MTI’s mission is to promote economic growth and create jobs, so as to achieve higher standards of living for all. A total budget of $2.52 billion has been allocated to MTI in FY2008 to achieve its mission.
The Singapore economy grew by 7.7% in 2007, with broad-based growth across manufacturing and services. 236,600 jobs were created in 2007. Investor confidence in Singapore was strong. EDB attracted $16.1 billion in Fixed Asset Investment (FAI). Visitor arrivals to Singapore reached a new high of 10.2 million in 2007. Total external trade grew by 4.5% to $847 billion in 2007.
Singapore’s economy is expected to grow at 4-6% in 2008. This represents a moderation in growth to the economy’s underlying potential rate, following four conservative years of above-trend growth.
In FY2008, MTI will continue to ride on the favourable economic environment and position ourselves for growth. We will strengthen and rejuvenate existing sectors, while nurturing promising new growth sectors. We will also keep a vigilant watch on our cost competitiveness. In addition, we will press on with economic restructuring and continue building up our capabilities to strengthen our long-term competitiveness.
Key Economic Thrusts
Expand economic space
Promote free trade
Singapore currently has a total of 13 bilateral and pluri-lateral Free Trade Agreements (FTAs) covering 23 trading partners. In 2007, we concluded the Singapore-Peru FTA; and the reviews of the US-Singapore FTA (USSFTA), Japan-Singapore Economic Partnership Agreement (JSEPA) and the Singapore-India Comprehensive Economic Cooperation Agreement (CECA).
In 2008, we will continue our FTA negotiations with China and we aim to conclude our FTA negotiations with the Gulf Cooperation Council Countries. We will also begin our FTA negotiations with Ukraine and we expect to review a few FTAs, such as the Korea-Singapore FTA and the Panama-Singapore FTA. At the multilateral level, we will continue to support the negotiating process in the WTO and work with DG Lamy, the Chairs and other like-minded countries to bring the Doha Round to a successful conclusion. An ambitious and expeditious outcome remains a key priority for Singapore.
International Enterprise Singapore (IE Singapore) would continue in its outreach efforts to increase the utilisation of our FTAs amongst businesses (eg. 28.5% for the ASEAN CEPT in 2006) through a series of targeted and mass outreach activities.
Leaders of the ASEAN Member Countries signed a Declaration on the ASEAN Economic Blueprint (AEC) at the 13th ASEAN Summit held in Singapore in November 2007. The AEC Blueprint is a master plan that guides ASEAN towards achieving an AEC by 2015 by clearly identifying economic integration measures, with details on commitments, targets and timelines for their implementation. The end-goal is the realisation of a single market and production base, in which there is a free flow of goods, services, investments and skilled labour, and a freer flow of capital, with equitable economic development and reduced poverty and socio-economic disparities.
Singapore will assume the ASEAN Economic Chair in 2008 and host the ASEAN Economic Ministers Meeting in Singapore in August. Building on the planned realisation of the AEC 2015, we will look for opportunities to further accelerate economic integration within ASEAN and focus on the effective and timely implementation of countries’ economic commitments.
In 2008, we also expect to see further progress in ASEAN’s FTA negotiations with Korea, India, New Zealand and Australia.
Promoting offshore trade
We are continuing with efforts to grow Singapore as an international trading hub. In 2007, we attracted 42 new top global trading companies to base regional or global trading operations in Singapore. The International Trading Institute was established in May 2007 by IE Singapore, Singapore Management University and industry partners to train more professional trading talents. Going forward, we are also looking at capturing new opportunities in liquefied natural gas (LNG) and greenhouse gas emissions trading.
Tapping market opportunities
We will step up our efforts to engage emerging markets and economies which present potential, like China, India, Middle East and Russia. We will also further our relationships with mature economies like the US, Japan and Europe, including possible partnerships to venture into emerging markets.
To help local businesses tap overseas opportunities, IE Singapore organised and supported over 197 business missions and trade fairs in FY2007, benefiting more than 2,000 companies. IE Singapore's iPartners programme also successfully catalysed the formation of four alliances. We now have a total of 29 business consortiums with 150 companies offering integrated solutions to potential buyers. The BuySingapore online business matching portal, launched in November 2006, has garnered a membership base of 110,000 local and foreign companies, and has generated 14,000 trade leads thus far.
Grow manufacturing and services
In 2007, the manufacturing sector and the services industries grew by 5.8% and 8.1%, respectively. EDB drew in a record $16.1 billion of FAI in manufacturing. For services, a total of $3 billion was generated in Total Business Spending (TBS).
Existing investors continued to expand their operations in Singapore, with Novartis sinking in its largest manufacturing capacity investment to date with a S$1 billion biologics manufacturing plant. ExxonMobil announced the setting up of its second world-scale petrochemical complex, at a cost of several billion dollars. There were also high-quality, ‘first-of-its-kind’ investments for Singapore. Rolls Royce will assemble and test large commercial aircraft engines in Singapore, the first time such engines will be manufactured in Asia. There was also continued progress in the new growth areas of Environmental and Water Technologies, Interactive and Digital Media and Biomedical Sciences sectors.
In 2008, we will continue to harness the strong investment climate to strengthen our clusters. EDB projects that it will attract total FAI commitments of $17 to $19 billion and TBS commitments of $7.5 to $8.0 billion from manufacturing and services projects. It expects to generate $12 to $14 billion of value add per annum from its projects and create 16,000 to 19,000 skilled jobs. To help achieve its target, EDB will be provided with an operating budget of $129.8 million.
The tourism sector generated $13.8 billion in tourism receipts in 2007, registering a growth of 11.3% over 2006. We successfully secured the hosting of major events like the FORMULA 1™ SingTel Singapore Grand Prix and Volvo Ocean race; these have help to strengthen top-of-mind awareness of Singapore as a leisure destination. The launch of “Uniquely Singapore Weekends” and rejuvenated plans for Orchard Road contribute to enhancing our attractiveness as a tourist destination. STB, working with the Workforce Development Authority, has also embarked on the Tourism Talent (TOTAL) Plan to train 74,000 tourism workers to support the growth of the tourism sector moving forward.
In FY2008, with a budget allocation of $166.37 million, STB will be stepping up its investment promotion efforts to attract new investments into key tourism precincts. It will place greater emphasis on BTMICE (Business Travel and Meetings, Incentives, Conventions, Exhibitions) in the key markets to accelerate the growth towards Tourism 2015 targets. STB will work with other agencies to ensure a successful inaugural 2008 FORMULA 1™ SingTel Singapore Grand Prix. It has also built up a busy calendar of major business and leisure events for 2008 to raise the profile of Singapore as a vibrant city for work and play.
Build R&D capabilities
The competitiveness of our industry clusters needs to be supported by a strong intellectual and knowledge capital base. A total of $7.5 billion has been allocated to MTI for FY2005 to strengthen Singapore’s R&D capabilities. Of this, $5.4 billion are allocated for public sector research and research manpower development in the areas of science, engineering and biomedical sciences (BMS). The remaining $2.1 billion are for the Research Incentive Scheme for Companies (RISC) to promote private sector R&D investments in Singapore. RISC provides project-based grants to companies to support the building of R&D capabilities.
Between 2005 and 2006 (latest data available), Gross Expenditure on R&D (GERD) has increased from 2.36% to 2.39% of GDP, with the private sector making up 65.7% of GERD in 2006. The number of Research Scientist and Engineers per 10,000 labour force for 2006 was 87.4.
A*STAR’s budget for FY2008 is $912.5 million. For BMS R&D, A*STAR will work closely with the Ministry of Health and the National Medical Research Council to integrate basic, translational and clinical research. A*STAR’s Science and Engineering Research Council’s (SERC) Research Institutes (RI) were involved in 341 projects with 287 companies in FY2007 (from beginning of FY07 up to end November 2007). In FY2008, A*STAR will continue to intensify industry development efforts to catalyse greater commercialisation of technologies, leveraging on the SERC RIs’ multi-disciplinary capabilities.
Ensure competitive business environment
MTI will maintain a close watch on business costs, to ensure that we remain a globally competitive investment and business location. We will ensure that adequate resources and infrastructure are available to support the growth of our industries.
A total of $162 million is set aside for developing industrial infrastructure. A key project would be infrastructural works for the Jurong Rock Cavern, an underground oil storage complex built at subterranean depths in Jurong Island. When completed in 2011, the underground caverns would have a potential storage capacity of about 1.5 million cubic metres for storing liquid hydrocarbons like crude oil, condensates and diesel oil, saving precious land for other activities. This budget also includes basic infrastructure works for One-north, a 200-ha work-live-play-learn ecosystem around Buona Vista, for the biomedical science, info-comm technology and media industries. This budget also includes infrastructure preparation for Industrial Government Land Sales (GLS) sites in various parts of Singapore, for the private sector to develop into industrial facilities.
Another $1.1 billion is set aside for land-related expenditure. This includes the development of land in areas like Tuas View Extension and Jurong Island, as well as the excavation costs for creating the underground caverns. These projects will create new industrial space to support the long-term growth of Singapore’s manufacturing sector.
Encourage entrepreneurship and grow Singapore-based companies
MTI will continue to help upgrade the capabilities of SMEs and raise their productivity.
Increase access to financing
Access to financing remains a key concern for start-ups and SMEs. We have worked with financial institutions to catalyse new financing solutions and evolve a spectrum of financing products that start-ups and SMEs can tap on. In 2007, these schemes (which include the Local Enterprise Finance Scheme, Micro Loan Programme, and Loan Insurance Scheme) extended $727.8 million of loans to about 3,319 companies.
Banks themselves now see the potential of working with SMEs. Many now have products specifically tailored to SMEs. In addition to traditional products, such as trade financing, hire purchase and property financing, banks are now also offering credit cards, cash management services, investment banking facilities as well as unsecured loans for SMEs. To increase local enterprises’ access to financing, Standards, Productivity and Innovation Board Singapore (SPRING) and IE Singapore will continue to partner financial institutions to increase financing-related facilities and sources of financing. A total of $669.63 million (comprising loan capital and grants) has been set aside to support our financing schemes in FY2008.
Build strong enterprise capabilities
In Apr 2007, the $20 million 5-year Management Development Programme was launched to upgrade management capabilities of SMEs. SPRING continued to support technology innovation of SMEs under the $150 million 5-year Technology Innovation Programme (TIP), while the $35 million 5-year Capability Development Program helped SMEs move up the value chain and provided better support to large enterprises. Under the Local Enterprise and Association Development (LEAD) Programme, $78 million of funding has been jointly committed by 16 industry associations and the government for industry development initiatives since May 2005.
In FY2007, SPRING will continue to develop new programmes for capability upgrading and management development in SMEs. SPRING will invest another $25 million into the LEAD programme. Under TIP, SPRING will collaborate with A*STAR in building up incubators to hothouse and mentor innovative start-ups. To further build up SMEs’ management capabilities, SPRING will launch the Young Executive Scholarship Programme aimed at grooming young managers, as well as the Human Resource (HR) Capability Programme to help SMEs develop better HR management systems.
Develop a National Energy Policy Framework
In FY2007, the Energy Policy Group (EPG) led by MTI released the National Energy Policy Report (NEPR), titled Energy for Growth. The NEPR presents a holistic national energy policy that balances the three policy objectives of economic competitiveness, energy security and environmental sustainability.
Growing the Energy Ecosystem
We intend to grow the energy industry in Singapore. We target to increase the value-add to the energy industry from $20 billion to $34 billion in 2015, and to triple employment from 5,700 to 15,300. Besides growing the existing oil and gas sector, we have identified clean energy as a new growth sector. We have already achieved some early successes. Renewable Energy Corporation (REC) chose Singapore as the location to build the world’s largest integrated solar manufacturing complex. Neste Oil will build the world’s largest second-generation bio-diesel plant. To grow the energy industry requires a strong technological base. To this end, the Government has committed more than $300 million to build up our energy R&D capabilities.
Competitive and secure energy
We will ensure that our economic growth is supported by access to competitively-priced and secure energy supply. We are committed to the promotion of competitive energy markets which will help to bring costs down and ensure our economic competitiveness. We have liberalised our electricity and gas markets, and are looking into enabling full contestability in the electricity retail market through the development of the Electricity Vending System (EVS).
To create greater diversity in our energy sources, we are pursuing liquefied natural gas (LNG) importation by 2012. The LNG terminal is a strategic infrastructure to enhance energy security by enabling us to import natural gas from different sources around the world. We will be continuing the implementation of the LNG project in FY2008 such as the selection of the Aggregator1 .
1 Due to the small size of Singapore’s market, we will procure LNG through a single buyer, also called the Aggregator.