Speech by Mr S Iswaran, Second Minister for Trade and Industry, During the Committee of Supply Debate Under Head V

SPEECH BY MR S ISWARAN, SECOND MINISTER FOR TRADE & INDUSTRY, DURING THE COMMITTEE OF SUPPLY DEBATE UNDER HEAD V (MINISTRY OF TRADE & INDUSTRY) ON 11 MARCH 2013

1.        Let me thank Members for their comments and ideas.  Allow me to elaborate on my Ministry’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. ENERGY 2.        Let me start with energy, which is a critical resource for any economy.  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 reliable and competitively-priced energy for Singaporean households and businesses.   Diversifying our energy options 3.        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 per cent of the growth in global energy demand in the past five years.  That is quite significant.  That share is set to grow, with Southeast Asia’s energy demand expected to expand by 80 per cent over the next 25 years.  Strong economic growth has fuelled regional demand for energy, especially natural gas, which accounts for 80 per cent 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 second quarter 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.  That will boost terminal throughput capacity to 9 million tonnes per annum (Mtpa).   4.        We are also studying possible frameworks for the future import of LNG beyond the first tranche of 3Mtpa which we have awarded to BG. EMA 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.   Greater competition in power generation and retail market 5.        Mr Gan Thiam Poh asked for the rationale behind the privatisation of the generation companies (or gencos).  Privatisation has helped to increase competition among the five active gencos in Singapore. Privatisation and competition that ensues drives innovation, production efficiency, and ultimately maintains competitive pressure on energy prices to the benefit of consumers. This is not a theoretical construct, we have seen it in practice in Singapore.   6.        As a result, 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 tariff today would be at least 15 percent higher.  So there is a tangible benefit for all Singaporeans.   7.        As a result, 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 tariff today would be at least 15 percent higher.  So there is a tangible benefit for all Singaporeans.   8.        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 per cent of our 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.   Promoting greater competition in the electricity market 9.        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 all Members of this House that we will be lowering the contestability threshold in phases for Commercial and Industrial (C&I) consumers - from the current monthly consumption of 10MWh to 8MWh on 1 Apr 2014, and then to 4MWh on 1 Oct 2014.  In addition, consumers will be allowed to aggregate their electricity demand at different locations in Singapore in order to meet the prevailing consumption threshold.   10.     What does this mean in practical terms? When these measures are implemented in full, it will allow about 70,000 accounts to benefit from increased retail competition, up from the current 13,000 accounts.   11.     Let me put it another way.  Our Town Councils will be a key beneficiary – all Town Councils will be able to negotiate for retail packages at competitive market prices for their accounts.   12.     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 island wide, as well as single location companies like Habitat Coffee, who would benefit from the lowering of the contestability threshold to 4MWh.   13.     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 increases in the accounts that would have to be supported through these enhanced contestability measures.  Beyond these measures, we are looking at how we can further expand and open up the entire retail market to competition.  Several studies have been done. The question is how much technology should be involved. Some countries have proceeded with technology intensive solutions.  Others have taken a more rudimentary approach, such as through the aggregation of accounts.  We want to be sure that when we embark on this, we are able to do it in a systematic way and extend this to all 1.2 million households.  When we do so, we should also have a clear idea of the capacity required in our back-end systems.  We are working on it and should be able to share more in due course.  The study is taking time due to the technical nature and scale of the market.   Targeted assistance for needy households 14.     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 energy to reflect its true cost and not to subsidise energy consumption, which would be wasteful and unsustainable.  Instead, we provide targeted assistance, which Members are well aware of, to low- and middle-income households through the permanent GST Voucher – Utility-Save (U-Save) rebates 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.    15.     To illustrate the impact, what this means that, the total U-Save rebates of $520 for a 1-room household will, on average, cover fifteen months worth of electricity bills.  In other words, effectively, it is more than fully covered.  For a 2-room household, it would be the equivalent of 10 months; for a 3-room household, 6 months; for a 4-room household, 4 months.  These rebates are substantial and will go a long way in helping our households cope with increases in energy costs.  Of course, they can respond to price signals by modifying their electricity consumption behaviour as well.    Building capabilities and innovation for the future 16.     Looking ahead, a key thrust of our energy strategy is to build capabilities and encourage innovation in the evolving energy sector.    17.     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, the Energy Market Authority (EMA) is 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.   18.     The power sector will need around 2400 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 are opportunities and we are trying to encourage more young individuals to take this seriously and pursue careers in this rewarding sector.   19.     Separately, Mr Yee Jenn Jong asked about greater support for the adoption of renewable energy in Singapore. While we are supportive of efforts to promote renewable energy, 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.    20.     We do not subsidise the consumption of renewables.  Mr Yee has asked why we cannot consider feed-in tariffs.  In fact, the Germans are scaling back their feed-in tariffs.  The Germans have found that this is an inefficient way to get the clean industry moving towards solar power.  Instead, what has happened is that there has been a large scale importation of low-cost photovoltaic cells and panels from low cost manufacturers in China. We have to look at this in context.  Subsidising consumption will likely lead to wrong outcomes.  What we have chosen to do, however, is to work with the industry upstream to invest in research, development and demonstration (RD&D) projects.  This is materially different from what Mr Yee has highlighted.  When we invest upstream, we are talking about working on measures to enhance economic feasibility and viability through technological advancement, which will then make technology adoption a natural consequence from an economic point of view.  This is opposed to subsidising consumption, which masks the true costs and leads to suboptimal outcomes.    21.     We are investing in research, development and demonstration (RD&D) projects to build capabilities and 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.   22.     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.   23.     Mr Yee and others have asked about examples. One example of a local company moving in this direction is Zeco Systems, which is involved in projects like solar powered “park and charge” stations and Electrical Vehicle infrastructure.  This is an important part of developing a new idea to support clean energy application. Another example is Daily Life Renewable Energy Pte Ltd, which works with EMA on the Pulau Ubin micro-grid.  This is a test-bed for renewable energy in the context of small micro-grid infrastructure.    RESEARCH & DEVELOPMENT 24.     These efforts in renewable energy underscore the importance of R&D as an important enabler in our economic transformation.    R&D is a crucial transformation enabler for our SMEs 25.     R&D has benefited our 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 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 effectively in R&D. Ms Jessica Tan has asked this question. Business expenditure on R&D by SMEs has grown at a CAGR (compound annual growth rate) of 3 per cent between 2001 and 2011, to reach $551 million in 2011.   26.     Our SMEs also benefit from R&D tie-ups with multi-national corporations (MNCs) through intra-industry collaborations, such as the A*STAR Aerospace Programme, and the Industry Consortium in Industrial Coating and Packaging (ICAP). So this is an ecosystem 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.   27.     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). The 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 analytic solutions to their suite of capabilities that they offer.   28.     Further, we are committed to enhancing the transfer of technologies to SMEs and providing support for commercialisation. About 70 per cent of A*STAR’s licensing deals are executed with SMEs. We have seen an increase in the successful commercialisation of R&D efforts. Today, ETPL (Exploit Technologies Pte Ltd), 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 licencees.  It has also spun off more than 40 start-up companies.   29.     To help our SMEs enhance their competitive edge, A*STAR provides technical advice, technology roadmapping 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 you an example, PJI Contract, a local company that specialises in industrial flooring, waterproofing and surface protection. Through GET-Up, PJI Contract was matched to a nano titanium dioxide technology from A*STAR, which it licensed and developed into new products, such as the Delta Nano Hygiene spray. Over 10 per cent of its sales revenue in 2012 can be attributed to the GET-Up programme in this specific initiative.   30.     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 who can best meet their productivity needs. In the picture there, on the left, at the top is Mr Seow Yit Yuee. He 57 years old and he is an example of the kind of intermediaries we are talking about. He has worked in EDB for 9 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 3 years, he engaged over 250 companies to address their technology needs and this resulted in more than 180 collaborative projects.   31.     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 technology 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.   32.     We will pilot this programme in six sectors. It is a question of which sectors and how do we apply them. And specifically they are 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 FY2011, over 500 SMEs claimed PIC for R&D that they have undertaken, up from about 430 in FY2010. And 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 have embarked on this TAP effort.  So 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 catalyses new growth areas and creates good jobs for Singaporeans 33.     R&D also catalyses new growth areas.  For example, Singapore is seeing more personal care companies, such as Procter & Gamble (P&G), L’Oréal and AmorePacific, collaborating with A*STAR to conduct R&D in Singapore.  With their focus on customised solutions for Asian consumers, they also help to strengthen Singapore’s positioning in the regional personal care industry.   34.     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 DPM 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.    35.     And 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 5 years.  In terms of Gross Expenditure on R&D (GERD), in 2011, we have reached a high of $7.4 billion, or 2.3% of our GDP. And importantly, and 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 catalyse and elicit a commensurate and appropriate response from the business community for this R&D initiative.  Our total R&D manpower, including researchers, postgraduate students, technicians and support staff, grew by 4 per cent from 43,000 in 2010 to nearly 45,000 in 2011.   36.     A*STAR will support such growth by continuing its strategy of developing local research talent, for example through its A*STAR Science Award (Polytechnic).  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.   TOURISM 37.     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.   2012 tourism sector performance 38.     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 as a vibrant and attractive tourist destination.  14.4 million tourists visited us in 2012, accounting for  a record level of tourism receipts of S$23 billion.  Over a five-year period since 2008, tourism receipts have grown at a compounded annual rate of 10.4 percent, and visitor arrivals at 9.2 per cent.   Focusing on quality, yield-driven growth 39.     STB forecasts 2013 tourism receipts to be in the range of S$23.5 to $24.5 billion (an increase of about 2.2 to 6.5 per cent from 2012), and visitor arrivals of about 14.8 to 15.5 million (an increase of about 2.8 to 7.6 per cent from 2012).   40.     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.    41.     This transformation and change is timely.  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.    42.     Internally, we have the essential building blocks in place to continue maintaining our edge as a premier tourist destination.  Taking our workforce for example, Mr Seah Kian Peng would be pleased to note that STB, 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 resource management, and rise through the ranks to assume greater responsibilities that realise their potential.     43.     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 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.  So as we push for quality, yield-driven growth, we can expect more of such opportunities for our SMEs to partner world-class players, and eventually come into their own.   Quality growth opportunities through “software” innovation 44.     What we need now 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 that we can derive from our current infrastructure.   45.     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 Jan 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 industry’s efforts to introduce other large-scale innovations.   46.     STB is also committed to fostering innovation and test-bedding new ideas which may be smaller in scale.  STB will therefore be establishing a new Kickstart Fund with an initial funding of S$5 million to support (start-up) lifestyle concepts with strong tourism potential and scalability, including 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.  They can add to the software that will enhance our cityscape.  STB will announce the details and call for applications soon.   Quality growth opportunities through enhanced capabilities and productivity 47.     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.   48.     One example is our 2000-strong tourist guiding industry.  Today, the industry comprises mostly Singaporean guides from a diversity of backgrounds and 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.  Geraldene offers tourists a mix of historical tidbits, infused with her own personal memories.  That is the kind of tour guides that Ms Faizah 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 experiences.   49.     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 the Board any skill gaps that need redress.   50.     Ms Faizah Jamal has highlighted a specific example of guides at NLB and NHB.  Today, the tourist guides that are licensed provide general guiding services to tourists.  If there are specific niche areas that are run by Statutory Boards, these Statutory Boards could work with STB to develop services in these niche areas.  STB’s primary interest is to ensure that guides are well trained and maintain high quality services, because they also receive compensation.  If there are niche areas involved, these are specific inter-Statutory-Board conversations that will need to take place.   51.     We will study further Ms Faizah’s specific suggestion of licensing and accreditation of niche tours according to tourist guides’ residency area or focal points.  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. There is also a lot of excitement and interest in the voluntary aspect. We need to preserve that enthusiasm and vigour in this space.   52.     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.   53.     Hotels are evolving their business and operating models, using technology and new management methods.  For example, The 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 Food and Beverage services.  Louis has benefited from his expanded roles and skills.  The hotel has also benefited from the productivity gains.    54.     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   CONCLUSION 55.     Mdm Chairman, if I may conclude, I have highlighted the Ministry of Trade and Industry’s efforts in three key areas – ensuring secure and competitively priced energy; leveraging on R&D to promote innovation and productivity, especially among our SMEs; and seeking higher yields 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.   Thank you.