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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“Among citizen employed households, the median monthly household income from work per household member increased from $1,860 in 2011 to $1,990 in 2012. This represents a 7.2% increase in nominal terms, and 2.4% in real terms. Over a longer period, from 2007 to 2012, the cumulative increase in median monthly household income from work per household member for citizen employed households was 13.9% in real terms, higher than the 7.9% in the preceding five-year period. Most deciles of citizen employed households saw higher growth in real monthly household income from work per household member between 2007 and 2012, compared to the preceding five-year period. In 2012, the Gini coefficient for citizen employed households was 0.4671. After adjusting for Government transfers and taxes, the Gini coefficient declined by 0.022 to 0.445 in 2012, reflecting the redistributive effect of Government transfers. The Gini coefficient (both before and after adjusting for Government transfers and taxes) for citizen employed households was also lower than that for resident employed households in 2012, indicating lower income inequality among citizen employed households. The coefficients for the last five years are provided in Exhibit A1. Page: 172”
“Mdm Speaker, data on total wages and profits, compiled under the income approach to measuring GDP, are only available from 1980 onwards. In the 1980s, the wage share of GDP averaged at 41.8%. This rose slightly to 41.9% in the 1990s and further to 42.5% between 2000 and 2009. Page: 12 A breakdown of the data into wages and profits for the private sector is not available due to data limitations. Nonetheless, for the economy as a whole, the ratio of wages to profits has remained broadly unchanged, averaging 0.83, 0.86 and 0.85 in the 1980s, 1990s, and between 2000 and 2009 respectively. 12.14 pm”
“Mdm Speaker, I apologise if the Member mistook what I said. I said that MTI does not find it meaningful to track a single number, comprising companies that move out or exited, as that was her question. As I mentioned just now in the reply to Mr Seah Kian Peng, we continue to have broad environmental scanning to know what is the situation, both forward-looking as well as anecdotal evidence. More importantly, we track by sectors because the conditions in each sector differ. Companies may be restructuring or moving up the value chain. We do track this. We also have broad economic numbers like the number of companies that are coming in and the number of companies that are going out. But as Members can well imagine, such macro numbers are also not very meaningful because it forms a very broad number. If we are looking at these numbers, then the number of foreign companies that have come to Singapore is much larger than the number exiting. That does not give us very much comfort because we need to go down several levels deeper. We also track, together with MOM, retrenchment figures which give us an idea of which companies are exiting and closing down and, therefore, workers have to be retrenched. We do this general awareness monitoring but the Member asked for a specific number of what companies are coming in or exiting, and which companies are downsizing. There are too many noises in those changes. So, we prefer to do so sectorally, and every sectoral division in EDB, IE Singapore, SPRING and MTI have a good awareness of what are the changes happening in that sector. Page: 11”
“We will Page: 10 continue our efforts to build higher value and more sophisticated manufacturing and services clusters to ensure our economy provides good jobs for our people and is diverse and resilient.”
“Mdm Speaker, companies may choose to exit or downsize their operations in Singapore for various reasons. At the firm level, companies may restructure and consolidate their global operations as a result of changes in company strategy, business model or finances. Companies are also affected by the macroeconomic environment – for instance, companies in export-oriented and cyclical industries, such as the electronics sector, may decide to downsize during the industry down-cycle. At the industry level, the profile of companies will change as our clusters move up the value chain and undertake more complex, value-adding and innovation-driven activities from Singapore. Such economic and industry transformation has been a continual process in Singapore's economic history. MTI does not find it very meaningful to specifically track a single factor such as the number of foreign companies that have exited or decided to scale down their operations here. MTI's key focus is to ensure that Singapore's business environment remains globally competitive, and that we continue to attract and anchor the right investments and economic activities into Singapore. We are mindful that significant changes in our domestic business environment, such as the foreign worker policy, can impact companies and businesses adversely, and will make it more challenging for Singapore to maintain its global competitiveness. Therefore, as we continue to restructure and transform our economy amidst the current tightened manpower resource considerations, we will continue to carefully pace out and calibrate the changes to ensure that the business environment in Singapore remains attractive and globally competitive.”
“Mdm Speaker, as Members can see, the benchmarks tend to be backward looking because they assess the situation up to now. What we need are more leading indicators or more forward-looking indices. We do not have these in a systematic way. So, what EDB and many the MTI agencies do is to collect anecdotal evidence from our discussions with companies, Page: 9 Embassies, business groups, and with business chambers and federations. They also track media reports and some analysts' assessments. These give us cause for concern because while we are having these internal debates, the discussions going on may give a wrong impression or misimpression. So, we are very watchful and continue to monitor this very carefully.”
“Mdm Speaker, the Business Environment Risk Intelligence (BERI) produces one of the most established reports benchmarking business and political risk, known as the Business Risk Service report (BRS). Singapore has been ranked first among 50 countries benchmarked in the BRS composite index from 2010 to 2012, reflecting the soundness of our operating environment for businesses, political risk profile and foreign exchange and external accounts' positions. For the preceding two years from 2008 to 2009, Singapore was a close second to Switzerland. As a component of the overall index, the BRS produces a separate index for political risk. Singapore has been ranked first for this component, which examines both internal and external sources of political risk, for all five years up to 2012.”
“There are also existing schemes and programmes – such as MDA's Talent Assistance Grant Scheme and the Media Education Scheme – which provide students and media practitioners with opportunities to further their studies in reputable local and overseas universities and take on apprenticeship stints with global media players. We are confident that these programmes will be able to provide the talent pool for our arts and media industry. Overall, the Global Schoolhouse initiative has been successful in helping to build Singapore’s brand name in education and provide courses which meet the manpower development needs of our economy. EDB has thus far attracted 11 renowned foreign tertiary institutions to set up independent branch campuses in Singapore. These include French business school INSEAD, the Technical University of Munich as well as the Digipen Institute of Technology2. EDB remains committed to developing the education sector to support the manpower and talent needs of our economy. Through the Global Schoolhouse strategy, EDB will continue to attract top foreign universities that can Page: 147 complement our local tertiary education landscape and develop and retain talent that the Singapore economy needs.”
“We regret Tisch Asia's decision to pull out, but recognise that this was a decision made after careful consideration by NYU. Investors know their business better than the Government and are in the best position to assess the viability of their plans. There will be specific circumstances that affect the Page: 146 viability of a school’s operations in Singapore. Our role is to facilitate and support projects where there are benefits for Singapore, while ensuring that public monies are used judiciously and that processes are in place to monitor the progress of these projects. EDB provided Tisch Asia with a level of support that was commensurate with the anticipated benefits of having the school in Singapore. To date, EDB has disbursed S$11.68 million in loans and S$5.3 million in grants to Tisch Asia. EDB stopped disbursements when it realised that Tisch Asia was facing financial difficulties. EDB is in close discussions with NYU on the details of the loan repayment. A total of 21 Singaporeans and PRs are enrolled at or have graduated from Tisch Asia. NYU has confirmed that Tisch Asia will continue to operate at its campus until 2015 when all existing students in Singapore complete their programmes. This means that no existing students will have their Master’s programme disrupted. While we regret the loss of Tisch Asia from our arts and media education landscape, there are other institutions which offer quality arts and media education catering to industry needs in Singapore. These institutions include the Nanyang Technological University (NTU), the LASALLE College of the Arts and the Nanyang Academy of Fine Arts (NAFA) as well as Polytechnics and private schools which offer specialised programmes for media practitioners.”
“Tisch School of the Arts Asia (Tisch Asia) was set up by New York University (NYU) in 2007 under EDB's Global Schoolhouse initiative. The Global Schoolhouse initiative aims to develop Singapore into an education hub offering a diverse mix of quality education services to the world and to build industry-relevant manpower capabilities for our economy. Tisch Asia has enhanced the scope and diversity of Singapore’s education landscape and the vibrancy of our arts and media scene. Several Tisch Asia graduates have received international recognition and awards1. Local talents, such as Adeline Foo, author of "Diary of Amos Lee", and Wee Li Lin, filmmaker and recipient of the Honorary Award at the Singapore Short Film Awards, are Tisch Asia alumni. Furthermore, Tisch’s links with influential international practitioners allowed Tisch to bring them in to teach and conduct workshops at Tisch Asia. Tisch Asia was established on the basis that it would be financially sustainable after a few years. However, the school faced financial challenges in its operations in Singapore. Its revenues turned out to be lower than projected while its costs exceeded projections due to factors, such as the appreciation of the SGD against the USD and the construction boom in 2007. To address this financial gap, NYU contributed over S$20 million in subsidies to Tisch Asia from 2007 to 2011. EDB worked closely with NYU and various stakeholders to explore options for the long-term sustainability of Tisch Asia's operations. EDB and NYU considered fund-raising and the establishment of an undergraduate programme. Unfortunately, none of these options were viable or sustainable, and Tisch Asia made the difficult decision to close down.”
“Going forward, our position as a Global-Asia Hub – where international companies can access opportunities in Asia and Asian companies can expand beyond their domestic markets – as well as our strong fundamentals, such as our highly skilled workforce and excellent connectivity, will continue to put us in good stead to attract high-value manufacturing investments. At the same time, we will continue to encourage exports directly by facilitating market access for local companies. Besides pursuing good-quality Free-Trade Agreements (FTAs) with key economic partners such as the EU and members of the Trans-Pacific Partnership, we have also increased our economic linkages with emerging economies in South Asia, the Middle East, Sub-Saharan Africa and Latin America. These strategies will help to keep our manufacturing sector and the overall economy competitive and resilient. Page: 131”
“Singapore’s sluggish performance in exports and industrial production was largely due to the challenging external economic conditions. In particular, exports to developed economies such as the US and Page: 130 EU were weighed down by the slow growth of these economies. Other East Asian economies that export to these markets, such as South Korea and Chinese Taipei, were similarly affected. While the small and open nature of our economy has made us vulnerable to swings in global economic conditions, international rankings indicate that our economy remains competitive. For example, Singapore maintained its position as the second-most competitive nation globally, after Switzerland, in the 2012 Global Competitiveness Index by the World Economic Forum. In addition, according to a 2012 report by the Economist Intelligence Unit, Singapore is the third-most competitive city in the world, after New York and London. Our manufacturing sector also remains attractive to investors. In 2012, fixed asset investments totaled S$16 billion, a 17% increase from the preceding year. Furthermore, rather than a hollowing out of businesses, net business and company formation in the manufacturing sector rose by 14% year-on-year in the first three quarters of 20121. Beyond investor interest, industrial production has been supported by our diversified manufacturing base, which limits the impact of global industrial shocks. For instance, the electronics cluster's weak performance in 2012 was offset by strong growth in the biomedical manufacturing and transport engineering clusters.”
“Entrepreneurs who subsequently start up new ventures can tap on various Government schemes, such as SPRING's Start-up Enterprise Development Scheme14 (SEEDS) programme and the Technology Enterprise Commercialisation Scheme15 (TECS), to help grow their business ideas.”
“The GDP contribution from the Food and Beverages (F&B) sector has remained at approximately 1.3%11 from 2001 to 2011. Over the same period, the number of F&B establishments grew from 4,185 in 2001 to 6,453 in 2011, an increase of 54%12. The total employment in this sector grew from around 91,000 to 175,000, with the proportion of foreign workers increasing from slightly below one in six in 2001 to around one in three currently13. The growth in the number of foreign workers employed in the F&B sector was strongest from 2005 to 2008, when the economic outlook was favourable and F&B businesses expanded rapidly. A vibrant F&B sector is important for Singapore to remain an attractive city in which to live, work and play. However, while the growth of this sector has created more jobs for Singaporeans, it has also led to a significant increase in the number of foreign workers. This is unsustainable. Under the productivity roadmap for the F&B sector, the Government has, therefore, set aside $75 million to help businesses improve productivity and reduce their need for foreign workers. One initiative under this roadmap is SPRING's Part-Time Pool Page: 154 Programme, which will help F&B establishments tap on a pool of trained part-timers for deployment during peak service hours. In addition, to encourage corporate restructuring, the Government provides an allowance of up to $5 million for all qualifying share acquisitions in the basis period for each Year of Assessment under the Mergers and Acquisitions (M&A) scheme. Businesses that cannot restructure and adapt to the new operating environment may eventually close down.”
“Singapore and the European Union (EU) concluded negotiations for the EU-Singapore Free Trade Agreement (EUSFTA) on 16 December 2012. Bilateral trade agreements, such as the EUSFTA, open new markets for goods and services, and reduce barriers to trade. Being a small and open economy, FTAs are an integral part of Singapore's trade architecture. Our trade relations are well diversified, and our broad network of bilateral and multilateral FTAs connects us to both mature economies and new markets. There is no evidence to suggest that trade agreements make countries more susceptible to external financial crises. Although the EU as a whole continues to face severe economic challenges, the EU is still Singapore's second largest trading partner globally, and our bilateral trade with the EU grew Page: 153 by 22% between 2009 and 2011, even as the EU was in economic crisis10. The EUSFTA will further enable Singapore companies to tap into the various EU markets and continue to grow our trade with the EU. Finally, contagion from financial crises is typically spread through the financial channels, such as links between banks. These risks can be mitigated through robust financial regulations and prudential requirements.”
“This means that no existing students will have their Master's programme disrupted. Page: 151”
“To plug this financial gap, NYU contributed over S$20 million in subsidies to Tisch Asia from 2007 to 2011. NYU eventually concluded that Tisch Asia's Masters of Fine Arts programme was not financially sustainable on its own. EDB worked closely with NYU and various stakeholders to explore options for the long term sustainability of Tisch Asia's operations. Unfortunately, none of these options was viable, and Tisch Asia made the difficult decision to close down. We regret Tisch Asia's decision to pull out, but recognise that this was a decision made after careful consideration. Investors know their business better than Government and are in the best position to assess the viability of their plans. Our role is to facilitate and support projects where there are benefits for Singapore, while ensuring that monies are used judiciously and that processes are in place to monitor the progress of these projects. EDB provided Tisch Asia with a level of support that was commensurate with the anticipated benefits of having the school in Singapore. To date, EDB has disbursed S$11.68 million in loans and S$5.3 million in grants to Tisch Asia. EDB stopped disbursements when it realised that Tisch Asia was facing financial difficulties. EDB is in close discussions with NYU on the details of the loan repayment. On the Member's question about the financial support given to the University of New South Wales Asia, EDB had provided S$15 million in loans and S$17.5 million in grants. This was reported to this House on 16 July 2007. Our key priority following NYU's decision is to ensure minimal disruption to the education of the affected students at Tisch Asia. NYU has confirmed that Tisch Asia will remain open at its campus until 2015 and will teach out all existing students in Singapore.”
“The Global Schoolhouse initiative was launched in 2002 to develop Singapore into an education hub which offers a diverse mix of quality education services and builds industry-relevant manpower capabilities for our economy. Overall, the Global Schoolhouse initiative has been successful in helping to build Singapore's brand name in education and provide courses which meet the manpower development needs of our economy. EDB has thus far attracted 11 renowned foreign universities to set up independent branch campuses in Singapore. These include French business school INSEAD (ranked 5th in the Global MBA Rankings), the Technical University of Munich (ranked top university in Germany), as well as Tisch School of the Arts Asia (Tisch Asia) (ranked 4th globally on Hollywood's 2011 list of Best Film Schools). At the project level, however, there may be specific circumstances that affect the viability of a school's operations in Singapore. Tisch Asia was set up by New York University (NYU) in 2007. Its presence has enhanced the scope and diversity of our education landscape and the vibrancy of our media and arts scene. Tisch Asia's students and graduates have received international recognition and awards, and the school has brought in several renowned industry practitioners to teach and conduct workshops in Singapore. Tisch Asia was established on the basis that it would be financially sustainable after a few years. However, over time, the school realised that its revenues were lower than projected while its costs exceeded earlier projections, mainly due to exogenous factors, such as the appreciation of the Singapore Page: 150 dollar (SGD) against the US dollar (USD) and the construction boom in 2007.”
“Apart from consultancy support, the Government also offers various schemes for SMEs to build up capabilities and improve productivity, so that they can restructure, reduce dependence on manpower, and achieve more sustainable growth. For example, SPRING and IE Singapore offer a suite of capability development schemes that companies can tap on. These schemes cover a wide range of areas, such as branding, technology adoption, innovation and service quality. Last year, we increased the grant subsidy rate for these schemes from 50% to 70%, for three years. Yes, we will consider initiatives to help SMEs as part of the Budget exercise. Page: 114”
“SMEs that need help to identify opportunities for productivity improvements can seek assistance from the Enterprise Page: 113 Development Centres (EDCs). At these centres, Productivity Management Programme advisers conduct workshops to introduce productivity concepts to SMEs, help SMEs assess their productivity performance and advise SMEs on productivity improvement plans and implementation. SMEs can also tap on SPRING's Innovation & Capability Voucher (ICV) to engage consultants to help them upgrade their capabilities in innovation, productivity, human resources and financial management. The Government also recognises that some SMEs may need more specialised and in-depth consultancy support, and has set up productivity centres to address the challenges faced by each sector. Two productivity centres have been set up for the Construction and Manufacturing sectors. A third centre for the Services sector, initially focusing on Retail and Food Services, will be launched this year. These three and future centres conduct industry-specific productivity diagnosis and improvement projects. They also train and develop productivity consultants and managers to facilitate the adoption and implementation of productivity initiatives. In addition, we are building up a pool of industry-specific productivity consultants. SPRING has engaged the Japan Productivity Centre (JPC) to develop and train productivity consultants for the local Retail and Food Services sectors, which comprise mostly SMEs. The Building and Construction Authority (BCA) will also introduce a training course to educate small builders and subcontractors on construction productivity.”
“The Regional Comprehensive Economic Partnership (RCEP) is a 16-party free trade agreement that was launched by the Leaders of the Association of Southeast Asia Nations (ASEAN) and the ASEAN FTA Partners of Australia, China, India, Japan, Korea and New Zealand at the 21st ASEAN and Related Summits in Phnom Penh, Cambodia. The negotiations are expected to commence in early 2013 and the aim is to conclude them by end-2015. The Senior Economic Officials from the RCEP Participating Countries will be meeting in early 2013 to finalise the terms of reference (TOR) for the Trade Negotiating Committee (TNC) as well as the work plan for the negotiations. Along with the Trans Pacific Partnership (TPP), the launch of the RCEP negotiations is a significant milestone for deeper regional economic integration, and a possible pathway to a free trade area of the Asia-Pacific.”
“The Government remains fully committed to the national effort aimed at driving productivity improvements across our economy, at the sector, firm and worker level. The National Productivity and Continuing Education Council (NPCEC) has endorsed a comprehensive range of broad-based schemes and sectoral roadmaps to meet the unique needs and challenges in 16 priority sectors. The take-up rate of the various productivity initiatives has been encouraging and there is some early progress on the ground. One example is in the retail sector. The retail productivity roadmap has supported various productivity and services upgrading projects from over 200 retailers. 185 CEOs and productivity managers have been trained under the various projects, and 14,000 workers were trained in collaboration with WDA. For example, Nanyang Optical used to rely on feedback and gut feel to manage inventory. In addition, collection of information was slow and tedious as many employees had to be involved in data entry. With support from SPRING’s Capability Development Scheme (Technology Innovation), Nanyang Optical implemented an IT system Page: 109 which improved the company’s inventory management and sales forecasting ability. Our key task ahead is to drive even more companies to take up the range of productivity initiatives that have been put in place. We will continue to keep our programmes relevant and effective for companies, as well as introduce new initiatives to keep pace with evolving needs on the ground. We will also help SMEs to navigate our schemes and apply for those that best fit their needs.”
“The Singapore Business Federation (SBF) had commented that the Government’s target of 2% to 3% productivity growth per annum over this decade is ambitious as most developed economies usually experience slower productivity growth averaging 1% to 2%. Page: 108 In 2010, the Economic Strategies Committee had recommended, and the Government had agreed to set a stretch target of 2% to 3% productivity growth per annum over this decade. This target was set after a decade of low productivity growth of just 0.8% per year between 2000 and 2009. In contrast, our productivity growth was 3% per year in the 1990s and 5% per year in the 1980s. As productivity measures are sensitive to economic cycles, we have to take a long term view towards achieving our target. If we are able to achieve 2% to 3% per annum productivity growth by 2020, offsetting the weak performance of the last decade, our average productivity growth from 2000 to 2020 would be 1.5% to 2% per annum. Seen over the long term, our productivity target is challenging but not overly ambitious. There is potential to transform practices and improve our productivity in several key sectors, such as construction, food services, food and furniture manufacturing. The productivity of these sectors lags significantly behind that of advanced economies. For example, productivity in our construction sector is 70% lower than that of Japan while productivity of our retail sector is less than half that of comparable global cities such as New York and London. If companies in these sectors are able to adopt the best-practices and technologies used in developed countries, and move up the value chain, we can close the gap and achieve significant productivity gains.”
“To take full advantage of our regional trade agreements, we should increasingly see many companies locating the different parts of their production and supply chain throughout the region. Therefore, we need to tweak the IIA to respond to this new reality. Again, this would be used very sparingly to make sure that the appropriate value-added activities are located in Singapore before these companies can qualify for the IIA. [(proc text) Question put, and agreed to. (proc text)] [(proc text) Bill accordingly read a Second time and committed to a Committee of the whole House. (proc text)] [(proc text) The House immediately resolved itself into a Committee on the Bill. – [Mr Lim Hng Kiang]. (proc text)] [(proc text) Bill considered in Committee. (proc text)] [Mdm Speaker in the Chair]”
“Mdm Speaker, I thank Member Low Yen Ling for her very thoughtful comments. I just want to reiterate the key point that she made and that is that even as we tweak the tax incentive regime, in the end, we have to depend on our basics, our ability to compete in order to attract investments. Hence, we have to depend on our regulatory system, our policy certainty, our human capital, our competence, our education. These are the basics. What we are addressing today is adjustments to the tax incentive scheme to make ourselves more effective. Let me address the three points that she raised. First, on the expansion of the tax incentive period from 20 years to 40 years. I would like to assure the House that this extension of a longer period would be used extremely sparingly, and this is only meant for companies that show commitment to the long-term development of their future in Singapore. To track their growth and commitments in Singapore, we would have intermediate milestones and intermediate targets. So the extent to which the tax regime would be extended would depend on them meeting these commitments and intermediate milestones. The second point is DEI for homegrown companies. This is clearly also extended to our homegrown companies. We encourage our homegrown companies to take full advantage of the development expansion incentives. In particular, I agree with Member Low Yen Ling that we should try to encourage our local companies to undertake more R&D, to build up their intellectual property capital and to be able to compete in the future. Page: 103 The third area is the application of the Integrated Investment Allowance (IIA). This is to recognise the reality of regional production chain and regional supply chain. We cannot expect everything to be done out of Singapore.”
“Clause 5 of the Bill repeals and re-enacts Part XIIID of the Economic Expansion Incentives Act (EEIA) to give legislative effect to these changes. The second major change is to extend the tax relief period of the Development and Expansion Incentive. The Development and Expansion Incentive (DEI) was introduced in 1996. It currently stipulates a maximum DEI period of 20 years. The intent of the DEI is to encourage companies which engage in high value-added activities to operate in Singapore. To further incentivise these companies to continue to grow in Singapore and use Singapore as the home to expand their activities regionally or globally, we will lengthen the maximum possible incentive period from 20 years to 40 years. This will allow our economic agencies greater flexibility to calibrate the DEI incentive period to be commensurate with the scale and scope of companies' incremental commitments and activities in Singapore. Clauses 2 to 4 of the Bill amend sections 19K and 19KA of the EEIA to give legislative effect to this enhancement. Page: 100 The remaining legislative changes arising from our periodic review of the income tax system are related to improvements in tax administration. Mdm Speaker, the proposed changes to the Economic Expansion Incentives Act seek to stimulate more economic activities in Singapore. These changes also reflect the Government's commitment to monitor the effectiveness of our tax incentive regime and to keep it competitive and relevant as economic conditions change. Mdm Speaker, I beg to move. [(proc text) Question proposed. (proc text)] 6.03 pm”
“Mdm Speaker, I beg to move, "That the Bill be now read a Second time." The Economic Expansion Incentives (Relief from Income Tax) (Amendment) Bill 2012 comprises legislative amendments for a key income tax change announced in the 2012 Budget Statement as well as other amendments for improving tax administration arising from the regular review of our tax incentive regime. Page: 99 Let me draw Members' attention to the two key tax changes contained in the Bill. The first change is to replace the Integrated Industrial Capital Allowance scheme with an Integrated Investment Allowance scheme. The Integrated Industrial Capital Allowance (IICA) scheme was introduced in 2003 in recognition that many companies site their operations across geographical boundaries. The IICA scheme allows a Singapore-based company, which carries out an approved project, to claim capital allowance for qualifying equipment that it leases to a wholly-owned subsidiary outside Singapore, provided that the equipment is used solely in connection with the Singapore business. The Integrated Investment Allowance (IIA) scheme was introduced in Budget 2012 to replace the IICA scheme. This change was made to ensure that our tax incentive scheme stays competitive and keeps pace with the evolving business environment. Compared to the IICA scheme, the IIA scheme provides an additional allowance on top of capital allowance for qualifying equipment. Furthermore, the equipment placed overseas need not be leased to a wholly-owned subsidiary of the Singapore-based company. This allows companies more flexibility in how they structure their overseas operations to support the activities that they carry out in Singapore.”
“Sir, at the risk of repeating myself, we have gone through this debate several times. JTC has decided to take itself out of the market because 80% is done by the private sector, 20% by JTC. JTC tenants have a very unfair advantage in that they are getting subsidised rents from JTC. It is not a level playing field. By the Government's "Yellow Pages" rule, we had decided to get out. It has taken us several years to stage the divestment such that it has minimal impact on the sector. Page: 1446”
“Sir, maybe I did not make it clear in my reply. If you stop anybody from renting, and say that SMEs can only avail themselves of factory space only if they own it, that would be a very severe requirement. It would mean all SME industrialists, whenever they want to start their businesses, must make sure they have the financial resources to buy and own their premises before they can start. Today, they can have the option of renting, which means they lower their upfront cost. They do not have to put money into such a big asset, as buying their own premises. That is a very serious implication.”
“Sir, I wish to clarify that the data that I gave earlier is for multiple-user factory space. As the Member knows, the industrial space in Singapore is divided into several categories. One is the single-storey factory where JTC either sells or rents the land and the factory owner then builds his own factory. That constitutes 55% of our overall industrial land space. That is the bulk. Most of our big factories and some of our SMEs buy standalone, single unit factories. They can either rent or sell, and the price, as I mentioned earlier, is pegged to a competitive slate of international prices. So, we ensure that the land prices for space that JTC allocates are competitive. Page: 1445 Of the overall industrial space, about one quarter is multi-storey factory space. That is the segment that JTC has decided that it would not own or rent out on its own. It would just sell the land, because there is a very thriving private sector market. As I mentioned in Parliament several times, even at the peak 10 years ago, JTC's market share of multi-storey, multiple-user factories is less than 20%. So there is no reason for JTC to be competing with the private sector. The data that I had given just now are for multi-storey, multiple-user factories, where REITS and developers constitute 27% of that segment.”
“Mr Speaker, Sir, there are currently no restrictions on the purchase of industrial properties by investors. Introducing such restrictions will have significant impact on businesses. Not all industrialists want to buy industrial space. Some industrialists prefer a rental arrangement, which gives them greater business flexibility. Others may choose not to commit higher upfront financial resources to own their properties. MTI ensures that there is sufficient space for industrialists to either buy or rent industrial space. Long-term investors play an important role in the business ecosystem. They rent out the space they buy to the users, the industrialists. Allowing investors to participate in the industrial property market provides options for our industrialists, reduces the upfront capital costs for businesses and keeps rentals competitive.”
“We are monitoring this. We do not have specific data for people to declare when they purchase industrial land, whether they are foreigner or local. So, we would have to start collecting the data. But as we all know, from anecdotal evidence – and this is the answer that I will give to the Member for the second question that he has filed – 60% of factory space that is rented out is used by industrialists who rent the space; 40% is owner-occupied, which means SMEs who buy the premises and then use it for their own purposes. For the 60% who rent, 15% or more comes from JTC and HDB; another 17%-18% comes from small owners, and the remaining 27% comes from the big developers or REITs. So, the Member can see that even if the foreign investments come in, they would be classified under the bigger owners – either REITs or developers – it is not a very big percentage. Page: 1444”
“On this, we are taking enforcement action and deterring people from allowing such non-industrial uses to creep in.”
“Mr Speaker, as I mentioned in my reply just now, there are two things that we have to watch. One is industrial land rentals, and the other is industrial land prices. As Members can see, there seems to be a divergence. Land rentals have not increased as sharply as land prices. Land prices have gone up – as Mr Inderjit Singh said – very sharply over the last three years. But if we look at land rentals, they have gone up by 30% over the last three years. If we look at the longer period, land rentals have been very flat from 2002 to 2007. There has been a pick up since then. When we look at industrial land, which is where the majority of our SMEs rent their premises, then we are watching very carefully. I do recognise that industrial land prices have gone up sharply. For us, we track our competitiveness very closely, in terms of our land prices and rentals, vis-a-vis alternatives in the surrounding countries and a suite of competitive locations. So, we continue to track and we continue to feel that our land prices and rentals are competitive, based on these competitive locations that we are tracking. Next, the question on industrial land use. Industrial land cannot be converted to non-industrial use. This is something that is very clear. We have very limited land zoned for industrial use, and URA and JTC do not allow the land to be converted to non-industrial use. What I referred to was infiltration of non-industrial uses in factory space. As Members know, sometimes, in a factory, we allow a 60-40 rule, meaning 60% industrial use, and 40% ancillary use. Ancillary use means supporting services or offices that are related to the industry. Sometimes, there could be infiltration in the ancillary uses being sublet to other non-industrial users.”
“Mr Speaker, URA's rental index for industrial property rose by 1.2% in the third quarter of 2012, moderating from the 2.8% increase in the previous quarter. This likely reflects a moderation in underlying demand for industrial space relative to supply, which has increased in recent quarters. However, industrial property prices continued their upward trend in the third quarter of 2012. We will release sufficient land through the Industrial Government Land Sale (IGLS) Programme to meet the needs of industrialists and moderate prices and rentals. We have also started to release smaller IGLS land parcels with shorter tenure, targeted at SMEs that require customised land-based facilities at more affordable prices. In addition, we will continue with our enforcement efforts to ensure that industrial space is not misused by non-industrial users, which may also have contributed to the increase in industrial prices and rentals.”
“URA’s price index for industrial property rose by 26.7% in the first three quarters of 2012. This exceeded the 1% increase in private residential prices over the same period. In general, prices for private residential properties have been moderating since the imposition of cooling measures in September 2009. This may suggest a shifting of some investment interest from the private residential market to the industrial property market. We will continue our efforts to moderate both prices and rentals for the industrial property market. We will release sufficient land through the Industrial Government Land Sales (IGLS) programme to meet the needs of industrialists. We have also started to release smaller IGLS land parcels with shorter tenure, targeted at SMEs that require customised land-based facilities at more affordable prices. In addition, we will continue with our enforcement efforts to ensure that industrial space is not misused by non-industrial users, which may also have contributed to the increase in industrial prices and rentals. Page: 1430”
“EDB will continue to build closer links between research, practice and teaching, and encourage corporations and academia to work together to build manpower capabilities. This will contribute to our overall objective of developing and retaining talent in Singapore. Page: 1013”
“The private education sector has seen significant consolidation after the establishment of the new regulatory regime under the Private Education Act in 2009. However, while the number of private education institutions has fallen by half since 2009, international student enrolment in the sector has decreased only by about 11%3. The industry consolidation, coupled with more stringent regulatory standards, has generally benefited students as well as the education sector as it has ensured that baseline standards are achieved across the industry. Since 2009, the Global Schoolhouse initiative shifted its focus towards building industry-relevant manpower capabilities and helping to attract, develop and retain talent for our economy as global competition for talent has intensified. EDB has, therefore, encouraged the introduction of programmes which are relevant to our economy, such as TUM's Master of Science in Transport and Logistics and its joint Master of Science in Aerospace Engineering with NTU. In addition, EDB has worked with companies to bring in leadership centres and training programmes for corporate executives. For example, Sony and Unilever have set up the Sony University and Unilever Four Acres Singapore respectively to conduct leadership training for their global and regional executives. Swiss bank UBS also has a wealth management campus in Singapore which provides training for its wealth managers here. Going forward, while the education sector remains an important part of our economy, the Global Schoolhouse initiative will emphasise quality of education and relevance to the economy, and not student numbers or GDP share.”
“The Global Schoolhouse initiative was launched in 2002 to develop Singapore into an education hub offering a diverse mix of quality education services to the world. Three key thrusts were identified under the Global Schoolhouse initiative – first, for the education sector to be an engine of economic growth; second, to build industry-relevant manpower capabilities for the economy; and third, to help attract, develop and retain talent for the economy. The Global Schoolhouse initiative has helped to grow the scope and diversity of our education landscape. For instance, the Economic Development Board, or EDB, has attracted leading institutions, such as French business school INSEAD and the Technical University of Munich, or TUM, to set up and grow their presence in Singapore. The Global Schoolhouse initiative also saw collaborations between foreign and local universities to offer joint academic programmes, such as the joint Executive MBA between Shanghai Jiao Tong University and the Nanyang Business School, as well as the Waseda-Nanyang double MBA. The presence of these Global Schoolhouse institutions in Singapore has helped to build Singapore's brand name in education. Page: 1013 As at July 2012, there were approximately 84,000 student pass holders in Singapore. The majority of these students, or about 68%, are in tertiary institutions, with the remaining 32% in pre-tertiary institutions. The breakdown of enrolment in public and private institutions is fairly even, with about 48% in private education institutions2 and 52% in public institutions. In terms of the economic contributions of the sector, as at December 2011, the education sector contributed 3.2% to our GDP and its share of total employment was 2.7%, equal to 86,000 jobs.”
“The National Productivity Fund (NPF) provides long-term support for productivity and continuing education initiatives and strategies over 10 years, starting from 2010. To date, about $950 million has been committed from the NPF to support a wide range of productivity programmes. These programmes have benefited about 5,700 companies so far. Page: 922”
“As the Minister for National Development mentioned in his answer earlier, we do face these problems and we have to manage these through macro prudential policy changes. Page: 810”
“Mr Speaker, Sir, the MAS just issued its monetary policy statement on Friday. And in its statement, the MAS explains quite clearly this balance of risks that the hon Member talked about. On the economic growth side, even though the external environment presents very strong headwinds to Singapore, we expect that we will end the year still within the range that we had forecasted, between 1.5% and 2.5%, and that, next year, our growth rate will be below our potential but we will still continue to enjoy modest growth. We can achieve between 1.5% and 2.5% this year, and similar rates next year. We are not heading into a recession, technical recession notwithstanding. On the other hand, the risk of inflation is significant. MAS, in its monetary policy statement, explained that the headline "Inflation" or what we call "CPI- All Items" inflation rate will come in at slightly over 4.5% this year. For next year, the projection is between 3.5% and 4.5%. So, this is still significantly high inflation, by Singapore's inflationary experience. If you look at core inflation rate, it is still on the high side. MAS estimates that our core inflation will come in at about 2.5% this year, and between 2% and 3% next year. So, to keep this balance, MAS has decided to maintain its gradual and modest appreciation in order to keep this inflation risk at bay.”
“It also provides a stable and conducive environment for businesses to undertake long-term investments, thus enhancing competitiveness and providing the basis for sustained economic growth. Given that Singapore's labour market remains healthy, with strong employment creation and a low unemployment rate, there is no immediate need for the Government to step in with measures to cushion the economy from the slowdown in external demand. However, the Government will continue to keep a close watch on developments in the global economy and stands ready to respond when appropriate.”
“For example, the increase in foreign worker levies will be implemented in several phases from 2010 to 2013, while companies have also been given up to two years to comply with the new Dependency Ratio Ceiling requirements, which came into effect on 1 July 2012. Furthermore, measures have been put in place to provide support to companies, especially our SMEs, to raise their productivity to cope with the tighter manpower situation. These include tax credits to encourage productivity and innovation-related expenditures, as well as funding support for employee training. Over the medium term, the economic restructuring efforts to raise productivity and reduce reliance on foreign workers will help to sustain Singapore's economic competitiveness. Mr Speaker, Sir, the strengthening of the Singapore dollar is a key macro-economic policy tool to keep inflation in check over the medium term. The Monetary Authority of Singapore (MAS) recognises the need to strike the right balance between ensuring exporters are not unduly hurt by a stronger currency in the short-term, and capping underlying price and cost pressures in the economy. However, the exchange rate cannot be used as a tool to manage Singapore's export competitiveness. Over the longer term, competitiveness can only be achieved through higher productivity and innovation, such as creating new products that the market demands. The trend appreciation of the Singapore dollar exchange rate is in line with our economic fundamentals. It keeps inflation low and stable, which helps to preserve the purchasing power of Singaporeans' income and savings.”
“Mr Speaker, Sir, Singapore did not enter a technical recession in the third quarter of 2012. Based on advance estimates, the Singapore economy contracted by 1.5% in the third quarter on a quarter-on-quarter seasonally adjusted annualised basis. However, the second quarter GDP growth was better than expected, resulting in an upward revision from the preliminary estimates of -0.7%, to 0.2%. The revision was due to new data from the construction sector, which showed much stronger growth than originally estimated for the second quarter. While we have avoided two consecutive quarters of decline, economic growth for the first three quarters of 2012 was very modest, at 1.7% on a year-on-year basis. The muted economic growth was largely due to the challenging global economic conditions, which slowed our export growth and caused our current account surplus to decline. Other Asian economies like South Korea, Chinese Taipei and Hong Kong were also similarly impacted by such external headwinds. Despite the sluggish economic performance, Singapore remains internationally competitive. In the 2012 World Economic Forum's Global Competitiveness Index, Singapore maintained its ranking at the second position. In addition, according to a recent report by the Economist Intelligence Unit, Singapore is the most competitive city in Asia, and third globally, after New York and London. Page: 809 Amidst the weak economic environment, the Government is mindful of the challenges faced by businesses and has, therefore, calibrated the pace of economic restructuring to a rate at which businesses can adjust.”
“Mr Speaker, Sir, may I have your permission to take Question Nos 5 and 6 together?”
“As Members are aware, India and ASEAN concluded the Trade in Goods Agreement a couple of years ago and we are in the process of negotiating the services and investment chapters of the agreement. We are making good progress. There have been some hold-ups bilaterally between India and some ASEAN member countries, but, more recently, some of these are being resolved. So, again, we are hopeful that we can conclude this at the end of this year. On the bilateral implications of the CECA, I think this has been generally positive. If you track the growth of trade, it has been very robust between India and Singapore since we concluded the CECA. Similarly, investment flows have been very good bilaterally between our two countries. Page: 722”
“Unfortunately, the review is taking longer than expected to conclude, but both sides are committed to concluding the Review by the end of this year. Page: 722”
“Mr Speaker, Sir, our economic relations with the EU and India are well-established, and both countries are important markets for our companies. The launch of the EU-Singapore Free Trade Agreement (EUSFTA) and the on-going second review of the Comprehensive Economic Co-operation Agreement (CECA) with India reflect the interest of Singapore-based companies in these markets, and vice-versa. The EU-Singapore FTA negotiations were launched in December 2009, and 11 rounds of negotiations have been held so far. The negotiations cover the full range of issues typically covered in a high-quality and comprehensive FTA. These include trade in goods and services, investment, competition policy, intellectual property rights, non-tariff barriers to trade, government procurement and sustainable development. Negotiations have gone well and are now in an advanced stage. There are a few outstanding issues which both sides are working hard to resolve. Both the EU and Singapore remain hopeful that the negotiations can be concluded later this year. The Comprehensive Economic Co-operation Agreement (CECA) was concluded between Singapore and India in 2005. The agreement provides for a review mechanism that allows both sides to update and improve the agreement to maintain its relevance to businesses. The key outcomes of the first review concluded in 2007 resulted in improvements in the ability for Singapore-based companies to gain access into the Indian market, and a "Special Scheme for Registration of Generic Medicinal Products" for India. The second CECA Review is on-going. It was launched in June 2010 and six rounds of inter-sessional meetings have been held so far. Singapore and India are seeking improvements in the goods, services and investment chapters of the agreement.”
“During the period 2007-2011, nominal average monthly earnings (AME), as a proxy for labour costs, increased at a compound annual growth rate (CAGR) of 3.5%. Rentals of factory space increased at a CAGR of 7.3%. Although costs have increased, firms have coped through restructuring and improving productivity. Over the same period, the unit labour cost (ULC), which measures the labour cost required to produce one unit of output, for the overall economy grew at a more moderate pace of 1.5% (CAGR), while the ULC for the manufacturing sector declined 2.9% (CAGR). The Government recognises that business costs have generally increased. Overall, Singapore is no longer a low-cost business location. The Government has put in place broad-based and sector-specific programmes to help businesses remain competitive through upgrading their capabilities and improving their productivity, thereby moderating cost concerns. SMEs which restructure by moving up the value chain and increasing their productivity will continue to remain viable in the Singapore economy. The Table below captures the statistics mentioned.”