pay-per-use basis.
14. The ITM will also help companies collaborate on innovation with the initial focus on MNC-SME projects. Montreux Patisserie, a local bakery, has partnered Unilever Food Solutions, for example, to develop new flavours and products. SPRING has started a Food Innovation Cluster (FIC) Workgroup so that our companies can spawn more of such partnerships with global food innovators and corporate accelerators.
15. As Mr Charles Chong has emphasised, such resource pooling, whether it’s in terms of equipment or R&D effort, can help raise productivity and lower business costs. However, resource sharing is still a relatively nascent idea for local food manufacturers, and it is important that our business owners be open to such novel business arrangements if we are to succeed in industry transformation.
16. The ITMs also seek to ensure that regulations do not hinder innovation and transformation. So, MTI and SPRING, for example, commissioned a review of food manufacturing regulations. The preliminary findings indicate that there is growing industry interest in novel food ingredients, such as ingredients produced by novel processes or from non-traditional sources. But, there is a need to strengthen and better communicate the regulatory pathway for such novel ingredients and this is under active review.
17. If I can pull some of these together, Aalst Chocolate exemplifies the enterprise transformation that we seek through the ITMs. Established in 2003 as the first Singaporean-owned chocolate manufacturer, Aalst has grown rapidly over the years. Government agencies have supported Aalst as it enhanced productivity through automation, ventured into new overseas markets, and invested in research and innovation.
18. With SPRING’s Capability Development Grants, Aalst has invested in a series of productivity projects, including an automated production line to improve the efficiency of chocolate production and packaging. It helped Aalst increase production by 70%, which allowed it to scale and meet export demand without the need to increase manpower.
19. Internationalisation has at the core of Aalst’s business strategy from the very beginning, because Singapore’s domestic chocolate consumption clearly cannot sustain its growth. 98% of Aalst’s revenues are from exports and a key success factor has been branding. Aalst has used IE Singapore’s Global Company Partnership grants to build a brand framework tailored for different markets. Today, Aalst is an established player, partnering large companies like Dunkin’ Donuts, Unilever and Nestle in various markets and projects.
20. Over the years, Aalst has also leveraged SPRING’s SME Talent Programme to identify the right people for its needs. Mr Dean Ng was one of Aalst’s first employees under the SME Talent Programme. He joined the company in 2013 as a marketing executive, and has since been promoted to a brand manager. He works directly with the COO to develop marketing plans and initiatives to increase sales and brand awareness in all markets. Aalst is also starting student placements under the SkillsFuture Earn and Learn programme.
21. The company’s growth has also created opportunities for older workers. Mr David Choy, now 62, has spent much of his career working in the ship maintenance line. At the age of 52, he made the switch to the food manufacturing industry by joining Aalst. He upgraded himself through continual training and development, especially as more new equipment was acquired by the company. Today, he is the “go-to” guy for assistance with Aalst’s machinery and he is testimony to the benefits of skills upgrading.
22. To sum up, the ITMs encompass a suite of programmes to help our companies scale up and transform. The aim is to transform every sector, enable enterprises to grow their top-lines and enhance their productivity and competitiveness.
23. Workers will also benefit from these ITMs. They will gain a clear view of the career pathways in the sector and the skills that are required.
24. To better match skills supply with industry demand, SPRING is working with the unions and industry to develop a Food Manufacturing Skills Framework. Workers can use this framework to map out their careers, assess skills gaps and tap on programmes, such as MOM’s Adapt and Grow Initiative, to enhance their employability. This Framework will be ready by 2017.
25. Also, trade associations and chambers like the Singapore Food Manufacturers’ Association (SFMA) and Singapore Manufacturing Federation (SMF) also play an important catalytic role as the industry embarks on projects to internationalise, innovate and develop people and technical standards. SMS Sim Ann will elaborate on our efforts to enhance the capacity of TACs in this regard.
26. Ms Foo Mee Har asked about the progress of the ITMs that have been launched so far, and the lessons that have been learnt. And I think she is rightly focussing on the implementation element because that’s really where the route is and that’s where we will see the biggest outcomes.
27. I have spoken in detail on the progress of the Food Manufacturing ITM, and how it will involve and benefit workers, companies and TACs. We will adopt a similar model for the other 17 ITMs which will be launched by the end of FY2017.
28. It will take time, however, before we can get substantive information to assess the progress and effectiveness of the ITMs. Nonetheless, I would like to emphasise that the ITMs are not static plans; they will be regularly reviewed, by tracking KPIs, and the plans updated/modified as we learn more through implementation.
29. Ms Foo also asked if we should prioritise sectors with high growth potential and established sector partnership structures for ITMs. The 23 ITM sectors account for about 80% of our GDP and generally meet the kind of criteria Ms Foo mentioned. They will all be launched by the end of this FY, but the pace of implementation will, to a significant extent, also depend on the response from industry and stakeholder commitment. We also have broad-based schemes to support the needs of companies in the non-ITM sectors. I just want to say that it’s not just about looking at the sectors where we see or assess that there’s growth potential because transformation is needed not just where there is significant growth, but also in sectors where there are other structural challenges, such as for example, in retail. Therefore we need the transformation and adaptation that we are looking for through the ITMs – to make sure that our companies are well positioned for the future.
GOVERNMENT IS PROACTIVELY RESPONDING TO COMPANIES’ NEEDS
30. I want to turn now to the role of Government, and what Government is doing on its part to respond to some of these changes. As a key enabler, it is important for the Government to be agile in response to changing industry needs, as highlighted by Mr Yee Chia Hsing and Mr Lee Yi Shyan.
31. Regulation is a case in point. Singapore is well regarded for its transparency and ease of doing business, due to our robust legal system, well-developed infrastructure and skilled talent pool. We must build on these strengths with a more nimble regulatory posture that safeguards legitimate interests whilst being more responsive to the changing needs and circumstances of industries. If we do this well, it will be another competitive differentiator for Singapore, especially in an era of rapid technological changes and intense competition.
32. To that end, we do want a more forward-looking regulatory regime that supports innovation, so that new products and services can be test-bedded and brought to market more quickly. This is also in line with the CFE recommendations on regulations, which Mr Liang Eng Hwa and Mr Henry Kwek enquired about.
33. At last year’s Committee of Supply, I spoke on HSA’s initiatives to create an enabling regulatory environment for the medtech industry. Since then, an inter-agency workgroup led by MTI and comprising HSA, EDB, SPRING, A*STAR and IE Singapore, has developed additional recommendations.
34. To allow innovative medical devices to gain quicker access to market, HSA will establish a priority review scheme. Applications submitted under this scheme will be prioritised for review, thus shortening turn-around-times to register the device. Patients and healthcare providers will also benefit from earlier access to innovative medical devices.
35. To give medical device developers greater regulatory certainty, HSA will also launch a “pre-market consultation scheme”. With this, companies can consult HSA on the regulatory requirements for devices at the product development stage, well before any formal submissions to register the device for sale or use in Singapore.
36. HSA plans to roll out these initiatives in the second half of this year and will share further details with the industry. More broadly, to address the other points on regulations that Members have raised, the Pro-Enterprise Panel (PEP) will continue engaging industry to identify areas where regulatory processes and compliance costs are of concern to businesses, and work with agencies to provide solutions. As Ms Cheng Li Hui rightly noted, it is important that we ensure our regulations are not an inadvertent burden to businesses.
37. I also want to say that our regulations have to keep up with the latest industry trends. One example is in the area of land zoning.
38. In manufacturing, we are seeing more servicisation, and business models are shifting from production-led to service-driven activities. Hence, the current guideline for Business 1 zones, which requires companies to use at least 60% of their space for core industrial activities, may be too restrictive for some companies especially those that are already making this transition.
39. Therefore, JTC and URA have been working on a more flexible industrial land zoning approach, which will be piloted at a multi-tenanted building to be developed by JTC and located within Woodlands North Coast. Instead of the “60/40” guideline, JTC will introduce more flexible guidelines so that companies can co-locate service-driven activities alongside their manufacturing operations. Companies that have offshored their lower value-added activities can also maintain their more knowledge-intensive activities here, while retaining close oversight of their operations overseas. Market response and feedback to this pilot will be studied and will inform any further steps to be taken.
40. More broadly, vibrant live-work-play-learn environments also play an important role in the attraction and retention of talent. So, beyond flexibility at the development level, we will also pilot greater land use flexibility at the district level in our upcoming growth centres, starting with Punggol. The Minister of National Development will be elaborating on this.
41. However, having outlined some of these moves that the Government is making and the general posture that we are taking, I want to caution that even as the Government adopts greater flexibility in regulations, we must remember that we are entering unchartered waters. We must be prepared that things may not always turn out as planned, in which case we should be ready to change course or cut losses as such risks are part and parcel of the innovation process. We should accept that as part of the natural evolution in our system and not look out for someone to blame when something does not work out the way we intended it to.
STRENGTHENING OUR CAPACITY FOR INTERNATIONALISATION
42. As part of the effort to stay open and connected, we want to help our companies to deepen linkages with overseas networks and partners, and seize opportunities in new markets. To ensure seamless support for our enterprises’ internationalisation effort, we will strengthen coordination of our agencies’ overseas operations under the consolidated “Singapore Centres”. These Singapore Centres will serve as the key point of contact for Singapore-based companies when they enter overseas markets when they enter overseas markets, as well as for overseas investors to better understand the business environment in Singapore. The Singapore Centres will also broaden and deepen our understanding of new markets, including at the city and regional levels, to better support our companies as they venture overseas. This is a point that we have emphasised in the course of the CFE studies as well. That we need to go well beyond the broad understanding that we have of these markets and have a much deeper appreciation for cities – second-tier cities, third-tier cities – and other regional opportunities.
43. We have so far established “Singapore Centres” in 9 key markets, and they have been well received by both local and foreign companies. Some examples include Beijing, Shanghai, Guangzhou, Frankfurt, London and Mumbai. We will extend the Singapore Centres to all other 36 overseas locations where EDB and IE are present.
44. In addition, as announced by the Minister of Finance, we will establish the Global Innovation Alliance (GIA). Its key objective is to help our startups and SMEs build networks and seize export opportunities in global innovation hubs and new demand markets.
45. A key component of the Global Innovation Alliance is to build a network of Innovation Launchpads around the world. Today, our Institutes of Higher Learnings (IHLs), companies and agencies have already established their own networks overseas. The GIA will integrate them into one network which companies can tap on readily, to bring their innovations to relevant markets.
46. ViSenze, a local startup providing visual search and image recognition solutions for the eCommerce sector, has experienced the value of such networks first-hand. In 2016, IE Singapore introduced ViSenze to the Mastercard Start Path accelerator programme in London, a competitive programme geared towards accelerating the growth of promising startups. Through that programme, ViSenze was exposed to Mastercard’s panel of international specialists who linked them up with their global network of potential business leads. This has enabled ViSenze to expand its presence in the US, as well as enlarge their global customer network.
47. With the GIA, we hope to connect more of our SMEs and startups, with the right people and networks in other parts of the world too. The GIA will also enable the best foreign ideas and talent to interface with Singapore companies and find local partners. This will, we believe, not only enrich our innovation ecosystem, but also strengthen our value proposition as a base for foreign companies to come here, test-bed new products and expand into the region.
ENHANCING OUR INNOVATION ECOSYSTEM
48. Let me turn to innovation. Mr Charles Chong, Ms Chia Yong Yong and Mr Leon Perera have asked about our objectives in investing in research and innovation and how we can strengthen our Research, Innovation and Enterprise (RIE) ecosystem. As Members have already noted, under the RIE 2020 Plan, we have made several shifts to ensure Singapore is well-positioned to harness technology and innovation to drive our next phase of economic growth. Let me illustrate what I mean.
49. First, our research framework is focused on four domains which hold significant economic opportunities and/or serve important national needs. These are (i) advanced manufacturing and engineering; (ii) health and biomedical sciences; (iii) services and digital economy; and (iv) urban solutions and sustainability. There is also some funding set aside for the White Space element.
50. Second, to tighten linkages between our R&D capabilities and industry needs, we have increased funding for public-private research collaborations under the Industry Alignment Fund (IAF). That’s going to bring the public and private sector closer together.
51. Third, to spur the best ideas, we increased the proportion of competitive funding that is open to all public research performers from 20% to 40%. It is not dedicated, it is open.
52. These shifts combine to bring about a significant directional move in our RIE system.
53. Mr Leon Perera also asked how we can leverage competitions as a means to develop IP.
54. SPRING has worked with partners such as NUS, NRF, IMDA and incubators to co-organise startup competitions judged by angel investors and venture capitalists at events such as TechVenture 2016 and InnovFest 2016. Winning teams receive prize money and a validation of their business plan and execution ability.
55. Ms Chia asked about the structural changes we will effect to achieve our objectives in research and innovation. Mr Chong also asked about A*STAR’s transformation. As Members would recall, Deputy Prime Minister Teo Chee Hean in his capacity as Chairman of NRF Board announced in Feb this year that A*STAR is embarking on a transformation effort that will bring R&D innovations to industry more quickly, and in a more targeted and collaborative manner.
56. A*STAR’s research have always been geared towards meeting the needs of industry and society. They always have been mission-oriented. However, with the gathering pace and complexity of technological advances, more and more innovations are now occurring at the interstices of disciplines. Companies must increasingly draw upon multi-disciplinary capabilities to develop new solutions, and they need to do that with greater speed.
57. A*STAR will therefore move towards more flexible, multi-disciplinary programmes. These programmes will be term-limited, so that A*STAR has the flexibility to start new programmes in line with evolving industry interests and needs, as well as phase out programmes which are no longer effective in meeting the needs of industry. This is an inherent flexibility that we want to build up in the institution so that we can be more responsive to the market. Equally importantly, these programmes will provide companies with a convenient modality to collaborate with multiple public research performers on complex, multi-disciplinary challenges.
58. One example of such innovation in the manufacturing sector is nanoimprinting. It basically taps on capabilities such as nanofabrication, simulation and modelling. This process enables the creation of textures and patterns at the nanometer-scale, that’s 10 to the power of minus 9. This imparts special properties to materials. Examples of such properties include anti-reflection, adhesive and water-repellant surfaces. These can be applied to materials such as plastics, glass and metals. Given the growing interest in this area, A*STAR has set up the Nanoimprint Foundry hosted at the Institute of Materials Research and Engineering (IMRE), which pulls together capabilities from IMRE, the Institute of High Performance Computing (IHPC), the Institute of Microelectronics (IME) and Data Storage Institute (DSI).
59. Ms Chia and Mr Perera asked about the economic impact of our public R&D activities and how this is monitored. We track a spectrum of performance indicators to ensure that our investments generate good outcomes for our economy.
60. Firstly, on industry R&D investment. In the RIE2015 tranche, A*STAR undertook close to 9,000 industry projects which catalysed more than S$1.6 billion in industry R&D investments in Singapore.
61. Secondly, on licensing. Over the past 10 years, A*STAR’s licensing activity has grown by close to 5 times from 221 licensing agreements under the Science & Technology 2010 Plan, to 1,030 licensing agreements in RIE2015. Around 70% of the licenses were signed with SMEs.
62. Thirdly, we track A*STAR’s Growing Enterprises Through Technology Upgrade (GET-Up) programme, which helps SMEs build technology capabilities, through the secondment of researchers and technology road-mapping. In RIE2015, a total of 202 SMEs benefited from the programme.
63. Finally, we track spin-offs. The number of A*STAR’s spin-offs has increased from 20 in the S&T2010 plan to 71 in RIE2015. Follow-on funding has also increased from $46 million in S&T2010 to $90 million in RIE2015.
64. Collectively, these outcomes suggest and indicate that we have been able to get good value out of our investments in R&D. But it is not something that we take for granted. This is why I have elaborated on the range of measures that we undertake. Importantly, these efforts have also anchored investments and good jobs in Singapore, as well as uplifted the capabilities of our local companies. Some of this is hard to quantify, but if you ask the EDB officers, and if you ask others in the industry, the qualitative engagement and traction with industry has been very strong.
65. Ms Chia also asked how we can ensure that IP generated from public sector R&D is managed well to reap economic and societal benefits. Fundamentally, we want our IP policy to ensure that we create and capture value for Singapore.
66. Recognising that companies have different commercialisation needs, public agencies adopt different approaches to engage industry, including exclusive and non-exclusive licensing, and the assignment of IP. Conditions may be imposed to ensure that companies are in fact committed to creating value from the IP.
67. We are also making publicly-funded IP more accessible to companies. In particular, we will create a National IP Protocol to provide companies and public agencies with a clear and consistent framework to access publicly-funded IP. With this, companies will have greater clarity over IP ownership practices, and standardised and simplified IP negotiations. More importantly, companies will be able to bring innovative products and services more quickly to market and reap positive value.
68. We will share more information on the National IP Protocol in the second quarter of this year.
69. Mr Liang and Mr Kwek had asked how we plan to implement the CFE recommendation on lead demand.
70. We want to leverage more lead demand to catalyse innovation and business opportunities for companies. The Government is investing in several areas where there are significant domestic needs and growth opportunities, such as healthcare, urban solutions, security and the Internet-of-Things. These are also areas of opportunity for our smaller innovative enterprises to build their capabilities and strengthen their track record. This is especially so as Government can be a valuable reference customer for SMEs seeking to capture more deals and venture overseas
71. To help SMEs participate in these opportunities, we will adopt a more targeted, systematic approach to using lead demand, through an enhancement of the Partnerships for Capability Transformation (PACT) programme, which we have already been doing. And this new programme will be called PACT through Government Lead Demand, or Gov-PACT.
72. Today, EDB and SPRING’s PACT programme facilitates collaboration between large organisations and local SMEs. We want to build on PACT’s success to foster greater collaboration between government agencies and SMEs.
73. Under the Gov-PACT programme, SPRING will work with agencies to put out calls for proposal where SMEs can co-innovate in identified strategic areas, with Government committing to procure the solution if the specifications are met.
74. Through this programme, SMEs will be given opportunities to develop, test-bed and validate new solutions. SPRING has budgeted $80 million to support SMEs under this programme. SMS Ann will be elaborating on this initiative further in her speech.
CLEAN ENERGY SECTOR OPPORTUNITIES
75. One sector that has benefitted from government lead demand is the clean energy sector. The SolarNova programme – that aggregates public sector demand for solar PV – has catalysed our solar PV industry.
76. Mr Yee Chia Hsing had asked about the future plans for the clean energy sector in Singapore. The clean energy industry here has grown from a very small base of about 10 companies in 2007, to around 100 companies last year. And, we are committed to developing it further through a number of initiatives. We will enhance Singapore’s position as a living lab and extend the use of lead demand, to help more Singapore-based companies build their track record and pursue regional opportunities.
77. We will maximise deployable space in our dense urban setting, by increasing the use of building integrated PV. We will also explore the application of a regulatory sandboxes to microgrids and floating PV. Finally, we will continue building capabilities in R&D, new renewable energy and energy management technology, and financing for the sector.
78. With these efforts, we expect sustainable growth in our clean energy sector, with more enterprise and job creation, and potentially 2,000 new PMET jobs in the sector by 2025. The sector will also help address Singapore’s energy security, competitiveness, and sustainability needs.
79. We have already seen the growth of home-grown enterprises like Singapore solar company Cleantech Solar, which has developed capabilities in roof-top solar system integration and remote monitoring from Singapore, and ventured into the region. This includes a roof-top solar project at Coca Cola’s recently established bottling facility in Cambodia. This is Coca Cola’s first flagship solar project in South East Asia and its system performance is being monitored and optimised in Singapore.
80. Let me now address Mr Daniel Goh’s question on setting renewable energy targets and Mr Yee Chia Hsing’s point on the costs of connecting solar facilities to the grid.
81. In 2014, we announced a plan to raise the adoption of solar power in our system to 350 MegaWattpeak by 2020. Since then, the installed solar capacity has risen from less than 20MWp to 126MWp today. It is noteworthy that this growth has been achieved without any subsidies. Rather, it has been aided by the cost of solar power coming down and module efficiencies improving with technological improvements. As a result, solar power has become competitive against the price of electricity from the grid, which we also do not subsidise. The global impetus to reduce carbon emissions is another contributory factor.
82. Looking beyond 2020, we plan to further raise the adoption of solar power in our system to 1 gigawatt peak (GWp). EMA has studied the matter carefully as renewable energy sources like solar are intermittent in nature, and therefore they can affect our system stability. Noting that the cost of intermittency must be balanced with the cost of carbon emissions, perhaps represented by a carbon tax, EMA has concluded that 1 gigawatt peak of solar can be accommodated in our system. This will support the achievement of our 2030 climate change pledge to reduce our emissions intensity by 36% from 2005 levels by 2030.
83. However, specifically in response to Mr Goh’s point, unlike some jurisdictions, we have not set binding targets for renewable energy. The reason is because often, such binding targets result in subsidies and other measures which, in the effort to get to that target, distort price signals and market behavior in the process. Instead, our policy is to ensure that energy, regardless of the source of generation, is priced right to fully reflect the cost of generation, and let the market work out the equilibrium. That is why we have avoided Feed-in-Tariffs that are common in other jurisdictions with binding renewable energy targets. Feed-in-Tariffs subsidise solar electricity by pricing it higher than electricity from the grid. Instead, what we have done is invested in the development of solar PV technology and I think the results show that this has served us well. In fact, industry players, many of whom are local enterprises, have given me similar feedback.
84. On Mr Yee’s point, I should clarify that grid charges are not levied on solar PV owners, or any other generation source, for that matter. The key point here is, in the electricity price that we pay, there is a grid charge component. That does not go to the company or the entity generating the electricity. That goes to the grid company, in our case, SP Power Grid. And that is to cover the cost of building and maintaining the national power grid. So, whether you are a conventional generator of electricity or a solar generator, you are basically getting the price that is net off the grid charge.
85. Mr Yee Chia Hsing also suggested tiering electricity tariffs, to penalise the heaviest electricity consumers with higher rates, and use that to subsidise the lower income households. As a practical matter, such an approach is quite problematic. For example, how would you determine the tiers for such differential pricing when the circumstances and needs of households can vary widely, even if they live in the same type of housing? So it becomes invariably an invidious exercise, so our approach is to price electricity right, fully from the first electron, and to provide targeted assistance though the tiered U-Save rebates. The outcome in some ways, from the equity point of view, is not unlike the intent that Mr Yee has in his suggestion.
INFRA FINANCING
86. Let me now turn to infrastructure. Mr Liang Eng Hwa and Mr Henry Kwek noted that as Asia urbanises, demand for urban solutions will also rise. This goes beyond energy infrastructure, but also includes others like water, waste management, telecommunications and transportation infrastructure.
87. Much of the demand in emerging Asia will be for small-scale projects, e.g. water and wastewater treatment plants, discrete small scale independent power plants, and renewable energy projects like solar farms and mini hydro power plants. Such projects typically range in value between SGD5m and SGD70m, which is of the right scale for our SMEs.
88. For example, Memiontec has been able to build deep capabilities in water asset developments in Singapore. The company has capabilities in Engineering, Procurement, and Construction Management, as well as operations and maintenance works for water reclamation and water treatment plants. In Singapore, they built a Wastewater treatment plant to clean water before it is discharged from our Semakau Landfill.
89. Last year, Memiontec successfully ventured into infrastructure development overseas and secured a deal to build, own and operate a water treatment plant that would convert water from Jakarta’s West Flood Canal into clean water for Jakarta’s residents. Memiontec is keen to scale up and secure more of such projects.
90. We want more of our companies, especially our SMEs, to be able to tap on these growing opportunities. However, their expansion is constrained by limited access to project financing for small projects. Typically, commercial lenders are less prepared to provide financing to SMEs unless they put up personal guarantees or recourse to the company’s assets. This makes it difficult for our SMEs to scale up.
91. That is why we have introduced the IFS Non-Recourse Financing Scheme, through which Government will co-share banks’ risks in providing non-recourse loans to SMEs for such projects. These non-recourse loans are secured only by the project’s assets and its cash flows, which will enable SMEs to take on more projects. IE Singapore will give details later.
92. At the other end of the spectrum, infrastructure developers who are working on large overseas projects face a different kind of challenge. One in particular is to secure loans for large projects undertaken on behalf of the sovereigns of developing countries. These can be for projects involving rail, ports, airports, conventional power plants, and desalination plants; and the typical value exceeds half a billion dollars.
93. Commercial lenders typically require insurance cover against sovereign risks of emerging markets. While foreign developers rely on their respective export credit agencies for such insurance coverage, Singapore-based developers do not have access to such facilities.
94. To help level the playing field for Singapore-based developers, the government will enhance the existing Internationalisation Finance Scheme (IFS) administered by IE Singapore, to provide insurance against default of payments by sovereigns in selected emerging markets.
95. This is an important and measured step in the Government’s efforts to help unlock private financing for Singapore-based infrastructure companies and help them secure projects which leverage their capabilities. IE will give more details.
CONCLUSION
96. I have outlined the work MTI and its agencies are doing in some sectors to illustrate our approach towards transforming industries and growing the economy, even as we enter a time of greater uncertainty. Our focus is on the development of deep skills for our people, and the building of enterprise capabilities for higher productivity, innovation, and internationalisation. These are priorities that we have been working on for many years, and will continue to do so in the context of the more dynamic environment that we are in today.
97. The ITMs will be a key mechanism for us to achieve this. We will adjust our strategies and programmes in response to changes in our environment, and adopt a proactive and forward-looking regulatory stance. We believe that collectively, these efforts will help ensure that our economy remains vibrant with thriving businesses and good opportunities for Singaporeans.