B.1. Let me start with the economy and jobs.
B.2. Last year, we achieved GDP growth of 2.0%.1 This is similar to the 1.9 % achieved in 2015. This is within range, but at the lower end of our potential growth over the medium term.
B.3. But this aggregate growth figure belies the uneven performance across sectors. Sectors such as Electronics, Information & Communications, and Education, Health & Social Services, did well. Some sectors have been harder hit by cyclical weaknesses, including Marine & Offshore, and to some extent, Construction. Other sectors like retail are facing structural shifts.
B.4. The picture of the labour market is similarly mixed. Overall, unemployment rate remained low at 2.1%2 in 2016, but redundancies have been increasing and more workers are taking longer to find jobs. Sectors such as healthcare and education offered more jobs, while others shed them. In 2016, resident employment increased while foreign employment contracted.3
B.5. Given the uneven performance across different sectors, we need to go beyond general stimulus, and target the specific issues faced by different sectors.
B.6. For firms and sectors that are doing well, we must focus on the long term and build on the momentum to seize new opportunities. For example, firms in the manufacturing sector should adopt advanced manufacturing technologies to build competitive advantage. In last year’s Budget, I announced the $450 million National Robotics Programme. This year, I will be announcing measures to help firms with good prospects scale up and internationalise. I will talk about these measures later.
B.7. For sectors facing cyclical weaknesses, we have introduced specific support measures like the Bridging Loan for Marine and Offshore Engineering companies, which provides access to working capital to help them bridge short-term cash flow gaps. I will introduce specific measures to address continued cyclical weaknesses in the Marine and Process sectors, and the Construction sector.
B.8. Last year, we deferred foreign worker levy increases in the Marine and Process sectors. In view of continued weakness, we will defer the earlier announced levy increases in these two sectors by one more year. (Refer to Annex A-1).
B.9. To support the Construction sector, we will also bring forward $700 million worth of public sector infrastructure projects to start in FY2017 and FY2018. Our construction firms will be able to bid for and participate in these projects, which include the upgrading of community clubs and sports facilities. To sustain the momentum for productivity improvement, we will proceed with the foreign worker levy increases for Construction announced in 2015.
B.10. Firms in sectors that are facing structural shifts will need to dig deep to change their business models to stay viable. For example, firms and workers in Retail will need to embrace digital capabilities to access new markets through online-marketing, and e-commerce platforms.
B.11. The Government will help workers adapt to structural shifts in the economy, especially those who seek to move to a different sector or industry. Last year, the Ministry of Manpower (MOM) launched the “Adapt and Grow” initiative to help workers looking to take on new jobs. We will strengthen the support this year.
a. We will increase wage and training support provided under the Career Support Programme, the Professional Conversion Programme, and the Work Trial Programme.
b. We will introduce an “Attach and Train” initiative for sectors that have good growth prospects, but where companies may not be ready to hire yet. Instead, industry partners can send participants for training and work attachments. This will increase the chances of these workers to find a job in the sector later.
B.12. An additional sum of up to $26 million a year will be committed from the Lifelong Learning Endowment Fund and the Skills Development Fund to support these initiatives.
B.13. The Minister for Manpower will elaborate on the initiatives at the Committee of Supply (COS). (Refer to Annex A-2).
B.14. Over the next two to three years, the different sectors of our economy will be in transition, repositioning themselves for the future economy. Some firms may need help to manage cost or cash flow. They will continue to receive support from schemes announced previously. Let me mention three.
B.15. The Wage Credit Scheme will continue to help firms cope with rising wages. We expect to pay over $600 million to businesses this March. Roughly 70% of this amount will be to SMEs.
B.16. The Special Employment Credit will continue to provide employers with support for the wages of older workers till 2019. Over $300 million, which will benefit 370,000 workers, will be paid out in FY2017.
B.17. The SME Working Capital Loan will continue to be available for the next two years. This is where Government co-shares 50% of the default risk for loans of up to $300,000 per SME. There has been good take-up for this scheme. Since its launch in June 2016, the scheme has catalysed more than $700 million of loans.
B.18. I will introduce two more measures to support firms.
B.19. First, I will enhance the Corporate Income Tax (CIT) Rebate. Last year, I enhanced the CIT rebate from 30% to 50% of tax payable, capped at $20,000 each year for Year of Assessment (YA) 2016 and YA2017.
B.20. This year, I will further enhance the CIT rebate by raising the cap from $20,000 to $25,000 for YA2017. The rebate will remain at 50% of tax payable.
B.21. I will also extend the CIT rebate for another year to YA2018, at a reduced rate of 20% of tax payable, capped at $10,000. The enhancement and extension will cost an additional $310 million over YA2017 and YA2018.
B.22. Second, we will provide more support for firms hiring older workers. MOM will raise the re-employment age from 65 to 67 years, with effect from 01 July 2017. This will apply to workers younger than 65 on that day.
B.23. To encourage employers to continue hiring workers who are not covered, we will extend the Additional Special Employment Credit till end-2019. Under this scheme, employers will receive wage offsets of up to 3% for workers who earn under $4,000 per month, and who are not covered by the new re-employment age of 67 years old. Taken together with the Special Employment Credit, employers will receive support of up to 11% for the wages of their eligible older workers.
B.24. The extension of the Additional Special Employment Credit will benefit about 120,000 workers and 55,000 employers, and will cost about $160 million. This helps to extend the employability of older Singaporeans. Details are in the Annex. (Refer to Annex A-3).
B.25. These additional near term support measures, with the existing Wage Credit Scheme and Special Employment Credit, will give businesses support of over $1.4 billion over the next year.
B.26. The measures I have described will help our firms and workers, especially in sectors that are facing cyclical or structural weaknesses. Even more important is how we increase our growth in the medium to long term, so as to sustain our potential growth of 2% to 3%. Let me now speak about measures to build our capacity for the future economy. These measures largely respond to the ideas put forth by the Committee on the Future Economy, or CFE.
B.27. The CFE has laid out seven mutually reinforcing strategies to tackle the challenges ahead. These strategies are not prescriptive blueprints but focus on developing adaptability and resilience. These qualities will keep Singapore relevant even as the world changes.
B.28. Emerging economies are now able to produce rather than import higher value components. There is also a growing consumer class in many Asian cities. Even as we stay open and connected, we have to understand our global partners and customers much better and more deeply. Our enterprises and people will need to venture overseas and to immerse themselves in these markets to gain deep insights.
B.29. Technology is reshaping businesses, jobs and lifestyles across the world. We must spot the opportunities in the digital economy, and make the most of our strengths as a nimble, well-educated, tech-savvy society.
B.30. As we mature as an economy, we must compete on the quality and novelty of our ideas, and our ability to create value. We need to build a strong innovation and enterprise engine, to complement our traditional strengths in efficiency and speed.
B.31. These moves will entail building capabilities of our enterprises, the capabilities of our people, and bringing all parts together in partnership to act as one agile, adaptable whole. This, in essence, is the key thrust of the CFE recommendations.
B.32. Let me start with enterprise development.
B.33. Enterprises are the heart of vibrant economies. For our enterprises to stay competitive and grow, they will need to develop deep capabilities. Which capabilities matter – this depends on the industry that the firm is in, and the firm’s own stage of growth. But there are three capabilities that many firms will need in common – being able to use digital technology, embrace innovation, and scale up.
B.34. Digital technology has unique potential to transform businesses, large and small, across the economy. The first way to strengthen our enterprises, especially SMEs, is to help them adopt digital solutions.
B.35. We will introduce the SMEs Go Digital Programme to help SMEs build digital capabilities. The Info-communications Media Development Authority (IMDA) will work with SPRING and other sector lead agencies in this effort. The SMEs Go Digital Programme will have three components:
a. First, SMEs will get step-by-step advice on the technologies to use at each stage of their growth through the sectoral Industry Digital Plans. We will start with sectors where digital technology can significantly improve productivity. These include Retail, Food Services, Wholesale Trade, Logistics, Cleaning and Security.
b. Second, SMEs will get in-person help at SME Centres and a new SME Technology Hub to be set up by IMDA. SMEs can approach business advisors at SME Centres for advice on off-the-shelf technology solutions that are pre-approved for funding support, or connect to Info-communications and Technology (ICT) vendors and consultants. The more digitally advanced firms can get specialist advice from the SME Technology Hub.
c. Third, SMEs that are ready to pilot emerging ICT solutions can receive advice and funding support. We will work with consortiums of large and small firms to help them adopt impactful, interoperable ICT solutions, to level up whole sectors.
B.36. We will also strengthen our capabilities in data and cybersecurity. With increased digitalisation, data will become an important asset for firms, and strong cybersecurity is needed for our networks to function smoothly. The Cyber Security Agency (CSA) of Singapore will work with professional bodies to train cybersecurity professionals.
B.37. I will make available more than $80 million for these programmes. The Minister for Communications and Information will elaborate at the COS.
B.38. The second way to strengthen our enterprises is to support firms in their broader efforts to tap on innovation and technology. With our consistent investment in R&D, we have built up excellent research institutes. We want to help companies better tap on these resources.
B.39. A*STAR currently works with firms to conduct operation and technology road-mapping, to identify how technology can help them innovate and compete. A*STAR will expand its efforts to support 400 companies over the next four years.
B.40. For companies seeking access to intellectual property, Intellectual Property Intermediary, a SPRING affiliate, matches them with IP that meets their needs. It will work with the Intellectual Property Office of Singapore (IPOS) to analyse and bundle complementary IP from Singapore and overseas. A*STAR also partners SMEs through the Headstart Programme. The Headstart programme allows SMEs that co-develop IP with A*STAR to enjoy royalty-free and exclusive licences for 18 months in the first instance. In response to industry feedback, this will be extended to 36 months.
B.41. We will also support companies in the use of advanced machine tools for prototyping and testing, which may require costly specialised equipment. A*STAR will provide access to such equipment, user training and advice under a new Tech Access Initiative.
B.42. The Ministers for Trade and Industry will elaborate at the COS.
B.43. The third way to strengthen our enterprises is to help them scale up globally. Many Singapore-based firms already have a presence in other markets, often with support from IE Singapore. In 2016, IE Singapore supported companies in over 37,000 cases, a 9% increase from 2015.
B.44. To further support our firms to grow, we will continue to develop a smart financing ecosystem. We will commit up to $600 million in Government capital for a new International Partnership Fund. The Fund will co-invest with Singapore-based firms to help them scale-up and internationalise.
B.45. An important opportunity for our companies is the growing market for infrastructure development in emerging economies, especially in Asia. However, there remain gaps in financial markets for project finance in the region. The Government will enhance its schemes to bridge these gaps, by catalysing private finance and sharing risks with financial institutions.
B.46. We set up Clifford Capital in 2012 to finance overseas projects by Singapore companies. To date, over $2.4 billion have been committed.4
B.47. We will enhance IE Singapore’s Internationalisation Finance Scheme to further support growth in this sector. We will catalyse private cross-border project financing to smaller Singapore-based infrastructure developers, by co-sharing the default risk of lower quantum non-recourse loans. We will also catalyse financing for projects undertaken by larger firms in higher-risk developing markets, by providing a share of the needed sovereign risk insurance coverage. Overall, these enhancements will enable more companies to take on more overseas projects. The Ministers for Trade and Industry will provide more details at the COS.
B.48. To sum up, these are the measures to help enterprises build capabilities to go international, go digital, and to innovate. (Refer to Annex A-4).
B.49. Next, I will speak on how we will help our people deepen their capabilities.
B.50. Our people are valued for their skills and adaptability, and have enjoyed high employment rates and rising wages. We must build on these strengths. As the pace of change quickens, we will do more to help them stay ahead. I spoke earlier about how we will support those affected by economic restructuring, to re-skill to find new jobs. I will now touch on two areas: new skills to operate overseas; and deepening skillsets to remain relevant in jobs.
B.51. We will set up a Global Innovation Alliance for Singaporeans to gain overseas experience, build networks, and collaborate with their counterparts in other innovative cities. The Global Innovation Alliance will have three programmes.
B.52. First, the Innovators Academy will enable our tertiary students to build connections and capabilities overseas. We will build on the NUS Overseas College programme, which connects students to start-ups overseas. Many of these students have gone on to start companies or pursue interesting careers. The Innovators Academy will go further by making these opportunities available to students from other Singapore universities. We aim to grow the annual intake of students from 300 to 500 over the next five years.
B.53. Second, we will establish Innovation Launchpads in selected overseas markets. These create opportunities for our entrepreneurs and business owners to connect with mentors, investors and service providers.
B.54. Third, through Welcome Centres, innovative foreign companies can also link up with Singapore partners to co-innovate, test new products in Singapore, and expand in the region.
B.55. The Global Innovation Alliance is a novel collaboration among our educational institutions, economic agencies and businesses. In the initial phase, we will launch the Alliance in Beijing, San Francisco and various ASEAN cities. The Ministers for Trade and Industry will share more details at the COS.
B.56. Firms that want to expand overseas need capable leaders who have spent time in these markets, with insights and connections that can help their businesses scale up globally. The SkillsFuture Leadership Development Initiative will support companies to groom Singaporean leaders by expanding leadership development programmes. This includes sending promising individuals on specialised courses and overseas postings. For a start, the programme will target to develop 800 potential leaders over the next three years.
B.57. I will set aside over $100 million to build capabilities under the Global Innovation Alliance and Leadership Development Initiative.
B.58. As our companies innovate and digitalise, we will also help our people acquire and use deep skills, taking the SkillsFuture movement further.
B.59. To enhance training and make it more accessible, we will offer more short, modular courses, and expand the use of e-learning. Our universities, polytechnics and ITE have started offering such modular courses.
B.60. Funding support for Singaporeans to take approved courses will continue to be available through SkillsFuture. In addition, union members can get subsidies for selected courses through the NTUC-Education and Training Fund. We have set aside $150 million to match donations to the Fund.
B.61. Besides learning new skills, our people must also apply and use these skills on their jobs. This requires employers, Trade Associations and Chambers, or TACs, unions and the Government to work together.
B.62. First, we must make sure that skilled workers are matched to where they can best use their skills. We will make the National Jobs Bank more useful for jobseekers and employers, and work with private placement firms to deliver better job matching services for professionals.
B.63. Second, employers, TACs, and unions should play an active role in structuring training for workers. Some have been successful in this effort. For example, SHATEC5 was set up by the Singapore Hotel Association over 30 years ago to provide hands-on training and certified courses. It has since helped to build up a skilled hospitality workforce, with its alumni winning accolades worldwide.
B.64. We hope more employers and TACs can do likewise. Employers and TACs who develop training programmes for their workers and the industry can receive funding support from SkillsFuture Singapore.
B.65. I have spoken about how we will support the development of our enterprises and our people. Beyond developing individual capabilities, we must also come together in partnerships - share expertise, tackle common challenges and reinforce our mutual efforts.
B.66. To systematically facilitate such partnerships, I announced in last year’s Budget a major initiative, the Industry Transformation Maps, or ITMs. The ITMs are integrative platforms, bringing together various stakeholders – TACs, unions, and Government – so as to align our efforts around a common plan to transform each sector. We will develop ITMs for 23 sectors, covering about 80% of our economy. Six have already been launched. We will keep this going at a good pace, and launch the remaining 17 within FY2017.
B.67. The ITMs help us to identify key enablers, which involve different stakeholders, to transform sectors. For example, the Centre of Innovation for Supply Chain Management at Republic Polytechnic works with companies to level up their capabilities6 and provides students with hands-on experience.
B.68. As I said last year, the ITMs are “live” plans that we will adjust along the way. Where we spot opportunities, including ones that do not fit any existing industry, we will adapt our ITMs to seize them. We must also maximise synergies between related ITMs, such as between the Food Services and Hotel industries.
B.69. Our companies, TACs and unions can play a key role in the success of our ITMs.
B.70. One example is Singtel. Singtel not only trains its IT services employees to transition into cyber security roles, it also works with CSA and the IMDA on the Cyber Security Associates and Technologists programme to develop mid-career talent for the broader cyber security industry. Singtel has also launched its Cyber Security Institute to train technical professionals, management and boards to better handle cyber breaches. It also engages students through internship programmes.
B.71. With the emphasis on innovation, Government agencies need to play enabling roles, to help realise new ideas.
B.72. Our regulatory agencies must balance managing risk and creating the space to test innovations.
B.73. For example, the Monetary Authority of Singapore (MAS) has just announced a simplified regulatory framework tailored to the needs of venture capital firms. This will give them greater flexibility, making Singapore more conducive to venture capital investment, thereby enhancing the supply of financing for start-ups.
B.74. We can also create more space for innovation through regulatory sandboxes. This involves setting boundaries within which some rules can be suspended, to allow greater experimentation.
B.75. The Land Transport Authority (LTA) has done this with self-driving vehicles, setting out specific zones where they can be tested on roads. Likewise, MAS has set up a regulatory sandbox for FinTech.
B.76. Regulatory agencies will further explore how we can facilitate innovation. For instance, our regulators can make their risk assessments for new products and services more swift and effective. A good example is the Health Sciences Authority (HSA), which will be setting up a priority review scheme to evaluate new and innovative medical devices. This will accelerate the commercialisation process and make Singapore a preferred location to launch these devices.
B.77. We will also support our agencies to procure products and services in a way that builds capabilities in the economy and supports innovation.
B.78. For example, in the Construction sector, we will introduce the Public Sector Construction Productivity Fund, with about $150 million. It will allow Government agencies to procure innovative and productive construction solutions, which may have higher costs as these solutions may be nascent and lack scale. The fund will allow these solutions to enter and gain traction in the market.
B.79. In addition to the funding for the measures mentioned earlier, I will top up the National Research Fund by $500 million, to support innovation efforts, and the National Productivity Fund by another $1 billion, to support industry transformation.
B.80. All in, we are putting aside $2.4 billion over the next four years to implement the CFE strategies. This will be over and above the $4.5 billion set aside last year for the Industry Transformation Programme.
B.81. Madam Speaker, may I have your permission to distribute materials to the Members in this House?
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