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 AND INDUSTRY, DURING THE COMMITTEE OF SUPPLY DEBATE UNDER HEAD V (MINISTRY OF TRADE AND INDUSTRY) ON FRIDAY, 2 MARCH 2012

“RESTRUCTURING: WE WILL DO THIS TOGETHER”

(A) INTRODUCTION

1. Mr Chairman, I thank Members for their questions and suggestions.  Allow me to elaborate on how our plans in the areas of R&D, tourism and energy will help us restructure for growth. 

RESEARCH & DEVELOPMENT 

(B) R&D to Restructure the Economy for Growth

2. Mr Liang Eng Hwa and Dr Chia Shi-Lu have asked how R&D has benefited the economy, businesses and Singaporeans.  We started investing heavily in R&D in 1991 as an integral part of our long-term strategy to restructure Singapore’s economy for growth.  For example, R&D in biomedical sciences has catalysed a new biologics cluster and played a critical role in attracting investments that will create 1,500 new jobs.  Biomedical manufacturing output quadrupled, from $6 billion to $22 billion over a period of about 10 years, from 2001 to 2010, and it accounts for about a fifth of our manufacturing value added. 

3. R&D in Electronics helped introduce successive waves of innovation that transformed this sector from assembly activities to components, and later to advanced manufacturing equipment.  This contributed to a more than five-fold increase in Value-Added per Worker in 20 years, as the chart shows.  Recently, leading semiconductor equipment supplier Applied Materials set up a Centre of Excellence with A*STAR’s Institute of Microelectronics to develop advanced wafer packaging to develop smaller, faster and more energy-efficient chips.

4. Such R&D collaborations also provide good job opportunities for Singaporeans such as Ms Shalina Sudheeran, a Singaporean who was able to relocate home from Applied Materials’ R&D facility in California.

(C) Nurturing Singaporean R&D Talent

5. She joins our thriving community of 28,000 Research Scientists and Engineers (RSEs) who have good jobs in our R&D ecosystem, something that Dr Chia referred to. Currently, a quarter of these RSEs are foreign professionals.  To build a strong core of Singaporean RSEs, we launched the A*STAR Scholarship scheme ten years ago to identify and nurture young Singaporean scientists.  To date more than a quarter of the 1000 PhD scholarship recipients have already returned home to contribute.  One of them is Dr Jonathan Loh, a Singapore Polytechnic graduate who now heads a lab at the Institute of Medical Biology.  Another is Dr Farhana Binte Mohammed Anuar who graduated from NUS is now a Postdoctoral Fellow at the Institute of Cellular and Molecular Biology.  Dr Lim Yiping, who served at the Bioprocessing Technology Institute, is now an Engineer at global biopharmaceutical manufacturer Lonza.

6. Whilst we have this nurturing of our local Singaporean talent, we must recognise the importance of international talent who add to the diversity and richness of Singapore’s R&D ecosystem.  This is a key characteristic of innovation hotspots all over the world.  Our openness to top international talent is a distinctive advantage and it allows us to compete on the global stage, and secure growth opportunities for locals. So we must pursue this path with balance and a consideration of the overall competitiveness of Singapore in this space.

(D) Helping SMEs upgrade and grow

7. Mr Liang and Dr Chia have raised questions on how we have helped the SMEs through R&D. Our key objective is to transfer technology to SMEs, to enhance their technological capabilities, competitiveness and productivity.  A*STAR and polytechnic research centres have numerous ongoing projects with SMEs, and have worked on over 700 projects so far in FY2011.

8. For example, A*STAR helped Dynaglass Pte Ltd to develop, for petrochemical storage tanks, a fibreglass floating roof that is corrosion-proof and maintenance free.  It enabled the company to secure more customers world-wide, and contributed to over a quarter of its total profits. This is just one example and we can enumerate many more. 

9. To help our research centres and SMEs proactively identify opportunities for collaboration, we have set aside $1 billion under the RIE 2015 plan. These resources will help take more ideas from basic research to commercialisation.

10. First, we will enhance our enterprise ecosystem in nascent sectors.  For example, SPRING has embarked on a new Biomedical Sciences Accelerator Programme to invest in start-ups and facilitate access to knowledge capital, markets and networks.  We are also expanding A*STAR’s GET-Up Scheme, the Growing Enterprises with Technology Upgrade scheme, to help Biomedical Sciences SMEs develop new products and services.

11. Second, we will devote more efforts to bridge the gap to market.  The new IP Intermediary, or Intellectual Property Intermediary Singapore, will proactively reach out to SMEs to assess and source for IP to meet their technology and business needs.

12. Lastly, we will develop platform technologies for key policy outcomes such as productivity.  One model is A*STAR’s Manufacturing Productivity Technology Centre (MPTC), which helped companies like Tru-Marine and Maha Chemicals to improve productivity and reduce costs. These are some examples of how we have gone about developing our R&D ecosystem and harnessing it to facilitate economic growth to our companies.

13. I am confident that we can spawn more of such partnerships between SMEs and research centres that will pave the way for greater productivity and long-term growth.

TOURISM

(E) Tourism Sector Transformation

14. Let me now turn to Tourism - a sector which has grown well and has further potential.

15. Mr Yee Jenn Jong asked how we spent the $2 billion in the Tourism Development Fund (TDF).  The fund was launched in 2005 with a five-year funding commitment period.  And the reason you have a five-year commitment period is because many of these projects have a gestation period – you invest early so as to let the infrastructure kick in, then contribute to your tourism spend. The long-term target is $30 billion of Tourism Receipts and visitor arrivals of 17 million by 2015. The fund has supported many major projects, including the Formula One Race, Gardens by the Bay, as well as the International Cruise Terminal and River Safari which are scheduled to open later this year, in latitude.  It has also brought in numerous events and helped our tourism companies build capabilities.  These, together with private sector investments such as the Integrated Resorts, have transformed our tourism sector and kept us on track to achieving our long term targets. In 2011, Singapore had 13.2 million international visitors and Tourism Receipts of $22.2 billion.  This is a 13% increase in visitor arrivals and 17% increase in the tourism receipts.  To respond to Mr Yee, Tourism Receipts include spend on accommodation, spend on shopping, spend on entertainment, so it’s a collection and not segmented into particular parts alone. And indeed, STB’s strategies cannot segment the spending activity of tourists in Singapore to the degree you have asked.

16. This growth in tourism has also created more and diverse job opportunities for Singaporeans.  Let me give you a couple of examples,  Catherine Ho is  a former Warrant Officer with 26 years of service in the SAF. Now, she’s a theme park manager in charge of park operations in Universal Studios Singapore.  She is now helping to set up operations at the upcoming Marine Life Park.  Another example is  Gwern Khoo.  A chef in the Celebrity Chef Restaurant Waku Ghin at Marina Bay Sands, who has been identified by Chef Tetsuya as a promising local talent with plans to send him to Sydney for further training.  He has come a long way from his days at SHATEC and with helping out in his father’s duck rice stall. And these are some examples of how the growth in our sector has created interesting and diverse opportunities for Singaporeans. 

17. The Formula One Race has also been good for our tourism sector.  Besides generating economic benefits and creating a good platform for business networking, F1 has helped to brand Singapore as a global city with a vibrant lifestyle and this has other collateral benefits for us as an economy and as a country.  In response to Mr Liang’s question, I would say that on the whole, the benefits of F1, both tangible and intangible, have outweighed the costs.  If there are certain disruptions like the road closures, and between the Government agencies and the race promoter, there has been significant effort to reduce that by more than half to about 6 days now, compared to where we were at the start, but we need to continue to work on this. Overall, the benefits have been significant and they outweigh the costs and any decision on an extension will have to be premised on the value that we can continue to derive from this event.  The Government will make this decision only after carefully weighing all pertinent factors. 

(F) $905 million for Next Stage of Growth

18. We must build on the significant tourism inroads that we have already made by seeding the sector’s next stage of growth.  We must especially focus on quality or yield-driven growth by attracting tourists to visit more often, to stay longer and to spend more.  That means enhancing the tourism experience through creativity and innovation, higher capabilities and productivity, and superior service standards.  For this, we are injecting $905 million over five years as the second tranche of the Tourism Development Fund.

19. Mr Yee and Mr Liang have asked what strategies this second tranche of funding will support.  First, we will invest $300 million to build on Singapore’s positioning as an international Lifestyle and Business events hub through the Tourism Events Development Scheme (TEDS). It will seed and anchor best-in-class events, whilst bringing in international conferences and exhibitions, as well as leisure and lifestyle events.

20. Second, we will co-create new tourism products with industry, and rejuvenate existing products, through the Tourism Product Development Scheme (TPDS).  A sum of $340 million will be set aside to drive new concepts and ideas for tourism products. 

21. Third, we will invest $265 million to enhance capabilities in our tourism-related enterprises as a key part of our drive for higher tourism yield.  Mr Dhinakaran raised the issues of manpower and the challenges faced by some of the companies in the sector. Substantively, the points on DRCs and levies have been dealt with in the Finance Minister in the Budget debate, and also earlier in the COS discussion.  I will complement that by speaking specifically what we are doing in one or two areas.  STB drives a productivity roadmap for the sector, and what it seeks to do is increase the attractiveness of jobs through redesign and reengineering of business processes. This will attract more Singaporeans to come and work in this space.  We are open to more ideas from the industry on how else we can increase local labour force participation rate. We are expanding the types of tourism-related training we support under the Tourism Capability Development Scheme (TCDS) to include specialised skills that can further increase productivity and enhance service delivery.  So to address Mr Dhinakaran’s concern about the lack of right talent, this scheme will also support local leadership and talent development in order to continue to build the pool of Singaporeans who can actively contribute in this space.

22. We expect this range of initiatives and investments to sustain our yield-driven strategy for tourism as we work together with the companies in this space. 

ENERGY

(G) Securing Our Energy Supply

23. Sir, let me now turn to energy. As we restructure our economy for sustained growth, we must also pay heed to the potential sources of external shock and cost pressures.  One such area is energy, a point that many members have made.

24. Singapore relies heavily on imported energy.  This exposes us to supply risks and price volatility. This is a reality, not just for us but many countries around the world.  Furthermore, we lack the geographic and climatic conditions for large-scale adoption of alternative energy. In other words, whilst we can try to promote alternative energy sources in Singapore, it cannot be, at least at this stage given the state of technology, the source of our baseload energy requirements. Therefore, as Mr Liang, Dr Chia and Mr Low Thia Khiang have highlighted, we need to strengthen our energy security to ensure that we have reliable and competitively priced energy supply.  Hence, we are exploring new energy options from diverse sources and fuel types.

25. One example, we are building a liquefied natural gas (LNG) terminal,. It will commence operations in the second quarter of 2013.  This terminal will give us access to the global gas market, in other words going beyond the region to tap on opportunities around the world and the advantage of that is significant, especially with the current environment of where the world is discovering new vast quantities of gas from unconventional sources, such as shale gas.

26. In the medium term, electricity imports could also allow us to tap on energy options currently unavailable in Singapore.  We are studying how it can be implemented without compromising the stability and the security of our system. And at the same time, we also want to see how some of the benefits of doing so can be passed on to our consumers, whether it’s households or businesses alike.  This will take some time to understand the possibilities, and scope out what industry is able to do. This effort, if it bears fruit, can also be part of a regional or wider effort to develop an ASEAN Power Grid in the longer-term. But that will take longer as it requires effort and countries from different jurisdictions agreeing to interconnect their grids and I think we will need more time for that. Singapore can look at options for our own needs, which is what we’re doing through this electricity import initiative. .

27. Our nuclear energy pre-feasibility study is ongoing. And I want to stress, that even with its completion, we will still be a long way from making a decision on nuclear energy.  Our objective is to gain a better understanding of technological developments in this space because there are significant movements, and understand better the issues such as the safety, security, and economics of nuclear energy especially in the context of a country like Singapore, given our constraints.

(H) Keeping Energy Affordable

28. Ms Jessica Tan, Dr Chia and Mr Low have asked about managing rising energy prices.  As we import almost all our energy, we are a price taker and are exposed to global trends.

29. One strategy we have adopted, is to continue to promote competition in our energy market.  Over the next few years, our net generation capacity will increase by more than 2,000 MW or about 20% of our installed capacity.  All the increase will come from the more efficient Combined Cycle Gas Turbines (CCGTs).  We will have more supply, that will be more efficient, and that should exert downward pressure on electricity prices.

30. But, we must also look at demand side measures as we can also manage energy costs better by using energy efficiently. In fact, many describe energy efficiency as another source of energy. Therefore, we will introduce fresh initiatives and funding to help households and businesses in this area.

31. First, we will allocate about $100 million for the Economic Development Board to extend the Grant for Energy Efficient Technologies (GREET), and to work with private players to pilot repayable financing schemes. These initiatives will help more businesses overcome market barriers to energy efficiency, such as high upfront costs of putting in some of the energy efficiency measures.

32. Second, we will roll out the Intelligent Energy System trials to selected households in Punggol and selected businesses. This pertains to the point raised by Mr Low on full retail contestability. To have full retail contestability first, consumers must be able to get meaningful information, which is what we can do through devices such as smart meters, in-home display units, and related applications.  With such applications, consumers can monitor electricity consumption in real-time to optimise usage and save costs. That’s not enough in and of itself. Beyond that, we also need the backward integration of payment systems which is a separate exercise altogether. This is work in progress. We will be at the cutting edge of this, as very few countries in the world have gone this far. There are some efforts in some parts of the world, but we are all learning through implementation. 

33. Still, rising energy prices may pose difficulties for some households, a point that Mr Low Thia Kiang had highlighted and I believe all members of this house will well appreciate.  As a policy, we have not subsidised energy consumption, as this would lead to inefficient use of a scarce resource.  Rather, we have chosen to provide targeted assistance to those in need through permanent Utility-Save rebates.  On average, rebates for 3- and 4-room HDB households will offset around two to three months of electricity bills. This is an important form of assistance, as up to a quarter of their electricity bill a year can be met by U-Save rebates. Households must also take charge by looking at more energy efficient ways of doing things in the home and this is where the efforts through MEWR to educate our consumers on how to buy energy efficient devices is an important step we will continue to follow through. 

(I) Developing Qualified Manpower

34. One impetus in the power sector is to ensure the continued availability of skilled technical personnel.  Our power sector must be supported by experienced professionals like Deputy Manager Mr Jamal Bin Jamali who joined Tuas Power 15 years ago.  Our challenge is that 15 years’ from now, many veterans like Mr Jamal will retire, reducing the power sector technical workforce by about 40%.  Scholarships have helped to attract and retain fresh talent like Ms Chu Xiao En, a Singaporean overseas graduate who is now working in Singapore Power.  However, we need to do more.

35. To this end, the Energy Market Authority has formed an industry-led Power Sector Manpower Taskforce.  It will recommend strategies to attract, retain, and develop manpower, and identify the skills required for the longer term.

(J) CONCLUSION 

36. Mr Chairman, in conclusion, we need to build on our strong foundation by restructuring our economy for the next phase of growth.  Whether it is by harnessing R&D to help our SMEs, boosting tourism, or paying close attention to the energy aspects of our economy and managing that challenge. If we do this right, then we will be able to continue to seize economic opportunities for Singapore and create good jobs for Singaporeans.

Thank you.