Hansard, 2010-03-08

Under the provision of clause 2(d) of Article 46 of the Constitution of the Republic of Singapore, the following Member has been granted permission to be or to remain absent from sittings of Parliament (or any Committee of Parliament to which he has been appointed) for the period stated: Name From (2010) To (2010) Dr Mohamad Maliki Bin Osman 12 Mar 17 Mar

ABDULLAH TARMUGI Speaker Parliament of Singapore

Order read for consideration in Committee for Supply [3rd Allotted Day].

Head T – Ministry of National Development (cont.)

Resumption of Debate on Question [5th March 2010],

"That the total sum to be allocated for Head T of the Estimates be reduced by $100." – [Mr Cedric Foo].

Question again proposed.

Residential property prices

Sir, Minister Mah gave a robust and immaculate defence of HDB’s housing policies last week despite the controversial and divisive nature of the topic. He has also shown flexibility in adjusting those policies to plug gaps that have emerged, such as the HDB concessionary loans for second purchase.

I have one point to add to the cash-over-valuation (COV) issue. COV is "uniquely Singapore". No other jurisdiction has anything like it. As an ex-practising valuer, I am puzzled by it. If there is widespread occurrence of COVs for particular flat types or locations, the COVs should form part of the evidence that constitute the basis of the valuation. In other words, unless the market goes totally ballistic, valuations should move up and reduce the COVs. It would therefore be an anomaly if COV persists. I urge the HDB to review the entire COV issue.

I also have a point to add to the issue of speculation in the HDB market. Based on anecdotal evidence, there are HDB flat owners who sublet their entire flat in contravention of HDB rules. I have come to know of an estate agent who owns five private properties, who bought a resale flat and promptly sublet the entire flat. His daughter and grandmother were also found to have done the same thing. Such "unnatural" demand also helps to fuel price rises. For the rules to be effective, HDB must enforce them vigilantly.

Let me now turn to the subject of private property, though I must add that the public and private housing markets are not distinct but interrelated and interacts with each other.

The complaints aired in recent months – rising property prices, project sell-outs – are symptomatic of short-term dislocations between the housing market and the overall economy. However, if overall economic growth and property prices continue to diverge for a prolonged period, we run the risk of blowing a real estate bubble, just like that in the US.

The Government’s recent interventions to cool the housing market albeit in a calibrated manner to avert a property bubble is thus welcome. Coming down with a sledge hammer could lead to a property market crash which is equally, if not, even more unwelcome as this would also have a domino effect on the rest of the economy. The Government would have to continue to vigilantly monitor the market and act to remove any speculative tendencies.

I would like to highlight one trend which I consider unhealthy – the proliferation of Mickey Mouse housing units. Profit-maximising developers want to push dollars per-square-feet of every unit up. The way to do so without hurting sales is to reduce unit sizes to make them "affordable" on a lump sum basis. Touting such high dollar per-square-feet prices can also influence buyers in the highly sentiment driven market and give the perception that property prices are experiencing steep price rises. The headline screams, "$1,634 per-square-foot for a unit in leafy Siglap."

I would like to ask the Ministry to guard against and/or calibrate the proliferation of such units.

Property prices

Sir, I shall talk about more measures to curb property prices.

Sir, in order to curb property prices from escalating further, I would suggest that the three-year minimum observation period for sale of each HDB flat only be imposed on permanent residents (PRs) and foreigners, and not on Singapore citizens. PRs and foreigners should also wait for three years before they are allowed to purchase HDB flats. After all, foreigners and PRs are only allowed to sell their private properties after three years of purchase.

Mr Liang Eng Hwa, you have two consecutive cuts. Take them together.

Property market

Sir, Singapore’s private property market is small by both global and regional standards. Coupled with a significant number of foreign buyers and high ownership mobility, our local property market can be quite easily heated up. To complicate matters, we do have en bloc fevers from time to time that cause short-term distortions to the market.

In the last few months, I have heard remarks from friends and in the community such as "just close your eyes and buy, and it would not go wrong!", or at the launches, you hear "no cheque book, no deal", or even some issuing signed blank cheques for property launches. As a result of buoyant activities, prices have moved up sharply.

This was in sharp contrast to last year's COS debate where we were talking about how to help the real estate industry tide through the downturn. Despite a still sluggish economy which is recovering from one of our sharpest recessions, the property market rebounded very strongly in the second half of last year. Once again, our property market has demonstrated its highly volatile nature. Is this a case of a demand-supply mismatch?

Hence, I am glad that the Government has come up with the recent cooling off measures and urge the Government to continue to watch the market closely.

A highly volatile property market is unhealthy for the economy. It may result in more capital and resources being allocated to this sector and thereby depriving long-term investments in other productive sectors.

I would like to ask the Minister to give his thoughts on the state of the current property market. In particular, I hope that the Minister can address the fundamental question as to whether there is sufficient supply to meet the demand in the next one to two years. Are there unusually large numbers of foreign buyers coming to the market and are they one of the causes for the rising prices? Is there evidence of unhealthy speculation in the market?

I would also like to ask the Minister how the Government determines whether the property market is speculative, bubbly or overheating? What are the key indicators and references that the Government uses? Would it be better if the Government adopt a more transparent approach and communicate these to the market? I believe more information and communication will lead to less volatility as well as reduce second-guessing by the market players and participants?

I also hope that Government can look at ways to pre-empt another emergence of the so called "en bloc fever". Excessive en bloc activity could cause distortions to the property market and add volatility in the short term. If too widespread, it is a negative externality to the economy as it adds upward pressure on costs in a tight labour market condition and can contribute to further bottlenecks in the construction industry.

Besides, en bloc related construction activity can be harmful in many other ways. To the environment, it is extremely wasteful to tear down and rebuild buildings in otherwise great condition. We have also read about how en bloc sales at private estates have heightened tensions and stirred up conflict among neighbours, residents and developers. Some of these disputes end up being played up in the courts, costing involved parties more money and stress. This would certainly destroy the social cohesion that we are trying to foster.

I feel strongly that the Government should look into the en bloc rules and look into ways to slow excessive and wasteful en bloc activity.

Limited land resources

Sir, with only about 710 square kilometers and a residing population of almost five million coupled with the aspiration to be one of the leading economic powerhouses in Asia and in the world, land use planning in Singapore is probably the most challenging task of any land planners in the world.

Here, we have to salute the land planners at the Ministry of National development (MND) and Urban Redevelopment Authority (URA) for having done a great job for Singapore since independence. Singapore is now a great place to live, work and play in Asia despite our tight land constraints.

Going forward, our limited land resources will be increasingly squeezed again as we embarked on the next phase of economic growth, to be a distinctive global city. How do we plan even smarter so that the land constraint would not impede our future growth and progress? What are our options – short term and long term?

The Economic Strategies Committee (ESC) has also come up with recommendations. I would like to hear also Government's response to the recommendations, and in particular how would the emphasis of land productivity impact the cost of industrial land.

Concept plan 2011 – Singapore's future

Sir, three years I signed up for a marathon. In all the marathons I have run, there are white strips after white strips on the road. It is a very long road when you think about 42 kilometers of running. But I was actually looking forward to this marathon. It can lead me from one place to another on a pavement, instead of the road. So it led me from the coast, to the lagoon, then to the HDB flats, ran beside the coffee-shops, back to the beach, go into the residential area and finally to the end point. This is what we call pavement running or now popularly-known, park connectors.

I am also very excited that the Ministry of National Development (MND) is talking about building an entire park connector round-island pavement of 150 kilometers. When that is up, you can imagine that families can go trekking for three days two nights – around Singapore, going through industrial areas, residential areas, HDB heartlands, into the city and back to their home.

I have lived in two other cities for a period of time. These cities are filled with a lot of energy and business life, but also a lot of people. However, they have vast land and nature. That is something that Singapore does not have in natural reserves, vast land or nature. But, then, I would say that the credit goes to the Singapore Government and the Ministry of National Development for doing very careful planning to keep our rustic nature. The other day, I signed up for another long distance race of 25 kilometres, that is to run the trails from MacRitchie Reservoir, to Peirce Reservoir, into Bukit Timah, and back. That was only 25 kilometres, but the longest distance is about 100 kilometres. That 100 kilometres takes you round two loops of 50 kilometres. Singapore does have 50 kilometres of trails, and I am not sure if many Singaporeans know that.

We are not just an urban city, we actually have very good reserves and nature to enjoy. I am glad that MND has now launched the Concept Plan 2011 public consultation to plan for the next 50 years. To me, it is a very important project, as a nature-lover and an outdoor-activist. This is not just to plan the infrastructure to contain the population, but it is also to meet the aspirations of citizens like me for quality living, so that they can have the rootedness and sense of belonging.

But we face many challenges, because we have land constraint, a really dense population, changing demographics, an increasingly greying population, a different population mix and environmental changes. I hope that the Concept Plan 2011 has considered all these factors and discussed these issues as well, and how we can overcome these challenges. There will be many trade-offs as you decide how best to position Singapore in land planning, both as a home and as a place for business. There is no easy solution. That is why the Concept Plan 2011 is important as it looks at the next 40, 50 years to answer these questions. I really hope that you would be able to do the forward planning as well as we did 40 years ago and achieve the same success. Singaporeans will continue to find Singapore a place they can identify with, be proud of and make it their home.

Effective land use

Mr Chairman, Singapore's growing population exerts increasing demand on land use for housing. With the increasing demand for housing, more land parcels are being released for both private and public housing development. The people to land ratio is facing an increasing stress on space. Can the Minister share with the House what criteria and planning considerations are taken, with the increase in people density when planning for the optimal use of land for housing, especially in our mature estates?

As we have more people living on the same plot of land, using the same amenities and increasing the load on the same road transport and public transport networks, what efforts are being made to enhance greenery, to preserve a sense of space and well-being in high-density areas?

The increased density of people in our estates will strain public amenities, transportation infrastructure and carpark facilities. When land parcels are released for development, what considerations are given to capacity planning on the increased demand on existing amenities and load on the physical infrastructure?

What measures does the Ministry have to ensure that there continues to be sufficient open spaces like parks and sporting facilities within the estate, for residents to relax, interact and for recreation activities?

As we all know, living in cities and living in high-dense areas can be really very stressful. As we use space more optimally, let us give consideration to at least having some space for people to relax and, hopefully, continue in our journey of gracious living and quality living.

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Planning for long-term growth

Sir, earlier this year, the Urban Development Authority (URA) launched its Concept Plan 2011 public consultation exercise. I am glad to note that our city planners take much effort to plan for the long-term development of Singapore. May I ask the Minister whether the planning authorities have considered the total infrastructure of the area when approving developments?

Do the authorities consider whether the roads, the parks and other social amenities are adequate to cope with the expected increase in the number of residents in an area?

To take an example, URA had previously approved several residential developments in the Katong/Amber Estate area. Thus, we have new condominiums like One Amber, the Aster and the Seaview, all being developed in the area. As the residents started to occupy their apartments, the concern they expressed is whether the roads are able to cope with the expected increase in traffic. Are there sufficient parking places for the residents in the estate? Are there sufficient social amenities like parks, shopping centres, markets and eating outlets to cater to the additional residents? Would there be heavy traffic congestion during peak hours along the roads in the area? There will also be additional developments coming up soon like the Silver Sea and Shore Residences. These condominiums will bring about another few thousand residents. Has URA taken into account these additional residents in the area when they approved the developments? How does URA intend to prevent overcrowding which will add to the social pressure for the residents in the area?

Housing for elderly

Sir, in the 2008 COS with the vision of the oncoming silver tsunami, I had brought up this. This year, yet again, a call for reconsideration for a retirement village concept tailored to the needs of Singapore combining elderly capable of independent living, those with assisted living and residential as well as nursing homes, all housed in an area equipped with facilities. Appropriate and relevant staffing will, of course, be required. The well elderly can provide manpower for employment in the retirement village, helping their weaker and immobile counterparts. This integrated concept of dwelling units, nursing homes, stalls, restaurants, etc, which are elderly-friendly and even partly manned by the elderly can certainly cater to their various needs – an extremely wholesome concept for living for our rapidly ageing population. What is MND's take on this retirement village concept this year, this time?

Ms Irene Ng, take your two cuts together.

Giving soul to the city

Sir, Singapore seems to be sprouting giant shopping malls everywhere. And now, oversized Integrated Resorts. They scream that we are a consumer city – even a copy-cat city.

You see the same offerings at any other large city in the world. They say nothing about our cultural heritage or our distinctive character.

Sir, we need to inject more soul into the city. We should identify more heritage areas and create a buzz around them while preserving their authentic, old-world charm. This should be done in an integrated masterplan, involving not only the hardware of buildings, but also the software to give the area its own personality.

A great example is Haji Lane and Arab Street – pulsing with the energy of our vibrant culture. A not-so-good example is Boat Quay. Visitors walking along the promenade today will not get a sense of its history. They would not know that it was once a major port in Singapore, or one of the most popular sites for Chinese street story-telling, stunts and opera performances. Why not build a maritime museum along the river and also bring back the aura of that history?

We should also be innovative and creative. Why not use our Electronic Road Pricing (ERP) gantries, bus stops, MRT stations, even rubbish bins, to display our heritage and creativity? Work with our local artists to hand paint on them. For example, the bus stops and ERP gantries in Orchard Road can have an orchard theme. Those in Chinatown can have a Chinese theme.

It is by involving people that the city evolves its personality. We should also allow people to adopt benches to commemorate a person or an event. For example, a husband can sponsor a bench in Boat Quay in memory of his wife because they used to date there regularly. Others reading the inscriptions would connect with the gesture.

Sir, it is our unique history, cultural diversity and the human touches which would give the city personality and soul. Then perhaps one day, our slogan can be "Singapore: The City with Soul".

Green spaces and coastal areas

Sir, go to the East Coast Park on any weekend and you can see crowds of people jostling for space – walking, jogging, cycling, roller-blading, camping, fishing, flying kites, and so on. All over the island, our parks, beaches and other recreational spaces are getting over-crowded. It is good that more people are into outdoor activities. However, the whole idea of being outdoors is to have a sense of freedom and space, and to connect with nature. We need to provide more areas for our often-stressed Singaporeans to get away from it all. Reports about a man with this big problem of not knowing where to row his own kayak, and the rise in illegal fishing, point to the need to give more thought to this.

The Ministry has done a good job of turning this island into a garden city. I especially commend it for building the park connectors. Like Member Teo Ser Luck, I have also enjoyed it tremendously, cycling from East Coast to Changi Village and marvelling at the natural beauty around us.

I would like to ask for an update of the work to link up the major parks, nature reserves and housing estates throughout the island.

Besides the main island, more should be done to develop our offshore islands into recreational areas, where people can swim, kayak and island-hop. But please do not turn them into another Sentosa, which has an artificial plastic feel about it.

When I was in Koh Samui and Phuket, it was easy to hop from island to island on a boat, and to swim and snorkel. However, the experience was somewhat marred by the hordes of tourists, the pollution of the boat engines and the destruction of corals.

Sir, we should use our own parks and coastal areas to teach Singaporeans, especially the children, to respect the environment and to love nature. Let us have more educational signs to teach them to identify the wildlife species that live under their own noses.

Many Singaporeans did not know that we have rare sambar deers living in the wild until one was recently killed by a car on the Seletar Expressway. This accident raises a red flag – is encroaching development threatening their survival?

I would like an assurance from the Minister that we are doing all we can to protect the habitat of our wildlife.

Mr Chairman, Sir, I thank Members for their questions on land use planning. First of all, Mr Liang Eng Hwa asked about our land use planning policies. I would like to assure him that the Ministry of National Development's land use policies will be geared towards supporting the economic recovery which has just started and also the ESC's recommendations to build a distinctive global city for all.

First of all, we will continue to maintain a stable property market which will underpin the economic recovery. Mr Liang asked what are the indicators or fundamentals that Government looks at to determine if the property market is bubbly. We do look at several indicators including price increases, transactions, sub-sales, and so on. We do not have a specific set of indicators or trigger points that say that we should do certain things when some things happen. We are not on auto-pilot, in that sense. It is not only looking at indicators but having a sense of judgment as to what is likely to happen in the months going forward.

As a result of that monitoring, we assessed that there was a high risk that a property bubble would be forming. In February, we introduced two measures to temper sentiments in the market. One was the decrease in the Loan to Value (LTV) ratio and the second was the imposition of a seller stamp duty. Why did we do this? Because in January, price increases had been strong and also the transactions were also at a high and the risk of over-heating was high. A property correspondent in Zaobao named Wu Hui Min put it this way: it is far better to take the liang cha (or cooling tea) now rather to take the tui shou yao (or aspirin) later on when the market is over-heated.

Mr Chiam had asked for more measures to curb property prices. I also remember Mr Hri Kumar asking for more severe measures to deter speculation. Let me say that we do not intend to introduce more measures for now but we will monitor the market closely. And if there are signs that the market will over-heat again, we are ready to introduce additional measures to stabilise the market.

Dr Amy Khor asked a specific question about what she calls "Mickey Mouse" units, extra small units. My view is that, beyond ensuring market stability, we should let market forces determine prices and also the type of unit sizes that they want to develop. But I do agree that the headlines about these units' high price per square foot (psf) are indeed misleading. I would suggest that we do more to educate consumers not to take such headlines at face value.

The second area of land use planning I want to emphasise is adequate land supply. We will ensure that there is an adequate supply of land to support economic growth. Mr Liang asked about foreign property buyers and also about whether the Government can provide more property market information. Singapore is a key city in growing Asia. I think it is understandable and natural and, indeed, not a bad thing that there is foreign interest in private residential properties here. But having said that, properties in Singapore will still remain largely in the hands of Singaporeans. Singapore residents last year accounted for close to 90% of all private property housing transactions. In the public housing market, the bulk of it is owned and occupied by Singaporeans. The Government will continue to ensure that there is adequate supply of private housing to meet the needs of both locals and foreigners through the Government Land Sales Programme which we announce twice a year. URA also releases property market information to the public regularly. There is ample supply of private housing in the pipeline to meet demand over the next one to two years. Buyers need not rush into the market.

Mr Liang also asked about further steps to pre-empt en bloc fevers. As he knows, this is under the purview of the Ministry of Law (MinLaw). MinLaw has been reviewing existing en bloc legislation and taken into account the feedback and the suggestions from the public. Any changes to en bloc rules will be made by MinLaw in due course.

We will also continue to ensure that we have an adequate supply of commercial space in terms of both quantity as well as mix to support the ESC's objective which is to nurture a diverse eco-system of enterprises.

In previous years, in the Committee of Supply, I had mentioned that we are planning to develop new growth areas in Jurong Gateway, Paya Lebar Central and also the Kallang Riverside. Despite the downturn, we have pressed on with infrastructure works and more sites at these areas will be progressively released for sale for development from this year onwards. Together with the grade "A" office spaces in the Central Business District (CBD), they will offer commercial firms more choice in business locations.

We will further catalyse growth at Jurong Gateway and Paya Lebar Central by relocating several Government agencies out of the central area to Jurong as well as Paya Lebar. My Ministry, the Ministry of National Development, and our statutory boards, AVA and BCA, will move to Jurong Gateway by 2015. The Ministry of the Environment and Water Resources and its statutory boards, PUB and NEA, are also planning to join us in Jurong.

The Workforce Development Agency (WDA) will move to Paya Lebar Central. Its new Continuing Education and Training (CET) campus that is targeted to complete by the end of 2013 will also be located there. The relocation of Government agencies will free up prime office space in the city to meet private sector demand. By 2015, we expect the current supply of one million square metres of office space in the pipeline would have been taken up. These relocations will be timely and will help to free up more space for the private sector.

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Thirdly, we will make the supply of land more responsive to the market with three improvements to the reserve list system. First, with immediate effect, we will reduce the deposit required from successful applicants of reserve list sites from 5% to 3% of the minimum bid, subject to a cap of $5 million to reduce the cashflow burden to successful applicants. Second, we will henceforth consider releasing a reserve list for sale immediately if there is more than one party that submits a minimum bid that is close to the Government's reserve price for the site within a reasonable period. As Members may know, prior to this, a site is released for sale only if a developer submits a minimum bid which is equal to or higher than the reserve price.

Third, we will make available a larger supply and wider variety of sites in the reserve list in the second half 2010 to give developers more choice. The second half 2010 Government's land sales will be announced somewhere towards the end of June.

Let me now touch on the Concept Plan 2011. Several Members, including Mr Teo Ser Luck, Mr Liang Eng Hwa, Ms Jessica Tan and Mr Lim Biow Chuan asked how we can tackle the land constraints and growth and still make sure that the infrastructure that we provide enables our population to enjoy a good standard of living.

We have an integrated planning system. This is a very holistic system that involves all Government agencies and it guides the staging of land as well as the infrastructure development. MND and URA have embarked on the Concept Plan 2011 Review. We do a Concept Plan Review every 10 years, so the next one is 2010 Concept Plan Review and this Review will chart our land use strategies over the next 40 to 50 years – 2050 and beyond. The developments that we see around us today, whether it is Changi Airport, the MRT network, Marina Bay, all these are developments that we enjoy today because of the work that went into previous Concept Plan Reviews. Similarly, the Concept Plan 2011 Review will highlight certain areas of growth and certain areas for development that we will see in the next 20, 30, 40 years.

Our objectives for Concept Plan 2011 are very simple. We want to support growth but, at the same time, we want to maintain a quality living environment. Under the Review, we will develop strategies to increase land productivity to support future growth. This was one of the recommendations of the ESC. It means intensifying land use as well as rejuvenating existing land, make better, make productive use of existing land for higher values.

In response to ESC's recommendation, we will study the development of a new waterfront city at Tanjong Pagar and Pulau Brani. But this will only take place after 2027 when the lease for the port of land – which PSA currently holds – runs out and PSA moves out. We will then identify opportunities to rejuvenate mature industrial estates as well.

While the Government plans for land use and infrastructure at the macro level, I think Members rightly pointed out that we should also not lose sight of the micro level and so we should leverage on the market to allocate scarce land resources to the most productive uses. We have studied ways to inject greater flexibility into land zoning so that our land use system can be more responsive to the changing needs of our economy. Here, I hasten to add that we have to do so in a very targeted way because land zoning is still relevant and it is still an important aspect of our land use policies because it helps to protect the amenities of the residents and the landowners in the area. It also ensures that we have sufficient and adequate land to meet various needs in the future, including industrial needs.

We will also study new ways to create land and space. We have reclaimed land over the last 40, 50 years. There is still scope to reclaim land. But there is a physical limit to how much land we can reclaim due to the availability of sea space and also to the technical constraints of reclamation. The same consideration applies to floating structures. There have been some suggestions that we should make more use of floating structures. But scarcity of sea space as much as scarcity of land space means that we do not have as much flexibility in this area. What we can do is try to build as much as possible upwards and this we have done. When the last Concept Plan Review was made 10 years ago, there was already a suggestion that we should increase our plot ratios and build more developments upwards. But we will also be studying new ways to build downwards, to use underground space and synergise new underground spaces with the space above ground and the surrounding developments – the underground Science City at Kent Ridge is one example of what we can do.

In parallel, we will examine new strategies under the Concept Plan Review to improve the quality of living in Singapore. This Review will take into account our changing demographic profile and it will ensure that there are adequate social facilities – housing, leisure, healthcare, etc, to support our future population. In this regard, I want to address specifically Dr Fatimah Lateef's question about retirement village. She has asked this several times. I want to point out that we do have our own version of a retirement village. It is not the sprawling retirement villages that we see in USA or Australia but it is our version. HDB has built "studio apartments". Our studio apartments cater to the housing needs of the elderly and there are provisions for social amenities, VWOs, etc, in the vicinity that help to look after the social and medical needs of the elderly. At the same time, in response to requests from some developers, we released the site at Jalan Jurong Kechil which can be triggered for a private retirement housing development. This site has not yet been triggered and there have been proposals to extend the lease of this site from 30 years to 60 years which we are considering.

Let me just add that we are unique in that a large segment of our population own their homes. Eighty per cent own HDB flats and others own private properties. It is not just a hardware response that we should be looking at but also software enhancements, meaning how do we allow the elderly to age in the homes that they already own and this, again, Mr Lim Boon Heng's Committee on Ageing is looking at it, together with the Ministry of National Development, MCYS and MOH.

In response to Ms Irene Ng's comment about safeguarding nature areas, I would like to assure her that we will continue to safeguard nature areas in the Concept Plan. We are not blessed with the crystal blue waters of Koh Samui but we do have nature areas that we want to preserve and what precious little we have, we will look after for our future generations. NParks will step up public education on biodiversity conservation. This year is the International Year of Biodiversity (IYOB) and NParks will be rolling out a series of programmes in conjunction with the IYOB.

Sir, ultimately, quality of living is subjective. As part of the Concept Plan process, we will consult the public on how we can enhance the quality of living in Singapore. We will certainly take note of Ms Irene Ng's suggestions on developing our islands but land constraint is a reality for us. Through innovative land use such as developing eco-links to serve as Park Connectors, animals can move from one part of the reserve to another. It also helps to enhance biodiversity. In this way we can marry recreation as well as conservation objectives. But we will inevitably have to make tradeoffs at each stage of our development between conservation and development among housing needs, leisure needs, industry needs. These are the tradeoffs we need to make to ensure that we develop in a more sustainable way.

Sir, 2010 will be a milestone year in the remaking of our city. Singaporeans can look forward to many improvements in our cityscape and their immediate neighbourhoods. Developments are not just in downtown but also in the heartlands as well.

Let me highlight plans for the downtown. By the middle of this year, the Marina Bay Promenade will be open. Singaporeans will be able to enjoy a 3.5-kilometre stroll, starting from our first Ark Park, next to the Marina Bay floating platform, over the double Helix Bridge and onto the waterfront promenade fronting the Marina Bay Sands Integrated Resort. This stroll will end at the Marina Bay's financial centre where phase one of the project will be completed this year.

We will also invest more in the software programming to activate key areas in our city. I think it is very clear to us that just hardware alone will not do. URA has planned a series of events called the Marina Bay Invitations 2010 to inject buzz and excitement into the Bay. This includes a mass walkathon and carnival, an urban light festival as well as the annual Marina Bay Singapore Countdown.

Besides Marina Bay, concrete improvements will be made to other places in Singapore. Ms Irene Ng asked how we can enhance our heritage areas. For her information, URA has conserved some 7,000 buildings since 1989 and identified 15 areas that are socially significant. Many of these places have been physically enhanced under URA's Active, Liveable and Endearing (ALIVE) community programme which upgrades waterfront areas, enhance community spaces and improve amenities in these familiar places.

Some examples of these projects completed under ALIVE by URA – together with other agencies like PUB – include the Changi Point Coastal Walk, the Southern Ridges, Siglap Village. These are places that have become very popular among Singaporeans and tourists and more such improvement projects are in the pipeline. Over at Upper Serangoon Road, pedestrians also enjoy wider walkways and large landscaping. The Member of Parliament for the area, Ms Cynthia Phua and her grassroots members have suggested installing storyboard markers and sculptures to depict the rich local history in the area and URA would be taking up those suggestions. In Geylang Serai, we will commence works this year on a new pedestrian mall which will provide space for community events like the popular Hari Raya bazaar.

Ms Irene Ng also asked for more parks and recreational areas. We will do just that. Woodlands Waterfront will be completed later this year. Punggol Promenade and the Labrador Nature and Coastal Walk will be completed within the next two years. When the Labrador Nature and Coastal Walk is ready, we can link that up with the Southern Ridges Walk where we cross from the Southern Ridges, go down Alexandra Road, walk along this Labrador Nature Walk and eventually reach Vivo City.

Sir, our vision of Singapore as a city in the garden is also taking shape fast. The 54-hectare Gardens by the Bay at Marina South will offer Singaporeans a new experience of urban greenery. Two cooled conservatories will showcase plants and flowers from the tropical Montane and Mediterranean regions. Super trees that are nine to 16 storeys tall will feature vertical gardens with large foliage and tropical blooms on them. Concerts and shows would be held in the Garden City setting for Singaporeans to enjoy. The construction of the Gardens by the Bay is on track.

It is expected to open by the end of 2011. Key infrastructures such as the drainage, lake system, the land forms, the road works, have been completed. Tree planting has started. In fact, tree nursery has also been established and the two conservatories are being constructed right now.

12.45 pm

Apart from the Gardens by the Bay, residents can also look forward to new and rejuvenated regional parks over the next two years, these include new parks in Punggol, Bishan, Sembawang and Yishun. Our parks will be more accessible as we expand the Park Connector network. This is the Park Connector network that I think many Members have used either for cycling, jogging, roller-blading, etc. And this year we will launch the Northern Explorer Park Connector loop which will serve residents living in Marsiling, Woodlands, Sembawang and Yishun.

Mr Chairman, Sir, allow me to end my remarks with a short video clip to share with Members what a wonderful home we have and what we look forward to in the next few years – a beautiful home in a garden. [Video clip shown to hon. Members.]

Constructive productivity

Sir, I am absolutely excited about the vision of the beautiful home that we are building here in Singapore and how much better if we can do so productively as well.

Sir, the Construction 21 (C21) report of 10 years ago set up the vision for the Singapore construction industry to be world-class builder in an knowledge age. The C21 study steering committee formed four working groups which comprised members from professional bodies, trade associations, regulatory bodies, public agencies, tertiary education and the public. They deliberated on issues that cut across the entire construction value chain, from upstream activities such as design and the tendering of projects to downstream construction activities and to the final stage of maintenance of the finished product. The report contains 39 specific recommendations to uplift productivity and standards in the Singapore construction industry. And there was every reason to be hopeful that such a comprehensive effort will propel the construction industry's productivity forward strongly. Today, the industry's productivity still lacks those of various developed countries significantly, for example, Australia and Japan has been quoted. I would like to ask the Ministry for its assessment of the extent to which the recommendations of the Construction 21 report have been implemented and whether the intended outcome have been achieved. If the recommendations have not been largely implemented, then I would like to know the reasons for that. And if on the other hand, the recommendations have been largely implemented and the outcomes achieved, then I would like to know where the gaps are that had led to the non-transformation of the industry thus far.

I would like to ask what plans are there to speed up the pace of progress over the coming decade in construction methods and productivity, both relative to the past and in comparison with other developed countries. And how does the Ministry of National Development and the Building and Construction Authority intend to enlist the partnership of the related industry bodies and unions in this endeavour?

Construction industry

Sir, we heard during the Budget debate that when benchmarked with other countries, our construction sector is lagging in productivity to a larger extent than other sectors in our economy.

With the latest $250 million shot in the arm for the construction sector, by the way of the National Productivity Fund, can the Minister elaborate on initiatives that are planned to facilitate the industry's transition to greater use of productive building methods and technologies, a point which my colleague, Mr Heng Chee How, has mentioned? Will measures be in place to incentivise local contractors who embraced more productive building techniques and also how do we support those impacted by the increase in foreign worker levy?

Sir, the construction industry has of late been in the limelight. Today, because it has kept pace with the times through upgrading, substantial precast system has been used. It is good. However, with the rapid building boom in the last few years, the industry is once again struggling, trying to find its feet as job demand outstripped this capacity to cope. The result: an industry that became somewhat bloated with foreign workforce, including foreign workers, foreign engineers, foreign architects and foreign construction firms.

With imminent revision of foreign workers' levy, will the industry players take a hard look at their manpower needs and invest in training and capability building or will just simply price in the cost?

The construction industry has always been perceived as labour intensive, highly reliant on foreign workers with low productivity. The ESC has recommended that measures are needed to encourage investments in technology and innovation. Can the Ministry share with us what are some of the measures the Government will put in place to help the industry move towards technology adoption and reduce our reliance on foreign workers. Besides precasting and modular design, is there anything else that we can do to improve productivity? Is there any grant to help the designers upgrade their computer software and hardware? I must declare my interest as a design engineer. What else can be done in terms of capability building? Certainly, we hope that the transformation will not be translated to higher costs and more expensive flats.

Sir, our calibrated policy on employment of foreign workers and our open economy has allowed our economy to grow at a pace and scope that is envy of many countries.

In 1990, 14% of our three million population were foreigners. We now have foreign workforce that make up more than a million of our close to five million people in Singapore. Undoubtedly, their contribution has helped us raised standards of living for all residents. We are dependent on them to fill many jobs for which there are shortage of Singaporeans, especially in construction and marine sectors, in manufacturing and service industries. However, we now need to manage this dependence and ensure a balance proportion of total workforce over the long term. This will enable us to provide employment opportunities for Singaporeans and allow them to develop the skills and gain experience in these sectors. A shift from being dependent on cheap labour will motivate employers to look at ways to work smarter.

With the proposed increase in foreign worker levy, the construction industry will likely be the most impacted by these changes. The construction industry employs almost a quarter of a million work permit holders. Foreigners make up nearly 90% of the workforce in the industry. The levy increase is individually minimal but collectively will have direct impact on construction costs.

In tandem with the proposed increases, Government programmes and schemes must also be introduced over the three years to raise skills, productivity levels to attract Singaporeans to re-enter the construction sector. If the employers react by reducing the workforce as a knee-jerk reaction, then our goal to re-skill Singaporeans will not be achieved.

Can the Ministry of National Development share its strategies to address these issues? How does the Ministry of National Development intend to assist local contractors to increase and sustain productivity? Within a short timeframe, what will be the measures to improve and enhance the image of the construction industry to attract more Singaporeans into the workforce?

Sir, the construction sector, despite accounting for only 6.2% share of the GDP value-add, has helped underpin the overall economy with its double digit growth in the last few years.

More often than not, the concern for the construction sector is whether the industry has the capacity to meet the ever increasing construction needs of the economy. There are a number of mega infrastructural projects ongoing and there are also many in the pipeline. Coupled with the increasingly buoyant property market and the recovering economy, I would like to ask the Minister for his thoughts on the state of the construction industry and whether the industry is now better able to cope with increased demand of construction activities.

In particular, also how was the level of activity for the construction sector last year compare to the peak and what is the level of activity expected in the next one to two years? How would the completion of the two Integrated Resorts impact the industry?

In one of my first parliamentary questions in 2006, I asked about the likelihood of a construction industry bubble forming in view of the many ambitious mega projects in the pipeline then. I would like to ask again whether we would again be seeing construction bottlenecks coming back like what we saw in 2007 and 2008 which resulted in sharply increasing construction costs.

With the new foreign worker levy structure, the average foreign worker levy is expected to rise by $100 by 2012, how would the increase in foreign worker levy impact the industry? Have the industry made progress in the area of technology enhancements and productivity?

With the new Budget measures and an infusion of $250 million from the productivity fund, would this be sufficient to uplift productivity and reduce the dependence on foreign workers? What are the possible initiatives and the timeline be like?

"Green" buildings

Sir, we are encouraged by the prospects of greener building. The pilot case in Punggol, dubbed the "Eco-town", is a good example. The use of solar panels, rain water recycling, modern energy and waste management methods, are developments that would be welcomed at HDB estates nationwide. Could the Minister share with us some of the measures taken to use modern building technologies for HDB estates under construction to create more sustainable communities? As quick wins, for example, have we mandated energy efficient fittings and recycling chutes for HDB new projects?

It would seem timely for the Government to put out a plan for Sustainable Green Buildings in general, both HDB or otherwise. Following the launch of the Sustainable Singapore Blueprint in April last year, could the Minister provide an update of the measures to improve energy efficiency in the building sector, especially with the large stock of the existing buildings?

Mr Chairman, the construction sector is a key economic growth sector and is of strategic importance in supporting the future development of Singapore. As Members have rightly said, it is thus important that we sustain and grow the construction sector by enhancing its productivity and capabilities.

Mr Heng Chee How has asked for an update on the Construction 21 (C21) report and our plans moving forward. The industry has made progress since the release of the C21 report in 1999. Between 1995 and 1999, that is the few years before the report, the industry saw negative productivity growth ranging from -2.1% to -4.1%. For the last 10 years, which is the next 10 years after the report was released, the industry has experienced an annual productivity growth of 0.7%, a positive although low productivity growth. We have increased the proportion of skilled workers as recommended by C21 and also implemented the Construction Registration of Tradesmen (CoreTrade) scheme last year to nurture a pool of localised workers in the high-value adding trades. Today, there are about 7,000 registered CoreTrade personnel earning monthly wages ranging from $1,200 to $2,400. For some higher value added trades, such as crane operators, wages are even higher – up to $3,000 per month.

Mr Chairman, over the last 10 years, we have plucked the low hanging fruits in growing our construction industry and for the next 10 years, as many Members have rightly said, we need to do more to achieve a sustainable long-term growth. First, we need to increase the productivity of our workers and, second, we need to build up key competencies and capabilities in complex civil engineering and building projects locally.

1.00 pm

Mr Cedric Foo, Mr Heng Chee How, Er Lee Bee Wah, Mr Zainudin Nordin and Mr Liang Eng Hwa have all asked about the measures to help the industry move towards technology adoption and manpower development to improve productivity. I will now elaborate on them. In line with the Economic Strategies Committee's (ESC) recommendations to shift towards productivity-driven economic growth, we will increase the quality of both the local and foreign workforce through a new levy framework that recognises skills and experience.

As announced by the Minister for Finance in his Budget speech, up to $250 million from the National Productivity Fund will be used to support productivity enhancement and capability building in the construction sector over the next five years.

First, at the workers' level, we will set aside funds to defray the upgrading costs for workers to be trained and certified in CoreTrade. We will expand the CoreTrade scheme to include additional trades, such as drywall installation, fire protection system, lift installation and others, which will be eligible for this training incentive. We will also co-fund the cost of specialised skills training and certification for workers taking on greater responsibilities and expanded work scope. The aim is to build up a larger pool of skilled and experienced workers to help boost productivity.

Mr Zainudin Nordin asked how we can attract more Singaporeans into this industry. The Building and Construction Authority (BCA), together with the National Trades Union Congress (NTUC), has actively worked with firms to recruit locals through the Job Recreation Programme (JRP) into selected higher value trades. BCA will step up its JRP to publicise subsidised training opportunities at the BCA Academy. We will also explore new classes of CoreTrade personnel, such as construction supervisors, which can cater more for locals. BCA is enhancing its outreach to students who form the potential pipeline of new local construction personnel in higher value trades or in supervisory positions.

Next, at the firm level, we will help finance firms' efforts to adopt the technology, to innovate and to re-engineer their construction processes. For smaller firms which specialise in more labour intensive trades, we will provide support for the purchase and leasing of equipment. We recognise that the cost of technology adoption can be an impediment to firms which want to switch to a greater use of machines and technology. For example, a trained worker using spray machines for painting can reduce the time needed to complete a paint job by at least 20% compared to the use of rollers and brushes. The Straits Times wrote a very interesting article about how a company can, through the use of equipment such as a spray machine, reduce the number of workers and manage to get much better and higher value added jobs for the company. These are the examples that we hope to encourage. But we recognise that the spray machines can cost about $6,000-$10,000. So, with the Government helping to co-fund such equipment, we hope to help small builders switch to a greater use of machinery to improve their productivity.

For firms that are seeking to upgrade their productivity levels, we will provide funding support for the adoption of technology and re-engineering of workflow. For example, the use of precast facade with coloured finishes done in a factory is more productive than the conventional way of constructing walls, followed by plastering and painting works. Such works on-site and the use of scaffoldings can be eliminated. There is scope for the main builder, the precast suppliers and installers to collaborate, and to seek Government's support to improve their workflow. In addition to financing part of their equipment cost, firms can also use the funds to cover the training cost of workers to operate the equipment, as well as the engagement of specialist consultants to enhance productivity level.

Next, for the industry. For the industry as a whole, we will provide financing to help build capabilities through the use of new construction methods, and improve productivity among different firms across the value chain. For instance, firms can adopt the 3D Building Information Modelling (BIM), which is an IT solution that enhances collaboration and streamline the sharing of information across the construction value chain – from the architects to the engineers and the builders. BCA will collaborate with industry partners to test-bed and adapt new construction technology to our local context for industry-wide adoption.

Further upstream, developers and architects will have to design for greater buildability. Since 2001, BCA's Buildability Score Framework has improved the efficiency in designs, requiring the wider use of prefabrication and precast technology. As Er Lee Bee Wah has pointed out, the use of buildable structural systems has doubled from 31% before 2001 to 65% today, and the use of prefabricated wall components has increased from 22% to 45%. We have done a lot but I think we can do more, and we will do more.

Mr Cedric Foo asked about our efforts to raise buildability. BCA will require more buildable designs, including the regulation of more labour efficient construction technologies. The industry can seek Government funding to build capability in areas such as prefabrication, precast technology and other construction technology to meet the new buildability requirements. For example, builders can utilise integrated system formwork which has proven to be labour efficient and is widely used in countries like Germany.

Mr Heng Chee How asked how we would be partnering with the industry in this productivity drive. BCA will set up the construction productivity centre to champion innovative solutions and technologies in the construction sector. We recognise thatthe challenges faced by small firms can be quite different from the larger ones. I have asked BCA to set up dedicated teams to look into the specific needs of firms of different sizes.

Er Lee Bee Wah has enquired about the measures to improve the capability of the industry. BCA will work with progressive builders to build new capabilities in complex civil engineering and building works. With the strong pipeline of projects in underground expressways and rail projects, firms can tap on the fund to build up their in-house technical competency for such complex projects. Funds can be used to defray the procurement costs of performance bonds to facilitate cash flow as well as to engage external specialists. We will also introduce a new post-graduate scholarship programme and an immersion programme to develop engineering expertise to undertake these complex projects.

Mr Liang Eng Hwa has asked how the levy increases will impact the industry and whether we would see further construction bottlenecks as a result of the economic recovery and market buoyancy. In general, we estimate that the higher levies could result in 1%-2% rise in construction cost for the industry, although the actual cost impact will vary from firm to firm. The $250 million fund will support the construction firms, be they large or small, to adopt a wide spectrum of productivity improvement measures that I have just alluded to. In 2008, we saw a peak construction demand of $36 billion, which dropped to $21 billion in 2009 as a result of the economic recession. With a projected construction demand of between $18 billion and $27 billion for the next three years, there is an urgent need to improve productivity so that our construction capacity can raise its output without having to increase its workforce significantly.

Mr Cedric Foo has asked how HDB estates can be more sustainable as well as our sustainable building plan. Our existing HDB estates have designs which facilitate cross ventilation and natural lighting. For new estates, we will continue to incorporate environmentally friendly features and green technologies. For example, HDB is pushing forward the installation of solar photovoltaic panels at four precincts at Tampines, Bukit Panjang, Tanjong Pagar and Marine Parade.

HDB, together with Town Councils, also aims to reduce the energy consumption of common areas in new and existing HDB estates by 20% and 30% respectively. This is done by introducing features such as energy efficient light fittings and lift systems.

In addition, HDB has piloted centralised recycling chute systems in our existing estates. This is in Blocks 297C and 297D Chua Chu Kang. The results of the pilot study were encouraging, with about three times more recyclables collected as compared to conventional door-to-door collection method. With the plan to position Punggol as an Eco-Town for the tropics, such technologies will be explored for testing on a larger scale in Punggol.

Our sustainable development efforts must extend beyond our public housing estates. In April 2009, the Government released Sustainable Singapore Blueprint which outlined our efforts to improve our overall energy efficiency by 35% from the reference point of 2005 levels by 2030. All sectors, including the building sector, will need to play their part towards meeting this target.

By the end of this year, we will raise the mandatory minimum energy efficiency standard for Green Mark certified level for new buildings by 10% from today’s standard. Correspondingly, the energy efficiency standards for other Green Mark levels, ie, Gold, GoldPlus, and Platinum, will similarly be raised. Building owners can enjoy cost savings in the long run by being more energy efficient.

To better understand energy consumption patterns, and to monitor the effectiveness of our energy efficiency measures, BCA will require building owners and utilities companies to submit energy and other building related data, such as Gross Floor Area (GFA) and specifications of building systems, on an annual basis starting from 2011. Building owners can also use the information to proactively improve their buildings’ energy efficiency.

Going forward, BCA will consult the industry on the possibility of mandating a minimum energy efficiency standard for existing buildings.

Mr Chairman, the Government will work closely with the industry stakeholders to support the growth of a capable and productive construction industry. While foreign workers will still form the bulk of the industry’s workforce, we will work towards building a pool of skilled and experienced local and foreign workers, and a group of competent builders who can lead the industry and support Singapore’s growth and development in the future.

Barrier-free access for private estates

Sir, we have done well in transforming our country into a handicap-friendly nation. Facilities that encourage barrier-free accessibility in public infrastructure and housing are becoming more commonplace, but I feel that we can do more for those living in the private estates, eg, Yio Chu Kang Gardens which is in my ward. This private estate was built on elevated ground. Hence, the need for residents to climb 28 steps to get down to the bus stop along Ang Mo Kio Avenue 4 and the wet market at Block 628. It is a challenge for the senior citizens and residents on wheelchairs as well as parents with babies in prams and residents who use trolleys for their daily marketing at the wet market. As a result, some even turn to driving their cars even for what would have been walking distance errands. This is not only wasteful and an environmentally unfriendly act, but it has become a necessity by default under the circumstances.

To further underscore the need for barrier-free access (BFA) in one of the most severe accidents, an elderly pedestrian lost her balance and fell while climbing the steps and suffered a few broken bones. I hope BFA facilities can be implemented sooner than later before worse accidents happen. The CIPC funding given to private estates is not sufficient to construct this BFA, even if I use the funding for all my private estates just for this BFA. I urge the Ministry to extend barrier-free access to the private estates in Singapore, just like what we have done for all HDB residents.

1.15 pm

Sir, I thank Er Lee for raising the issue of barrier-free access for residents of private estates. The Building and Construction Authority (BCA) is the agency which oversees the development of barrier-free accessibility (BFA), in Singapore. For private estates, BCA plays an active role during the design stage of the Estate Upgrading Programme (EUP) to incorporate barrier-free features, as requested by residents, eg, ramps, tactile markings in bright colours on pavements.

Some barrier-free features like the long ramp over steep terrain, as Er Lee has mentioned, can be very costly. For estates that have been selected for EUP, we often advise residents on the need to plan carefully to make the best use of their upgrading budget.

Any clarifications? Mr Foo.

Sir, it is interesting to listen to the Minister talking about the Concept Plan 2010. I would like to ask the Minister about the planning norm that has been used for the Concept Plan, as regards the end-state population for Singapore and also the pace at which this population growth was assumed.

Sir, in any concept planning, except Concept Plan Review Exercise, one of the key parameters is what are we planning for and how many people are we planning for. In 2006, for the first time, we held a mid-term review of the Concept Plan. We adopted a planning parameter, in other words, we started off with the question: "What if we had to plan for so many people in this year, what would the outcome be?" So, in the case of the 2006 planning exercise, we used the population figure of 6.5 million people for year "X" – 50 years hence – which in that case would have been 2056.

In this case, we have kept to the same planning parameter of 6.5 million. But now we are becoming more aware of the demographics, in other words, within the 6.5 million, the number of elderly, the breakdown between citizens and non-citizens, etc. These are some of the new considerations. But the population planning parameter remains unchanged.

Sir, I am very happy by the answer given by the Senior Minister of State just now. I have some clarifications to make. The image of the construction industry for many years has always been an issue. Parents do not want their children to join the construction industry. The impression is that it is very hard work and not paying well. And I think that work needs to be done on this issue of image for the construction industry – the pay and the professionalism of the workers who are in the construction industry. Are there efforts that the Ministry is thinking about to really improve this image over time?

Thank you, Mr Chairman. I totally agree with the Member's views about image. When we look at improving the image of the construction industry, it is not just about glossy pamphlets and exciting portals. I think what we want to do, first and foremost, is to make sure that in the work environment, sufficient attention is paid to safety as well as to have proper equipment and training, so that potential employees know that when they work in the construction industry, it is not hazardous, they are not putting their lives at risk.

Secondly, I think it is also about raising the career prospects and this is where we have to put in a lot of attention to look at how we can build a career path for our Singaporean workers that if you enter the industry, there is a training roadmap for you and that with the better training and certification; at the end of it, there is a licensing scheme which you can be licensed as a tradesman, as well as a supervisor, and that ultimately will put you in a very good position for better paying jobs.

In addition to that, I think the industry is reaching a very exciting phase, because of concerns over environment as well as a new focus on green building technology. I think this is a very attractive area for young Singaporeans. They find that there is a mission, there is a calling, to improve the environment for Singaporeans as well as for the world as a whole. The ability to add value in making our buildings more efficient, in terms of energy and resources, or making our buildings more appealing, for example, in this whole area of urban design, has now attracted a lot of attention from our younger prospective employees. So, thank you for the question. We are going to continue with our effort to increase the profile of the industry.

Sir, I thank the Senior Minister of State, Ms Grace Fu, for her answers on construction productivity. I would like to ask her, aside from the efforts aimed at upgrading the skills and capability of the workforce within the sector, would efforts also be put in to retaining the skills and capabilities already acquired by the workforce, both local as well as foreign. And I say so because the construction sector by its nature goes through cycles, and we have seen cycles where they actually shed significant numbers of workers, local and especially foreign. And many of these workers would have picked up skills in the meantime, and it would not be easy to get them all back too quickly when the upturn comes. So as we go forward, would this be part of the plan to retain them?

Mr Chairman, we are keen to build up a local core group of experienced as well as skilled workers in the industry. We have done so, not just through a training framework but also through the CoreTrade Scheme. We have made it mandatory for projects of certain size to have licensed tradesmen to do the job. By doing so, as I mentioned earlier, it is really our intention to make it more attractive to view construction as a career. And that is not just for locals alone, but also for foreign workers, because we must admit that this industry is not one that we can depend entirely on locals to fill the jobs that are available. So we need to now look at the group of foreign workers that are working in the industry. I think Mr Heng also earlier asked about the areas in the C21 that we have not adopted. I think one key area is the training of foreign workers.

In the past, we had always viewed foreign workers in the construction industry as transient in nature and we had not put emphasis on training foreign workers. I think this will change with what we are doing now. We will look at improving the experience and skills of foreign workers as well. We are not saying that we are going to have all of them staying in Singapore for the long run, but we are looking at building a core group that perhaps will provide guidance as well as necessary supervision in the industry. And the changes that we are making in the foreign worker levy framework will help us reach this goal. We are, for example, having another tier of foreign worker levy that is a lower amount, targeting at foreign workers with experience and certification. So, if you have been here for four years and you have accumulated certain certifiable skills, you will qualify for a lower foreign worker levy.

So, these are the changes that we are making to basically steer the construction industry towards one that has greater skills content and of a higher productivity level.

Mr Chairman, the Minister has just said that Government buildings will be relocated to Jurong Gateway as well as to the Paya Lebar area. Can I just ask whether the Government has plans to ensure that the roads, parks and other social amenities in that area would be sufficient to cope with the expected increase in the commercial activities in that area? On the same point, for the Amber and Katong area, what are URA's plans to prevent overcrowding which would add to the social pressure for the residents in that area?

Yes, the relocation of the Government buildings to Paya Lebar and Jurong will obviously mean that there will be increased requirement for adequate infrastructure, not only transport infrastructure, but also social amenities, etc. This is part and parcel of the overall Concept Plan and the Master Plan that we draw up. From the Concept Plan review that I talked about earlier, we actually derive a detailed and specific Master Plan. This Master Plan will then look in a more detailed manner, what kind of road infrastructure is needed, what kind of transport infrastructure is needed, what kind of other facilities such as schools, jobs, parks, shops, commercial areas, etc, are needed. This level of planning is conducted at the master planning level. I want to assure the Member that when we do make these changes, they will be taken as a whole and not just development for its own sake. I think this is one of the strengths of the Singapore planning system. When we plan, we plan it on a holistic level, taking everything into consideration.

The Member is worried, justifiably so, about the increased developments in the East Coast area, particularly in the Amber-Katong area. This has traditionally been a very low density area, but it has become much more high density as a result of the changes in the Master Plan. But the Master Plan does not just talk about re-zoning to higher density, it also takes into account and discusses with the relevant Government agencies, eg, LTA, what will these additional increased densities mean for traffic.

Specifically, to answer his question about Amber and Katong, the transportation infrastructure has taken into account these new developments. It is still being planned, so it is not in place yet. For example, the MRT system in the East Coast area will reach that particular area. The Circle Line will serve part of the Paya Lebar developments. The roads will also be expanded. There will be a new Marina Coastal Expressway that will be built, in addition to the current East Coast Parkway, which will help to take additional traffic volumes.

So, in a nutshell, when such development plans take place, whether it is further expansion of Jurong or Paya Lebar, or whether it is intensification of land use in the Katong area, it is done on a total basis. Of course, there will be specific pockets of congestion that will take place, and this has to be resolved at a local level. If there are such problems taking place, LTA and URA, will collectively look at these problems together with the MP for the area. I am aware that there are such localised congestion problems in that vicinity and I will be happy to look at those specific areas in greater detail. But, overall, the whole planning process takes into account a whole gamut of requirements, ranging from housing to roads to schools to nature areas, even right down to things like markets and places of worship, etc.

Sir, my clarification is regarding the issue of limited land resources. Currently, for building of multi-storey carparks, you have this planned under the Main Upgrading Programme (MUP). But because now the Main Upgrading Programme is no longer popular, you are doing away with it. So, currently, there is no programme to build multi-storey carparks in mature estates where there are a lot of surface carparks. This issue of insufficient car park lots is a daily problem currently faced by residents. Can we know the Ministry's long-term plan of providing carpark lots for our residents, especially in Aljunied GRC, where we are facing daily requests for additional lots?

1.30 pm

I recall that there was an answer to a parliamentary question just a couple of days ago on this subject. Let me just reiterate the main points. First of all, yes, there is an increasing pressure on carpark spaces in HDB estates. This is as a result of the increase in the car population where planning norms used to indicate a certain number for HDB estates. We did not count on the fact that many families actually have more than one car today. Some have even three or more cars. As a result of that, we do face a pressure on carpark space.

Overall, there are enough carparks but in localised areas you have a shortage. HDB tells us, when they did the last survey, that about 10% of the carparks in Singapore are over-subscribed; in other words, there is a need for expansion. So we will look at this 10% as a priority to see how we can alleviate that shortage. We can do that in several ways. One, we can simply expand the surface carpark if there is space and there are no other competing uses for land or, two, we could increase the number of floors on an existing MSCP (Multi-Storey Carpark). That is also possible. But if those two measures are not sufficient, then we will be looking at building MSCPs. These are the three ways we can alleviate that problem.

Specifically, the problem is that there is an increase in the car population in our HDB estates. The Ministry of Transport (MOT) is looking at the control of car population. On our part, we would have to provide sufficient carpark space. But I want to add that some of the problems cannot be solved just by MSCPs alone. Sometimes, when we look at the carparks, we group several carparks together into one. And when we look at the number, we find that actually there is sufficient carpark space. The problem is that there is insufficient carpark space in one particular carpark, even though there may be available lots elsewhere. Here, we will have to look at some demand management measures as well, eg, we may have to look into giving more priority to the first car of each family as opposed to the second or even the third car. Together with the increase in the supply of carpark spaces, we will have to look at demand management measures as well.

Sir, I would like to ask the Parliamentary Secretary how many private estates were selected for estate upgrading per year during the last few years and how many private estates are there in Singapore. At the rate that we go, I am afraid some of the residents may have to wait as long as 30 years before their estates are selected for the estate upgrading project. In view of the ageing population, I would like to urge the Ministry to set aside a sum for carrying out Barrier-Free Accessibility (BFA) for private estates.

Sir, we understand Er Lee Bee Wah's concern for her residents and many other residents in the private estates. As Members are aware, we have two programmes for upgrading of private estates. The main programme is the Estate Upgrading Programme. For estate upgrading, the target is really for the older estates. We know that basically the criterion is the age of the estates because these are the estates that require a lot more upgrading works. At the same time, it is the magnitude of the work that could be done because we want to make sure that the funds put in are made available for the Estate Upgrading Programme, and to effectively try to do a lot more of the works that are required. Even in private estates, as we know, when works start, the disruption that is created would create a lot of inconvenience to the residents. When we do Estate Upgrading Programme, there is a lot of planning that goes into it. The funds that we put in are quite substantial. That is the reason why we do not have unlimited upgrading works as the resources are limited. We select a few estates at that point in time based on the assessment of the Estate Upgrading Programme Committee. We select those estates that are older which have got better opportunities for upgrading in terms of the works that can be done, and we work with all the different agencies to try and make the work as comprehensive as possible with limited disruption to the residents.

Of course, the other programme which was introduced last year was the Interim Estate Upgrading Programme that Members are aware of. This includes opportunities for the younger estates. As Er Lee said, it would take sometime for the older estates to be eligible for upgrading and sometimes the works within the estate may not be as extensive but may require immediate attention. So we do provide funding for Interim Estate Upgrading. Having said that, on the question of how long and when we are able to provide for upgrading of those estates, the approach of both I-EUP and EUP is to assess the local situation. Every estate is different and unique. I think the current programme that we have allows the residents as well as the committee to make decisions and prioritise. On the example that Er Lee highlighted, she is aware that it is a very extensive investment as we need to consider the width of the proposed ramp as well as the height that is required. Sometimes, the budget that we have is really not unlimited. Therefore, we need to prioritise what we can do.

On the suggestion that we provide barrier-free access programme for all, I think we can review that. We have to take a look at the resources that we have. But for now, I think we have to look at what we can do with the budget that we have for the Estate Upgrading Programme as well as the Interim Estate Upgrading Programme.

Could the Minister comment on my proposal on whether HDB will consider selling some of the 3-room or 4-room flats on a 60-year lease, instead of 99 years, to provide another choice for those people in the low-income group?

Sir, if the idea of having a shorter lease of 60 years is to make the HDB flat more affordable to the low-income group, then I submit that there might be a better way of doing it, and indeed that is what we are doing. We provide additional grants to the lower-income group. We build smaller flats, priced more affordably for the lower-income group. So if you take the 2- or 3-room flats that we are building for the low-income group, with the additional housing grants that we have in place, these 2- or 3-room flats are actually very affordable. In fact, they are below or close to the debt service ratio (DSR) of 22% that I talked about last Friday. I think that is a much better way of providing them with a roof over their heads, with a 99-year lease which they can stay in comfortably and with a great piece of mind for as long as possible.

If you are talking about providing a 60-year lease for a young couple, I think we are going to run into trouble especially when that particular family grows old because our life expectancy is increasing. So a 60-year lease may not be that attractive for them. We do have shorter leases, as the Member knows. For studio apartments, we have a 30-year lease. But that is really meant for the elderly – the senior citizens. That is the reason why we have a shorter lease. But I am not keen on the idea of a 60-year lease for a young family or young couple starting up. We want to make flats affordable for them. Let us find other ways of doing so. Give them more additional housing grant, build smaller flats for them and also tweak the policy such that higher income applicants do not compete with them for the same flats. So for the 3-room flats, we have a $3,000 household income ceiling, that means, if you earn more than $3,000, you will not be able to compete for the 3-room flat. Similarly, if you want to buy a 2-room flat, your income cannot be more than $2,000. With all these in place, we do not see any problem in making HDB flats affordable for first-time low-income families.

Last clarification, Dr Lim.

Sir, the Minister mentioned that the current measures are enough to cool the property market and say that the Ministry will consider more measures. Can the Minister clarify what are the other measures that the Ministry is thinking of now if the market is not cooled by his cool tea?

If we tell you what other measures there are, then there is no point in having these other measure in our pockets.

Mr Foo, last question.

Sir, can I just ask a couple more short questions?

We have only four minutes.

The Minister was talking about how to make HDB flats affordable last Friday and also in reply to Mr Ang Mong Seng's question. I would like to ask if it is possible to make the DSR progressive for 3-room, 4-room, 5-room, etc. In other words, the DSR for a 3-roomer should be lower than a 4-roomer and 5-roomer. What is the Minister's view on that?

I think that is a very relevant point because if we talk about Debt Service Ratio (DSR), obviously the amount of money that a low-income family needs as a proportion of his total household income for his other necessities would be higher than, say, for a higher-income family. So, strictly speaking, the ideal DSR for a low-income family for a 2-room flat should be smaller than the DSR for a higher-income family for a bigger flat. I do agree with the point that the Member is making. Indeed, the evidence suggests that this is so. Over the last 10 years or so, I have been looking at the numbers and the Debt Service Ratio for the smaller flats, ie, the 2-room flats, is indeed smaller than for the 3-room, 4-room and 5-room flats. That is a result of a deliberate pricing policy that we have plus, of course, the additional grants that we give to the low-income families. Just to recap, for a low-income family of, say, $1,500, that family can get as much as another $40,000 more in grant.

$80,000 in total?

$80,000 in total. In other words, if they buy a resale flat, they have got $40,000 from the CPF grant, another $40,000 from the additional housing grant. If they buy a new 2-room flat, they can get, on top of the subsidised price, additional discount of $40,000. With these things in place, the Debt Service Ratio for that family buying a 2-room flat is below 20%.

Mr Foo, are you withdrawing your amendment?

Sir, can I use up the entire four minutes?

Otherwise, the Ministry will not have any money to do projects. It is true. So you have got to withdraw your amendment.

Sir, one very quick question. The Minister has lamented the fact that a lot of prospective buyers like to choose flats that are in the right location, near a MRT station, with the right view, and so forth, and those flats with poorer attributes are not selling as well. Is it a question of pricing? Are we not pricing them correctly which is why flats with poorer location and attributes are not selling?

The quick answer to that is that we do price these "less attractive" flats cheaper than the other flats. Is it cheap enough? I do not know how cheap is cheap enough. But the evidence shows that some of these people who reject these flats do not even look at the price when they reject them. So it is not just a matter of pricing.

Mr Foo.

Sir, thank you for your indulgence. Indeed, the Minister, the Senior Minister of State and his team have given us comprehensive replies. I would like to thank them on behalf of the GPC. Also, I totally agree with the Minister when he shared with us that Singapore's entire skyline has been transformed. Every time, I pass the city, I can see the new skyline emerging – you have the Marina Barrage, the Sail Condominiums, the Promenade and soon the Gardens by the Bay, my two beloved "durians" of the Esplanade, you have the Marina float, the Helix Bridge, the Flyer. These, I think, would not be possible without the passion and the dedication of the fine men and women at MND. They have made us proud.

With that, Sir, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $1,066,357,600 for Head T ordered to stand part of the Main Estimates.

The sum of $6,077,864,200 for Head T ordered to stand part of the Development Estimates.

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Head V – Ministry of Trade and Industry

Capitalising on recovery

Sir, I beg to move,

That the total sum to be allocated for Head V of the Estimates be reduced by $100.

Mr Chairman, 2009 was a challenging year for most economies including Singapore. The recovery seems to be underway and what we now see with the recovery is fundamental shifts in markets, opportunities and competition. Against this backdrop, the Economics Strategies Committee (ESC) drove its recommendations for sustainable and inclusive growth to Singapore.

In line with Budget 2010, which is forward-looking in the recommendations of the ESC, the emphasis is for Singapore to push for longer term strategic and sustainable growth. To achieve this, businesses will be required to restructure and change. This will create opportunities, but also uncertainties and adjustments for businesses operating in Singapore. The question is that as we push for longer term strategic and sustainable growth, how can we ensure that we can provide the environment and impetus for businesses in Singapore to capture the opportunities with the recovery in the shorter term? Singapore's economic performance still correlates with the global economic recovery, as Singapore's economy is heavily dependent on external demand.

Can the Minister share what strategies are we driving to differentiate and promote Singapore's growth and to ensure that Singapore is ready to take full advantage of growth in the short term to capitalise on the recovery? With all of these, what will the impact be on business costs and its impact on Singapore's competitiveness? Does the Minister see Singapore companies and companies operating in Singapore as being able to capitalise on the recovery? In the shorter term, what are the potential markets and industries that the Minister sees as opportunities for Singapore to take advantage of the recovery? And how does the Minister see the balance of SMEs and MNCs and the local and foreign companies in the recovery.

Opportunities

Mr Chairman, with the help of several economic stimulus packages around the world, although each is customised to its own environment, we are expecting a recovery earlier than usual. In 2009, roughly about 0.8% contraction happened globally and, this year, IMF forecasted 3.9% growth and next year 2011, IMF forecasted 4.3% growth. With two consecutive years of growth globally, we should expect a higher growth regionally in Asia. I expect Asia to be leading the charge and emerging economies to reap the maximum benefit. As such, this is very critical for us to identify potential opportunities. The emerging markets could grow three times faster or better than most of the world's advanced economies. And what is exactly in store in terms of opportunities for our local businesses, especially the SMEs? I am glad that this year, the Government is focusing on the SMEs and coming up with several measures, especially in the areas of innovation for the SMEs to tap on the various grants to help them to innovate and grow their businesses.

I would like the Government to provide some guidance as to what other areas of opportunities these SMEs can actually tap on, in order to grow their businesses and expand their horizon.

Growth opportunities

Mr Chairman, for many of our companies, the growth opportunities lie outside Singapore. Can the Ministry provide the House with an update on our efforts to help local businesses internationalise? The ESC report mentioned that with the rise of Asia and emerging markets, economic opportunities abound. What is the Ministry doing to guide local companies to take advantage of these opportunities, especially tapping on the growth of economic giants like China and India, and highlighting the opportunities for Singapore in the current global recovery?

Much has been done in the past years to give Singapore companies an advantage like the FTAs, positioning us as an active player in international economic cooperation. To date, what benefits has this strategy yielded for Singapore?

I have no doubt that these efforts are very well appreciated. However, more could be done as we are participating in an uneven playing field, especially amongst players from developed countries and even from the less developed countries. We are squeezed.

Let me give a couple of examples. Singapore stands for delivering value and straightforward ethical dealings – our hallmarks. Many of our entrepreneurs play by such rules as we go overseas. But others do not. Moreover, some of the ground rules and mindsets overseas are also different. For example, one of my Indian friends once told me – in India, to get on the bus is not to stand in line at the bus stop. Either you get on the bus before the bus stops or run after it and jump on it after it has left the bus stop. Imagine how uncomfortable that will be for our people in our interchanges. You can also imagine the mental dexterity and swiftness in action of people who have grown up in such an environment. Some countries like China are already flushed with capital, such that some aspects of our earlier value proposition is no longer that attractive. In short, our window of opportunity is closing and we should try to leverage our strengths and make as much headway as possible. Many from the developed countries have their government pitching for them. I am very enthused by the recent pronouncements that give hope that our Government is pulling out all stops to assist businesses in their forays overseas. However, many times in the past, I feel that while the intention is there, we are constrained into paralysis by our elaborate considerations of all angles. I guess, if you think hard enough you can always find a problem. This brings me back to my suggestion in the budget debate that advocates for businesses be planted in Government agencies to pitch on behalf of businesses. If we depend on the same group of civil servants with the ingrained mindset, I fear that we may be disappointed. Let us not further compound our lack of size. An all-Government approach is important. Let us pay heed to the several speakers at the Budget debate who still detect silos in our Government.

Growth strategies

Sir, many economies are reporting different pace of economic recovery following the downturn which we just experienced. I have met many Singaporeans who are hopeful that Singapore will rise again, particularly due to the potential of the Asian economies. I would like to ask the Minister, besides the rise of Asia, what other growth opportunities are available in the current upturn? And what are our growth strategies to capitalise on these opportunities?

Singapore – hub strategy

Sir, the story of Singapore has been that of a hardworking clever strategist, who was able to take advantage of its strategic geographical location to develop itself into a bustling city. Over the years, we have also leveraged on our competitive advantage to develop multiple hubs that continue to add fuel to our economy. Hence, can the Minister first update us on the status of our hub strategies and, in particular, whether we have also strategies to interlink these hubs, so that each hub can leverage on one another to multiply the returns.

Two, with the changing trade routes from the Atlantic to Asia, it presents unprecedented opportunity for Singapore to reposition itself. We can be a convenient gateway to the new emerging mega economies of China and India. Given our familiarity with the global business lingua franca, transparency, low tax regime, rule of law and political stability, how are we leveraging on this window of opportunity to develop Singapore as a global business hub as well as a global gateway to Asia? What are the measures and support available to both local and foreign businesses?

Finally, given the threats of climate change and pandemics, we spoke about the possibility of setting up Singapore as a disaster and relief co-ordination hub. Could the Minister give an update on this? Also, would the Minister agree that this hub is even more effective if we also invest in building a Humanitarian or International Organisational Hub that can complement the hard products with humanitarian software and services – whether in training or hot housing such organisations?

Mr Liang Eng Hwa, take both of your cuts together.

Growing globally competitive companies

Sir, the key buzzword for this year's Budget is productivity. Given the significant gap between our productivity levels and that of our global leaders, it is clearly something we need to work on. In several of our large sectors, we are about 60% of the global leaders. Even if we are able to achieve the 2%-3% productivity growth for a whole decade, it will at best only get us near the leaders and put us in the game. Our competitors who are behind us will catch up and narrow the productivity gap as well.

My point here is that a competitive, skilled and productive workforce, while essential and necessary, is only a prerequisite and a tentative first step. It does not guarantee us long-term livelihood in the brave new world. At the end of the day, we need viable and successful businesses and companies in Singapore to create and sustain quality jobs for our workforce. Of course, without a first class workforce in Singapore, we will also not have a viable and successful business here. So, only with labour and capital working seamlessly together, can we multiply our economy value and grow.

Given our small and export-dependent economy, we must get our local enterprises to be more outward looking and to have their business strategies geared towards the wider world. Many of these firms may be doing well locally but we need them to think big, expand the operation beyond our shores and develop our external economy.

However, as the ESC pointed out, we do not have a healthy spread of local companies of different sizes. We have a dire shortage of large firms, especially those that have annual sales turnover of beyond $100 million or above. There is a clear need to expand this $100 million club and spur some of its members to grow into industry champions in their own right.

In this case, I am glad that the ESC has recommended an ambitious target to double the number of local enterprises with revenue of over $100 million from 500 to 1,000 within the next 10 years.

There are generous schemes announced in the Budget that would certainly help. Some examples include the $1.5 billion growth capital for co-investments in local companies, tax deductions for angel investors and Government assistance in cross-border financing.

This is all great news for local companies seeking internationalisation. My only concern is whether there are now just too many measures being offered by the various economic agencies. This buffet spread of schemes may be getting too much for the companies and even for the staff of these agencies to digest. I read that between the various agencies, like IE Singapore, SPRING, EDB, Customs, and so on, there are about 157 schemes. I am sure the bright officers at these agencies would be able to come up with more schemes each time the businesses or the MPs present a strong and deserving case or request.

However, following ESC report, I believe it would also be timely to take stock of the various schemes across agencies and see how we could harmonise and further streamline the various programmes and also minimise the administrative paper work. The challenge is to make these schemes even simpler, yet retain their effectiveness.

Besides assistance schemes to help companies grow, I am glad that the Budget also enhanced the future business leaders scheme. Without entrepreneurial skills, there would not be business and ventures. We need a new generation of self-starting businessmen to emerge, stand tall and be prepared to take risk on their capital. Hence, I would like to ask the Minister if an entrepreneur culture has indeed taken root in Singapore, something we had debated at length in the past.

Besides growing companies to beyond the $100 million sales revenue, we should push for the growth of new industry champions and develop our local brand names, global in outlook, yet anchored to the local economy. Having a strong base of such companies gives us a bigger handle of our own economic destiny and hence greater economic resilience. These companies will employ our skilled and productive local workforce, utilise our infrastructures and real estate, pay returns to our capital and, most importantly, call Singapore their home. We need more of these queen bees, as I have said in my Budget speech.

We could leverage on our strengths and advantages. We have the capital, the talents, the infrastructures and system know-how for new industry champions to emerge. So let us aim to nurture and develop between three and five global brands, similar to the likes of SIA in the next 10 to 15 years.

Business cost

Sir, the economy is recovering with little spare capacity. Unemployment remains at a very low level of about 2% and bottlenecks remain in many parts of the economy. Externally, commodity prices are on the uptrend again and oil prices today are above $80 per barrel. Coupled with the impending increase in foreign worker levy which will have a spiral effect on the economy, there is a real risk that business cost will rise sharply again in the next one to two years.

2.00 pm

The investments in productivity growth, which would take some time to bear fruits, would not help improve the situation in the short term.

Here, I hope that the Government will keep tab of the costs of doing business and our cost competitiveness even as the economy recovers. In this transformational phase of the economy, many of the businesses may be incurring short-term adjustment costs as well as managing the rising input costs as the economy grows.

Are we expected to see inflationary pressures in the economy, especially in areas where bottlenecks existed even during the crisis, such as the construction and hotel sectors?

Our own history provides us with some learning lessons. In the 1980s, Singapore was enjoying strong economic growth and then the economy undergone a major shift towards higher value adding activities. However, rising business costs, including higher wages, took away our competitive edge as some businesses struggled with high overheads and low profit margins.

We had to respond then, and it was a painful time for all. I remember we had to introduce sharp reductions to CPF contributions and forced to lower business costs sharply again.

I would like ask the Minister for his take on the business cost and inflation outlook in the next one to two years.

Credit liquidity and Special Risk-Sharing Initiative

Mr Chairman, the 2008 and 2009 downturn as well as concerns about ensuring sufficient liquidity for enterprises prompted the establishment of the Special Risk-Sharing Initiative (SRI) scheme. The scheme was well-received by the industry, following a period in which many local companies face a credit crunch in the market. Can the Ministry update us on the scheme's effectiveness during the recent downturn? Were there segments of the industry that the SRI scheme as well as other schemes of the MTI not found to be as effective? Does the MTI see any potential risk for businesses with the phasing out of the SRI scheme within a year? Based on MTI's assessment, has the scheme resulted in any change in the sensitivity of the banks in evaluating credit risk for corporate lending, given that the Government has been subsidising a substantial portion of lending risk for the past few months? What is the assessment of commercial lending by the banks for SMEs over the next six to 12 months?

Mr Chairman, first, let me thank Members for their comments and suggestions.

Indeed, 2009 was a turbulent year for our economy. We went through a deep recession in the first half, but rebounded strongly towards the end of the year. GDP contracted by 2% over the year but employment increased by 38,800 jobs.

In 2010, our focus will be on recovery and setting the stage for the next phase of growth. I will briefly talk about the outlook for 2010 and our strategy for consolidating the on-going recovery. For the medium term, we have to count on productivity to fuel our growth. As Deputy Prime Minister Teo Chee Hean said, productivity also means increasing the top line. I will therefore spend sometime discussing the economic opportunities and growth strategies for the medium term. In other words, how to grow the "top line".

The Singapore economy should do well in the first half of this year. But uncertainties remain in the second half. We expect the fiscal stimulus in the G3 economies will fade and inventory adjustment will taper off in the second half. The underlying sluggish demand in private consumption and investment in the G3 economies, combined with fragile financial markets and tight credit conditions, may slow the pace of recovery. There are also new downside risks for us to monitor, such as the sovereign debt risk in Europe and asset inflation risks in Asia.

But, overall, our economy should grow by between 4.5% and 6.5% this year. This is slower than previous recoveries, but a decent performance nonetheless given the strains the global economy is undergoing.

Ms Jessica Tan and Mr Liang Eng Hwa have asked how we intend to manage our recovery and whether business costs will start to go up again as assistance measures are withdrawn and demand picks up.

As the economy recovers, we must expect costs to go up compared to last year when we were in a recession. But there is still some slack in our economy. As of the fourth quarter 2009, the economy was around 4%, below its recent peak level of output. Office rents and industrial rents were 17% and 29% below their peaks respectively. Nominal wages last year were 2.6% below 2008 levels. So we do have some buffer. Our forecast for inflation this year is between 2% and 3%.

Mr Zaqy Mohamad asked for an update of the Special Risk-Sharing Initiative (SRI) scheme. In the 14 months, from December 2008 to January 2010, more than 16,000 loans worth about $8.9 billion have been catalysed under the SRI and other enhanced business and trade financing schemes. More than 90% of these loans went to our SMEs.

We have extended these schemes for another year, with some scaling back on lending terms in view of the improving credit conditions. We expect the impact of this revision to be minimal as there had already been a decrease in the demand for Government-backed loans prior to this scaling back. After the discontinuation of the SRI in 2011, SMEs will still be able to tap on the mainstay Government financing schemes, which were in place before the recession.

Let me now turn to the economic opportunities and the growth strategies for Singapore. Ms Jessica Tan, Mr Teo Ser Luck, Mr Wee Siew Kim and Dr Muhammad Faishal Ibrahim have all raised pertinent questions on this subject. The Economic Strategies Committee has set out the broad directions for the economy for the next 10 years, and the Government has responded with a slew of measures and programmes in our Budget. Let me focus on the five key growth strategies that my Ministry will pursue in order to raise the top line over the medium term.

First, we will facilitate existing industries to move up the value chain by helping them to deepen and expand their capabilities. Second, we will take advantage of global trends, such as new growth areas at the intersection of the manufacturing and service sectors. Third, we will build a more diverse and vibrant corporate landscape. Last year, I explained that the value-added of our economy is contributed by the four groups: foreign MNCs contributing one-quarter of our value-add; foreign SMEs, another one-quarter; local large companies, one-quarter; and local SMEs, one-quarter. Going forward, we want to strengthen our corporate landscape by adding new players, for example, global mid-sized companies and Asian MNCs. Our fourth strategy, we will strengthen our integration with our ASEAN neighbours to sharpen our competitive age. And fifth, we will support the internationalisation of our companies by leveraging on our existing Free Trade Agreements (FTAs) as well as pursuing new FTAs. Let me elaborate on each of these strategies in turn.

Singapore has adopted a cluster approach in our industrial development strategy by promoting the growth of the wider ecosystem that supports each industry. Miss Penny Low asked how some of these cluster strategies were progressing, particularly, our hub strategies for each of these clusters. Overall, we have done reasonably well. Let me give a quick update on a few major clusters and how we are deepening and expanding their capabilities, which is our first strategy.

Let me start with the biomedical sciences (BMS). We started developing the BMS sector in 2000. Today, we are a highly competitive and trusted site for manufacturing pharmaceuticals. Our recent investment in building capabilities for biologics manufacturing has paid off. Despite the difficult conditions in 2009, we attracted new BMS projects resulting in 1,200 new jobs and over $1 billion in fixed investments. For example, GlaxoSmithKline opened a plant that will produce compounds used to manufacture its innovative vaccines such as a new vaccine that protects against meningitis.

The logistics sector is also another key sector. Over the years, we have built upon our natural attributes and strengthen our position. Singapore was ranked by the World Bank in 2009 as the number two logistics hub in the world. Today, 17 of the world's top 25 leading logistics companies have a significant presence in Singapore. DHL, the world's largest logistics player, has expanded the responsibility of the Singapore office to manage operations as far away as the Middle East.

Miss Penny Low has asked whether we can become a humanitarian or an international organisation hub. We are making good progress. We are home to more than 80 international non-profit organisations, a number that has more than doubled since 2005. EDB has, in fact, set up a dedicated International Organisations Programme Office to assist international organisations interested in Singapore. We agree with Miss Penny Low that our strategic location in Asia and our excellent logistics connectivity lend ourselves naturally to play the role of a disaster rescue and relief coordination hub. This is, in fact, what is happening.

Let me turn to the electronics sector. This sector has been with us since the 1960s. It is a good example of how we have moved up the value chain. We started with semiconductor packaging, then moved up to the hard disk drive assembly in the 1980s, and then semiconductor wafer fabrication. Today, nearly half of the world's hard disk media are made in Singapore. Electronics is a key demand driver for our logistics, chemicals and precision engineering industries. It is also an important capability enabler for new clusters such as avionics and medical technology. But electronics is a sector that changes rapidly. So, we must also continuously adapt, and change in order to seize the opportunities in this very exciting sector.

Looking at the future of electronics, we have identified four new growth areas. First, concerns about climate change have raised awareness and need for green electronics products, such as energy-efficient computing solutions, green automative and green lighting solutions. Second, demand for bioelectronics products, such as ingestible pill-cameras and bio-sensors, will increase as the developed world ages. The final two areas are security technologies such as biometric access systems and plastic electronics such as flexible e-book displays. These four areas are very high-tech and build upon the competencies that we have already established. They illustrate that our electronic sector has the potential to continue to grow.

Mr Chairman, Sir, time does not permit me to go into all our sectors but suffice to say we have similar strategies to deepen and broaden our capabilities in each of our key sectors.

Let me turn to our second growth strategy, which is riding on the convergence of manufacturing and services in new growth areas. The key to this strategy lies in understanding that the line between manufacturing and services is blurring. Some commentators have questioned why Singapore is still holding on to its manufacturing base. They are missing the point. It is not a choice between manufacturing or services, but whether we can successfully seize the new opportunities emerging in the space that spans manufacturing and services. Many manufacturing firms no longer simply transform raw materials into finished products. Rather, they now see themselves as entities that turn ideas into products and services that provide integrated solutions for the end-consumer.

Let me illustrate with an example. Teo Garments is one of our largest local textile and garment manufacturing SMEs. They started off manufacturing apparel to meet the specifications of their customers. Today, they complement their manufacturing activities with a full range of services, from product development and design, to merchandising, to logistics management. Their customers, who include well-known Western brands such as Osh Kosh B'Gosh, benefit because it conveniently develops both the products and the services that they require. And, of course, Teo Garments benefits through the additional revenue and market opportunities that they can now reap.

Economists call this the "servitisation of manufacturing". We expect this development to gain momentum and see this being replicated in many other sectors, blurring the once clear distinction between manufacturing and services.

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Leading manufacturers are, therefore, moving beyond production to develop a full suite of services such as R&D, design, supply-chain management and after-sales support. These are activities that Singapore is well placed to capture. We already have well developed professional and business services that complement our manufacturing activities but to capitalise on these new opportunities, we need our manufacturing base. By being a home to companies' entire suite of solutions, we entrench them further in Singapore. We are, therefore, not just deepening our capabilities in each cluster or sector but also capturing the value between the sectors.

Miss Penny Low and Ms Jessica Tan asked for the prospects of our global business hub strategy. Our third strategy is to build on this business hub position by attracting new players, as I mentioned just now. We intend to attract global mid-sized companies as well as Asian companies looking to internationalise and facilitating the growth of our own globally competitive companies. Mid-sized companies from the G3 economies who wish to tap into the opportunities in a rising Asia want to base their regional operations in a modern business friendly environment that is able to manage both India and China from one location. This is because some of these mid-sized companies do not want to set up one base in China, one base in India and another one in Southeast Asia. Singapore is well-positioned to be their pan-Asia headquarters. We have already done relatively well in attracting MNCs from the G3 economies to invest in Singapore. We are now attracting mid-sized companies who are responding to the Asian growth story and may grow into the MNCs of tomorrow. For example, Pall Corporation is an American clean-tech company specialising in fluid management technologies. They are keen to expand into Asia and have chosen to set up their Asia-Pacific headquarters in Singapore. At the same time, companies from India and China have started expanding their presence overseas. Singapore's excellent connectivity to G3 companies and markets offers them the option to take a small calibrated step out of their borders but which immediately connects them to the developed world. We have already had some initial success. For example, Tata Communications from India has set up an international headquarters and data centre here.

Our locally-based companies have grown quickly in the past decades. Some of them have managed to achieve regional and even international success. As Mr Liang Eng Hwa pointed out, our economy benefits when some of our local companies become industry champions in their own right and become queen bees. We definitely like to see more home-grown industry champions. We will take a multi-pronged approach to achieve this. Schemes such as the Partnerships for Capability Transformation (PACT) have already been announced by MOF and we will announce the details in May. We have many other schemes in place. Mr Liang counted there are over 150 schemes to help our local companies grow and succeed. I will leave it to Minister of State Lee Yi Shyan to elaborate on these schemes in his response later on.

But this is the idea that we have to ride on the Asia growth story. We think we can strive to be a leading consumer business centre in Asia where consumer insights are developed and consumer-centric businesses managed and grown. In this way, we can build up a cluster of companies in the consumer-related fields of marketing, branding, consumer research and market intelligence. We will, therefore, establish an Institute of Asia Consumer Insights in Singapore to conduct such research and analytics that will draw insights from consumer data to create value for companies that are established here.

Mr Chairman, our fourth growth strategy is to strengthen our integration with our Asian neighbours and, thereby, sharpen our competitive edge. ASEAN provides two key advantages for our businesses. First, with a middle-class of more than 75 million people, the ASEAN nations provide a growing market that serves as a very natural first step out of our borders. In fact, many of our successful companies such as Raoul, Crystal Jade and AceCom first started serving the ASEAN market before they expanded more widely onto the global stage.

In addition, our companies have also leveraged on ASEAN as a competitive production base, conducting entire value chains of activities within ASEAN. For instance, STMicroelectronics conducts R&D, IC design, application support and wafer fabrication in Singapore while the packaging of chips is carried out in Malaysia and the final testing of the chips is conducted in Malaysia or Philippines or in fact outsourced to other players in Southeast Asia.

ASEAN aims to achieve deeper economic integration through the ASEAN Economic Community or the AEC by 2015. The ACE will accelerate ASEAN's journey towards a single market and a synergistic production base with enhanced transport and business connectivity. ASEAN-based businesses, including Singapore-based businesses, will then be able to produce, operate and export more seamlessly across the region. We must take full advantage of this new development occurring in our neighbourhood.

Our fifth growth strategy is to support our companies as they internationalise by leveraging on our existing FTAs and by pursuing new FTAs. Mr Wee Siew Kim asked about the benefits from our existing FTAs. Our FTAs have helped us to reduce costs, to lower our risks and open new markets for our companies. Let me elaborate. Today, Singapore has a network of 18 FTAs in force. As an export-oriented economy, Singapore thrives on the free flow of trade and better linkages to major economies and new markets. Last year, companies based in Singapore enjoy more than $700 million in tariff savings as a result of our FTAs. Our service suppliers and investors in key sectors enjoy more predictable and better access to the markets of our FTA partners. Furthermore, overseas investments by our companies have enjoyed increased protection, both through our FTAs and our investment guarantee agreements. Trade facilitation measures under our FTAs help to lower the business costs of our companies. For example, mutual recognition agreements eliminate duplicate testing and certification, yielding cost and time savings. In the case of consumer electronics, such mutual recognition agreements saved our exporters between $3,000 to $8,000 on testing costs for each type of product.

Mr Wee Siew Kim has also asked about the areas where additional effort is needed. We already have FTAs with nearly all our top trading partners covering 66% of our exports. This year, we have embarked on two deeply significant FTAs. The first is with the European Union, our largest trading partner in 2009. We look forward to substantial tariff savings and improved market access there. The second is the Trans-Pacific Partnership FTA, together with seven other APEC economies, including the United States. This FTA can be the building block for eventually achieving an FTA for the Asia-Pacific region. The closer economic cooperation agreement with Egypt is also another important FTA this year. This would give us access to the Egyptian market. When done, this will be our first FTA with an African country which gives us access to both north and east Africa.

Mr Chairman, let me conclude. We are small and open and will always be vulnerable to the fluctuations of the global economy. There are still some uncertainties in the near future but we must chart the course for long-term growth and resilience during this period of our recovery. The first three strategies that I outlined – strengthening our existing clusters – capturing new growth areas and building a more vibrant corporate landscape – will expand the scope and capabilities of our companies as they compete in the new landscape. Our fourth and fifth strategies of deepening integration with our ASEAN neighbours and leveraging on our trade agreements will expand the market space for our companies. Together, these five strategies will put us on a path of a broad-based growth for our economy and create better jobs for all Singaporeans.

Tourism

Sir, in the last three years, we witnessed two F1 races and the developments of the two IRs which will operate in full scale in the coming months. They involve large amount of capital and infrastructure investment.

I would like to ask the Minister what are the Ministry’s plans to get the most out of these investments. In addition, in view of the rising travel among Asians, what are we doing to reap maximum benefits from this opportunity? Finally, in view of the proposed plans of similar theme parks and casinos in our neighbouring countries, what are the Ministry’s plan to make Singapore a preferred tourist destination and extend our visitors’ stay here?

Nuclear energy

Sir, the ESC report recommended that we should study the feasibility of nuclear energy amongst other options. The announcement created a buzz on the ground.

There are those who strongly favour this. They mentioned that nuclear energy is clean, reliable and contrary to popular belief, a safe source of energy. The generation of electricity using nuclear energy is relatively cheaper and nuclear power plants are able to generate more electricity compared to other methods. Furthermore, the fuel used is inexpensive and easily transportable.

However, another group is concerned about the safe storage and the disposal of nuclear waste. Nuclear plants usually have a highly complex infrastructure and the slightest malfunction might cause devastating results. They are also concerned about it being a target of terrorist attacks.

Nevertheless, both groups would like the Government to consider this proposal carefully as it has both positive and negative implications. Besides the tangible and intangible costs and benefits, they would like the Government to look at the social costs and benefits of nuclear energy.

I would like to ask the Minister about the status of our current knowledge and research capabilities with regard to nuclear energy. Would the Government consider having a private firm running the nuclear plant instead of it being State run?

Finally, as nuclear plant can develop vast amount of energy, in any case that the production is more than the usage, would the Government consider having neighbouring countries as our partners?

There are more than 400 nuclear plants worldwide generating 16% of the world's electricity. While many governments are highly ambivalent about this energy source, especially its safety concerns, technological advances and stringent requirements since the Chernobyl accident have made nuclear energy a much safer option. In addition, it is friendlier to the environment as it produces very little carbon dioxide emission.

Fossil fuels like coal account for half of electricity production costs while for nuclear energy, only about 3% to 4% of total production costs is due to the raw uranium. Volatile and rising oil prices have meanwhile made the relatively lower costs of nuclear energy more appealing but I understand there are challenges to making it a reality in Singapore.

The Economic Strategies Committee (ESC) has recommended that Singapore should look into tapping on nuclear energy for this long-term energy requirements. I would, therefore, like to ask the Minister what is the feasibility of Singapore achieving this, considering the potential problems associated with nuclear energy generation and the geographical location and size of Singapore.

Sir, one of the recommendations of ESC that caught the public's attention was the possibility of nuclear energy being a possible option to meet our long-term electricity needs. We know that nuclear energy has been around for some time and has been a strategic source of energy for many countries for many years. Technically, it is a rich source of energy at competitive economic cost. However, like many Singaporeans, it comes as a surprise to me that the nuclear energy would ever be a possible option in an island state with a size of about 710 square kilometers and a residing dense population of five million people. It may take a while for some to overcome that psychological barrier, given the perception of the radioactive hazards and safety concerns.

2.30 pm

There are strong strategic and economic appeals for the nuclear option. It would certainly enhance our energy resilience and, unlike many countries, we have the patient capital for such high capital intensive investments.

Like the decision we made on the casinos some years ago, we know the compelling economic benefits but the question is whether the other costs can be mitigated and reduced to an acceptable level. Not much has been said by the Government or MTI since the release of this far-reaching recommendation by ESC. So, I hope that the Minister can shed more light on the Government's thinking and its position; pending, of course, the feasibility study.

A decision like the adoption nuclear energy would have a significant bearing on future generations. I also hope that with more information from the Government, it would trigger a healthy and informed public debate on this issue much like what had happened to the IR debate. It would also be a good gauge of the risk profile of Singaporeans on the susceptibility of the nuclear risk.

Our neighbouring countries are also looking at the nuclear energy option. Given the close proximity, can the Minister give an update on the developments at our neighbouring countries and how it could impact us? Do we have an ASEAN stand on nuclear energy, for example? I would also like to ask the Minister on the progress and developments of the other alternatives. How would nuclear energy feature when compare to these other alternatives like solar, wind, and so on.

Solar energy

Sir, as we make the move towards becoming a more green nation, there will eventually be lower usage of electric power generated from fossil fuels, thus, less greenhouse gases and acid rain emissions. One of the options of the alternative sources of energy is that of solar energy and this seems appropriate with our climate and our position close the Equator. What steps is the Ministry taking to encourage the development of infrastructure to harness solar energy and its usage? Can the Ministry come up with a listing of appropriate companies, contractors and gadgets in the market for easier consumer identification and choice? Starting with a small list, I feel this can be expanded and also publicised. Other plans to work or collaborate with other agencies to encourage the use of solar, which I feel is certainly less controversial than that of nuclear energy.

Ms Sylvia Lim, take your two cuts together.

Energy policy

Sir, the ECS has put forth recommendations on Singapore being a smart energy economy. As electricity is a modern necessity, it is of paramount importance that it is reliable, pollution-free and affordable. As regards reliability, the ESC recommended that, in the medium term, Singapore considers importing coal and electricity to diversify our energy sources so as to free up land in Singapore. I would like clarification on the pros and cons of relying on imports and, thus, becoming less self-reliant for our energy needs. Which are the countries we are likely to import electricity from? Will there be additional risks to our energy security? What are the infrastructure investments we need to put in place to enable this? Will these investments lead to higher electricity prices? Are we expecting imported electricity to be more or less expensive than what is generated in Singapore? As regards to coal, are we taking a step backwards on the environment when other countries are moving away from it due to such concerns?

As for pricing, the ESC notes that economic fundamentals will mean that electricity prices will trend upwards, it further recommends pricing energy to reflect real cost and constraints, with suggestions of a carbon pricing scheme. From the point of view of the consumers, such a scheme sounds ominous, even with the offsets to help buffer the transition for the low-income. Sir, while offsets to low-income households will be useful while they last, an additional idea is to have a tiered system of pricing electricity in favour of small consumers. The fundamental idea is for the threshold level of power consumption by households to be determined. Households consuming less than the threshold level will enjoy a lower tariff charge. With increasing consumption levels, the tariff will escalate. The higher tariff collected in the upper tiers can be used for two purposes – one to cross subsidise the first tier tariff and, second, to encourage all households not to over-consumer electricity.

Many countries, including New Zealand, Canada, Hong Kong and the US, implement variations of this idea to protect small consumers. Some governments require electricity retailers, by law, to provide a low-tariff charge for small consumers. I hope that MTI's plan to open up the market for electricity supply among households to several retailers can incorporate such a requirement for the retailers to provide a low-tariff charge for small consumers.

Research and development

Sir, since the year 2000, Singapore has spent about $33 billion on R&D, also referred as gross domestic expenditure on research and development (GERD). Of this, about $12 billion was funded by taxpayers. I agree that it is necessary for Singapore to invest heavily in R&D for our nation's future, however, it is critically important to measure the output and impact of our R&D investments to ensure it is money well spent. This is, admittedly, not an easy task. The results from research may take years to materialise and some R&D may be undertaken for strategic reasons, the benefits of which may not be easy to quantify. Nevertheless, any spending from the public needs to be accounted for.

First, how are we currently measuring the output and impact of our R&D investments? I note that A*STAR puts out annual R&D surveys, covering input factors such as GERD in various fields of R&D and overall GERD as a percentage of GDP. There is also mention of certain outputs like sales revenue from commercialised products and processes, licensing revenues from patents and technologies produced here and the number of patent applications. However, the Singapore competitiveness report 2009 by the Lee Kuan Yew School of Public Policy observed that Government funded research institutes did not seem to be translating the scientific research into new products and services at a significant skill. Does MTI agree with the author's allusion to some under-performance? What other output and outcome indicators are tracked by the Government? How are we doing in terms of R&D output and outcomes vis-a-vis other countries at a comparable stage of R&D?

Sir, next – R&D manpower. The number of full-time post-graduate research students, who are citizens or PRs, was only 26% in 2008 with 75% being non-PRs foreign citizens. The ESC has acknowledged that we need to boost the numbers of local students pursuing PhDs in R&D fields. What are the Government's plans in relation to boosting the numbers of local students pursuing PhDs in R&D?

Supporting local enterprises

Sir, I would like to speak about how we can better support local enterprises and elaborate on what I mentioned during the Budget debate.

Sir, the Action Community for Entrepreneurship (ACE), submitted several recommendations to the ESC. Firstly, ACE feels that there needs to be a clearer focus from the Government on local enterprise development. Currently, since resources are accorded by the Government to enterprises based on incremental economic activities – which is a value-added method that we have been using right now to evaluate the potential of companies – this disadvantages SMEs compared to foreign SMEs as the former build from a higher baseline. Singapore should support enterprises based on absolute total return rather than incremental economic activities to create a more level playing field for all.

To aid in this objective, ACE proposed the establishment of a new local enterprise development agency or "Enterprise Singapore", which will be a single agency to develop globally competitive locally-based enterprises. Whilst the intent of SPRING and IE Singapore is to have specialised expertise to assist and support companies, this has also resulted in gaps to provide a seamless, comprehensive and integrated assistance to companies. Potential SMEs which could become Globally Competitive Companies (GCCs) but have reached a certain size, may not also be able to get the support from either agencies and, therefore, they are not well served under the current system. Other agencies with domain expertise like A*STAR, IDA, MDA and other agencies within the Government may not have a clear enterprise development role, nor are their KPIs directed in this focus.

"Enterprise Singapore" can, therefore, adopt a more targeted and "account management" approach than the other agencies in growing GCCs and involving the Whole-of-Singapore approach to provide the entire value-chain support to grow them from start-up to become world-class brands. An additional role of "Enterprise Singapore" could be to help in attracting, anchoring and nurturing promising world-class foreign start-ups and SMEs to locate in Singapore as EDB has successfully done for large MNCs in the past. These SMEs could one day become our GCCs and it does not matter where they originated from as long as they finally have home bases here in Singapore. I am glad that the Minister mentioned this is one of the strategies.

Sir, Singapore has seen the start-up, growth and internationalisation of Government-linked companies (GLCs) due to the support from Temasek and Ministries' funding and also the Development Bank of Singapore of those days. Many successful Singapore GLCs may not have been around without such support and we need to create more of such companies to add to the wealth and the growth of the nation.

"Enterprise Singapore" should, therefore, be complemented with a new Investment Agency or Temasek II, as ACE has called it, which will play a developmental role in investing and grooming promising locally-based private companies to be the GCCs of the future as the Government did for the GLCs in the past. Besides growing local companies, Temasek II should also bring potential foreign GCCs into Singapore by investing in such foreign SMEs. As governments around the world withdraw the massive economic rescue packages, there is a window of opportunity for Singapore to aggressively attract some foreign SMEs here.

I am also glad that the ESC's recommendation of a fund to invest in growth companies has been announced. I am glad that this is finally being recognised as a need. Sir, in 2003, a committee which I headed called the SME Financing Panel made this similar recommendation and we produced a report in 2003. Seven years later, the ESC has seen the same need and the Government has responded by setting aside $1.5 billion for this. Sir, the effectiveness of this fund depends on how it is managed and we must remember that the US$1 billion Technology Innovation Program (TIP) fund used to create Venture Capitalists (VCs) here did not succeed in getting many of our local start-ups funded as the VCs chose to invest outside of Singapore after the VCs received Government funds and tax incentives. A growth fund is needed because of market failure and therefore it is unlikely that many private funds will invest in targeted companies that may not yield the type of returns that they may desire. The Government may need to become more proactive in investment decisions rather than to leave it to third party investors. But it is also not optimal for the Government to make investment decisions. I think the best way to go about doing this is for the Government to set up a panel of established business leaders who are given the flexibility to identify suitable businesses to invest in, very much like the SPRING SEEDS programme where we have a panel of private sector experts making investment decisions on behalf of the Government and this has worked well for many years.

Sir, we will need to re-orientate our approach to turning Singapore into an entrepreneurial hub and to calibrate the playing field, Government-support mechanisms and focus should be on economic activities and spin-offs and move away from local ownership as a qualifying criteria. We should remove the 30% Singaporean ownership criteria for Government grants, loans and incentives so as to support enterprises based on economic activities and not the type of ownership. In this way, we can successfully bring in many entrepreneurs from outside Singapore to be based here.

Sir, on R&D, the ESC has repeated the need for innovation and R&D, and this is something all past committees have also highlighted and I believe we have not fully achieved the desired results. While we have done very well in the input factors for example, the amount the Government has spent on R&D, like the $12 billion that Ms Sylvia Lim mentioned, the equivalent outcome of this R&D is far from desirable. The substantial investment in R&D in this recent past has yet to yield the results that we want, especially in commercialisation and tangible start-up spin-offs. The lack of appropriate businesses as receptacles to translate R&D to commercialisation is one reason. The selection of research projects without inputs and guidance from innovative businesses creates another gap. Therefore, without an active involvement of innovative business ecosystem, expenditure on research may not yield the returns that we expect. In this aspect, "Enterprise Singapore" could play the role of creating that eco-system. A distributed approach of commercialising R&D residing in respective agencies has so far failed to yield the results that we so desire.

Sir, in conclusion, I will give credit to Budget 2010 that it has attempted to help companies through the adoption of innovation and technology and to improve the productivity of the workforce. However, we should not waste this opportunity to signal to SMEs that we would like to help them grow and that we have a clear and precise policy to create a level playing field for all of them. I think our SMEs will very much appreciate this gesture from the Government. If we want to grow globally competitive and world-class companies here in Singapore, we will need to take bolder and more definitive steps. I think if we miss this boat this time, it may take us a longer time to catch up and this will be costly for the long-term economic growth of Singapore.

Mr Heng, take both cuts together, please.

2.45 pm

Centre for research on productivity

Sir, the Economic Strategies Committee (ESC) recommended the setting up of a centre to research on productivity and innovation. I think this is an important move to help ensure that knowledge about productivity methods and practice can be obtained and shared quickly to the benefit of companies and workers.

We cannot assume that companies will naturally know what to do or how best to improve productivity in the context, especially for the smaller companies. And a lack of know-how can be a real impediment, aside from money. And this may also be a especially relevant in the case of the SMEs.

Deputy Prime Minister Teo Chee Hean said in his speech during the Budget Debate that in recognising the different circumstances of different industries, specialist centres may be established for the different industries. I am firmly in support of the view that such centres should not only do research and then make the findings available to companies on a pull basis, ie when the companies come and draw the information from the centres, but that the centres should also be open knowledge and leaving hubs that actively engages and distributes knowledge from the applied research to industry through close collaboration with industries' stakeholders; and that is a 'push' approach. And I believe that both 'pull' and 'push' methods are needed concurrently. I would like to ask if this is the correct reading of the intent of Government, and if so, whether there is a preliminary thinking on how many such centres and in which industries would be set up, when they would be set up and what resources would be deployed to back them up.

Hotel productivity

According to figures from the MTI and the MOM, labour-productivity growth in the hotels and restaurant sector was 4% in 2005 and dropped to 0.4% in 2006 to -6% in 2007 and -9% in 2008. One factor was the seeming difficulty of hotels in Singapore to raise the room rates compared to the situation in major cities in the west and with Asian cities like Hong Kong and Tokyo. A second factor may be the propensity on the part of the many hoteliers to equate service standards with headcount although with a keen eye on cost. The combination of these factors created a gravitation towards lower-fixed pay and smaller core workforce, and the relatively high dependence on part time, temporary, trainee and foreign manpower to provide flexibility and cost effectiveness.

The high turnover and quality or lack of quality of such workforce is not conducive to training and development and this is in turn bad for industry productivity. Over time, the image and attractiveness of the industry as an employer is also eroded. Growth prospects in the hotel sector remains strong in the medium term with MICE facilities such as the Fullerton Bay Hotel, the Marina Bay Sands and the Resorts World at Sentosa, coming on stream. In this time, it is all the more crucial for companies, workers, unions, Government, to work together to ensure that growth in the sector is sustained by productivity.

This is the only way to uplift profitability, wages, standards and image sustainably and substantially. I would like to know what plans do the MTI and the STB have to uplift productivity and spur innovation in hotel and F&B sector? Would efforts and resources be put into benchmarking, service excellence and people development? How do MTI and STB intend to enlist the partnership of the industry representative bodies and unions in these efforts?

Employers and productivity

Sir, employers will be the prime movers of our renewed productivity drive. There are, in our midst, corporate leaders who still do not see the bigger picture. The importance of investing, in employee training is to drive productivity and employability. These leaders have voiced various concerns in the words of one, "I do not want to train them and make them marketable. They have no time for training." These employers question whether the broad-based training and the diagonal exposure and vertical path progression to value add to employees. Development tracks, as mentioned by Deputy Prime Minister Teo Chee Hean, is indeed the employers’ responsibility.

These concerns will be stumbling blocks for our Nation's productivity drive. I fear that such leaders fail to understand that Singapore's future growth agenda must stem from a positive mindset of magnanimity, sincerity and an understanding that we are training our employees for a bigger goal and our competition is really not amongst Singaporean companies but the neighbours around us. We must impress upon our corporate leaders the need to think Singapore first. In this productivity journey, we must be able to align every employer to the National Productivity goals. What is the Government's plan on this?

Strengthening SME capabilities

Sir, capability development is important in achieving higher productivity, in particular, human capital management and human capital processes and system, the underpinning foundation is both critical and pivotal to the SMEs' growth and productivity journey. SMEs are well supported in the areas of automation for work processes and market exposure but more attention should be paid to Human Capital Management and development capabilities. Their bigger stumbling block is that, most of the time, they are too small to have a specialised HR function. They gloss over the most strategic aspect of capability development. I urge SPRING Singapore to explore the possibility of setting up an HR service outsourcing hub to give more focus support to SMEs in their HR processes and systems.

SPRING Singapore has the HR tool kit, a DIY for SMEs. I understand that the ones who are benefiting from it are the MNCs, who are happily downloading the tools free of charge (FOC). And they can Do-It-Yourself (DIY) because they have specialist HR function to leverage on these tools. As for SMEs, they do not have specialist HR resources to do-it-yourself, instead, they are saying, do-it-for-me. Sir, to strengthen the human capability management function of the SME, I urge that the WSQ national framework on HR competency qualifications and the HR toolkit induction be taken seriously by agencies as eligibility criteria for companies vying for the respective SQA, ASME or Asian Human Capital Awards. Afterall, these national programmes were mounted to level up the capabilities of companies and their people managers.

Strengthening SMEs and corporate ecosystem

Mr Chairman, global and regional competition is growing. At the same time, our businesses face resource constraints, particularly in foreign labour. What are we doing to ensure that our SMEs are equipped to meet this challenge, raise their productivity and expand internationally? As we restructure our overall economy towards higher-value activities and exit from less efficient ones, it is inevitable that many companies, particularly our local SMEs, will have to change their core businesses or move their operations to other countries where costs are lower.

During the 2006 Budget Debate, I spoke about how our local companies should work together so that we can stake out a bigger slice of the global pie. Co-operation, collaboration and mutual help are key traits best exemplified by Japanese and Taiwanese companies. Not very much has changed in the last four years. There are still only a handful of Singapore companies which have the competence and talent base to compete on a global or regional basis. The Minister of Finance, Mr Tharman, had mentioned in his speech about Singapore Mozaic's success in promoting our local furniture makers collectively. We should have more of such collaborations. We should hunt as a pack.

The Minister has mentioned using our business associations as growth champions. I agree that our trade associations and Chambers of Commerce can play a greater role in strengthening our capabilities as we go global. They are the most suitable agents to change the mindsets of our business leaders to think collectively as Team Singapore. I would like to suggest that big local companies, especially those which are government-linked, proactively take the lead when going overseas to capture contracts. The Government may wish to consider providing such companies with incentives to do so. This is pack hunting with a lead. I am heartened to note that the Government will commit $100 million over five years to facilitate international market access for members of our business associations.

All entrepreneurs have to start somewhere and often fail at the beginning before they can succeed. Hyflux, Creative and many other local enterprises started as SMEs. We need many more Singapore companies like them. Their eventual success translates into more jobs and greater tax revenue for Singapore. Only then, will our economic growth be truly sustainable.

The Government has agreed with the ESC recommendation to raise our Gross Expenditure on R&D to 3.5% of GDP over the next five years. In the past, I appealed to the Government to give our local companies extra consideration when procuring services and goods for itself. Such support is vital to grow our own global companies. If we do not give them a chance – a break – who else would?

Hence, I applaud the Government's decision, as a sizeable consumer of products and services, to play a larger role to help innovation-driven companies turn their R&D into marketable solutions on a more proactive and systematic basis.

As the Government help innovation-driven companies turn R&D into marketable solutions through Public-Private Co-innovation Partnership, we must bear in mind that innovation is not only R&D. For beyond technological innovations, there are also innovations in business models, process, branding that would set our SMEs apart, and they should be given the same level of support.

Many times, and even in this Debate, it has been mentioned that the Government can play an enabling role, not a deciding role. I do not agree. I certainly understand the Government's concern that policymakers may not be able to pick winners. I suggest that we can adopt the ideology of making it "market based" and aligning interests through co-investing. This is because I do not believe that we have the scale and scope for a "let a thousand flowers bloom" approach. For Singapore, the risk of picking the wrong seedlings is less than not picking at all.

I suggest the key aspects of selection criteria should include; substantially Singapore-based companies; equity capital is required to compete overseas; the "ticket size" is perceived as too big for the current shareholders and they must have proven success domestically.

The idea of Government co-investment, with businesses taking the lead, is not new. In its earlier form, it had propelled our industrialisation in the 60s. In just the recent past the SRI is based on such a concept. For example, an agency like EDB Investments can co-invest directly in exchange for an equity-like stake. There is certainly a need for growth/patient capital. M&A is a crucial and under-used approach for Singapore companies to grow both domestically and overseas. The GPC had discussed using a new development agency (such as a Temasek II) to support acquisitions where there is a "ticket size" issue, especially when it is an overseas acquisition. In so doing, we can quickly build bulk and scope that in many sectors is a key differentiating element. I hope that the Ministry would give serious consideration to this GPC suggestion.

Strengthening the SME sector

Mr Chairman, the Budget has certainly brought upon a rejuvenated focus on productivity to get companies and the workforce better prepared to adapt to an increasingly comparative world economy. The unfortunate reality is that the business world is brutal. And our competitive companies and workers who are not willing to adapt may find themselves left behind.

I believe the incentives approach given on this Budget is a right approach for those who are willing to adapt and transform. I would like the Minister what are the additional resources given to SPRING and IE Singapore to focus on transforming local companies into globally competitive ones and help them build strong management teams? Some measures certainly favour medium and larger sized companies that are able to transform, invest in R&D and commercialise innovation. However, smaller firms may not have sufficient cash flow to transform and invest in HR due to tight resources. How does MTI plan to help the smaller firms below $10 million in revenue, achieve critical mass so that they can scale to $200 million?

What more can be done for them?

With limited Government resources for industry development, are there key sectors that MTI is counting on to deliver, improve productivity and promote Mergers and Acquisitions (M&A) to grow globally competitive companies?

Would the MTI consider partnership incentives for MNCs and successful global Singapore firms to help our SMEs enter new overseas market and sub-contractors or business partners? This can be a potential channel to help IE Singapore scale its operations through the use of partner enterprises. One challenge for local businesses here is the high cost of rental and utilities. Can the Ministry share if it has performed a study on what percentage of revenue earned by SMEs goes into rental? The challenge with land scarce in Singapore is that high rentals of businesses are controlled by a small pool of landlords and this form the basis of business costs as everything else comes on top. Anecdotally, many business feedback that for every dollar earned, a high proportion goes into rent and utilities. I fear that this may counter our productivity efforts because in the long run, it might may make it tough for employers to pay workers better, even with higher productivity.

We will take a break now.

Thereupon Mr Speaker left the Chair of the Committee and took the Chair of the House.

Order. I suspend the Sitting and will take the Chair again at 3.20 pm.

Sitting accordingly suspended

at 3.00 pm until 3.20 pm.

Sitting resumed at 3.20 pm

Debate in Committee of Supply resumed.

Head V (cont.) –

Entrepreneurship

Mr Chairman, Sir, the ESC and the Budget seem to focus heavily on helping companies which are already successful to become globally competitive companies.

In its drive to identify and assist these promising medium-sized companies, has the Government forgotten about local small businesses like sundry shops and car workshops? Would such small enterprises have a place in the new economic landscape, or will they be crowded out or gobbled up by bigger fish? What is the Government doing to help local small businesses, especially those in sunset industries, to become more competitive and viable in the new economy?

Secondly, is the Government providing the right environment and support for entrepreneurship to flourish in Singapore? We must not lose the spirit of enterprise in Singapore, keeping in mind that many global companies today started from very humble beginnings. Last year, a survey of 2,300 students from local universities and polytechnics found that less than two in 10 of them considered starting their own businesses after graduating, compared to almost seven in 10 who planned to take up salaried jobs. Is the Minister concerned that so few of our brightest students aspire to be entrepreneurs? Are our schools helping their students to develop more of the traits necessary to be successful entrepreneurs? For example, risk-taking, initiative and agility.

I understand that SPRING Singapore has a number of schemes that provide funding to start-ups. Can the Minister provide an update on how effective these schemes have been in nurturing successful entrepreneurs? While financing is important, access to good mentors is equally key to help these entrepreneurs succeed. Are there sufficient experienced mentors available to advise our entrepreneurs? If not, are there plans to invite successful business founders or venture capitalists from places like the Silicon Valley to provide sound advice to these start-ups and evaluate their business plans?

Shared resources

Mr Chairman, Sir, for SMEs in the manufacturing industry, increasing productivity rates may involve a need for better, faster and more sophisticated machinery. However, these machines often involve high cost and may be under-utilised due to the SMEs' lower volume of output. These factors have discouraged some SMEs from upgrading to more sophisticated and higher quality machines.

One way to overcome this is to encourage SMEs to pool their resources and invest in more sophisticated and higher quality machines altogether. A joint venture company can be formed between SMEs to co-own these assets. These machines can produce components or even sub-assemblies. With a few companies running the machines at different times, the owners can swop the assets by having 24/7 production and, in doing so, maximise their return on investment in the machines.

Similarly, for common infrastructure needs such as IT systems, warehousing and services such as HR, payroll, finance, IT, inventory and quality control, SMEs should be encouraged to form clusters so that they can reap the benefits of shared infrastructure and services wherever possible. These initiatives will lead to cost savings for SMEs and they can, in turn, focus on becoming more efficient and productive.

With all these benefits, Sir, I would like to ask if the Government can incentivise SMEs to enter into such arrangements by co-financing the initial cost for the sharing of machines and services.

Building an inclusive economy

Sir, building an inclusive economy is a key thrust in Budget 2010. If so, while widening and deepening the capabilities of SMEs, would MTI also do the same with non-profit organisations (NPOs), especially social enterprises that intend to do good and do well?

Sir, a few of the SME schemes under SPRING and IE Singapore claim to be open to social enterprises (SEs). However, upon closer examination, the fundamentally different value propositions, organisational and cost structures of SEs immediately disqualify themselves from those schemes. If indeed we want an inclusive society, can MTI tweak the qualifying criteria and make it more friendly towards the NPOs?

Sir, Singapore is an old hand at inter-Ministry priority sector nurturing. For instance, in the ICT sector - with iN2015 plans, IDA works with SPRING to support the Technology Enterprise Commercialisation Scheme (TECS) and provides SMEs with early-stage funding for R&D projects. A Proof-of-Concept grant attracts up to $250,000, while a Proof-of-Value grant 85% co-funding of up to $500,000. In addition, there are also generous opportunities like the Overseas Development Programme and the infocomm Local Industry Upgrading Programme that are created for infocomm local enterprise (ILEs) to collaborate with the infocomm MNCs. Through these initiatives, the local SMEs also get access to the global marketing and distribution networks of their MNC partners, build new capabilities in emerging technologies.

My question therefore is: can we do the same for SEs? Imagine if MTI can work with MCYS to formulate a systematic approach to groom local SEs, treat them like any other priority sector SMEs, not only would we have a more robust and inclusive economy, SEs can also become a strategic partner and a competitive edge in the second budget thrust which is growing global companies.

Let me explain that briefly. With IE Singapore, I understand Budget 2010 will encourage "cluster hunting" and collaborations between SEs when going overseas. We will then compete with hard-nosed Taiwanese conglomerates, Japanese and Korean chaebols to offer foreign investment, mostly based on price points and competencies, often driving down marginal revenue. My suggestion is: why not strategically include the SEs in the conglomerate, and position ourselves not just as a Singapore Inc, but as Singapore Syinc? In other words, while the pure-for-profit businesses offer their investments and trade, SEs complement it by offering social goods and services which find solutions from within the community to break poverty cycles and help communities to help themselves. In the longer term, these empowered communities will also become our clients to ensure the success of our SMEs. On the other hand, especially in the developing nations, our local counterparts can also look good and gain popularity for partnering investors with a heart.

Sir, Singapore will be known as the Singapore brand where every citizen will be proud of and feel welcome wherever we go to.

Helping SMEs internationlise

Sir, in the next 10 years, how will Singapore overcome the intense competition presented by rising Asia? India and China have their own home-grown multinationals. How many local MNCs do we have and are they capable of harnessing the might of these two countries?

We have more than 110,000 enterprises here, of which 99% are SMEs. How many are involved in trading activities? How many have been venturing out into the region and have made inroads there? How does IE Singapore deploy its manpower resources to facilitate and support SMEs who are making inroad into Asia?

Sir, the Local Industry Upgrading Programme will soon be subsumed under PACT. How much has been spent on this programme and what is the present status of these companies? How many companies have been transformed into our very own local MNCs? And how will PACT help in greater collaboration between MNCs and local firms?

Sir, a common grouse amongst SMEs is the lack of financing. Banks shun new markets and favour established players. The ESC report recommended the setting up of an EXIM bank to provide risk insurance for trade and overseas investments. When will such an institution be set up and what are the parameters under which it will operate?

Tapping on China's growth

China is the world's third largest economy targeting at 8% GDP growth this year. They are trying to ensure that the quality of economic growth is for the long term so they are focusing on transformation of economic growth pattern and also to adjust their economic structure. But there are challenges. These challenges are both short- and long-term policies conflict as well as external and internal influences.

In the words of the Prime Minister Wen Jiabao, he said in Chinese, "短期问题和长期矛盾相互交织，国内因素和国际因素相互影响。经济社会发展中，两难问题增多 (duan qi wen ti he chang qi mao dun xiang hu jiao zhi, guo nei yin su he guo wai yin su xiang hu ying xiang. Jing ji she hui fa zhan zhong, liang nan wen ti zen duo )".

Despite these challenges, I still think China is the largest market with lots of opportunities. Business people will tell you that over there, it is "shi ban gong bei", and not "shi bei gong ban ". So what is the Government's strategy in tapping on China's growth and how can it help our local enterprises tap on this growth?

3.30 pm

Consumer protection

Sir, let me first declare my interest as President of the Consumer Association of Singapore (CASE). CASE has been actively educating the public and protecting their consumer rights. However, certain groups of consumers are not reached by our regular information channels. There is an urgent need for us to put in place programmes and activities so as to reach out to a specific audience like the young consumers and the illiterate, particularly the elderly and the housewives. To meet the need to enhance their awareness, we require additional resources to put in place a comprehensive plan and a more focused programme to deliver the message in a way and in a medium that would best suit this group of people.

Sir, CASE studies show that the elderly and the housewives often fall victim to direct sellers, door-to-door sales as well as being persuaded to use their retired savings to buy structured financial products and investment-linked insurance policies. We should help them to better understand financial products and their risks as well as protection against door-to-door sales and their rights under the Consumer Protection (Fair Trading) Act.

The young consumers and the students form another group. It is important to educate this group of consumers as they do spend a lot of money purchasing items like mobile phones, services and lifestyle products. We aim to provide such consumers with some tips and also raise their awareness on legal protection for the purchase of services or products in the area of beauty and electrical and electronic devices as well as mobile phone and related mobile and broadband services.

I would like to request MTI to consider providing additional funding support for such initiatives. In addition, I would also like to request MTI to step up enforcement against errant retailers and strengthen its administration of the Consumer Protection, Trade Description and Safety Requirements Act, particularly to enforce this Act against retailers who run afoul of the law such as those who labelled jewellery pieces as of a certain gold fineness standard when they are not and those who imported toys that do not meet the safety requirements. I think these are very dangerous and irresponsible acts. These errant retailers have to be taken to task so the consumer, both locals and foreigners alike, can shop with confidence and ease in Singapore. My recent dialogue session with a group of local jewellers showed that many of the retailers actually are not aware of their legal duties and obligations under this Act.

Timeshare and lemon law

Sir, let me declare my interest as the Vice-President of Consumers Association of Singapore (CASE). Despite the passing of the Consumer Protection (Fair Trading) Act (CPFTA) in 2003, timeshare and its related complaints have topped the complaints chart at the Consumers Association for the sixth consecutive year.

In 2004, there were some 100 complaints relating to the sale of time share products. From 2005 to 2009, every year, the complaint figures have hovered above the 200 mark.

The general complaints are related to breaches of CPFTA in areas such as misleading and/or false claims, undue pressure and failing to inform about or honour the cooling-off period.

CASE had already taken injunction proceedings against three timeshare-related companies. However, under the Act, such proceedings take a while to be concluded and companies have taken advantage of this time lag to wind down their operations and to start new outfits to operate as before with exactly the same management. This is a brazen move to skirt the laws.

We believe timeshare legislation is both timely and necessary to address this issue and to offer more comprehensive protection for consumers. We need to make it unlawful for individuals who have engaged in such unfair trade practices to close their operations and then reopen the businesses to perpetuate the same activities. May I urge MTI to reconsider its decision and to introduce legislation to protect consumers in this area?

Sir, MTI had earlier accepted the proposal of CASE for the introduction of lemon laws in Singapore. I would like to ask for an update. Has the legislation been drafted? And if so, when can we expect the first reading?

Mr Chairman, first, I would like to thank Members for the wide range of issues that they have raised. My Minister has set out MTI’s overall strategy to take advantage of growth opportunities as our economy recovers. I will supplement his response by addressing specific questions that Members have raised by relating to three broad areas – tourism, energy, and research and development.

The first, tourism. Last year was a difficult year for Singapore’s tourism industry. Visitor arrivals to Singapore declined by about 4% from 2008 to reach 9.7 million, though this exceeded the Singapore Tourism Board’s (STB) projection of 9 million to 9.5 million.

We start 2010 with clear signs of recovery. Visitor arrivals registered overall positive growth from the fourth quarter of last year and surpassed 900,000 in January this year. This is the highest ever recorded for the month of January. The World Tourism Organization (UNWTO) forecasts international tourist arrivals to grow between 3% to 4% in 2010, with Asia leading this rebound. STB projects our visitor arrivals in 2010 to increase by more than 20% to between 11.5 million and 12.5 million. Tourism receipts are expected to be $17.5 to $18.5 billion, which is about 40% above 2009 levels.

Dr Muhammad Faishal has asked how we will tap on the growth of Asian markets. Our destination appeal to Asian visitors is strong. In 2009, more than 70% of our visitors came from Asia. Indonesia, China, India and Malaysia were four of Singapore's top five source markets by visitor arrivals and tourism receipts – in other words, both quantity and value. Vietnam is another promising market registering double digit growth of 11% last year. The Pacific Asia Travel Association (PATA) forecasts that Singapore will be India's top outbound destination in the next two years. PATA also expects Singapore to be among the top four destinations to be visited by Chinese travellers, excluding Hong Kong and Macau.

To further strengthen our destination awareness in the major Asian markets, STB has undertaken several key branding and marketing initiatives. Our participation at the World Expo in Shanghai, from May to October this year, is one example. The Singapore Pavilion will showcase our city as a place to live, work and play to the 70 million Chinese and international visitors. Last year, STB entered a three-year marketing partnership with VISA that will not only attract more visitors to Singapore but also to help stimulate their spending here. With Internet penetration increasing worldwide, STB is also focusing on digital media marketing to seek out the growing pool of IT-savvy travellers.

This marketing effort is complemented by a suite of key projects which are coming to fruition. Mr Chairman, these projects will transform our tourism landscape and further differentiate Singapore from other tourist destinations – a point that Dr Muhammad Faishal raised. Combined with our strong air connectivity, we are in a strong position to capitalise on the economic recovery and to tap on the Asia’s growing markets.

The advent of the two Integrated Resorts (IRs) will contribute significantly to our tourism landscape on two counts. First, with internationally acclaimed shows, events, restaurants, and Southeast Asia’s largest theme park, the IRs will enhance the quality and variety of our tourism offerings. Second, these changes ushered in by the Integrated Resorts will enable us to achieve longer stays and higher yields from our visitors, which is our objective.

STB is also collaborating with the IRs to maximise the benefit from their facilities and resources. One example is the support STB has given the Integrated Resorts to secure new BTMICE events for Singapore. Through this partnership, Marina Bay Sands and Resorts World at Sentosa will host a range of BTMICE events which are projected to draw in more than 11,000 visitors to Singapore this year. With the IRs opening in phases, the full benefits of these new tourism products will only be realised over the next few years.

There has also been a quantum leap in our events landscape. Flagship events like the Formula One (F1) night race and the F1 Rocks concert have elevated Singapore’s international standing as a global city with a vibrant lifestyle. The F1 races in 2008 and 2009 collectively brought in over 70,000 overseas visitors and generated about $260 million in incremental tourism receipts. Each race also profiles us to a "live" television audience around the world of about 100 million. We will continue to refresh the F1 and enrich the entertainment content, to ensure that Singapore remains a must-see event on the F1 calendar.

Our tourism precincts are also constantly being refreshed. Last year, the opening of three new retail malls, ION Orchard, Orchard Central and 313@Somerset, complemented our makeover of Orchard Road.

Other key projects in the pipeline include Gardens by the Bay, River Safari which is a project by the Wildlife Reserves Singapore, and the International Cruise Terminal, all of which will open over the next two to three years. STB will also develop more signature events, such as the Asia Fashion Exchange, to position Singapore on the international stage.

With this array of initiatives, Singapore is well positioned to ride the growth in the global and Asian tourism market.

Mr Chairman, I will now move on to address Members’ questions related to our energy policy. We are currently in a healthy position to meet our energy needs. Our total generation capacity is in excess of 10 gigawatts, which is more than sufficient to meet our peak electricity demand of six gigawatts. However, given that we import almost all our energy, Singapore remains exposed to the vicissitudes of global energy markets and faces several challenges. Firstly, notwithstanding the brief respite during the recession, global energy prices are on a long-term upward trend, driven by energy demand in Asia. There will also be intermittent bouts of energy price volatility due to the business cycle and other episodes.

Secondly, and consequently, there is a global race to secure adequate and reliable energy supplies from diverse sources.

Thirdly, our energy plans must accommodate the possibility of a carbon constrained future. Singapore has committed to reduce carbon emissions substantially as part of a global deal on climate change.

Our goal is to make Singapore a Smart Energy Economy with an energy ecosystem that is secure, sustainable and competitive. Our strategy to meet the global energy challenges rests on two key thrusts: diversification and competitive energy markets.

The Government agrees with the Economic Strategies Committee’s (ESC) recommendation to adopt a portfolio approach towards energy – in other words, no one energy option will be adequate to meet our varied energy objectives.

Our liquefied natural gas (LNG) terminal is one important step towards a more diversified energy portfolio. It will enhance the resilience and competitiveness of our energy supply by providing access to an integrated global LNG market that draws from gas sources from around the world. The project is on track for completion in the year 2013.

Beyond the advent of our LNG terminal, we must consider a range of energy options, based on emerging technologies and new sources, to meet our long-term needs. We will adopt a pragmatic approach by evaluating the alternatives on the basis of energy security, economic viability and environmental sustainability.

Mr Chairman, allow me to elaborate on solar energy, nuclear energy and other energy options, in response to Members’ questions.

Among the renewable energy sources currently available, solar is one of the more promising in our context for electricity generation. While still relatively expensive today, solar energy prices could achieve grid parity in the medium term.

But as pointed out by Dr Fatimah Lateef, in order to harness solar energy effectively, we need to develop the infrastructure. We must upgrade our building infrastructure for efficient installation and integration of solar panels.

The Government has put in place incentive schemes to develop capabilities in these areas and to test-bed new technologies. The $20 million Solar Capability Scheme (SCS) encourages innovations in the design and integration of solar panels in private sector buildings. For example, this scheme supported the 500-kilowatt peak solar photo-voltaic (PV) system at Resorts World Sentosa, the largest single system in Singapore to date.

Public buildings like Changi Airport’s Budget Terminal, the Khoo Teck Puat Hospital and Ngee Ann Polytechnic are also active participants in our solar test-bedding and industry development initiatives.

For those who wish to install solar PV (photo-voltaic) systems, Dr Fatimah Lateef raised this point, the Energy Market Authority (EMA) and the Building and Construction Authority (BCA) recently published a comprehensive Handbook for Solar Photovoltaic (PV) Systems. EMA also provides information on Licensed Electrical Workers (LEWs) who have the skills to install, maintain and test solar installations.

3.45 pm

Mr Chairman, given the limited potential for renewable sources to meet our base load electricity requirements, it is imperative that we explore other options as well. In that regard, MTI agrees with the ESC recommendation that we should study the feasibility of nuclear energy and develop expertise in nuclear energy technologies.

Mr Chairman, Members have listed a range of pros and cons and asked why are we prepared to study nuclear energy as an option now. There are several reasons for this. Firstly, it can potentially enhance energy security, reduce carbon emissions, and mitigate the impact of volatile oil and gas prices – thus it could meet potentially all our objectives embedded in the national energy policy.

Second, several developed countries have been using nuclear energy for a long time and many others are now considering nuclear energy seriously. France has been using nuclear energy since the 1960s and currently generates 80% of its electricity from this source. Small countries like Switzerland and island-nations like Japan have also made significant strides in the use of nuclear energy over the last four decades. These are developed nations with high standards of living and exacting safety regulations.

The nuclear energy option is also being revived and explored in many countries. According to the International Atomic Energy Agency (IAEA), China is expected to build 25 new nuclear power plants by 2020, a rate of two new plants a year. In the US, loan guarantees totaling US$8 billion have recently been approved for two new nuclear power plants. Closer to home, in ASEAN, Vietnam, Thailand, Malaysia and Indonesia have all begun exploring nuclear energy as an option with different timelines.

Mr Liang Eng Hwa asked whether there is an ASEAN stand on the issue. I think each country has evolved its own strategy and policy towards this. But at the ASEAN level, there is an effort to try and develop a common understanding on what would constitute a nuclear energy safety regime in this part of the world. Thirdly, science and technology have evolved much since nuclear power plants were first built 50 years ago. Dr Lam Pin Min has noted the challenges associated with nuclear energy given Singapore's location, size and urban density. Indeed, these were some of the reasons for not considering the option before.

But new technologies are being developed to address some of the key concerns associated with nuclear energy, and to make nuclear reactors smaller and safer, at a lower cost and with less high-level waste. Some of these technologies are in early stages of commercialisation and we need to study if they could be feasible in our context.

Finally, there is merit in building up our knowledge and expertise in nuclear science which has applications in diagnostic medicine and cancer treatment. Research and development in this field is promising and could potentially yield therapeutic and economic benefits.

Dr Muhammad Faishal has raised the issue of public concern over the potential use of nuclear energy in Singapore. Dr Lam Pin Min and Mr Liang Eng Hwa have asked if the risks associated with nuclear energy are acceptable. It is precisely to address these and other valid questions and concerns that we need to embark on a feasibility study of nuclear energy.

MTI will, therefore, lead a multi-agency effort to undertake this feasibility study. The aim is to ensure that we fully understand, and objectively evaluate from all perspectives the opportunities, challenges and risks involved with nuclear energy. The study will commence later this year. It will entail a careful, deliberate and rigorous examination of the technical, economic and safety aspects of nuclear energy. It is premature at this stage to talk about details such as what form, and so on, which Dr Muhammad Faishal raised. What we should acknowledge is that this is an important first step in assessing a possible long-term energy option for Singapore.

Mr Chairman, for the medium term, we also need to keep our options open for other sources of conventional energy to further diversify our energy portfolio. These options will have to be considered on a market basis, after our LNG demand has stabilised.

Ms Sylvia Lim has asked about the implications of using coal and electricity imports in Singapore. Clean coal could be a component of our energy diversification strategy. Currently, coal makes up more than 40% of global power generation. And, it is expected to remain at this level until at least 2030 given the relative abundance of coal sources in the world. Coal also has a cost advantage though this may be eroded by any future global carbon pricing regime. However, combustion technology is evolving, making coal cleaner than before and we must, therefore, keep this option open.

Precisely because the technology is evolving, I do not think it is necessarily a step back to consider this as a possible option for ourselves, a point that Ms Sylvia Lim raised. Electricity imports could also help us gain access to alternative sources of energy such as hydropower from the region and also free up valuable land in Singapore. Ms Lim asked what are the risks of importing electricity. In a sense, it is a very similar risk to importing the fuel in order to generate the electricity locally. The key additional risk factors would really be a reliance on the infrastructure that conveys the electricity to Singapore. So, we will study the safeguards necessary to mitigate any risk from being exposed to a disruption in imported electricity supply and how it could feature potentially as part of our overall energy system.

The second plank of our energy strategy is to keep our energy markets competitive. Ms Sylvia Lim has asked about energy pricing and let me just set out the broad framework.

We are price-takers in the global energy market because we are small and import almost all our energy requirements. We therefore must allow the full cost of energy to be reflected in prices. Subsidising energy would be encouraging wasteful consumption and it will also be a drain on public finances. Many countries which subsidise energy, including oil and gas producers, have found to their detriment that they impose an unsustainable fiscal burden over time. Instead, our approach is to provide targeted assistance through the Utilities-Save (U-Save) and other schemes.

In addition, we promote competition in our energy markets to keep prices competitive. As evidenced since liberalisation in 2001, fuel oil prices have gone up by about 160% and our tariffs have risen by about 15%. That is not a bad track record. This is an ongoing process and in the last year, we have also taken a number of additional steps.

At last year's COS, I informed the House that EMA was studying ways to inject more competition into the household electricity market. EMA has since completed the tender of 10% of household electricity demand. The tendered price will be incorporated into the electricity tariff starting from April 2010. Going forward, EMA will put out more tranches for tender and the savings will be passed on to households.

Mr Chairman, Sir, in the long term, EMA is working towards opening up the household electricity market for competition so that consumers will be able to purchase electricity direct from different suppliers through a range of retail packages that they offer. Ms Lim asked whether the Government will allow such retail electricity sellers to use a tiered system. Once such a market is established, then we should leave it to the market to work out what are the different ways they can meet customer needs. But it is quite a different question which is a point that Ms Sylvia Lim also alluded to, whether Government should in fact be introducing a tiered structure at this stage. We have had this discussion before and I want to just re-emphasise the key point. If we were to introduce a tiered system today, it means Government is deciding what is an acceptable level of electricity consumption and establish that as the threshold, as Ms Sylvia Lim puts it, and the Government then has to decide at what level of additional manageable threshold should be. This is quite a problematic process in terms of determining the key levels of thresholds. So it would be far superior to allow the market to work, for us to give targeted subsidies to those who need it and when the market is fully liberalised, the players can then work out the schemes as we see in other sectors like telecoms.

Sir, let me now move on to research and development (R&D). R&D cannot be viewed in isolation from the broader innovation ecosystem that we seek to create. The ESC has recommended that we make innovation pervasive and strengthen the commercialisation of R&D. Indeed, these are MTI's priorities too. Ms Sylvia Lim has asked how the outcomes and output of our R&D sector compare with other advanced economies. As she has acknowledged, it is a difficult matter to measure and there is no single measure for this, so let me just highlight just three aspects: the generation of intellectual property, the degree to which public R&D helps to catalyse private R&D, and the extent to which R&D leads to economic activity or commercialisation.

In of the area of IP creation, our R&D sector is broadly comparable to other advanced countries. The World Economic Forum Global Competitiveness Report ranks Singapore 11th globally, in terms of patents per 1,000 population, ahead of countries like the Netherlands and Denmark. In terms of published Science and Engineering papers per 1,000 population, we are ahead of OECD countries like Japan and South Korea. However, we still have some way to go before we can close the gap with countries like Sweden and Switzerland.

In terms of the ratio of public sector to private sector spending on R&D, we are on par with countries like the Netherlands and Denmark. Our private R&D investments are twice that of our public sector – a significant improvement from 20 years ago when public and private investments were equal. It also has resulted in ventures such as the strategic alliance between Roche and our medical and scientific institutions. This partnership which will expand the knowledge of disease biology to develop new personalised treatment approaches has brought in private R&D investment of close to $100 million.

Finally, with regard to economic spin-offs and commercialisation, we have made good progress. A*STAR's spin-off, A-Bio, for example, has been catalysing the growth of a new biologics segment within our biomedical sector. In the past three years, Singapore has secured six major biologics manufacturing investments totaling more than $2 billion. SMEs have also benefited from our public sector R&D capabilities. One example, is CEI Contract Manufacturing Ltd, which with the help of a scientist from A*STAR, will be able to qualify its product for High Level Assembly and Testing to meet a US customer's standard.

So, we are not lagging or underperforming like Ms Sylvia Lim asked, but we can do more in the commercialisation of R&D – which is also a key recommendation of the ESC. To that end, in the next phase of our R&D development, we aim to facilitate greater collaboration between private sector and public sector R&D, creating the infrastructure for test-bedding innovative solutions, and establishing platforms for industry practitioners and researchers in academia and institutes to work together on research projects that can potentially lead to commercial application and value.

A key success factor for our R&D drive is the availability of a deep pool of scientific talent. Ms Sylvia Lim has asked about the extent to which locals are part of this talent pool.

Singapore citizens and Permanent Residents take up the majority of R&D jobs, and this share has been increasing over time. Based on the 2008 National R&D survey, there were more than 25,000 research scientists and engineers in Singapore, of which about 21,000 were Singapore citizens and Permanent Residents. Between 2001 and 2008, the number of Singapore citizen and Permanent Resident research scientists and engineers has grown at 8% per annum, compared to 5% per annum for non-locals. Amongst the population of PhD students, the proportion of SCs and PRs have grown from 22% to 26% in the same period, that is, 2001 and 2008, and this number of PhDs will increase further as many of the PhD scholars under A*STAR scheme return to work in Singapore under various institutions.

Mr Chairman, I want to conclude on this point by making one key observation. We have been able to grow our local R&D talent not because we have protected them or kept out foreign talent. Rather, they have done well because we have created a vibrant R&D community that attracts and develops the best and brightest, both local and international, and that will continue to shape the way we go forward with our R&D strategy and the development of our manpower pool.

Mr Chairman, to conclude: MTI's policies on tourism, energy and R&D have served us well and will continue to evolve as we adapt to seize the opportunities in the years ahead.

4.00 pm

Mr Chairman, let me start by thanking Members who spoke enthusiatically about supporting our SMEs in raising productivity and competitiveness.

SMEs, as a group, contribute half of Singapore's GDP and they account for six out of every 10 persons employed. And, yet, they are only half as productive as the average firm in Singapore. There is much room for improvement, and SMEs play a critical role in determining the success of our productivity drive. MTI is committed to supporting SMEs to build up capabilities to raise productivity and increase competitiveness.

I will set out MTI's strategy for supporting businesses to raise productivity at three levels. At the national level, we must ensure that our overall business environment remains favourable to large and small businesses alike. At the sectoral level, we will support our industries in working together to address productivity gaps. At the firm level, we will help SMEs build capabilities and create value.

At the macro level, we need to ensure that our business environment remains conducive to all businesses. Entrepreneurs must be able to start and grow businesses easily. We have been quite successful in this area. For four years in a row, the World Bank has ranked Singapore as the easiest place to do business, out of 183 economies. And, yet, we must continue to improve.

Through the Pro-Enterprise Panel, we have received close to 1,800 suggestions from businesses to cut red tape. We have adopted half of them. We will continue to find ways to reduce, simplify, or to do away with bureaucratic complexities.

Mr Liang Eng Hwa asked whether an entrepreneurial culture has taken root in Singapore. I would like to take the opportunity to thank the Action Community for Entrepreneurship (ACE) for their work in promoting an entrepreneurial culture in Singapore. Successive batches of entrepreneurs have contributed to this movement. Today, we celebrate entrepreneurship. We have many more successful role models. There is also a greater social acceptance of entrepreneurship as a career choice among our young and educated. A survey shows that more than 60% of our start-up founders are below 40 years old, and about three-quarters of them have at least tertiary-level education. NUS, NTU and SMU house 120 promising start-ups in their incubators. ITEs and polytechnics run business plan competitions. Even our primary schools have children educated on entrepreneurship programme today.

Mr Inderjit Singh, who is a passionate advocate for entrepreneurship, asked if the Government can do more in this area. The answer is: Yes, we can and we will. We clearly must build up our entrepreneurship ecosystem to anchor a critical mass of start-ups, angel investors, VCs and deal-flow network.

In an effort to render Singapore as a meeting place amongst business angels from Asia, SPRING Singapore, ACE and the Singapore-based Business Angel Network of Southeast Asia (BANSEA) are organising an inaugural Asian Business Angels Forum today and tomorrow. The forum brings together 150 business angels, entrepreneurs and their respective networks from 14 different countries. In line with this, the newly announced Tax Deduction for Angel Investors Scheme will catalyse more of such investments in our start-ups.

A vibrant business environment is not only one where new firms form readily. It is also one where there is a continuous advancement towards higher value activities in a virtuous cycle of renewal. Economists would call this "creative destruction" – the basis for "disruptive innovation".

Mr Low Thia Khiang has asked what the ESC recommendations will mean for low-value activity in Singapore. I think he cited the sundry shop and car repair shop as examples. Well, economical speaking, in any free market competition, the fittest survive. Companies engaged in low-value activities cannot hope to do things the same way as they have been in the past 10 or 20 years. They must upgrade, innovate and focus on value creation, or they will lose their customers to competition.

And this is exactly how the furniture industry in Singapore has transformed itself over the years. In 1993, as an EDB Centre Director based in Washington DC, I received an incoming delegation from the Singapore Furniture Industries Council (SFIC). After meeting up, we went on to call on the leading furniture distributors in the east coast of the US, hoping to convince them to "buy Singapore". When SFIC showed their brochures to a leading US furniture retailer, the Vice President receiving us said, "Let's be frank, for furniture of this standard, I can make it in my own garage!" Imagine the shock on our faces then. What a blunt rejection! It was a wake-up call. SFIC came home to Singapore. They went back to the drawing board.

The furniture scene in Singapore is completely different today. We have "graduated" out of the space of low-cost manufacturing. Our furniture companies are now moving towards "Original Design Manufacturers". Many market their products under their own brands.

Mr Low Thia Khiang, in his speech, asked what is the Government doing for the sunset industry. In this case, what was once a sunset industry in Singapore has been completely rejuvenated and given a new lease of life. I think, you are sunset when you think you are sunset. This was possible because SFIC members innovated and transformed. SFIC even created a strategic blueprint describing where they want to be in the next five years.

The success of our companies and industries ultimately rests on their own drive, innovation and entreprenuerial effort. Entrepreneurs such as Ron Sim of OSIM and Olivia Lum of Hyflux, established their successful businesses with very little in the beginning and with sheer resourcefulness throughout. The furniture industry in Singapore made the bold decision to renew itself and we have supported them in doing so. For all who are willing to upgrade and innovate, the Government is always ready to support.

There are often productivity gains to be found by looking across companies to identify scope for collaboration. One example, raised by Dr Ahmad Magad, would be the sharing of resources such as infrastructure and services among SMEs. Indeed, this is a great way for SMEs to aggregate demand and leverage on economies of scale.

Mdm Ho Geok Choo suggested that one such initiative could be the setting up of a HR service outsourcing hub, and to give more focused support to SMEs in this important area. It is a good suggestion which SPRING will look into.

Consider the example of hotels and restaurants sector, as highlighted by Mr Heng Chee How. It may be amongst the productivity laggards today. But there is no reason why our hotels and restaurants cannot aspire to become the most innovative, most service-oriented and most technology-savvy in the world. To make this happen, it is crucial that the industry work closer together to pursue common productivity improvements.

Years ago, I was told that Raffles Holdings Group realised that they were paying high prices for daily consumables such as tissue papers, soaps, combs and other toiletries. So they came up with an idea – to build a web-based purchasing system open to other hotels in Singapore, so that by aggregating demand, they can secure the best pricing from suppliers. One participant recalled that he experienced 10% to 15% savings from using the system. In this case, the leadership of one company in the industry led to the cost savings for all the players.

Industry associations can play an important role in rallying their members to secure sectoral productivity gains. Consider, for instance, the Textile and Fashion Federation (TaFf). Many of their members wanted to re-engineer their systems and processes for greater production efficiency. But none were in the position to employ full-time engineers. So what TaFf did, was to train up a pool of engineers and deploy them across their members. As a result, members were able to tap on much-needed expertise in a cost-efficient manner. This is a good initiative on the part of TaFf.

We have good mechanisms to support industry associations which aspire to improve. Since 2005, SPRING and IE Singapore have committed $50 million under the Local Enterprise and Association Development (LEAD) programme, to help 22 associations run projects just like the one I have described. The additional $100 million that the Minister for Finance has announced will further scale up the support for business associations. I strongly encourage our associations to work closely with SPRING and IE Singapore to help member companies raise productivity and expand their presence overseas.

Mr Heng Chee How asked about the development of a centre for research on productivity and innovation. I would like to highlight that SMEs can already access five Centres of Innovation (COIs) set up by SPRING with polytechnics and research institutes. The five centres cover food manufacturing, marine and offshore engineering, environment and water technology, precision engineering and electronics. This sectoral infrastructure, each capital-intensive in nature, allows SMEs to tap on scientific expertise and resources in the form of manpower training, technology consultancy, prototyping and testing to become better in their processes and products.

We will study how to strengthen further the existing network of Centres of Innovation or to create new ones if need be. We are studying the modalities and appropriate models for doing so. These centres will do applied research on sector-specific productivity, identify international best practices, and develop productivity benchmarks that benefit the entire industry sector.

As many Members have emphasised today and during the Budget debate, boosting productivity does not mean working harder and longer. As Mdm Ho Geok Choo stresses, employers must take the lead, including training their workers to be more skilled and more effective at what they do.

Mr Zaqy Mohamad has raised concerns about high costs running counter to our productivity efforts. Given Singapore's size and circumstances, it is inevitable that we will face resource constraints. But this does not mean we cannot create business models that will help us overcome these constraints and prosper. Growing revenue top line and profitability through innovative products and services becomes an imperative.

This is why we should shift our focus to value creation. Much has been said about the "hows" – that is, the efficiency of doing things, or doing things right. But I think it is important to take a step back and ask about "what" – meaning what should we do, or doing the Right Thing. Are we competing based on value creation or on cost efficiency?

Let me illustrate with some examples of innovative companies that have done exactly this.

Many of us cannot do without our daily staple of kopi-o and soft-boiled eggs for breakfast. But Tippling Club at Dempsey has taken it one step further. They have come up with a fancy cocktail drink based on kopi-o which is served with eggs. To create its menu of unique "food-cocktails", they invested substantially in food science technology and introduced the concept of "molecular gastronomy" to their concoctions. In fact, it was through much research and experimentation that the mixologist discovered that the optimal temperature for the eggs has to be at 62 degrees Celsius – not higher, not lower, to taste its best. With food science as their edge, the Tippling Club creates not just cocktails, but an experience its customers have never had before.

Another innovative company is Azimuth. When we think of luxury watches, we think of Swiss brands like Rolex and Patek Philippe. But Azimuth is Singapore's home-grown luxury watch company that designs in Singapore and manufactures in Switzerland. It takes an unconventional route to design. It created the world's first single-hand watch that moves anti-clockwise. So it is not an optical illusion when you look at the watch face. It has another watch that is modelled after a robot. There is even one that has a functioning roulette wheel as a watch dial to commemorate the opening of IRs here. By making watches that do not look like a traditional three-hand watch, Azimuth defines a niche for itself. Azimuth's watches retail at between $5,000 and $120,000 a piece. Only five years old, Azimuth has a steady following among watch lovers in Singapore and over 20 countries.

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One study shows that the profit from selling a Swiss-made watch is more than selling four cars combined. Of course, if you measure this last year, it may be infinity because most of the car-makers were losing money. If you were a start-up thinking of new areas to venture into, or a precision-engineering firm seeking new markets to specialise, which path would you take? Azimuth's approach is instructive.

Several Members – Mr Inderjit Singh, Mdm Ho Geok Choo, Mr Heng Chee How and Mr Zaqy Mohamad – have asked about how we will help SMEs in raising productivity.

Well, let me say that the drive for productivity must come from the SMEs themselves. For the willing and determined, SPRING offers a comprehensive range of capability development programmes to assist them. In fact, Mr Liang Eng Hwa earlier has mentioned that 154 schemes can be found on the website. The programmes range from IT upgrading, HR and process innovation, to design, product development, branding and business management systems. In 2009, SPRING helped more than 3,000 companies in the many areas mentioned. We will ramp up our capacities to help at both the firm and sectoral levels.

Mdm Ho Geok Choo and Mr Wee Siew Kim asked what we are doing to enable SMEs to internationlise.

Going forward, IE Singapore's new SME Market Access Programme will complement its existing suite of schemes to help internationalising SMEs. The programme will help SMEs defray the developmental cost of entering new markets, such as fees incurred for engaging distributors, professional services and certification.

Mr Wee Siew Kim and Mr Zaqy Mohamad have correctly pointed out the importance of "hunting as a pack" in entering overseas markets. By doing so, companies can complement their product offerings and achieve economies of scale, and hence strengthen their overall competitiveness and maximise their chances of success. I encourage companies to tap on IE's iPartners programme to form and develop such business alliances.

Finally, Mr Inderjit Singh has asked if an agency called "Enterprise Singapore" is required to help Singapore companies grow into globally competitive companies. While there may be many benefits to combine several agencies into one, as proposed by Mr Singh, there would also be operating trade-offs too. I think the most important point about his suggestion is that there should be seamless and integrated support provided to growing SMEs, whether in the area of capacity building, internationalisation or productivity enhancement.

In fact, in recent years, our economic agencies have been working towards a more seamless service model for SMEs. At the board level, EBD, SPRING and IE Singapore are represented on each other's boards. At the operational level, SPRING and IE Singapore share information on account management of key accounts in key sectors. Certain capacity building programmes, such as branding capability and SME financing, are jointly administered by the two or more agencies.

In enterprise development, SPRING serves 3,000 SMEs in 2009. In the same period, IE Singapore provided support to 4,700 companies in internationalisation-related services. Enterprise development requires active cooperation amongst agencies with complementary expertise. SPRING and IE Singapore will continue to work closely together to support SMEs in raising their productivity in a seamless fashion.

I would now turn to Miss Penny Low's query on the role that we can play in supporting the development of social enterprises.

MTI's mission is to maximise economic benefits for Singapore. As long as enterprises, including social enterprises, are able to create jobs and contribute to Singapore's economy, upgrading support for productivity improvements will be available to them. In fact, social enterprises can also tap on other assistance schemes provided by MCYS, such as the Comcare Enterprise Fund (CEF).

City College Holdings Limited is one example. It is a social enterprise which provides effective and affordable education to private candidates taking GCE 'O' level examinations. Under SPRING's LETAS grant, City College implemented an Academic Information Management System to improve the efficiency of its administrative process.

Sir, in conclusion, let me reiterate that the new productivity drive is a national effort that requires everyone to play his part. At the broad level, what the Government can do and will do, is to ensure that we have a conducive environment for all businesses, large and small, to conduct their businesses with ease. Industries and enterprises must take their lead in drawing up their own roadmap towards higher productivity. For those who are ready to rise up to the challenge, the Government stands ready to provide our maximum support.

Mr Chairman, Sir, I would like to certainly thank the Members for their views and their contributions on important issues such as internationalisation of our companies riding on the Asian waves as well as consumer protection. My Minister and Minister of State (MOS) had earlier talked about Singapore's internationalisation efforts. So on this subject, Mr Teo Ser Luck, Mdm Ho Geok Choo and Mr Wee Siew Kim asked how Singapore is tapping on both China and India's growth.

In the foreseeable future, G3 countries will remain the key drivers for Singapore's external demand. But emerging markets in Asia, particularly in China and India, also present exciting opportunities for us. Already, the share of trade with Asia has been increasing. Ten years ago, China and India accounted for 5.7% of our total trade. Today, this has risen to 13%. The potential for further growth is therefore very strong.

In order to realise this potential, Singapore needs to capitalise on two key trends which will underpin the rise of Asia. First, Asia will experience a surge in its middle-class. In China alone, this strata, which is often defined as people enjoying an income of at least RMB 25,000 a year, currently accounts for 12% of China's population and this is expected to grow to 75% by the 2030. Similarly, India's middle-class will also grow from around 5% to 10% today to about 90% by the 2030. This trend is also seen in varying degrees across most of Asia. What this means is a rise in the spending power, which will drive demand for quality products and services that will go beyond healthcare and education, into other lifestyle services.

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Second, most Asians will live, work and play in rapidly urbanising city centres. In China, we are seeing strong signs of this, with large migrant populations moving into cities. By 2025, there will be eight mega cities in China with populations of more than 10 million each. In India, the three mega cities in Mumbai, Delhi and Kolkata will also have some of the largest and fastest growing cities in the world. This rapid urbanisation will add to the demand for infrastructure development and new services.

Against this backdrop, Singapore is well-positioned to leverage on strengths that we have built up over the years, such as systems integration and modern services provision. For example, our ST Electronics was a key player in setting up Beijing metro's state-of-the-art command and control system. Many Singapore companies can provide high quality and high value products and services that have the potential to meet the rising demands in Asia. For example, Etonhouse provides quality pre-school and international school education in Indonesia, Malaysia, India and China. BreadTalk Group and Charles & Keith have also established a strong retail presence within Asia, in countries such as Malaysia, Thailand and China. They can scale up their operations in emerging new cities with the rise of China, and also other parts of Asia.

Going forward, our economic agencies will step up efforts to help companies expand overseas. We will continue to strengthen our bilateral ties, improve existing trade and investment facilitative agreements, help companies understand the evolving markets better, enhance our outreach and also our ground presence.

In many ways, we are reaping the benefits of our pro-active engagements of key markets, having recognised the value of growing our external wing early. In China, we undertook the Suzhou Industrial Park (SIP) project 15 years ago, with the intent of transferring our developmental experience to China. In the process, we established strong bilateral economic ties and also built up the Singapore brand name in China. This has contributed to Singapore and our companies' familiarity with the Chinese business environment. It also further deepens our partnership with China. We have embarked on the Tianjin Eco-city and this is our second G-to-G flagship project.

Bilateral ties were further enhanced via the China-Singapore Free Trade Agreement (CSFTA) and the ASEAN-China Free Trade Area agreement (ACFTA), which came into force recently. These FTAs have lower trade barriers and also created new opportunities for Singapore-based companies.

To make deeper inroads into China, we established seven provincial-level business councils, with the latest two being in Jiangsu and Guangdong. These councils are set up in regions where Singapore businesses have a strong interest. Co-chaired by Ministers or Ministers of State, these councils promote economic cooperation and facilitate networking between the business communities of both countries.

We have had considerable success with the councils. For example, under the auspicies of the Singapore-Jiangsu Cooperation Council, a consortium of Singapore companies comprises Yanlord, Surbana and SembCorp secured a choice site from the Jiangsu province for the Nanjing Eco High-Tech Island project. Through the council, IE Singapore was able to uncover downstream opportunities for other Singapore players. IE Singapore has helped the consortium to link up with over 25 companies, including SMEs, on this project. In 2009 alone, IE Singapore has organised more than 170 outgoing missions for close to 700 Singapore-based companies to help them internationalise their business.

We have also gained an early foothold in India. In 1992, Ascendas opened its IT park in Bangalore, right after India embarked on economic reforms in 1991. Since then, Singapore developers have established more IT parks in various parts of India. Progressively, we strengthened our G-to-G engagements, cemented by the India-Singapore Comprehensive Economic Cooperation Agreement (CECA). This has received a boost through the Trade-in-Goods Agreement under the ASEAN-India Free Trade Area (AIFTA) that came into force this year. Reflecting a mutual desire to strengthen and also to deepen our bilateral economic ties, a second review of CECA will be launched later this year.

Within ASEAN, my Minister earlier pointed to the benefits of increased integration. Bilaterally, we have also made steady progress in our economic engagement efforts. In Vietnam, for example, we embarked on a joint Vietnam-Singapore Industrial Park (VSIP) in 1996. Today, we are already into our fourth VSIP project. More importantly, we have moved up the value chain, from developing industrial parks to integrated township developments. These projects have also facilitated our companies' ventures. For example, coffee processor Gold Roast leverages on its premises in the second VSIP to now process and also export Vietnamese coffee beans to the world.

As the Asian economic landscape evolves, we need to deepen our knowledge on the emerging opportunities. IE Singapore and EDB will continue to support Singapore companies, and engage Asian businesses to promote greater bilateral trade and investments. To this end, IE Singapore and EDB will also consider expanding their ground presence in key emerging regions, such as cities in central China.

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More global companies will seek to penetrate emerging markets in Asia. At the same time, Asian enterprises' ambitions to expand their international reach will also grow. So with our established hub status, efficient and business-friendly environment, strong financial sector and comprehensive FTAs with key markets, Singapore offers a compelling value proposition as a dual-purpose gateway for companies "seeking Asia" and for companies "going global".

As an indicator, we have managed to attract nearly 3,000 Chinese companies here. One of them, AAC Acoustic Technologies Holdings Inc., a China-based global leader in miniature acoustic components, set up its regional headquarters and R&D centre in Singapore in 2009. This regional headquarters is to coordinate its global expansion and also to enhance product development capabilities.

Beyond Asia, our economic agencies will also help companies explore opportunities in other fast growing or emerging markets such as the Middle East and Latin America. Developments in these countries create demand in various sectors such as infrastructure projects, transportation and logistics services, urban solutions, lifestyle and consumer products, which can benefit many of our local companies and SMEs.

Finally, Sir, I would like to touch on an issue closer to home. I would like to thank Mr Lim Biow Chuan and Mr Yeo Guat Kwang for their active roles in championing consumer protection, and for their feedback and concerns. CASE's active role in consumer education forms the basic level of our consumer protection framework, and we are supportive of CASE's work and efforts. In fact, we have significantly increased our funding by about 30% to CASE since 2008, and we continue to be open to providing more resources for new educational programmes for the vulnerable, which has been highlighted by Mr Yeo Guat Kwang, which cannot be reached by CASE's current efforts. Secondly, the Consumer Protection (Fair Trading) Act has provisions for civil remedies, with appropriate and practical channels for redress and compensation. This will apply to sub-standard gold jewellery and timeshare sales raised by both MPs. In addition, the mandatory cooling-off period for timeshare sales has been extended from three to five days to address pressure selling, while a 60-day refund period was also added.

Finally, the Consumer Protection (Trade Descriptions and Safety Requirements) Act is a criminal law carrying a fine and imprisonment term. This Act is reserved for false trade descriptions with clear criminal intent and harm, and for unsafe products. While it is not practical to screen all the products upfront, this Act nonetheless empowers SPRING to screen higher-risk products such as electrical and gas appliances prior to sale. Our product safety framework will also be enhanced to make it easier and faster for SPRING to recall unsafe products. For the incident of toy safety issue mentioned by Mr Yeo Guat Kwang, SPRING has identified the distributor of the toys. This distributor has recalled the toys from the market. SPRING has also visited island-wide 109 shops, push carts, stalls in 16 major shopping areas and found that four of them are selling those toys. These four shops have been asked to stop selling the toys. Mr Lim Biow Chuan asked for the status of the Lemon Law so MTI has been working on this matter. As the Lemon Law is quite a complex issue cutting across many sectors, careful steps must be taken to ensure a balance and effective legislation is put in place to safeguard the interests of consumers and businesses. So MTI is currently studying the necessary legislative changes and will complete the public consultations on these proposed changes by this year.

We have some time for clarifications.

Sir, may I ask the Minister to clarify. He mentioned that there will be an increase in cost and it is going to be inevitable. How does the Minister then see Singapore staying competitive and differentiating for companies both here as well as attracting new companies to base their businesses out of Singapore, and to continue to be able to value-add beyond cost?

Sir, in my response, I mentioned that cost is likely to go up this year compared to last year because this year we are in a recovery process; last year we were in the depth of a recession. But having taken all the various cost pressures in mind, the MAS and MTI estimate that inflation this year will be between 2% and 3%. So it is still something that we can cope with.

Sir, we have a number of economic agencies that go all out to help our businesses and companies, like IE Singapore, EDB, SPRING, A*STAR, and so on. In addition to that, we have many trade associations and the business chambers all out there to help the businesses as well. So clearly there are some areas of overlaps. I want to ask the Minister whether there is a need to consolidate or streamline many of these agencies that are helping the businesses, including maybe even sharing of database.

MCYS promotes the philosophy of Many Helping Hands. I do not know whether MTI subscribes to this philosophy, but certainly if there are too many cooks it may spoil the food. Maybe the Minister may want to give a response on how we would want to streamline these, in the light of the ESC report that more schemes will be announced.

I thank Mr Liang Eng Hwa for his very well researched comments. Obviously, it is a very complicated landscape out there. Our approach is to try and generally approach it sectorally. As Mr Lee Yi Shyan mentioned just now, we have already specific programmes working with 22 trade associations on each specific sector and therefore all the help is directed through this sectoral approach. At the same time, there are horizontal things that we have to do, whether it is technology, capability, training or human resource. These are horizontal programmes that we also have to do across the economy. So it is having to manage these vertical and horizontal approaches that sometimes it looks very complicated. Mr Lee Yi Shyan also explained, within our agencies we have tried to streamline our approaches so that companies do not have too many touchpoints dealing with different agencies. So far, I think the situation has improved. But if there is any area in any specific sector that faces too many overlaps or examples of people having to run from pillar to post, we will be happy to take this feedback in and review our processes.

Sir, this is regarding the Energy Policy cut which I spoke on earlier and the Senior Minister of State's response. First, I would like to clarify that under the tiered system which I was talking about, the cross subsidy for the lowest tier will actually come from the higher users. So it is not a proposal to beat the State budget as such.

A clarification for the Senior Minister of State. The first is I do not think he has answered my question about which countries we were expecting to import electricity from. My query is whether that would expose us to another set of, not just risk in terms of reliability of the cables but also, perhaps, another set of political risk, depending on the countries that we are referring to.

Secondly, regarding the cost of imported electricity, could the Minister of State clarify whether we are expecting that cost to be higher or lower than the electricity which we generate locally?

Thirdly, could the Minister confirm that in the new pricing mechanism that ESC talks about, we are expecting electricity prices to take a higher share of household income than it is now. And fourthly, he mentioned that targeted assistance to those who need it would be the way to go to assist those who need help. My clarification is whether this is just during the transition phase when we move into this new pricing system or is this going to be a permanent feature of the Government Budget.

Sir, on the point of the tiered system, I understand what the Member is saying. I think the issue is not just about cross subsiding from one higher end user group to another. The most fundamental question we got to ask ourselves is: if a government were minded to establish tiered levies for electricity consumption, how does a government go about determining what are justifiable, reasonable tiers, given that no two households are alike. And even if you take a HDB-type household in a 3-room flat, the consumption can vary quite a bit. So, this is why the problem is inherently egregious and it is superior to have a clean system but with targeted subsidies.

I take the last point on this issue of targeted assistance, which is really a question for the Minister of Finance because any assistance is really driven by the fiscal position. But I think, in general, the Government's position has always been that help will be made available to those who need it in a targeted manner; and that is a policy that cuts through many agencies and many Ministries. So, energy would be no exception in this regard.

Which countries do we expect to import the electricity from and would imported electricity price be higher or lower? Mr Chairman, I think when the ESC Sub-Committee made the recommendation, it is not with a view to any particular country being a source. But, clearly, to some extent, the limits of technology and infrastructure would suggest that the most obvious sources would be in our neighbourhood. Today, we import our natural gas from our immediate neighbours. Any sourcing of electricity that can go beyond that would help us in terms of our diversification objective. But, at the same time, I want to make the point that if we were not importing gas but importing electricity from a neighbour, the overall risk to us as a system, in my view, remains the same, with the exception of the connectivity issues. But beyond that, I think the key point is really that there is no fixed idea of where we can import the electricity from but, in principle, it is an idea which we should consider. Therefore, naturally the corollary is that we cannot really say for sure which way the price would go, whether it would be higher or lower. But, clearly, if it were to add value to our system, then it would only make sense if a proposal were to be put forward by a private operator or an entity, that it should be able to price electricity competitively in the context of our system; otherwise it would not make sense.

And finally, pricing policy and whether this augurs a higher share of energy in a household budget. Mr Chairman, I think it is hard to predict this. If you had asked me the question last year, I would say, well, it is actually going to be a lower percentage because fuel and oil prices went down. And that is precisely the point: there is a lot of volatility; we cannot tell for sure which way it will go in the short term. But the long-term trend, in terms of energy vis-à-vis other product groups, tends to be relatively higher. And that is something that we should accept. The sooner we recognise it and undertake fundamental measures to mitigate through competition and other efforts and, where necessary, intervene in a targeted way to help, the sooner we have a system that is clear and unambiguous in its intent, I think the better we will be, whether it is households or as an economy.

Mr Chairman, Sir, three clarifications.

For the Minister of State on Social Enterprise (SE). I think he mentioned that City College was successful in getting the LETA Scheme, and I am very happy about that. But may I ask whether City College is the only SE that qualified because as far as I know, they took at least between one-and-a-half to two years before they managed to get the paperworks through and qualify for the LETA Scheme. And I suspect that part of it is because of the inherent differences in the organisation's core structure of SEs that makes it very difficult to qualify for it. So would the MOS look into the intricacies of the grants and the schemes available to make them more friendly and more suitable to MPOs like SEs?

Second clarification: MOS has not really replied to my query on whether we could have a strategy of putting SEs and SMEs together in the cluster hunting overseas because they can add to the competitive edge, as I mentioned in the speech itself.

And the third clarification: EDB has a special International Organisation (IO) team that was set up to attract IOs to Singapore quite successfully. As the Minister has mentioned, in the past two years or so, it attracted some 80 IOs to Singapore.

Can we set up the same under SPRING to groom and have a priority sector development for the SEs in Singapore?

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Sir, the short answer to Ms Penny Low's first question is yes, we can look into it. I am surprised that it took one-and-a-half years, as she said, but LETAS is really a very simple programme offering technical assistance and co-funding for SMEs to undertake upgrading consultancy work. The short answer is yes, we will look into it and encourage other qualifying SEs to apply.

On the issue of SMEs and SEs going overseas, the concept is good. I do not see how this cannot be doable. But, in practice, it is hard for Singapore companies with complementary strengths to come together and address overseas market opportunities. What IE has been doing is to create the iPartners programme under which about 50 consortiums were formed – encouraging companies of different sizes, following a lead company, to address a specific opportunity. Like the CSR, I think we can encourage but I do not think we can mandate such a relationship to happen.

On the third point about whether SPRING can follow EDB's model in the developing the SE sector here, SPRING and MTI's primary objective is still to create jobs through economic activities. To that extent, if SEs qualify, we will support it. If we change this focus, I think it will be wrong for MTI. Having said that, it does not mean that SEs are not worth supporting. So, between MTI, SPRING and MCYS, I think we have got to find a way to support the SEs to the best of our ability.

Sir, the Minister mentioned about plans to attract medium enterprises to Singapore. Can the Minister elaborate a bit on the plans and also which economic agency will handle this task of bringing these companies to Singapore?

This will largely be done by EDB. The EDB has begun this effort beyond targeting the bigger multi-national companies. They are also looking at companies that are of some size which will be classified as SMEs by their home country, but fairly large by our standards. And these will be promising companies, looking at the Asian growth story as the way to grow. So, if we can bring them to Singapore, anchor them here, then as they grow, they can use Singapore as a home base for their Asian growth.

Sir, I thank Lee Yi Shyan for touching on my point about business costs. A large part of many of the costs to our businesses is rental cost and utilities cost. I am not sure whether the Ministry has looked into how big this is today. I do agree that while the approach is really to look at business models that go beyond just these high costs. Having said that, is MTI just resigned to the fact that our costs will always remain high and therefore we do not have to look at our own business models to see whether we can bring such costs down? Is there a competition among the landlords to see whether there is enough supply, so that we can bring the costs down for the businesses, especially for the small companies? The challenge for small businesses is that there is still space for them. Not everyone can globalise at the same time. I think we talk about very big plans. We talk about some successes. But I also notice that among the office holders, they are constantly meeting the same few $100 million companies. I think we need to probably relook at this in terms of how we support the smaller businesses and, at the same time, to keep them sustainable in the long term as well.

The other point I want to raise is on the question of tourism. I think we have done well with F1 and the IRs. My question is that beyond the F1 and the IRs, what more can we do to promote tourism to Singapore? Right now, what I am seeing is that we are doing quite a bit in terms of getting MICE and the events companies moving in terms of to make it more vibrant. But having said that, beyond these two, are there other concept plans that we can look forward to?

Sir, Mr Zaqy Mohamad asked about rental and utility costs as part of SMEs' operating costs. In our survey, we observed that for companies in different industries, obviously they have different sensitivity to these two factors of production or cost factors. If we look at utility cost, for some companies in the chemical industry, it is about 40% of their operating costs. But if we look at very light manufacturing, maybe it is just 5%.

Likewise, for rental cost, for some companies it is 5%. For some of the retailers in the prime area, it is about 28%. So, obviously, our focus in MTI is to ensure, as the Member said, that there should be enough competition and enough supply – enough alternatives for our small businesses to choose. So, whether it is in utility or rental space, we monitor, and if we think that it is not competitive, then we would work on the supply side.

Sir, when we measure tourism outcomes, we are really looking at a few things – visitor arrivals, how long they stay, and how much they spend. So it is quite critical that what we should be able to do is to have good products, new products in the pipeline and constant refreshing of the products, which is an important of it.

As the Member observed quite correctly, we have got some very good products at the moment which are making an impact, not just regionally but globally. At the same time, we have others in the pipeline. As I mentioned in my speech, one area is cruise tourism – the international cruise terminal which will come onstream in about two to three years. I think that will create a whole new segment for us. Apart from that, we have the Gardens by the Bay product which is going to be quite exciting in its own right. Our wild life reserve is going to have a third gate – River Safari – and the pandas will be there. So I think all these will add to the buzz and attraction over the next few years. There is a steady pipeline.

The other key thing is marketing – how we reach out to our target markets, a point that many Members raised and I responded to earlier. The important thing is that Asian markets are growing – a potential source of additional demand for us. China and India in particular, I think in the next few years are going to have tremendous possibilities for us. So, STB's marketing strategy really is how we can reach these target groups through conventional channels and new channels like digital media, and make them aware of our new products, not just engender visitor arrivals but repeat visitors.

Sir, it was mentioned that Suzhou Industrial Park (SIP), Tianjin Eco-city and all the projects undertaken by the Government could actually help to spin off other opportunities for our local business people or enterprises. One suspects that all the businesses flock to the coastal cities and coastal areas. I think, more or less, they are saturated. The cost of operations has also gone up and escalated. I think these are the cities that I think opportunities are there but then the competitive landscape is hotting up. Are there any other cities – second tier or even third tier cities – that the Government could be looking at, and where our local enterprises can also look at to target. I hope the Ministry can elaborate on this.

Sir, I would like to thank the Member for raising the clarification.

Just now, my Minister talked about the Asian growth story. I think when we talk about the story, it is important to talk about China. Mr Wee Siew Kim also talked about the closing of the window of opportunity in China as China modernises and develops. It may have its own capabilities to take over some of the jobs that Singapore companies have been doing. I am more sanguine about this sentiment. I think it is true, as what Mr Teo Ser Luck has mentioned, that the coastal cities in China, as they are more developed, have also moved up the value chain. The cost of doing business there and also the type of investment and the technological requirements that they ask for may be beyond some of the reach of our companies. But there are also plenty of opportunities in central and western China, not forgetting north eastern China.