Lim Hng Kiang
Singapore
“The company has made commitments to recycle the ash, and as for renewable energy, the gasification project is not an energy project, it is not a generation company (genco). It is to produce hydrogen and carbon monoxide or, essentially, carbon. Because as feedstock to the petrochemical sector, you need more C and more H2.”
“The Government will continue to recover the IIA awarded if the company fails any conditions or breaches the legislative amendments. I would like to highlight that there are no errant cases in the last five years for IIA and the current amendments are, therefore, not reactionary in nature, but are being made for legislative clarity.”
“In addition, the IIA scheme will be extended till 31 December 2022. Clauses 10 to 13 give legislative effect to this change. The remaining legislative changes arising from our periodic review of the income tax system are either administrative or technical in nature.”
“Data on household and individual savings rates by income groups are not available. However, data on the aggregate level of household financial assets can be obtained from the Household Sector balance sheet compiled by the Department of Statistics.”
“The aggregate level of financial assets owned by Singapore’s household sector6 in each of the past five years is provided in Table 1 below. Data on the amount of financial assets owned by households and individuals in the different income percentiles is not available.”
“The Second Review of the Comprehensive Economic Cooperation Agreement (Second CECA Review) is ongoing. The review is taking some time as both countries have our respective interests to work through, such as in the area of labour mobility. Our agencies regularly engage Indian counterparts to work through issues collaboratively.”
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“So these are the two key areas that I would like to address: first, we are in this because it is an opportunity, not because we are desperate; second, we have explored many times the option of an integrated resort without a casino. And as many Members here would have experienced - Mr Lim Boon Heng, Dr Amy Khor and Mr Ravindran - this is not an easy task, and it is better if we are able to attract investors to do this entirely. Before I end, I would like to also mention some of the comments about social safeguards. These would be addressed by Vivian, but I would like to respond to some of the points raised. I would like to say that the analogy given by Dr Geh Min of a sugar-coated pill is not an apt analogy. I prefer the description put up by Ms Irene Ng - that this is really a buffet and you have many attractions to go to and you need not go to the casino. A sugar-coated pill means that you have got to take everything in one swallow, and this is not the case. I acknowledge the many reservations that Members put up about the exclusion clause. I think there are many suggestions. We will go through these suggestions. But, for me, I think the exclusion clause is a very simple and a sensible way to let families deal with the problem of gambling. Some of you say that it may lead to family difficulties and problems within the family. Well, in my family, my wife is dead set against gambling. So we have decided that when the time comes, both of us can send in our exclusion forms. The only concession I get from her is that I need only send in my form after I have attended the opening ceremony. We have two boys, and they have just turned adults. Under the rules, they have to send in themselves, we cannot do it for them.”
“We have Seletar Expressway, so transport is very convenient. It is a lovely site with the reservoir as a backdrop. But we were not prepared to pay the very high price needed to give away 300 hectares of land at a very low cost, development fee, management fee, etc. So the deal fell through. But we are constantly interacting and talking to the various theme park operators to continue to attract them. Unless we are prepared to put in a very high equity stake and fund many of these attractions, the theme park operators are not likely to come in. If you look at the Hong Kong example, in Hong Kong Disney, the Hong Kong government in effect owns 57% of the whole operation. Their investment is 57% and the ownership can go to as high as 75%, depending on the various scenarios. So this is not the kind of model which we are prepared to go in because we believe that a theme park should be run essentially by the private sector. It should not be owned by the Government. The reason why we prefer the private sector to run it is not just because of the investment upfront but because the private sector brings with them the expertise, the connections, the network, the ability to bring in celebrities and to keep the attractions fresh. Also, in answer to Dr Geh Min, it also releases the Government and the Ministers of having to make difficult decisions. So if the operator introduces a whale, that is the operator's choice, not because I want to have a whale swimming in the aquarium. And if the operator has very excellent foie gras or shark's fins in its fine restaurants, well, that is his business. Those who object to shark's fins or foie gras will not lobby the Government. So that is another good reason why we should leave it to the private sector to do these projects.”
“We ourselves have tried in the 1990s, talking to Walt Disney and Universal Studios, and we understand a little bit of their business. First of all, theme park operators are actually content companies. They only provide the software, intellectual property and brand. For that, they do not want to put too much of their own money. They take very little financial risk. So, first, they earn a development fee, even before the theme park operation starts. This is to bring in their brand and attractions. Then when the operation starts, they earn a management fee, top-line, not bottom-line, not only when you make a profit. They have a top-line management fee and they take a cut of the gate-takings. This business model is not unique to just theme park operators but, in fact, to all major international content providers. When we were negotiating with the theme parks in the 1990s, I remember somebody told me that we should look at Walt Disney not only as a theme park operator, but also as a real estate player, because they want a big piece of land to build their theme park and then as the theme park becomes successful the capital value of the surrounding land appreciates and they make the capital gains of that land. For example, Walt Disney built Tokyo Disney over 70 hectares. But when they were negotiating with us in the 1990s, they wanted 300 hectares. Seventy hectares for the first phase to build the first set of attractions, but they promised us that they would build Phase II and Phase III, and they wanted the other pieces of land for future expansion. We earmarked a piece of land in Seletar for them to look at. We even offered to build a MRT station between Yio Chu Kang Station and Khatib Station so that visitors can go to the theme park.”
“Because of the regulatory and shareholder requirements, these large gaming companies prefer markets that are similar to their home markets, such as a stable political environment, dependable legal structure, comparable gaming regulatory structure and the lack of corruption. Singapore is highly rated in this regard. So we do have a window of opportunity, but the investors would not wait forever at our doorsteps. If we say no, they will not hesitate to take their investments elsewhere in the region because the demand for integrated resorts will not disappear. So this, to us, is a window of opportunity. The next question which Members raised is: why not have an integrated resort but without a casino element? I think here we can refer to the experiences recounted by the other Members. For example, Mr Lim Boon Heng explained why we need a big theme park for theme parks to succeed. In the past, we have had several experiments with small theme parks, but they have not done well. The reason is because, as Mr Lim Boon Heng explained, to run the theme park you need to refresh it every two or three years. So you need a sizeable theme park, so that while the rest of your theme park is in operation, you can devote one segment of it to come up with the new attraction. So we need a big theme park. We have tried many times to attract theme park operators to Singapore, without a casino element, but without success. I think yesterday you have heard Dr Amy Khor, in her real estate professional experience, her company had tried bringing in investors in theme parks. Mr Ravindran also mentioned that he tried to bring in investors, but there were no takers. Why is that so? I think there are several reasons.”
“The trade in Singapore is strong because our exports are up. The whole range of FTAs that we have signed is giving us a boost. Our position as a transport hub is being strengthened. The throughput in PSA is growing very quickly. For the first quarter, PSA handles the most number of containers in the world. When we look at the tourism sector, it is just one sector in our whole economy. The tourism sector has been doing well the last few years, but if you look at it from a 10-year time span, we have lost a bit of our market share. This is where the integrated resorts come in. As many MPs pointed out, including Dr Ahmad Magad, as we go into the services sector, tourism, being less volatile, is a good sector to promote. And when you have the Asia-Pacific region growing so strongly, there is no reason why we should not strengthen our position in this sector and reinstate tourism as an important pillar of our economy. So we are going into this not because the economy is in desperate straits, but we are going into this because of the opportunity it presents to us. A subtext of this question is: Why now? Why after 40 years are we doing this? Again, we are not doing this because we are desperate. We are doing this because this is a window of opportunity. The integrated resort is a matter of economic rejuvenation, not of economic survival. As I explained in my speech earlier on, the traditional gaming markets of North America, Australia and Europe, are now mature. So the major players in the world are looking for new growth opportunities elsewhere. And they are looking towards Asia.”
“Today, our economy is doing fairly well. We have made many changes and adjustments to the economy and, unless one is a casualty of the dot.com collapse or is in the construction sector or in one of the retail centres in HDB estates that are not doing well, I think, by and large, the other sectors in the Singapore economy are doing reasonably well. If I can just take a quick survey of the economy. Manufacturing which constitutes 25%-27% of our economy is fairly robust. Electronics, one of the key sectors in our manufacturing, is doing very well. Electronics and precision engineering contribute around 10% of our GDP. If one looks at the petrochemical sector, it is doing very well because of the very high oil prices and the huge demand for petrochemical products in the world, especially in Asia. If one looks at the pharmaceutical and life-sciences, which contribute around 5% to our GDP, that is also doing well. If one discounts the volatility of the production month-by-month, looking at it over the years, the pharmaceutical and life-sciences are doing well. Our transport, marine and aviation engineering, overhaul, repairs, these sectors are all doing well. And we have a lot of projects in the pipeline. EDB is very confident of a very strong pipeline of investments. They are very confident that they can attract $8 billion every year over the next few years. And we have been nurturing new areas - displays, medical devices, environmental engineering and alternative energy. These areas may grow and become new clusters of competencies in Singapore. If one looks at our services, financial services is doing well. That takes up 12% of our GDP. Business services, we have many companies setting up regional headquarters here.”
“Mr Deputy Speaker, first, I would like to thank hon. Members for their very candid views of the integrated resort project shared over the past four days. Many Members have spoken in support of this project. At the same time, many have also given their reservations. The economic merits of the integrated resort are clear but, at the same time, Members remain concerned about the social impact that casino gambling would have on our society. Many have given very thoughtful suggestions on how to implement and further strengthen the social safeguards against problem gambling. The Minister for MCYS will address these points later on. What I would like to do right now is really to focus on two key economic questions that have surfaced during the debate. The first group of questions is related to some of the concerns raised by the Members: whether or not the integrated resort is an act of economic desperation. Members have asked: Why now, after 40 years of saying no to casino? The second set of questions is to address the Members who asked: can we, indeed, have an integrated resort without a casino? Over the last four days, Members have asked whether we really have no choice. They asked whether we are so economically desperate that we need to have a casino. It seems to me like they are asking whether we are discussing an integrated resort or the last resort. Or, as Mr Low Thia Khiang put it, he said, "Are we saying that if we do not have a casino, our economy will collapse and Singapore will have no future?" Mr Deputy Speaker, Sir, the answer is, of course, a resounding no. As I explained earlier on, we have to put the integrated resort in its context. This is not the panacea to our economic challenges, but it is a very important element in what we intend to do.”
“We have to adopt a holistic and realistic perspective, look at all the relevant facts, make sure the economic benefits are real and not fluff, and put in place the necessary measures to contain the downside social impact. This pragmatic approach has served Singapore well in the past, and we should approach the Integrated Resort in the same manner. The Integrated Resort is one of the many strategies that Singapore is pursuing to boost its tourism appeal and generate economic growth. Whilst it is not the only strategy in our tourism masterplan, the two resorts will serve as the engine of our leisure sector and bring in significant and widespread benefits for Singapore. We should move boldly and swiftly, and seize this opportunity to entrench our hub status, before it is too late.”
“The RFP would close in the third quarter and we would award by the end of 2005. This would mean that Integrated Resorts would be operational around 2009. We have seen that the economic benefits of the IRs are considerable. While there are valid concerns about the social impact of casino gaming, the Government is prepared and committed to put in measures and resources to control and mitigate it. This leaves us still with one important consideration. A sentiment voiced directly or indirectly by a large number of Singaporeans goes beyond its social ills of gambling. They are concerned that a casino would change the tone of society that we have so carefully nurtured over the years. I am sure we will debate this point thoroughly over the next few days. I can only say that if the Integrated Resort would put the future of Singapore as a safe, wholesome society at grave risk, then we would not have supported it. The Swiss Minister for Economic Affairs was in Singapore two weeks ago. Switzerland allowed casinos five years ago. The Swiss Minister told me that they decided to allow casinos because casinos were already freely available across their frontiers. They decided they cannot stay put. I think we are in a similar position. We cannot stand still either. Has the reputation of Switzerland as a trusted financial centre, a land of hardworking people, or a wholesome society suffered as a result of having casinos? The answer is no. So I am confident that with adequate safeguards, we too can preserve our societal values with the Integrated Resorts. Mr Speaker, Sir, the Integrated Resort is neither the panacea to all our economic challenges nor will it destroy our social and moral fabric, or the strong foundations on which Singapore is built.”
“8 billion for Disneyworld in Hong Kong, the Hong Kong government is committing a total of S$4.8 billion. This is unlike the Integrated Resorts that we are attracting which will entirely be driven by private sector funding. We should not be surprised by this finding. If indeed it is true that non-gaming amenities are viable on their own, savvy investors would have jumped on this opportunity already. They could trigger any site on URA's reserve list, or approach the URA or Sentosa Development Corporation directly, but none have done so. Even for the RFC exercise whereby investors were not required to include a casino, none of the submissions came without the gaming component. This is because the casino is the economic engine that generates the bulk of the profits for the resort. The higher profits from gaming are used to offset the lower profits of the non-gaming attractions, which are vital to drawing large numbers of visitors to the resort. This will in turn feed traffic to the casino and generate gaming profits. It is this symbiotic relationship between the gaming and non-gaming components that keeps the Integrated Resort viable independently. Mr Speaker, Sir, today, we face a small window of opportunity. Only recently have top IR operators started looking at expanding their operations to Asia because their own home markets have matured. Just a few years ago, we would not have garnered the same level of interest from them even if we were prepared to consider establishing an IR. Now, Singapore could be an early-mover in the region to develop an iconic, world-class Integrated Resort. With this decision, we can now move on to the next stage and launch a Request for Proposals (RFP) in the second quarter of 2005.”
“If I were to say that one of the attractions in the IR would include an aquarium, the average man-in-the-street might think of the seawater aquarium in the basement of Wisma Atria, or the Underwater World in Sentosa, and think, "Well, that doesn't sound so extraordinary." But what if I said the aquarium would be large enough for a whale to freely swim around? That gives you an idea of the scale of the project that we are looking at. Scale, innovation and top-class creative talent are key to the IR's appeal. These are the elements that will produce a "distinctive and lasting visitor experience". What exactly does this phrase entail? It does not just mean having a good time for a couple of days. It does not just mean building something that is hip, chic, cool, or happening. It means keeping millions of individuals, groups and families entertained, excited and intrigued. It means creating happy memories that people will cherish and share enthusiastically with all their friends and relatives. It means people will actually regret if they cannot make it to Singapore. I am confident that among the concepts that have been proposed to us are projects that are capable of creating this "distinctive and lasting visitor experience" for all those who visit us. During the course of the debate on the pros and cons of having an IR, some people have asked me, "Why can't we have an IR without the casino?" If investors are willing to develop a similar entertainment product without a casino on their own, we warmly welcome these investments. But, in reality, none of them have done so because these large-scale projects are not viable without a casino or some form of government funding. For example, out of the total project cost of S$5.”
“Critics may point out that Singapore is also capable of landing investment projects of this order of magnitude in the other sectors, such as manufacturing. This is true. But, as I had earlier described, success in tourism will stimulate many other sectors of our economy. The IR will help to revitalise our tourism sector and enhance our appeal in hosting conventions and exhibitions, and strengthen our status as an aviation hub. This is why the economy-wide impact of two IRs, taking into account direct and indirect effects, is huge. With the two IRs, the incremental annual GDP is estimated to exceed S$1.5 billion and total incremental employment is about 35,000 jobs. In addition, our analysis suggests that the consequent growth in the tourism pie would be more than what the Integrated Resorts alone could absorb. Therefore, overall, there will be a net positive benefit for existing players, with spin-offs for the whole tourism industry and the overall economy. This addresses concerns that the Integrated Resorts would negatively impact on existing businesses. Some of the prospective investors have released elements of their proposals to the media. Architects like Daniel Libeskind; museums like the Guggenheim; theme park operators like Universal Studios. I am not at liberty to divulge what is not already in the public domain so as to safeguard the proposers' competitive and intellectual property interests. But I can say that what the prospective investors have not divulged is as impressive and exciting as those elements which they have made public. Another reason why Singaporeans may find it hard to imagine the impact that an IR would create has to do with scale. Let me illustrate with an example.”
“Casino gaming is an important part of the mix, but only a part. Examples of overseas IRs that we are looking for include the Bellagio and Venetian in Las Vegas, as well as the Atlantis in Bahamas. More importantly, we are looking for IR operators with the "software" to market the resort extensively and transform the world's view of Singapore as a tourist destination. This involves high-end, innovative marketing and distribution that secures international prime-time media coverage, and access to an exclusive network of top artists and performers. The best IR operators can secure world-famous celebrities to grace their resort, and persuade TV executives and film-makers to use their resort as a backdrop. This maximises the global exposure of the destination and ensures that it is one of the first things that come to people's minds when they plan a vacation. This kind of marketing ability will greatly boost our own efforts at branding Singapore, such that it becomes widely recognised as a leading city in the Asia-Pacific, the way New York, Paris and London are regarded as leading cities in the West. As the Prime Minister explained, we received a total of 19 submissions when we conducted a Request for Concepts (RFC) to test the viability of an IR in Singapore. This showed that there is serious interest from world-class companies. Many of these companies have extensive and impressive track records for developing, managing and marketing successful world-renowned Integrated Resorts. We also learned from the RFC exercise that the economic benefits from this project are substantial. The proposals envisage investments in the order of $5 billion for the two IRs, direct employment of more than 10,000 jobs.”
“The Government is not interested in a stand-alone gambling hall that offers only table games and slot machines. In fact, if we were building just a gambling hall, we would not be able to attract large numbers of tourists. Tourists would not fly many hours to visit a casino that can be found nearer their homes. So what would make tourists come to Singapore? If you look at casino developments around the world, you would find that they form an entire spectrum. At one end of the spectrum, you would find the exclusive gambling clubs in London or the exclusive casinos in Monaco. Next in the spectrum would be casinos situated in hotels like in South Korea. Then you have stand-alone casinos like those in old Macau. They can be more upmarket or downmarket. Next, in the spectrum, some operators would include some entertainment elements in their casino facilities like on cruise ships, in Genting, Perth or Melbourne. At this end of the spectrum, you would find large scale entertainment developments with a small gaming component in it, like some of the recent developments in Las Vegas. This is what an IR is all about. The Integrated Resort that we envisage in Singapore is a large-scale development offering multiple world-class attractions. We are not talking about one or two hotels of several hundred rooms with a casino attached. We are talking about an entire complex of classy hotels, luxury shops, fancy restaurants, spectacular shows, convention centres all found in one single destination. The gaming component will occupy not more than 3-5% of the total area of the IR development. Visitors are drawn to the resort not because of gambling, but because it offers a wide range of world-class leisure and entertainment choices, with something for everyone.”
“Venetian Macau, the centrepiece of this COTAI Strip, will have 1 million square feet of convention and exhibition space, a 2,000-seat theatre, and a 15,000-seat arena. Macau will also be a major Meetings, Incentives, Conventions and Exhibitions (MICE) competitor to Singapore once the COTAI development is operational in 2007. So, to keep ahead, we cannot afford to make merely incremental improvements. The clear trends emerging in the global tourism industry showed us that the number of tourists from this region will double by 2015. This is fuelled by the growth of the middle class in China and India, as well as the falling costs of air travel. Opportunity is knocking on our door. We can take full advantage of this opportunity, but only if we are prepared to act boldly. It is in this context that the Government decided to proceed with the two IRs. I must emphasise that the two IRs are by no means our only response to the challenges we face in growing the tourism sector. The Singapore Tourism Board has been hard at work, attracting other investments in the tourism sector. It is also leading efforts to revitalise the Singapore River and Orchard Road. Having an IR, therefore, will complement our many efforts to remake Singapore as a tourist destination. It is worthwhile, at this juncture, to paint once again the picture of the sort of Integrated Resort that the Government is considering. In the course of the nation-wide debate on the IR, it became clear at times that people were talking at cross-purposes because they had different mental pictures of the IR. Many drew conclusions based on their personal experiences at the old Macau, Genting, Batam, Australia, or just on the cruises to nowhere. Let me be clear.”
“We do not even enjoy seasonal variation that gives rise to specialty attractions like the sakura in Japan, the foliage of New England or the ice sculptures of Harbin. Under such conditions, having compelling man-made tourism products becomes vital in attracting visitors. Apart from a number of sizeable investments in cultural attractions such as the Esplanade and the museums, we have not made major investments in tourism attractions over the past decade. The last significant investment in a tourist attraction was really the Night Safari in 1994. Moreover, several tourism investments made in the early 1990s turned out unsuccessful, like the Haw Par Villa, Tang Dynasty, Asian Village and Fantasy Island. At the same time, our competitors are not standing still. Many cities have been aggressively investing in new tourism products to attract visitors. Some of our innovative "success formulas" are being copied. For example, Night Zoos can now be found in Guangdong, Sichuan, Malacca and Cairns, with another soon to open in Chiangmai. The Underwater World in Sentosa was novel when it first opened in 1991, but such aquariums now exist in many cities. Some are bigger than ours. Other destinations are coming up with ever bigger and bolder plans to "wow" tourists. Hong Kong's Disneyland is due to open later this year. Dubai is having its own version called "Dubailand" - a comprehensive tourism, leisure and entertainment city. We have been successful so far as a convention city but others are catching up. Kuala Lumpur and Bangkok aspire to be successful convention cities. Macau has reclaimed land for the COTAI Strip where a total of 10,000 hotel rooms are planned for Phase 1 development.”
“Mr Speaker, Sir, the Prime Minister has explained clearly why the Government has decided to proceed with two Integrated Resorts, or IRs, after very serious deliberation. I wish to elaborate on the tourism and economic considerations. Tourism has always been an important sector for the Singapore economy and not simply for the tourism receipts that visitors generate. The more attractive we are as a tourist destination, the easier it is for us to develop our convention and exhibition industry, and grow as an aviation hub. However, our tourism sector has faced major challenges over the past decade. Our total arrivals and tourism receipts have declined. Between 1993 and 2002, visitor arrivals stayed relatively stagnant at about 6.5 to 7.5 million visitors. Over the same period, tourism receipts fell by 17%, from S$11.3 billion to S$9.4 billion. The tourism sector has not been keeping up with the growth in the rest of the economy and consequently tourism's contribution to our GDP was reduced by half, from 6.1% in 1993 to 3% in 2002. These developments did not take place because the prospects for tourism in the region had dimmed. On the contrary, tourism traffic grew strongly in the Asia Pacific, at about 6.4% each year. With our tourism earnings falling at a time when the regional tourism market is expanding, this means that our slice of the tourism pie is getting smaller. Singapore's share of the Asia-Pacific tourism receipts fell sharply, from 13.1% in 1993 to 6% in 2002. How do we explain this? One key reason is that we have not been investing sufficiently in quality tourism products. Remember, we start off with a handicap. We cannot boast breathtaking scenery or spectacular wildlife. Being a young nation, we do not have historical relics or world heritage sites.”
“Sir, the Prime Minister will be making a Statement later on on the proposal to develop Integrated Resorts. I would like to urge Members to wait for the Statement. I think most of the queries will be addressed during the statement. PROPOSAL TO DEVELOP INTEGRATED RESORTS 4. Assoc. Prof. Ong Soh Khim asked the Minister for Home Affairs with the development of the Integrated Resort and casino (a) whether there will be an increase in vice, illegal money-lending, money-laundering and drug activities; and if so, (b) what are the safeguards that will be put in place to prevent them.”
“Mr Speaker, Sir, can I have your permission to take Question Nos. 1 to 3 together as they relate to the same topic?”
“I have already stated many times that we have one whole year of discussion. Members have used the opportunity here in the House and outside the House to give us their views. We have called for the proposals. We will make the evaluation and make a decision. After we have made a decision whether to proceed or not to proceed, we will make a statement, and then we will give MPs the opportunity to seek clarifications. The Chairman: Yes, Mr Heng. You have 30 seconds. 2.15 pm”
“I think we have many events. For example, the Singapore Arts Festival is growing in stature. But, beyond the Singapore Arts Festival, we are looking at other events throughout the year. The strategy whether to put them together or make sure there is activity every week, that is something that we have to examine.”
“We will make an evaluation and we will put up our recommendation to the Government. The Government will assess it and decide before the middle of April. And, as I mentioned earlier, whatever the decision, we will come back to Parliament, make a Ministerial Statement on the decision whether to proceed or not to proceed, explain our decision, and give MPs the opportunity to state their views to and seek clarifications on the decision that would be taken. I think that is that. Then we go on to other issues of economic development.”
“Sir, this is the first time in my many years here that I have heard Mr Low Thia Khiang going round and round, and I am not sure whether he has clarified the issue or he has made us more confused. The reason why we are proceeding with a decision whether to proceed or not by the middle of April is already stated by the PM. We have had a discussion on this issue for almost a year. We have invited developers to come in. We have got 19 proposals, and we are on record to say that we will look at these concepts and then we will decide, and we intend to do so by the middle of April. So, we have given people plenty of notice and I do not see any reason for us to postpone this decision by another two more years and make this into an election issue. Whether it can be an election issue or it will be an election issue, we would not know. It is up to the issues of the day when we go for elections. But the Government has to make decisions, based on information available to us, and this Government has been elected to govern, and this Government will do what is necessary to make the right decisions for Singapore, having heard the range of views, both for and against. My point earlier was that, while all this discussion has been going on for one whole year, the Workers' Party and Mr Low Thia Khiang have been conspicuously silent. Then they had this seminar, I believe, last Saturday or last week. I wonder how many turned up for the seminar. I wonder whether the Workers' Party has formed a position on that issue. Apparently not, from the explanation given by Mr Low Thia Khiang. Therefore, there is no reason for us to wait just because the Workers' Party has not made up its mind. MTI will be looking at the proposals submitted.”
“So this does not prevent local companies from looking at other sites which fit this objective and coming to the Ministries, whether MTI or MND, to see whether or not such a concept can be tried out in areas beyond what we originally stipulated as approved areas. So let me, again, establish the facts. It is not meant to favour anybody. The location which a particular consortium or foreign retailer selects is done on his own accord. We are quite happy if Singaporean retailers also identify other sites not from the original approved list, and which meet the objectives and have the approval from MND.”
“I really do not want to get into the details of all these. But let me assure Members that MTI treats foreign and local enterprises equally. We do not favour or discriminate either one of them. If you talk to the foreign companies, some of them will say that we discriminate against them, we favour local companies, which is the natural instinct of all countries. But I would like to share with everybody here that we treat everybody the same. On the Warehouse Retail Scheme, if I may give the background, since this has been raised. In case other Members start forming opinions based on misperceptions, let us get the facts out. The Warehouse Retail Scheme is intended so that companies, whether foreign or local, can try out new business concepts, integrating warehousing with retail, and also distribution to the region. So it was proposed that, with this objective in mind, it is not for local retail. So we are not favouring foreigners coming to retail to Singaporeans, neither are we encouraging our local retailers to use this scheme to distribute to Singaporeans. The idea is to have a new business concept that amalgamates warehousing and distribution, not just to locals, but also to the region. We originally wanted to allow such a concept to be tried out in industrial estates, away from the housing estates in Singapore where we already have an established retail distribution through the HDB shops. But, at the same time, we want to be flexible. And so when the companies propose other locations which are not in the approved areas, I think the various Government agencies try to be flexible and see whether or not we can accommodate them, and we found that we were able to do so.”
“For example, the GST increase, the CPF contribution changes, all these are issues that, after having gone through discussion and taking into consideration the views of people, the Government then has to make a decision, and this is the same for the casino. I agree with Mr Gan Kim Yong that the Workers' Party and Mr Low Thia Khiang have been conspicuously silent for this entire one year. Like him, I am a little perplexed why Mr Low thinks that this ought to be an election issue. As Mr Low Thia Khiang knows, the election is not due until 2007. And if he is suggesting that we do not make any decision and wait until the election comes around and to treat this as an election issue, we have to wait at least another two more years. Mr Low Thia Khiang is a teochew. So I will use the phrase, by that time, mui sek already. In other words, the porridge would have been cooked. So the Government intends to make the decision. Whatever the decision, we will make a Ministerial Statement in Parliament and use the occasion to explain our decision, whether we are proceeding or not proceeding. This will then give the MPs the opportunity to state their views and also to seek clarifications on whatever the decision may be. So there will be an occasion for MPs to be able to clarify and express their views when we make the statement. I agree with Mr Gan Kim Yong that even though Mr Low has been quiet all the time, that will be the occasion for him to state his views. I also notice that he has not filed any cut during the entire session of the Committee of Supply. And when he spoke on the debate on the Budget, this did not feature at all in his speech, but there will be an occasion for him to do so. Consumer Protection”
“The first element which we cannot avoid is tourist attractions. We must invest in tourist attractions, and this means quite heavy investments. The second is events. We must have things happening in Singapore - some buzz - so that when tourists come, they have something to look forward to. On the many suggestions that Miss Penny Low put out, we will look at them. In fact, STB is even more ambitious. STB sets for itself a target of having 52 events. This means that at every weekend, there must be something happening in Singapore. There must be some buzz. So the tourists who come just for the weekend will have something attractive to look forward to. The third area is capabilities. We must develop the industry - the promoters, the event organisers, the guides, the waiters, the sales people. People must feel happy coming to Singapore and they must have a good and delightful experience when they come to Singapore. So these are the three key elements. On the issue of the integrated resort, this is an issue which has been debated many times. There are a lot of views put out. We have had this discussion for over a year. I disagree with Mr Gan Kim Yong. In fact, Members have used this House on many occasions to express their views. And even though we may not have a direct debate, the Government has listened to these views and will be taken into consideration when we make our decision. The Prime Minister has explained that we intend to make a decision before the middle of April. The Government has been elected to govern, and it has the full mandate to decide on many important issues.”
“7%, this means over 80,000 Singaporeans are unemployed, which means nearly 1,000 per constituency, and these are the people who come and visit us every other week, and all of us as MPs realise that. But that does not change the hard facts of the ground, which is that the average Singaporean, the 90 over per cent who retain their jobs, have had good income. And for most of them, their incomes have grown even in the most difficult years that we faced in the last five years. Let me now turn to tourism. I agree with Miss Penny Low that the targets we set ourselves for the next 5-10 years are very high targets. We want to double the number of tourist arrivals. We want to triple the tourist receipts and we want to make tourism an important component of our GDP. This is not an easy task but it is something that I think we can achieve. Why? Because the tourism flow in this region and for the world is growing. If we are intelligent and hardworking enough, there is no reason why we should not capture our share of that growth. I remember many MPs have raised this, including Mr Tan Soo Khoon, and I agree with him that over the last 5-10 years, we have indeed under-invested in our tourism capability. Even though our tourism receipts and the tourist arrivals have been quite decent and remain fairly steady, as a percentage of GDP, the contribution of tourism has, in fact, dropped over the last 5-10 years. What we want to do is to try and redress this. I am not saying that it is an easy task but I think it is something that we have to do. The suggestions that Miss Penny Low raised about having fiestas and activities, this is in fact a key component of what we plan to do. As I explained in the press conference some months ago, there are three elements.”
“Sir, let me take Mr Steve Chia's question. First, he must understand how to interpret statistics. When the statistics show that the incomes have risen, it does not mean that there will not be 3% people who are unemployed, and therefore their incomes have dropped. This is the per capita gross national income which looks at the average numbers. The Prime Minister, in his speech on 19th January 2005, mentioned that the overall per capita income has increased since 1998, and indeed it has increased. The per capita income is a widely used benchmark in international comparisons. So we are using internationally accepted statistics and the method of measuring such statistics. The per capita income is obtained by dividing the gross national income (GNI) by the population. Therefore, the gross national income which is the income receivable by all residents of the economy will include both Singaporeans and foreigners. Mr Steve Chia claimed that this will distort the numbers because it will include the high-earning expatriates. I think he will realise that the number of expatriates and people with employment pass is, in fact, a smaller percentage compared to the larger pool of other types of foreign workers. If anything, the foreigners' element of the calculation in Singapore's context would tend to drag the number down. Anyway, even if we exclude foreigners, the latest statistics show that the average income of Singaporeans in 2004 was 10.1% higher than in 1998. And compared to 10 years ago, the average income of Singaporeans has increased by 25.1%. As I have explained, this is the average number. We all realise that over the last five years, the unemployment in Singapore has risen. The latest number is 3.7%. So if we look at 3.”
“The R&D Committee, chaired by DPM Tony Tan, will cover the full spectrum of R&D, both the pure R&D undertaken by the universities and the other research institutes in the academic setting, as well as the applied R&D, which is really the responsibility of MTI, through our research institutes and collaborations with the industry. So it covers both areas. But we have to realise that in Singapore, our priority must be on applied R&D. That is my view because, whatever funds we have, I think a greater portion of that fund must be leveraged towards industry applications, economic development and generating jobs. On the PPP, I accept Prof. Ivan Png's point. But let me again explain that the PPP that the Government promotes will be for some of the big projects. One of the best examples will be, say, an incinerator plant. I could not realistically see how that PPP project of an incinerator plant could be packaged, whether it is mandatory or not, that it makes itself available to local SMEs. As Heng Chee How explained in his speech, the best way forward for our local SMEs is to improve their capabilities, establish their own brands and compete, based on price, quality, competence and product delivery. To try and favour SMEs through a buy-local policy by the Government is not the way to go. Tourism”
“But if this is too restrictive we will review the programme and extend it also to the private sector, especially if our private sector grows in capabilities and there are more private sector facilities or organisations that are able to band together and have a greater capability to undertake such a research. So the number of scholars that we are providing nowadays, 100-150 A*STAR scholars, is not a very big investment. $40-100 million a year is a drop in the ocean. I think one of the conclusions which I hope will come out in the June review by the R&D Committee is to give us a boost in our R&D efforts.”
“And, for that, our strategy is to have biopolis, which gives them the facilities to come in, plug and play, so that they do not have to invest so much in setting up the infrastructure. I think we have had several successes. So when we look at the investments that we have put in, and the progress that we have made in five years, I think we have done reasonably well. Part of this is greater investment in R&D. If one looks back, I think we were a bit slow. If one looks at countries like Taiwan and others, I think they have invested more heavily in their people and research talent pool. I think we are a bit slow but, as I have said, we have caught up somewhat over the last five years, but I do not think we should be complacent. We still have a long way to go. On Dr Tan's question about SEEDS and the grant being limited, I agree with him. Bio-tech research is a very expensive enterprise. If we want to encourage new start-ups in bio-tech, we have got to find a way in which the environment allows them to do so. But we have to be quite realistic. Most bio-techs, beyond a certain stage, have to be bought out by the big pharmaceutical companies, and they could latch on to big scale clinical trials and major production. I think that has to be the evolution process of the bio-tech companies. Therefore, we will look at the quantum of SEEDS. If $600,000 is not effective, we will have to see how this could be done. Similarly, for the DMRC grants. Again, we have to be realistic. Clinical research is a very difficult and long-drawn process and essentially it has to be done primarily in a hospital setting or in a specialist centre setting.”
“Then we have our traditional sectors - transport engineering, marine and aviation engineering, which constitutes another 3-4% of our GDP, and the others, furniture, food, printing - and so many other SMEs. So, even within manufacturing, 20-25%, we are fairly diversified. So where do you place - I would not say "place your bets" - but where do you develop your capabilities? We look at biomedical and we think this is an area that will be with us. Why? Because the population everywhere will be ageing and the demand for healthcare and biomedical services will increase. Today, we are spending 3% of GDP on healthcare. But other developed countries are spending 9% of GDP. In US, it is 15-17% of GDP. Therefore, the trend is greater expenditure on healthcare, and this is the area where it is worth our while to invest in capabilities and build up the talent pool. I would not say this is an investment that will definitely give us returns but, if you look at the landscape, going forward, if you have to develop your capabilities, I think this is an area where it behoves us to develop. We have done so since the year 2000. I must say that in just five years, A*STAR has done remarkably well in building up the biomedical sector to contribute 5% of our GDP. Again, the strategy we take is a very diversified and sensible strategy. One, we bring in the pharmaceutical companies to do their manufacturing here. Two, we build up an eco-system that allows new bio-tech companies to sprout out. This is not easy, but it is something that we are growing, and I think Dr Tan Sze Wee will realise the difficulties of growing bio-tech companies. Three, we try to anchor some of the research facilities of the big pharmaceutical companies here in Singapore.”
“Before I answer the question in detail, it is worthwhile for us to try and understand how do we envisage Singapore's economy developing, going forward. If you look at the economy today, we have one of the best diversified economies in the world. Manufacturing takes up about 25% of our GDP. Our traditional roles - trading, wholesale, retail plus the trade functions that we do - take up another 20%. Financial sector is about 11% and growing strongly. Related to the financial sector, we have the business services sector, which is another 20%, both for local business services, as well as regional business services, RHQs, etc. Then we have the infocomm and transport services. 1.15 pm By and large, we have a fairly diversified economy. Our best strategy going forward is to try and keep these diversifications. One of these diversifications is, of course, manufacturing, 20-25%. Even within manufacturing, we are reasonably well-diversified. But we have to recognise that we are a very small economy with a GDP of US$100 billion. We could not spread all our eggs so thinly that it would not get any core competence. So, it is a judicious balance that we have to take, between concentrating our effectiveness in certain key areas, but not so concentrated that we are vulnerable. Let us take manufacturing. We have electronics, which takes up about 8-10% of the GDP and, even within electronics, we are fairly well diversified - semi-conductors, consumer electronics, infocomm equipment, computer and PC peripherals. Even that is quite diversified. The second area that is now growing very rapidly is biomedical sciences. Today, it constitutes about 5% of GDP. Petrochemical constitutes another 5% of GDP. Over the next 5-10 years, I think petrochemical will be very strong.”
“And I welcome the suggestions by Mr Lawrence Leow to make them both flexible so as to be able to be more effective to the wide range of SMEs that we face out there. Can I now ask Mr Heng Chee How to help clarify some of the other issues raised by Members?”
“But it is an investment that we have to do. Prof. Ong Soh Khim listed out all the risks in our investments. I must say that we have to take these risks. If we do not invest and build up our talent, we cannot expect people to set up R&D facilities in Singapore. So the Ministry fully supports A*STAR's efforts to build up this flow of talent. A*STAR has done a very good job in identifying these people to take up a research career. If at any point, especially after the first degree, we find them unsuitable or they do not perform well, then of course they will not continue to the PhD segment of their studies. But this is something that we have to do. Let me round up with a few specific responses. First, the Economic Development Assistance Scheme (EDAS). Prof. Ivan Png asked about the return on investment on the EDAS. Let me clarify that EDAS is not an equity fund and therefore there is no ROI. The EDAS is a range of programmes which comprise both grants and loans. Therefore, we do not use ROI to measure these programmes. Let me just summarise. As we go into the next stage of our economic development, it is very important for us to make sure we build up enterprises in Singapore, both local and foreign. That is the key to generating wealth and employment. The SMEs play a very important part in our strategy. We have a range of programmes. I am sure we can do more. Both Mr Inderjit Singh and Mr Lawrence Leow suggested some adjustments to the financial schemes that we have for the SMEs, even though we are extending practically about $600 million worth of assistance to SMEs. I am prepared to review these schemes to make them more effective.”
“The Ministerial Committee will conclude its study in June this year and its recommendations will set the broad strategic directions for Singapore's R&D landscape for the future. MTI would then use this to draw up the science and technology plan for 2006 to 2010. The S&T 2010 Plan will identify the plans and programmes that we should undertake to carry out the R&D strategies for our economy. In preparing the S&T Plan, there will be extensive consultations with the various Ministries, universities, research bodies, economic agencies and industries. The plan would be made public in due course. Let me just summarise what we are planning to do. First, we need to raise the level of expenditure in S&T. That is the only way to compete. In the past, we have been fairly frugal, in fact to the point of being stingy in developing our R&D capabilities. Now, we realise that if we want to compete, we have to be bolder and be prepared to invest more. But we have to make sure our investments are better targeted, that means, (1) if we want to set up and build up the research institutes in Singapore, we cannot do everything. Therefore, we have to identify certain areas where we are likely to have a competitive advantage; (2) we should not do it all by ourselves in the Government. We should work with the industry. If the industry is prepared to put in the money, I think that points the direction of where we should be investing and, therefore, our programmes in R&D will be directed towards gearing the industry to also spend and invest more in R&D; and (3) to build up the talent and the people to be able to support the R&D effort. As I mentioned at the last sitting, it is not inexpensive to train research scientists. It costs about nearly a million dollars.”
“Through our various S&T efforts, the gross expenditure on R&D has risen to 1.88% in the year 2000, and then to 2.15% of GDP in . I think Dr Tan Sze Wee has given the figures for the other developed countries. And Members will observe that we are on the lower end of this R&D scale. In terms of the manpower development, we have also made some improvements in the number of research scientists and engineers per 10,000 labour force. This has increased from 48 in 1995 to 66 in 2000 and further to 79 in 2003. About half of our research scientists and engineers are postgraduates. Members will agree with me that if we want to upgrade our economy, one of the key strategies we must pursue more vigorously is our S&T capabilities and our need to raise the level of expenditure on research, and target this research expenditure in selective areas where we can take full advantage and build up our competitiveness. So last year, the Government set up a Ministerial Committee on Research and Development, headed by DPM Tony Tan. This committee was formed to review the strategic direction for R&D in Singapore. From its deliberations and visits to research organisations, both locally and overseas, the committee has identified a few areas in our R&D landscape which can be improved upon. For example, in niche areas of strategic economic importance to Singapore, we need to deepen and broaden our research capabilities. We also need to help our local enterprise enhance their competitiveness by improving their technological capabilities. In addition, we need to intensify our efforts to further engage the private sector in R&D.”
“30 pm In Singapore's context, we have to recognise that we only have two suppliers, either Malaysia or Indonesia, and these supplies come in the form of pipelines which require quite a heavy investment upfront. So these companies that negotiated have to take these factors into consideration. Mr Chiam noted that the Government is looking into the viability of setting up a LNG terminal in Singapore. This would bring in more potential suppliers and we think that this would give us greater leverage to bring in more competitive prices for our gas supplies. The next area that I would like to cover is the importance of R&D in the upgrading of our manufacturing. As we move into the next phase, a strong R&D base will give us the intellectual wherewithal to undertake more sophisticated and higher value-added manufacturing in Singapore and anchor key projects here. Members would have known the various R&D facilities that we are able to attract here over the last five years, as we develop our R&D capabilities. We do so through the science and technology (or S&T) plans. Prof. Ivan Png asked about our S&T 2000 and our S&T 2005 plans and their outcomes. Basically, we are moving into the next stage. In the early stage, when we were attracting MNCs to set up manufacturing base in Singapore, our main attraction was the availability of skilled manpower, engineers, technicians and mechanics. As we move to the next phase of the brain industry, our new competitive advantage must be in the higher level of talents that we can attract and this would mean more research scientists and engineers. If you look at the progress that we have embarked on, I must confess that we are a relatively latecomer in the R&D scene. In 1995, we barely spent 1.15% of our GDP on R&D.”
“Let me now turn to the cost of doing business in Singapore in order to remain internationally competitive. I think Members would note that over the last few years, we have taken several measures to make ourselves more cost competitive. We have cut our corporate taxes. We have reduced the employers' CPF contribution rates. We have lowered industrial land rentals, and we have improved the flexibility in bringing in foreign workers. Also, by our competitive adjustments to the electricity market, the efficiency gains have caused electricity prices to fall by 11%. Mr Chiam See Tong asked about the high cost of piped natural gas from Malaysia and Singapore. Today, we have three gas importers. Senoko Power Ltd imports from Petronas, Malaysia, for its own use. Both SembCorp Gas Pte Ltd and Gas Supply Pte Ltd import from Pertamina, Indonesia. These are commercial companies and their gas sales agreements were commercially negotiated. However, as their gas prices are indexed to High Sulphur Fuel Oil (HSFO), so whether the gas that we get is cheap or expensive will depend on this high sulphur fuel oil index. Mr Chiam quoted the article where it was indicated that our gas costs about 35% to 40% higher than what the Koreans were able to negotiate. There are several reasons why the Koreans were able to negotiate a very competitive price for their contract. First, it was a very big contract. They were talking about a 10-year contract with a value of US$20 billion. So once you negotiate a big contract like that, I think you have more bargaining leverage. Second, their contract was from LNG suppliers. And, again, when you are able to negotiate with several or many potential LNG suppliers, you have more bargaining leverage and can get a better price. 12.”
“In December last year, ST Microelectronics announced that it will invest another S$2 billion by 2006 to expand its production capacity. Seagate will invest another S$200 million in a new media plant and will develop and manufacture its state-of-the-art one-inch drive for the global market here. SMEs in the electronics industry have also put in new investments. Autron Corporation Ltd, a regional integrated supplier of assembly equipment and services, will set up a S$50 million new Global Solutions Centre here. Home-grown Eastgate Technology is also setting up a new plant which can produce 1.5 million mobile-phone organic LED displays a month. In fact, an independent report by Credit Suisse First Boston (CSFB) in January this year concluded that the "doomsday scenarios over the last few years indicating that the manufacturing sector is dead in Singapore and that most activities were all going to move to China and other emerging markets are clearly unfounded." In fact, our Revealed Comparative Advantage Index shows that our global market share in key electronics and electrical goods sectors is now rising. The CSFB's report also said that CEOs and other corporate executives from around the region have indicated that they want a diverse production base, and Singapore remains one of the top destinations for outsourcing and investments. However, with intensifying competition, we need to stay ahead, and we need to continuously upgrade our electronics and other manufacturing sectors. To do so, we will have to move up the technology ladder and go into more sophisticated manufacturing. We also need to promote the full value chain of activities here - from R&D to design, production, supply chain management and regional and global headquarters functions.”
“Let me reaffirm that even as we grow our services sector, manufacturing will continue to be an integral part of our economy, contributing 20% or more to GDP over the next few decades. This intention to keep manufacturing as the key sector of our industry is not something new. It has always been an integral part of our economic strategy. Recently, I was very gratified when I met the Dutch Economic Minister, and he told me that Netherlands also wants to keep between 20% and 25% of their economy in manufacturing. So this is not a unique strategy. I think many economies see the value of keeping manufacturing as a very important part of their economy. So, let us look at the electronics sector. I think we have gone through a whole series of restructuring exercises in the electronics sector. There have been a spate of electronics companies relocating to other lower cost countries in recent years. But these are mainly in the area of commoditised products like radio, low-end PCs and low-end consumer electronics assembly, the most recent of which would be Maxtor's relocation of low-end desktop drives to China. For the higher end products, we continue to hold our own against stiff global competition, for example, in high-end server drives where we still command more than 50% of the global volume. Companies like Maxtor intend to maintain Singapore as their manufacturing hub for high-end drives. We remain an important electronics manufacturing hub - we have in Singapore the world's top three wafer foundries, top three semiconductor assembly and test companies, three of the world's top four hard disk drive manufacturers and four of the world's top five electronics manufacturing services. We have also seen expansions and new investment commitments in the electronics sector.”
“So far, I believe more than 14 have already set up operations there. So this is an illustration of what Mr Lawrence Leow mentioned yesterday about co-location in a Singapore industrial estate overseas. We can do so Singapore-wide or we can do so through the industry associations. I believe doing so through the industry associations is a better vehicle because the needs of the various industries are different. As the Singapore Furniture Industries Council has illustrated, this is one way in which we can relocate overseas and, as Mr Lawrence Leow described it, "hunt or work in a pack". The SFIC has also collaborated with the Government in its plans to set up the International Furniture Centre in Sungei Kadut. In this International Furniture Centre, they will house export showrooms, a design resource centre with prototyping facilities for young designers and a learning centre to train workers and various grades of executives. Generally, I think we need more proactive industry associations like the SFIC. SPRING and IE Singapore will be jointly launching a programme soon to help the industry associations build up their capabilities, and to take the lead in implementing programmes to upgrade and improve their industry. We, therefore, welcome industry associations that are ready and willing to step forward. The second area that I would like to touch on is this whole issue about the future of our manufacturing sector and the role that R&D will play in our plans to upgrade the manufacturing sector. Mr Alex Chan is concerned about the hollowing out of the manufacturing sector, especially the electronics industry.”
“More importantly, Enterprise One Stop will be backed by a network of Government agencies, which will work together to provide quick and easy access to information, as well as to help resolve issues that SMEs face. The second approach that I mentioned is to work with the industry associations. We have always been working closely with the business chambers and the various industry associations. We believe that these private sector organisations, being in close touch with their members, are in a better position than the Government to reach out to the SMEs. They are also better able to identify the problems that their members face, and to deliver assistance and help their industry upgrade. As Mr Lawrence Leow mentioned yesterday, SPRING is collaborating with the key business chambers and trade associations to set up Enterprise Development Centres (EDCs). These EDCs will provide advisory and consultation services to enterprises. The Association of Small and Medium Enterprises (ASME) will launch the first EDC at the end of this month. Let me illustrate how we have worked with the various industry associations. We have worked closely with the Food Manufacturers' Association and with people in the precision engineering sector. The latest example which we can illustrate is the Singapore Furniture Industries Council (SFIC). As Members know, when the furniture manufacturers in Singapore face competitive pressures, many of them have to relocate overseas, because the cost structure in Singapore is just too high. And they banded together and went to Kunshan in China. They negotiated with the local authorities for a joint package. A total of up to 25 of their members were prepared to relocate to the same industrial estate.”
“Therefore, to envisage a single agency that can totally meet the needs of the SMEs is not realistic. I think our approach of making sure SPRING is the champion and it coordinates all the various Government agencies, so that we give a coherent and integrated package for each industrial sector, is a more workable solution. Let me give a few examples of how we are approaching this closer collaboration of the various agencies. The first example is the BrandPact programme which will be launched next month. This is a joint initiative by IE Singapore and SPRING to assist local enterprises in building up their capabilities in branding. They do so locally as well as overseas. Going forward, we can expect more of such joint programmes and initiatives. By breaking down inter-agency boundaries, we hope to address the enterprises' needs in a more customer-centric manner. Another initiative that we are embarking on to serve SMEs better is the Enterprise One Stop service that Miss Penny Low has enquired about. Let me give an update on this. SPRING has recently concluded a survey of over 400 SMEs in January to better understand their needs, and what they want out of this one-stop centre. It will conduct a pilot test of the service with a select group of SMEs some time in the middle of the year, before launching it by year-end. Knowing that we have this large client base of more than 110,000 SMEs, Enterprise One Stop will therefore have to rely heavily on technology to deliver its services. The primary mode of access will be through a web-portal. Nevertheless, it will not merely be a virtual one-stop centre. This will be supplemented with a call centre and also face-to-face consultation services for SMEs with more complex issues.”
“Therefore, we will modify our approach to work through the industrial associations, because every industrial sector has its own characteristics, and it is more sensible for us to look at the needs of the industry sector and work through the industrial associations. On the approach of making sure our assistance is integrated and seamless, we have made several changes. The two key agencies dealing with the SMEs are SPRING and IE Singapore. We have made an assessment not so long ago and we have decided to keep them separate with specialised roles to look after the many diverse needs of our many SMEs. 12.15 pm Notwithstanding all this, let me make it clear that SPRING is the overall champion for SMEs. I am indeed very happy to hear from Mr Lawrence Leow yesterday, coming from ASME, that he recognised and indeed had seen SPRING to be the "de facto champion of SMEs." SPRING recently underwent a corporate restructuring exercise to refocus its mission to "enhancing the competitiveness of our SMEs". Mr Inderjit Singh is on the Board of SPRING, and I am sure he will be able to contribute to SPRING's new focus on its mission. And I would like to assure all Members here that SPRING will be given the right level of resources to carry out its mandate effectively. Let me explain why it is not possible to have a single agency. Let us take the example of the food industry. We work closely with the food manufacturers in Singapore. There are about 300 such companies which are SMEs. SPRING is the focal point, and it gathers all the other agencies to support the food manufacturing industry. In fact, the key agencies that the food manufacturers have to deal with are AVA, NEA, WDA, and so many other agencies over and above SPRING and IE Singapore.”
“In fact, over time, we have also nurtured our own local "queen bees". One good example is Venture Corporation Limited. From a start-up founded in 1984, it has grown to become a leading global electronics services provider, offering world-class manufacturing technology and testing capabilities. Today, top Fortune 500 companies like Agilent, HP, IBM and Motorola have chosen Venture as their strategic partner for their long-term manufacturing needs. Venture has helped strengthen Singapore's position as a leading electronics hub, create spin-offs for the logistics sector and promote the growth of the local precision engineering industry. I think we can illustrate with other examples. One of the best examples that I can think of is our marine engineering industry where the "queen bees" are our local shipyard companies - Keppel Corporation and SembCorp Marine - and around it there is a whole cluster of local SMEs providing supporting capabilities and, in turn, making our whole industry one of the most competitive in the world. While we have put in much effort to develop our enterprises, I agree with Members that we can and, in fact, should do more. Here, I would like to highlight two key directions that we are moving towards in our enterprise development efforts. The first is in response to Members' suggestion about a single agency. Even though we may not have decided on a single agency, I agree with Members that our approach and our assistance programme to SMEs should be better integrated and should be more seamless. That is our first strategy. The second strategy is that when we are dealing with the SMEs, I do not think a one-size-fits-all approach works.”
“We all know that our domestic market is small. So to grow their businesses, many Singapore enterprises will need to venture overseas. Several MPs have asked how we can better help local companies tap overseas market opportunities. Mr Heng Chee How will later elaborate the various initiatives that we have put in place to help companies internationalise, including take advantage of the many Free Trade Agreements that we have signed. The third thrust of our strategy is helping local enterprises to grow into vibrant industry clusters. In developing industries in Singapore, we have always adopted this cluster approach. EDB not only anchors the "queen bee" MNCs and the large local enterprises in Singapore, but EDB also actively develops around these "queen bees" a community of supporting industries comprising mainly the SMEs. This cluster approach creates opportunities for local companies, as well as strengthens the competitiveness of our industries. Let me give Members an example. The hard disk drive industry in Singapore started with Seagate's arrival. EDB worked closely with Seagate, our first "queen bee", to identify and nurture local suppliers to support its operations. This spawned the development of our precision engineering industry and, in turn, attracted more hard disk drive manufacturers to Singapore. Today, not only are we the world's top producer of high-end hard disk drives, we also have a strong supporting industry with an annual output of $4.5 billion, and strong capabilities to support process and product innovation in Singapore. Many companies in the disk drive supporting industry are local players. Success stories include First Engineering, Jurong Tech and Metalform, and several of them have since grown to be sizable public-listed companies.”
“We estimate that more than 26,000 SMEs have benefited from these programmes over the past five years. As Members can see, the resources devoted to the SMEs are not small, and the number of SMEs that have benefited from these programmes are also not small. Dr Ahmad Magad, Mr Inderjit Singh and Miss Penny Low spoke about the demand side for the SMEs. Dr Ahmad Magad suggested that the Government should actively encourage its agencies to buy the products and services of local enterprises. The Government has indeed simplified its public procurement rules to make it easier for SMEs to compete for Government tenders by removing the track record requirement, and also by allowing SMEs to jointly bid for contracts. This will give SMEs a fair chance in supplying to Government. However, Government procurement is not a significant component of domestic demand. If Members look at the Government expenditure, if we take away the expenditure by MINDEF, if we take away the expenditure in the development programmes, the amount of money the Government spends over and above manpower cost is really not very significant. When I was in the Ministry of Finance, most of the contracts that came up to the Ministry of Finance were really joint procurement for IT services. This is a big item for Government. If we strip away all these, the Government does not procure very significantly from the domestic market. In fact, I would argue that the private sector accounts for the bulk of domestic demand, and therefore we welcome the business community to take the lead in promoting the purchase of products and services from the SMEs. I think the local business community can band together and mount a "Buy Singapore" campaign and the Government will support this campaign.”
“On the first dimension of fostering a conducive environment for businesses, we do so by keeping our taxes low, by cutting red tape, by providing excellent infrastructure, as well as developing an educated and productive workforce. Singapore is currently ranked the third best business environment in the world, and the top business environment in Asia by the Economist Intelligence Unit. We discussed how to maintain and improve on this during the debate on the Budget. I assure Members that we take this exercise very seriously and will continue to make sure that we maintain this competitive position. The second thrust of our enterprise development strategy is to provide broad-based assistance to enterprises so that they can build up their capabilities and expand their market. The Government has in place various programmes to help companies gain access to financing and upgrade their productivity and efficiency, as well as develop core capabilities in key areas such as technology, distribution, manpower training and branding. These programmes cater to the different capability needs of the enterprises at various stages of their business life-cycles, from starting up to venturing overseas. Just to give Members an example, over the past five years, some $600 million has been devoted to SME assistance - about $200 million in interest subsidies for $3.3 billion worth of loans extended to SMEs, and about $400 million in the various technical assistance and capability development programmes. This $600 million does not include the cost incurred in delivering these programmes by our various statutory boards and agencies. It also does not include the tax incentives given to local enterprises.”