Speech by SMS Lee Yi Shyan, Senior Minister of State for Trade and Industry, During the Committee of Supply Debate Under Head V

 "Transforming to a highly productive economy”

INTRODUCTION

1.              Mr Chairman, we started our restructuring journey in early 2010, and our productivity level today is 13 per cent higher. We must continue to press on with our efforts, so as to transform our economy and create better jobs for Singaporeans.

PRODUCTIVITY IS MIXED ACROSS DIFFERENT SECTORS

2.              Mr Heng Chee How and Ms Tin Pei Ling asked for an update on our productivity drive. From 2009 to 2014, productivity growth was 2.5 per cent per year. This lies within the 2 to 3 per cent target set by the Economic Strategies Committee (ESC).

3.              Our export-oriented sectors have performed better, with annual productivity growth of more than 5 per cent. Such sectors, for example, Manufacturing, Finance & Insurance and Wholesale Trade, are characterised by businesses which compete internationally. For them, being productive is essential to compete on a global scale. In contrast, productivity in domestic-oriented sectors such as Construction, Retail and Food Services has grown by less than 1 per cent.

4.              However, there are bright spots in the domestic-oriented sector. Take, for example, the Cleaning Sector. Under the Clean Mark Accreditation Scheme, some 120 accredited cleaning companies are required to appoint productivity managers to carry out continuous productivity improvement. As a result, cleaning companies are increasingly reviewing their work processes and automating their cleaning works. These companies have achieved an average of 46 per cent improvement in process efficiency.

5.              Mr Liang Eng Hwa and Mr Heng Chee How asked about the progress of the National Productivity Council (NPC). Since we embarked on our productivity journey in 2010, a total of $650 million has been committed to companies through the measures under the NPC. About 24,000 companies have benefitted.

6.              I will now share the NPC’s approach in lifting productivity.

7.              At the broad economy level, we continue to build a conducive environment to support restructuring. This facilities innovation and internationalisation, which our companies need to carry out to transform. We also review regulations to ensure they do not impede productive practices.

8.              In specific sectors, the NPC’s 16 industry roadmaps incorporate international best practices. We continue to keep abreast of international trends and emerging technologies that can help raise productivity, and adapt them to the local context where relevant.

9.           Tripartite collaboration fosters collective responsibility, and is an important feature of industrial development and skills upgrading in countries such as Germany. The NPC has therefore been structured as a tripartite council, and our agencies continue to work with various partners to raise productivity.

10.           Mr Zaqy Mohamad asked about the use of sector-specific productivity indicators to help companies gauge their performance. We collect such indicators to monitor sectoral performance, which complement the usual measure of value added per worker. For example, in the Construction sector, we track site productivity, or the amount of floor area constructed per man day. This data is published on the Building and Construction Authority’s (BCA) website and available for the industry to benchmark against.

11.           Assoc Prof Randolph Tan further asked if we could refine our assistance to companies through various schemes based on their productivity outcomes. As Prof Tan has said, productivity is influenced by a combination of factors and companies should be given time to transform. We agree that it would be best to assess the outcomes of their efforts over a longer period.

12.           Our Centres of Innovation (COIs) and productivity centres work closely with companies to identify their challenges and suggest follow-up actions to take. For example, the Singapore Productivity Centre (SPC) engaged local retailers and food services companies in a benchmarking exercise in 2014. Mr Zaqy Mohamad will be pleased to know that participating companies received individual report cards showing their performance relative to the industry average and the top 20 per cent of companies in their sector. Companies can then use these data to analyse their performance and, with partners like SPC, implement improvement efforts.

GROWING TOPLINE THROUGH INNOVATION AND INTERNATIONALISATION

13.           Mr Liang Eng Hwa and Mr Zaqy Mohamad asked what our strategy in raising productivity is over the next few years. Simply put, there are two ways of raising productivity – growing the top line through revenue expansion and market development, or improving efficiency by reducing wastage and optimising processes.

14.           To help companies raise their top-line, we will continue to assist our companies in finding new revenue streams.

15.           One way to do so is by innovating and raising the value per unit of sales. Innovation creates value, and sustainable value creation is key. We provide incentive support companies at different stages of growth to innovate.

16.           SPRING’s Innovation and Capability Voucher (ICV) offers support for companies looking for basic solutions. Since 2012, SPRING has awarded around $80 million to SMEs through 16,000 ICVs, to engage consultancy services as well as implement productivity solutions.

17.           For companies keen on more advanced innovation projects, SPRING provides Capability Development Grant (CDG). In 2014, SPRING supported more than 1,200 projects and provided over $100 million of funding support. MOS Teo will elaborate on how companies can and have used the CDG.

18.           Dr Chia Shi-Lu and Ms Jessica Tan asked how MTI could help businesses capture opportunities in overseas markets.

19.           Allow me to give a brief update on our external economy. We have done relatively well. From 2004 to 2013, our merchandise export growth was 8.4 per cent per annum, slightly above the global growth rate of 8.2 per cent. Export of our services expanded at a compound rate of 11 per cent, as compared to the global growth rate of 8.3 per cent. In terms of our Direct Investment Abroad (DIA), we have surged ahead with a CAGR of 12 per cent, much faster than the global growth of 4.9 per cent.

20.           We have assisted our companies in expanding overseas. In 2014, IE Singapore helped 28,000 companies in venturing abroad, compared to 26,000 in 2013. Of these, 4,000 took up the Global Company Partnership grant (GCP), while 24,000 took up the Market Readiness Assistance scheme (MRA). 80 per cent of these companies were SMEs.

21.           We have targeted assistance for our companies in different markets and sectors. In China and Indonesia, we have observed a rising middle income group and growing consumerism. IE has thus collaborated with our businesses to drive market access for the consumer sectors. For instance, IE Singapore established “Singapore Food Aisles” in supermarkets in Indonesia, so as to feature Singapore brands and products more prominently. IE has also collaborated with the Singapore Food Manufacturer’s Association (SFMA) to create a Singapore Food Product Centre in China to help our food companies navigate import regulations and source for good distributors.

22.           Our efforts so far in helping our companies internationalise have seen good results. In 2014, a survey showed that about 50 per cent of our SMEs have overseas revenue. We are also observing an upward trend of SMEs investing overseas. Singapore SMEs’ stock of direct investments abroad has increased from $29 billion in 2004 to $52 billion in 2013. The top markets for our SMEs continue to be China and Southeast Asia – in particular Malaysia and Indonesia. Beyond these markets, 12% of our SMEs reported engagements in the Middle East and 5% in Africa.

23.           Take, for example, 5footway, which owns a chain of boutique hostels in Singapore. With IE Singapore’s assistance, 5footway has expanded its footprint to Macau with a 25-room hostel, and a boutique hotel in Hong Kong. Following the successes in Hong Kong and Macau, 5footway continues to seek further expansion, and is set to launch two to three more boutique hotels in Hong Kong and Macau next year, while setting its sights on the mainland China market.

24.           Mr Yee Jenn Jong will be pleased to note that as part of the Economic Strategies Committee (ESC) plans, the Government aims to grow a larger base of globally competitive Singapore companies, create a vibrant corporate ecosystem in Singapore, and grow the external wing of our economy. As of 2013, a total of 626 local companies have crossed $100 million in revenue. This is up from 530 in 2007 and 280 in 1998.

25.           Going forward, we will introduce the new International Growth Scheme (IGS). Under the IGS, qualifying Singapore companies will be given a concessionary tax rate of 10 per cent on their incremental income, for a period not exceeding 5 years. Such companies will be expected to anchor their headquarters and key business functions in Singapore, while engaging in internationalisation activities and providing opportunities for Singaporeans to gain international exposure. This includes creating good overseas jobs for Singaporeans, and helping their smaller SME partners expand overseas.

26.           Next, we will also enhance the Internationalisation Finance Scheme (IFS). The IFS has helped Singapore-based companies secure mid- to long-tenure capital facilities with Participating Financial Institutions (PFIs) for overseas assets and acquisitions. Under the IFS, the Government takes on up to 70 per cent of the risk-share for approved loans. The maximum loan quantum for the IFS was doubled in last year’s Budget, from $15 million to $30 million.

27.           AC Global Energy, a local renewable energy project developer, took up the IFS when it made its first investment into the United States. Other than regulatory, tax and manpower assistance, IE Singapore supported about S$20 million of financing for AC Global’s machineries through the IFS, for use at its new biomass energy production facility based in Tennessee. This is AC Global’s first foray into renewable energy and its first biofuel plant in the US, and it plans to expand its business by developing more biomass-to-gasoline facilities.

28.           This year, we will also extend the coverage of the IFS to include the financing of mergers & acquisitions (M&A). This will encourage M&A as a complementary growth strategy to help companies expand quicker overseas. We expect this to catalyse up to $100 million worth of incremental loans over the next year for companies pursuing internationalisation via M&A.

29.           Beyond nurturing globally competitive companies, we also encourage SMEs to internationalise. IE Singapore will extend two existing schemes that help companies expand overseas.

30.           First, it is the Market Readiness Assistance scheme (MRA), which provides companies new to internationalisation with financial and advisory support in their overseas set-ups, business partner identification and market promotion. Second, it is the Global Company Partnership grant (GCP), which provides comprehensive and customised assistance for Singapore companies looking to expand their global presence, covering many areas such as capacity building, market access, manpower development and access to financing.

31.           In FY2012, the support level of four activities under the MRA and GCP – namely Design, Branding, Intellectual Property and M&A – were set at up to 70 per cent of qualifying costs. This year, we will extend this to all activities covered under the MRA and GCP schemes. This will be provided for three more years, until March 2018.

32.           Crayon Data is a local company that has tapped on both MRA and GCP schemes. Crayon Data is a big data analytics firm founded in 2012. Today, the company has made its way into India, the UK, the UAE and the US. In making its plans to enter its key market of the United States, Crayon Data took up financial assistance from the GCP to engage in-market consultation services, so as to identify project leads and tailor their market entry strategy. With this assistance, Crayon Data secured two Proof-of-Concept deals within a month of beginning its engagements in the US. The company also used the GCP to engage a Human Resource consultancy to implement a HR culture that would help it attract and retain top talent. It is now tapping on IE Singapore’s MRA scheme to set up its legal entity in the US.

33.           Singaporeans will benefit from this, as Mr Liang Eng Hwa, Ms Jessica Tan and Mr Vikram Nair have noted. Good jobs are created as companies expand overseas. Companies would need good people to take on a range of regional jobs, such as in marketing, operations and financial control. Internationalisation helps create regional and global career pathways for Singaporeans.

34.           We will also enhance the scope of the Double Tax Deduction for Internationalisation scheme (DTDi) to include manpower expenses as qualifying expenditure. Businesses will be able to claim 200% tax deduction on expenses incurred in posting Singaporean personnel to overseas entities for up to 3 years of overseas operations, and up to $1 million per approved entity per year. This is a fairly generous provision. This enhancement provides greater support in initial years of business overseas expansion.

IMPROVING EFFICIENCY THROUGH PROCESS IMPROVEMENT AND PEOPLE DEVELOPMENT

35.           Beyond growing topline, it is also important for our companies to invest in improving efficiency. Our strategy continues to be to facilitate a conducive environment through broad-based schemes such as the Productivity and Innovation Credit (PIC) and the Innovation and Capability Voucher (ICV). Further assistance is also available at various Centres of Innovation (COIs) and productivity centres, where consultation and expert advice are available.

36.           We are also working hard to link up research organisations with SMEs. We want to encourage more adoption and commercialisation of our R&D findings.

37.           For example, A*STAR’s Technology Adoption Programme (TAP) has developed 16 plug-and-play technology solutions (also known as ready-to-go packages) which can be applied across different industry sectors. To-date about 50 companies have adopted sensors and analytics, or what is popularly known as the Internet of Things (IoT), in sectors such as Construction, Retail, Healthcare, and Admin & Support Services.

38.           Consider Soundeye, a non-invasive fall detection system developed by A*STAR to pick up signs of distress when someone has fallen down. It is also capable of detecting when someone has been inactive for an extended period of time, which indicates a potential loss of consciousness. This system has been deployed in nursing homes such as Ling Kwang Nursing Home.

39.           Gas and motion sensors have also been deployed in the restrooms of several places in Singapore such as the East Coast Park. These sensors collect a range of data, including the number of users and air quality. Information is then analysed and transmitted to cleaners to inform them when the restroom needs to be cleaned. This allows cleaning companies to deploy their workers more efficiently.

40.           Ultimately, raising productivity is about people. Ms Foo Mee Har is right in mentioning that employee engagement is important for raising productivity. We need to foster a positive workplace culture, where workers are engaged and empowered to put in their very best.

41.           This requires high quality leadership and management within our companies, and MOS Teo will be speaking more about this later.

PREPARING SINGAPOREANS FOR GOOD JOBS OF THE FUTURE

42.           Mr Chairman, may I now speak in Mandarin.

43.           随着经济的发展和转型，许多行业的工作性质也会有所改变。我们必须确保新加坡人掌握未来的职场技能,有正确的心态，才能在新时代的经济环境中如鱼得水，发挥所长。因此，我们必需调整现有的劳动力发展模式，侧重深化个人的手艺和技能。所谓熟能生巧，巧夺天工。若人人都有非一般的技能，人们必能对自己从事的行业感到自豪。

44.           如财政部长所提出，要推行技能深化，我们必须先在社会文化方面做出相应的改变。在个人层面上，人人得热心终身学习，不断自我提升、更新技能。雇主也必须更强烈意识到员工是财富，鼓励他们学习新技能。政府宣布一系列“未来技能培训计划和措施”，便是为了帮助企业建立“精兵猛将”的团队，协助个人与时俱进，掌握未来科技和技能，站上最先进的工作岗位。

45.          我们正在同商界和工会紧密合作，为主要的领域制定“经济领域人力计划”（Sectoral Manpower Plans or SMPs)， 预计2020年之前陆续推行和落实。这个计划将着力于拟定每个领域在技能培训方面的行动计划，以及员工的职业发展规划。这些具有高度针对性的计划， 将有助于提升个别行业的劳动生产力和创新能力。

46.          另外，为了帮助企业国际化、到海外发展，我们必须确保企业能够聘请到具有相关国际经验的本地人才。我们将扩大现有的“青年人才培育计划” (Young Talent Programme), 让理工学院和工艺教育学院的学生也能加入这个计划，有更多机会到海外浸濡、开拓国际视野。政府将资助这些学生到外国实习和参与工读计划等。

47.           我们了解企业，尤其是中小企业，在提供优质的员工培训上所面临的挑战。因此，我们将与商会及业界合作，在未来两年筛选和培训出200名“未来技能的导师”。这些导师们将会具备深入的行业技能和经验，能够帮助中小企业加强它们的培训能力。例如，导师们可协助主管人员和经理们提升他们的培育及指导能力，并向雇主和学员提出反馈。

CONCLUSION

48.           Raising productivity is a long-term endeavour. It is also a complex task – companies must simultaneously grow their topline and improve efficiency on a sustained basis. We need everyone – workers, employers, managers, customers – to be committed to change. Many of these changes, such as self-service concepts, require everyone to move together.

49.           The best and most important drivers of productivity growth are the companies themselves. If all of our companies improve productivity, even incrementally, there could be a significant impact on overall productivity.

50.           The adoption of various productivity schemes has risen over the years. More can be done, and we encourage companies to take advantage of the support that the Government offers. We know that companies need time to make changes and meaningful investments, so the Government is committed to continue support companies on their restructuring journey. Together, we can open up exciting opportunities and enable Singaporeans to enjoy the fruits of economic success.

51.           Thank you.