1. Madam Chairperson, let me thank Members for their comments and for raising very pertinent issues. 

2. First, let me set out the backdrop. The Singapore economy has performed well despite the very recent global financial crisis. If you look at the last 5 years, between 2008 and 2013, our economy grew by 5.2 per cent annually.

3. This economic growth has lifted the incomes of Singaporeans. Real median wages among our citizens have increased by about 9 per cent in the five years to 2013. This is higher than the income growth in a number of countries such as Switzerland, Germany and the UK. This tells us that our efforts to restructure the economy, by moving up the value chain and into new growth sectors, are benefitting Singaporeans.

4. Our economy grew 4.1 per cent in 2013, supported by strong growth in finance, insurance, and wholesale and retail trade. Our manufacturing sector also expanded at a faster pace, on the back of strong growth in transport engineering and electronics.

5. Ms Jessica Tan asked how our economy will perform this year.  She is right in pointing out the downside risks from monetary tightening in the US, and economic restructuring in China. The persistent tightness in Singapore’s labour market could also weigh on growth in some labour-intensive, domestically-oriented sectors.

6. Nonetheless, we expect the global economic outlook to improve modestly, supported by the gradual recovery of the US and the Eurozone markets, and continued resilience in key ASEAN economies.

7. Against this backdrop, we expect Singapore’s economy to grow steadily by between two to four per cent this year.

8. Ms Jessica Tan also asked about MTI’s measures to help businesses cope with rising costs.

9. Our economy is now entering a new phase of development, where our cost structure is higher as our economy matures. We have to cope with this adjustment, as we cannot expect to have a first world economy with third world costs.  

10. To grow sustainably, we need to improve productivity by growing our topline and managing costs. Many of our companies understand this, and are already transforming to respond to this new reality.

11. We will support our companies by continuing to expand our economic space overseas. Our companies can capitalise on growth opportunities overseas particularly in our neighbourhood, the ASEAN region, by leveraging on our network of Free Trade Agreements (FTAs).

12. Mr Gerald Giam is concerned that Singapore’s interests may not be adequately protected as we negotiate with other countries participating in the Trans-Pacific Partnership (TPP). Let me assure Mr Giam that Singapore and Singaporeans are at the heart of our FTA negotiations. We proactively consult other Government agencies as well as relevant stakeholders, to ensure that Singaporeans benefit from our FTAs with other countries. Our approach to the TPP is no different.

13. More specifically, Mr Gerald Giam also asked about the tradeoff between a strong Intellectual Property (IP) regime versus healthcare cost through generic drugs.

14. A strong IP regime is a critical enabler for Research and Development (R&D). In fact, our strong IP regime is an important factor why we have succeeded in building up a significant biomedical sciences sector over the last 15 years. 

15. At the same time, keeping drugs affordable for Singaporeans is a very important consideration. Therefore, MTI will work with MOH and other government agencies to strike the right balance in our TPP negotiations.

16. Ms Lina Chiam alluded to a “spaghetti bowl” problem created by overlapping FTAs.

17. Our approach to FTAs has been explained several times. We are committed to multilateral trading systems like the World Trade Organisation (WTO). At the same time, we see regional and bilateral FTAs as being important, because they complement the multilateral approach. They allow like-minded and progressive trade partners to move ahead and liberalise earlier.

18. Ms Chiam refers to the EU-ASEAN bloc to bloc FTA negotiations. As she mentioned in her speech, this negotiation was initiated in 2007 and after 2 to 3 years, did not get anywhere.  That is the reason why the EU decided to change tack and revert to a EU-Singapore FTA. And we successfully concluded that in 2012.

19. The EU is now in the process of negotiating with Vietnam and Malaysia. This approach of EU negotiating with other ASEAN countries and later putting it together into a regional agreement is very similar to the process that Japan undertook, in negotiating with ASEAN.  So it is not unusual for regional blocs like the EU to negotiate on a country to country basis, before putting it together as a regional bloc.

20. But the key point I want to make is that in our FTAs, we try to open up market access for our companies. Overall, Singapore benefits from the network of FTAs that we have negotiated. We have indeed capitalised on these FTA agreements to strengthen our position as a key trading, investment and services hub.

21. Our companies appreciate this, and are working with IE Singapore as well as our trade associations and chambers to fully utilise our extensive FTA network for preferential market access.

22. Mdm Chairperson, in addition to strengthening our trade linkages, we will continue to restructure our economy and help companies transform the way they operate.  DPM Tharman outlined how we can keep our economy vibrant and create good jobs for Singaporeans.

23. Let me delve one level deeper and explain our specific strategies for the four broad clusters of our economy: manufacturing; financial and business services; exportable services; and domestic services.

24. First, let me talk about manufacturing. This sector remains a key growth engine for our economy, providing more than half a million jobs and contributing about a fifth of our GDP last year.  In recent years, key manufacturing sectors continued to deliver topline growth even as our cost base increased.

25. Ms Jessica Tan asked if we remain attractive as a manufacturing hub given keen regional competition.

26. The prospects for our manufacturing sector remain bright. Singapore is plugged into the regional manufacturing supply chain, and our companies stand to benefit from the growth of manufacturing in China, India and ASEAN.  This is only possible because we are continually moving existing clusters up the value chain, and have established a competitive niche at the higher end of this value chain. 

27. To maintain our competitive advantage in manufacturing, we will continue to sharpen our industry development strategies.

28. First, we will leverage on the strengths that we have built up in traditional sectors like Precision Engineering to upgrade and move into adjacent industries such as Aerospace and Medical Technology or Medtech.  In a similar way, in the petrochemicals sector, we have moved into specialty chemicals; in the biomedical sciences sector into biologics and in the electronics semiconductor sector into the fabless segment.

29. Second, we will invest in R&D to deepen our manufacturing capabilities. We are already tapping on cutting edge technologies to upgrade existing activities and open up new growth opportunities in manufacturing. Through the $500 million Future of Manufacturing initiative, EDB and A*STAR are helping businesses to develop and adopt such technologies. For example, EDB has worked with GlaxoSmithKline to pilot new technologies like enzymatic and continuous processing techniques.  These have enabled the company to reduce its resource requirements, lower its physical footprint, and shorten its manufacturing lead time.

30. Third, we will build up industry capabilities by leveraging on our Institutes of Higher Learning. For example, EDB is supporting the Nanyang Additive Manufacturing Centre, which is a $30 million research facility at NTU equipped with the latest 3D printers capable of printing metal objects and even human tissue.  This centre will work closely with businesses through R&D projects to develop new commercial applications for additive manufacturing.

31. SPRING is also supporting our SMEs to adopt new technologies. Take Lintech Engineering, for example, it has implemented a robotic welding system to automate its oil & gas repair jobs. The effect has been quite dramatic - Lintech has increased its productivity by up to three times and is now better equipped to expand its business. MTI will develop more such partnerships to build up our industry capabilities and expand our talent pool.

32. Ms Jessica Tan has highlighted manpower constraints as a key issue for the manufacturing sector. EDB is working with industry stakeholders to develop a pipeline of multi-skilled engineering talent to support the growth of manufacturing. Through initiatives like the Precision Engineering Vocational Continuing Education and Training programme, EDB is grooming a pool of 2800 master craftsmen to take on higher value, more complex manufacturing operations and leadership responsibilities. This will help the industry recognise and reward craftsmen who build-up their skills and experience.

33. Madam Chairperson, the profile and nature of jobs in manufacturing will change as we restructure and upgrade. Future manufacturing jobs will be highly-skilled, multi-disciplinary and have high potential for career growth. They will be different from the jobs today. There will be a need for data analytics professionals, supply chain experts, industrial engineers, designers, business managers, and software programmers. In addition, future jobs will require individuals who can integrate multiple-skill sets such as technical knowledge, systems thinking and industry application.

34. Therefore, I strongly urge Singaporeans to look at the prospects of our manufacturing scene. Good jobs are being created and they should take full advantage of these jobs.

35. Ms Jessica Tan asked about the services clusters with the highest potential for growth, and our plans to help companies leverage on these opportunities. Let me address her questions as I go through our strategies for the various service clusters.

36. I will begin with financial and business services, which provided close to 700,000 jobs and accounted for 28 per cent of our GDP last year. The Monetary Authority of Singapore (MAS) is developing the financial sector by enhancing our strengths in areas such as trade finance, foreign exchange trading and wealth management.  MAS is also working with the industry to build capabilities that facilitate trade and investment in Renminbi.

37. MTI will complement MAS’s effort by growing our business services sector. The sector has seen strong growth over the past few years, with the likes of Proctor and Gamble, IBM and other multinationals setting up their regional and even global headquarters here. 

38. Ms Jessica Tan asked if Singapore remains an attractive location for MNCs in view of our rising cost. Multinationals sink roots here because we are an attractive Global-Asia Hub for their industry leaders. We are a leading global city with a solid foundation in connectivity, skilled labour, sound governance and liveability and these help us to compete for new investments.

39. We will build on these strengths to continue growing our business services cluster.  We will also work with MNCs to groom Singaporean leaders from within their ranks, in functions such as business development, sales and marketing, brand management, talent management and supply chain management.

40. At the same time, we need to remain open to global talent as they bring perspectives and deep in-market knowledge that are necessary for keeping our clusters innovative and relevant to global markets.

41. Let me now turn to our exportable services cluster, which covers wholesale trade, transportation and storage and information and communications.  Together, these provide about 650,000 jobs, contributing about a quarter of our GDP in 2013.

42. We will continue to strengthen existing clusters such as commodities trading. Singapore is now one of the top commodities trading hub in Asia, with over 400 global trading companies across the energy, metals, minerals and agri-commodities clusters.  In 2012, the trading community here generated about $16 billion in local business spending, which in turn yielded spillover benefits to the rest of our economy, especially in business services.  

43. We will continue to build on this solid foundation and pursue new sectors with strategic growth potential, such as the precious metals cluster.

44. However, we will need to move quickly as competition in exportable services is growing. Shanghai, for example, has established a Free Trade Zone which attracted over $140 billion in trade in 2013, the first year of its initiation.

45. We are working with businesses to enter new, higher value services clusters that play to the strengths of our workforce. One example is infrastructure services.  Asia alone will need more than $10 trillion of infrastructure investments between 2010 and 2020. Singapore is well-positioned to serve the strong demand in Asia with our strengths in urban solutions. Hyflux, for example, has signed a deal valued at over $500 million to build a seawater desalination plant in the Dahej Special Economic Zone in Gujarat, India.

46. We will help our businesses access opportunities in this sector by increasing the number of bankable infrastructure projects, through collaboration with multilateral agencies like the Asian Development Bank and World Bank.  We will also catalyse deal-making for Singapore companies by organising roundtables where industry stakeholders can discuss infrastructure projects in detail, such as the inaugural Asia Singapore Infrastructure Roundtable held in October 2013.

47. We will help Singaporeans embark on careers in infrastructure services. For example, IE Singapore is working with our tertiary institutions to initiate an Infrastructure Development Programme to equip our undergraduates with the inter-disciplinary skills needed by the industry. As a first step, IE Singapore has also launched an Infrastructure Development Internship programme in collaboration with NUS and nine industry partners.

48. EDB will also be helping Singaporean professionals develop deep expertise in project development through an executive education programme known as ALPINE – the Asia Leaders Programme in Infrastructure Excellence. This course will be conducted by SMU and the Lee Kuan Yew School of Public Policy. EDB will announce the details soon.

49. Another exportable service sector that we are developing is information & communications. We will capitalise on our established base of business Headquarters, infocomm infrastructure and research capabilities to grow this sector, and in particular the data analytics segment. With falling costs of collecting and analysing data, companies across a range of industries are increasingly looking to use “big data” to improve how they serve their customers and indeed, anticipate their needs.  We will build up a pipeline of talent to support the growth of this sector. EDB for example, is working with stakeholders to grow a pool of 2,500 data analysts by 2017. 

 

50. The last economic cluster we are continuing to support is the domestic services sector.  The demand for domestic services, such as healthcare, F&B and retail, will increase in tandem with the increase in our population.

51. The key to sustainable growth in these clusters is to raise productivity and innovate our product offerings. We have embarked on several productivity roadmaps to foster such transformation, but the journey has not been easy for many, especially our SMEs.

52. However, we need to press on together and stay the course in restructuring efforts. SMS Lee and MOS Teo will elaborate on how MTI will continue to support our businesses in doing so.

53. Madam Chairperson, the growth areas which I have outlined will provide many jobs with good wage growth potential. MTI, MOM and MOE are working together to prepare Singaporeans for these jobs.  We will also enhance upgrading and employment support for Singaporean workers as we continue to restructure the economy.

54. Through these efforts, we will ensure that Singaporeans continue to benefit from our economic growth.  The journey ahead will not be easy but we need to stay the course. Our economic growth strategies will enable us to capture the new opportunities in our region, translating them into better jobs for Singaporeans.

55. Second Minister Iswaran will now respond to the cuts raised on energy, R&D and tourism.