"Staying the Course to Shape Singapore’s Economic Future Together”
INTRODUCTION
Mister Chair, I would like to thank Members for their comments and suggestions.
ECONOMIC GROWTH IN AN UNCERTAIN GLOBAL ENVIRONMENT
2 Mr Liang Eng Hwa asked for the economic outlook for Singapore in 2015. Mr Liang correctly pointed out that there is considerable uncertainty in the global economy. This is because, seven years after the Global Financial Crisis struck, the world is still affected by the aftershocks of the crisis. The recovery has been uneven and relatively weak and we can expect this sluggish global environment to persist for some time to come.
3 But if we step back and review how Singapore has fared over the Global Financial Crisis, in fact, we have performed relatively well. Chairman, may I have your permission to distribute some charts?
4 While the charts are being distributed, let explain the intent of the charts. The charts compare our performance in GDP growth, employment and median income growth. These are our KPIs showing how our overall economy is doing, whether there are enough jobs for our people and how well our workers are being paid. For comparison, I have selected 2 sets of countries. The first set comprises the advanced economies, i.e. US, EU and Japan. And the second set comprises key Asian economies.
5 If you look at the first set of charts, in terms of GDP growth, Singapore has grown by 4.7 per cent annually since 2007. As the charts show, we outperformed both the developed economies as well as the key Asian economies.
6 On the next chart, on the jobs front, our unemployment rate has not exceeded 3 per cent. This was so even at the depth of the global financial crisis. And since 2008, we have created approximately 112, 000 jobs[1] every year. More importantly, over two-thirds of the jobs created in the resident workforce were professional, managerial, executive and technical or PMET jobs.
7 The final chart - the median income of employed households headed by Singaporeans has been on the rise, with a real annualized growth of 2.9 per cent since 2007.
8 Mr Chairman, as our economy matures, we will need to get used to a lower but more sustainable rate of growth. In addition, our tight labour market is a continuing reality. These domestic challenges will also affect our growth trajectory. But as the numbers show, our efforts in the past few years put us on the right track and we are making progress despite significant headwinds. Against this backdrop, we can expect Singapore’s economy to grow between 2 and 4 per cent in 2015.
9 Mr Liang has also asked for the outlook for growth in ASEAN, and how this will affect Singapore in the lead-up to the ASEAN Economic Community or the AEC this year. ASEAN is expected to achieve a growth rate of 5.6 per cent per year between 2015 and 2019. If ASEAN continues on this trajectory, ASEAN could become the fourth largest single market by 2030, after the European Union, US and China. We must therefore position ourselves to take advantage of the opportunities that deeper integration through the AEC will bring, and indeed we have been actively engaging businesses to do so.
STAYING THE COURSE
10 To achieve the growth of between 2 to 4 per cent, Mr Liang, Ms Jessica Tan and Mr Gan Thiam Poh asked what our key growth sectors will be in the years ahead. Our economy is well-diversified. Previously, we highlighted the Asia growth story. The prospects of an increasingly integrated ASEAN remain positive. In our projections, manufacturing will continue to be an important part of our growth story. The manufacturing sector has achieved steady value-added (VA) growth of 4.3 per cent per year since 2007. And this was achieved while keeping the labour force in the manufacturing sector approximately constant. In 2008, the manufacturing sector employed a total of 565,000 people; in 2014, this was 536,000. We will continue to move up the value chain into advanced technology and high-value areas, as well as to seek productivity improvements in existing sectors.
ADVANCED MANUFACTURING
11 Our achievements have been underpinned by a steady pipeline of projects we have secured across our manufacturing clusters. Three days ago, I attended the ground-breaking ceremony for the expansion of Micron Technology’s NAND flash memory wafer fab. This will be Micron’s largest and most advanced wafer fab location in the world. It entails an investment of US$4 billion. When fully operational, it will create about 500 highly skilled jobs. Last November, I was at the opening of Amgen Singapore’s Biologics manufacturing facility. This facility is Singapore’s ninth world-class biologics manufacturing plant, and the first in the world to use Amgen’s latest proprietary technologies and manufacturing processes on a commercial scale. Each biologics plant will create 100 to 200 highly skilled jobs.
12 Cutting-edge projects such as these will keep us at the forefront of global manufacturing. Our steady pipeline of investments will keep us in the game for the next 5 years. To remain competitive in the longer run, we will have to adopt disruptive technologies such as 3D printing and advanced robotics, something that Mr Gan Thiam Poh also raised. This will enable us to create new business models and take advantage of new opportunities. For example, rapid prototyping through 3D printing enables faster innovation, helping companies bring their products which would not be possible using traditional manufacturing techniques. 3D printing also enables more cost-effective small-volume production, enabling new business models which rely on mass customisation, such as the Consumer-to-Business (C2B) model as well as the personalisation of goods like running shoes tailor-made for the individual. In addition, 3D printing could disrupt established supply chains as it erodes the competitive advantage traditionally held by mass production, enable the emergence of efficient, yet small-scale domestic production hubs. One can argue that 3D printing and advanced robotics have the potential to disrupt the competitive landscape. Smaller niche players can now take on the bigger players.
13 Mr Liang, Ms Tan, and Mr Gan Thiam Poh asked how MTI will be facilitating the creation of the right sort of jobs for Singaporeans. The evolution of the manufacturing sector will create jobs which require new competencies such as data analytics, engineering, and operations expertise. For instance, technicians in a wafer fab will require analytics and operations skills to monitor production output and quality, and advanced robotics capabilities to troubleshoot and repair the robots which will take on the lower-value tasks.
14 Mr Chair, we are also taking steps to ensure that our SMEs can keep up with leading-edge technologies. This is one key reason why we will provide greater support for collaboration between Large Enterprises and SMEs through the Partnerships for Capability Transformation (PACT) programme.
15 We introduced PACT in 2010 to help SMEs build up their capabilities and track record. The scheme was expanded in 2013 to cover new industries and new forms of collaboration. It now provides support for supplier qualification, test-bedding of innovative solutions, knowledge transfer, and productivity improvements.
16 PACT has achieved good progress, and we will be extending the scheme by another three years, to March 2018. PACT will cover a broader spectrum of co-innovation to include joint product development at the proof-of-concept stage. This will provide greater support for co-innovation between the SMEs and the Large Enterprises, and help local contract manufacturers upgrade to supply higher-technology components.
17 In addition, to enable more projects to qualify for support, PACT will now be able to support the SMEs even if the partner Large Enterprise does not receive funding – so long as the Large Enterprise is committed to develop the local company’s capabilities.
18 We will also improve and enhance the Capability Development Grant or the CDG. The CDG is a flexible grant that can be customised for each individual SME. SMEs can choose to defray up to 70 per cent of the project costs in ten areas ranging from technology innovation, to intellectual property and franchising. It has been well received, and has supported over 1, 200 projects in 2014. We will be extending the enhanced support under the CDG, so that companies can continue to get 70 per cent support till 2018. We will also simplify the application process for projects under $30,000, so that smaller companies can access this grant more easily.
19 To illustrate how all these programmes are coming together, we can look at the re-structuring of the precision engineering sector. Taking advantage of the various government support programmes, the precision engineering sector has been able to upgrade and now support the aerospace as well as the med tech sector, in addition to the traditional electronics sector. Over the last 5 years, the output and productivity of the precision engineering sector have both grown by 9.9 per cent per year.
SERVICES
20 Let me now turn to the growth prospects of our services sector.
21 Our services exports have performed well in recent years. Since 2007, our services exports have grown by 6.9 per cent per year. In terms of the value of our services exports, Singapore now ranks eleventh in the world and fourth in Asia.[2] Despite keen competition from the bigger economies, we have been gaining market share of global services exports. Take our trade in services with China as an example. We are now China’s third largest foreign trading partner for services after the US and Japan.
22 We have done well in the financial services sector, the wholesale trade sector as well as the transport services sector. We will seek new opportunities for growth in the other services clusters. Take the logistics sector for example. Many companies in this sector have found ways to overcome manpower constraints and pursue higher VA endeavours. More are also growing their commercial presence overseas. YCH Group is one such company. A home-grown logistics company, YCH has transformed the traditional business model for logistics service suppliers, by adopting innovative end-to-end supply chain management solutions, embracing e-commerce as well as developing its own proprietary software. Today, YCH operates in more than 100 cities worldwide and continues to expand its network of e-fulfilment services.
23 To help more companies like YCH, we will strengthen schemes to help companies internationalise. IE Singapore currently offers the Market Readiness Assistance or MRA and the Global Company Partnership or GCP programmes, to help local enterprises defray the costs of internationalisation. Starting this year, we will enhance these schemes by raising the grant support levels to SMEs.
24 Our other services cluster will also provide the kind of jobs that Mr Liang, Ms Tan and Mr Gan alluded to – jobs that increasingly educated and qualified Singaporeans want to do.
25 Take the professional services sector for example. Since 2008, employment in this sector has been growing at 5.5 per cent per year. As of 2013, this sector provides over 220, 000 jobs, and Singaporeans hold more than half of the PMET jobs.
26 This achievement is in large part because Singapore has become a choice location for regional headquarters activities. The 2014 Economist Intelligence Unit Business Environment Rankings study ranked Singapore the best place in the world to do business. Consultancy firm Roland Berger also found that European companies consider Singapore the preferred location for regional HQ activities, with Hong Kong and Shanghai being close competitors. To sharpen our competitive edge, we are working with global leading companies to develop Centres of Excellence, specialising in diverse fields ranging from analytics, growth markets, consumer insights to cyber-security. Professional services firms such as McKinsey, KPMG, and PricewaterhouseCoopers have already chosen Singapore as the location for their Centres of Excellence. These Centres of Excellence will not only help create more job opportunities for Singaporeans, but offer good quality jobs.
TRADE AND INTERNATIONALISATION
28 Mr Gan Thiam Poh asked how we can keep Singapore relevant as a key hub for the international movement of goods and services.
29 In addition to the schemes I have described to build up our companies’ capabilities, we also intend to reduce trade barriers so that our companies can compete more effectively.
30 We already have a network of more than 20 free trade agreements with 32 trading partners, who account for more than 70 per cent of our trade in goods. We will expand this network, as well as review existing free trade agreementss to maintain their relevance to businesses. And here I would like to respond to Mr Charles Chong’s question. Under the Korea-Singapore Free Trade Agreement (KSFTA), which Mr Charles Chong talked about, we surfaced our industry’s request for continued exemption of customs duties for goods re-entering South Korea after maintenance, repair or overhaul (MRO) in Singapore. The Korean Government recently announced that it would postpone the implementation of these customs duties till 2017. We will continue to work with Korea to resolve this issue as a part of a more comprehensive review of the Korea-Singapore FTA.
31 Singaporean companies can also look forward to further developments on three fronts in our trade negotiations: the implementation of the AEC by the end of 2015, the Regional Comprehensive Economic Partnership or the RCEP and the Trans-Pacific Partnership or the TPP. I have spoken about the opportunities presented by the AEC. The RCEP links ASEAN, China, India, Japan, Korea, Australia and New Zealand together, while the TPP connects half of ASEAN with the US and countries on the other side of the Pacific Ocean. Both the RCEP and TPP are designed to be inclusive so that we can eventually have a Free Trade Area of the Asia Pacific.
32 The AEC, RCEP and TPP will enhance the economic integration of our region and is expected to boost intra-regional trade significantly. For goods, our companies will be able to have more import and export opportunities because of the significant reduction of tariffs. In addition, these new initiatives will take into account the realities of global production chains, so that our exports can qualify for preferential tariff rates even when components are sourced from other parts of the world. Our companies can also look forward to further liberalisation of the service markets in the region, which will bolster the strong growth of our services exports. And finally, these three initiatives will also deepen the protection of investments in the region, which will not only facilitate the internationalisation of our companies but also enhance the attractiveness of Singapore as a place to do business and anchor regional and international headquarters in Singapore.
SKILLSFUTURE
33 Mr Chair, I have spoken about our growth sectors, which will create new and exciting jobs. To complete our mission, we must ensure that Singaporeans are well-equipped to take up these opportunities.
34 Mr Liang and Mr Vikram Nair asked what MTI is doing to support the SkillsFuture initiative. Let me illustrate with three initiatives by EDB to support the SkillsFuture effort by working with industry partners to develop talent at all levels in our key growth areas.
35 First, to ensure that our workers have the core skills needed to support future growth, EDB will work in partnership with MOE and WDA to encourage companies to build their training capability and expand their training capacity. EDB will support these efforts in seven pilot sectors namely, Logistics, Electronics, Biopharmaceuticals, Chemicals, Precision Engineering, Marine and Aerospace.
36 Second, our future growth clusters will require domain experts with deep specialist know-how as well as competencies such as advanced manufacturing, business analytics, and systems integration. EDB will develop these capabilities in partnership with industry as well as Institutes of Higher Learning. This will go towards creating on-the-job training programmes with leading companies, anchoring Centres of Excellence, and establishing relevant executive and specialist development programmes.
37 And third, EDB will support companies in developing high-potential Singaporeans through the SkillsFuture Leadership Development Initiative. This will help Singaporeans to gain the necessary competencies as well as global and regional exposure to take on leadership roles in their industries.
CONCLUSION
38 Chairman, let me summarise the key points of my response. First, despite the major disruption and the continuing aftershocks from the Global Financial Crisis, we are making steady progress and Singaporeans enjoy close to full employment.
39 Second, our emphasis on re-structuring, innovation and productivity is gaining traction in the manufacturing and exportable services sectors. Third, we should persevere in our efforts so that we can replicate these improvements in the other sectors, particularly the domestic-oriented sector. In short, MTI will continue to help our companies enhance their productivity, raise their competitiveness and create good jobs for Singaporeans. At the same time, we will equip Singaporeans with the skills and expertise to take on these new jobs.
40 Mr Chair, if we stay the course, I am confident that we will continue to grow and to do well. Thank you.
[1] Based on MOM’s published data, the average annual increase in total employment level between 2008 and 2014 was 111,700.
[2] The ranking considers China and Hong Kong as a single economy.