B. A VIBRANT AND INNOVATIVE ECONOMY
B1. Let me start with building a vibrant and innovative economy.
B2. We must support our firms and workers to overcome near-term challenges, as well as prepare them to capture future opportunities. I will address each of these in turn.
Overcoming Near-Term Challenges
B3. First, overcoming near-term challenges.
B4. Though our economy picked up last year, some firms remain concerned about business costs.
a. A key driver of this is wage growth.
b. But wage growth is good for Singaporeans.
c. To sustain wage growth and keep business costs manageable, our firms must continue to improve productivity and achieve quality growth.
B5. We will support our firms to cope with near-term cost pressures by extending two measures.
a. First, I will extend the Wage Credit Scheme (WCS).
i. This scheme co-funds wage increases for Singaporean employees, up to a gross monthly wage of $4,000.
ii. For 2017, we expect to pay out more than $800 million to more than 90,000 firms, for wage increases given to more than 600,000 employees.
iii. I will extend the WCS for three more years. The WCS will provide 20% co-funding for 2018, 15% for 2019 and 10% for 2020.
iv. This will cost about $1.8 billion over the next three years. (Refer to Annex A-1.)
b. Second, I will enhance and extend the Corporate Income Tax (CIT) rebate.
i. For Year of Assessment (YA) 2018, I will raise the CIT rebate to 40% of tax payable, capped at $15,000.
ii. I will also extend the CIT rebate to YA2019, at a rate of 20% of tax payable, capped at $10,000.
iii. The enhancement and extension will benefit all tax-paying companies, especially smaller ones.
iv. These changes are projected to cost an additional $475 million over the next two years. (Refer to Annex A-1.)
B6. For the Marine Shipyard and Process sectors that still face weakness, I will defer the earlier-announced increases in Foreign Worker Levy rates for another year. (Refer to Annex A-1.)
B7. We will also strengthen support for our workers.
a. We have been supporting those facing career transitions to stay employed and employable, through the Adapt and Grow initiative.
i. For example, the Professional Conversion Programmes have helped more than 3,700 mid-career individuals take up new jobs last year.
b. This year, we will strengthen employment support for lower- to middle-income workers in various ways.
i. This includes upgrading the current Work Trial scheme into a Career Trial scheme, with higher funding support for workers to try out new careers. (Refer to Annex A-4.)
B8. The Minister for Manpower will elaborate on this and other measures at the Committee of Supply (COS).
Capturing Future Opportunities
B9. Let me now move on to our longer-term transformation strategies.
B10. To capture future opportunities, our economy must transform in response to the three major shifts I mentioned earlier – the shift in global economic weight to Asia, the emergence of new technologies, and our demographic transition. And what changes do we have to make?
a. New technologies mean that the ways in which companies do business, create value and organise themselves will change, and change quickly. Our companies must keep up, and our workers must adapt as the nature of jobs and the skills required evolve.
b. Asia’s growth means new markets, with new needs to be met. Changing global patterns of production and consumption, together with new technologies, will bring new opportunities, but also greater competition. Our businesses and workers must differentiate themselves, and continue to venture abroad.
c. And with an ageing population, we need to find ways to reduce manpower demand, while enabling our older workers to continue contributing.
B11. We have made a good start through the ITMs.
a. In the next phase of our ITM journey, we will take a more cluster-based approach – to reap synergies and strengthen linkages across multiple industries, and explore new opportunities.
B12. And we must strengthen the three key enablers that lay the foundation for all the ITMs – innovation, capabilities and partnerships.
a. First, we must foster pervasive innovation throughout our economy,
i. So that we can make the best use of technology, adapt quickly, and create new value to differentiate ourselves.
b. Second, we must build deep capabilities in our firms and our people,
i. So that we can compete not on costs, but on the value and skills we bring.
c. Third, we must forge strong partnerships both locally and abroad,
i. So that our firms and people can work together to address common challenges and access new opportunities in our region and beyond.
B13. By strengthening these three enablers, we can anchor Singapore as a Global-Asia node of technology, innovation and enterprise.
Fostering Pervasive Innovation
B14. Let me start with the first enabler – innovation.
Supporting Firms in their Innovation Journeys
B15. With the rapid pace of change and greater competition, we must make innovation pervasive throughout our economy. Firms in every sector and of every size need to embrace innovation, and make the best use of new technologies as a competitive advantage.
a. Take Pan-United, a local concrete and cement company.
i. It has invested significantly in R&D, innovating new products to meet customer needs.
1. For example, it has developed a new type of flexible concrete that can cushion the landing impact of aircraft, reducing wear and tear of airport runways. This concrete complies with the latest specifications set by the US Federal Aviation Administration.
2. Pan-United also has a range of concrete varieties catering to different specifications, including one that shields against proton radiation.
ii. Such product innovations have helped Pan-United expand into regional and global markets.
iii. Pan-United, you might say, is a concrete example of how innovation can help a firm cement its position as a market leader.
B16. This Budget, we will support more firms to innovate across the entire value chain – whether they buy new solutions, build their own, or partner others to co-innovate.
B17. Industry partners, like the Singapore International Chamber of Commerce and the Big Four accounting firms, have given us useful suggestions. We have studied and will implement some of them.
B18. First, we will support businesses to buy and use new solutions.
a. We will streamline existing grants supporting the adoption of pre-scoped, off-the-shelf technologies into a single Productivity Solutions Grant (PSG). (Refer to Annex A-3.)
b. In addition, I will raise the tax deduction on licensing payments for the commercial use of intellectual property (IP).
i. With the expiry of the Productivity and Innovation Credit (PIC) scheme, the tax deduction on licensing payments has reverted to 100% for YA2019 and beyond. I will raise this to 200%, capped at $100,000 of licensing payments per year.
ii. This cap ensures that smaller businesses will benefit more from this measure. (Refer to Annex A-5.)
B19. Next, to support businesses to build their own innovations,
a. I will raise the tax deduction for IP registration fees from 100% to 200%, to help firms protect their intangible assets. This will be capped at $100,000 of IP registration fees per year. (Refer to Annex A-5.)
b. I will also raise the tax deduction for qualifying expenses incurred on R&D done in Singapore, from 150% to 250%. (Refer to Annex A-5.)
B20. Finally, to help businesses find partners to co-create solutions,
a. We will pilot the Open Innovation Platform this year.
i. This is a virtual crowd-sourcing platform, where companies can list specific challenges that can be addressed by digital solutions. They will then be matched with info-communications and technology (ICT) firms and research institutes, to co-develop solutions. (Refer to Annex A-2.)
Harnessing National Research Efforts
B21. Besides supporting our firms to innovate, we will do more to harness our national research capabilities, to enhance our economic competitiveness.
a. We have built a strong research and knowledge base in our universities and A*STAR institutes, which provides a solid foundation for an innovative economy.
b. To maintain this competitive edge, we have sustained our public sector R&D spending at 1% of GDP annually.
B22. We have various programmes to translate our public sector research efforts into commercially viable applications, and we will build on these.
B23. This year, the National Research Foundation (NRF) and Temasek will launch an NRF-Temasek IP Commercialisation Vehicle.
a. This new investment venture will bring together Temasek’s global investment networks and NRF’s connections with the Singapore R&D community, to grow companies that draw on IP from publicly-funded research.
b. At least $100 million will go into this joint venture – $50 million from the Government, and at least $50 million from Temasek. (Refer to Annex A-2.)
B24. We will also continue to harness our R&D resources, to drive greater adoption of digital technologies, automation and robotics.
a. To strengthen our status as an air and sea hub, we will launch an Aviation Transformation Programme (ATP) and a Maritime Transformation Programme (MTP) this year.
i. Through these programmes, our airport and seaport will become platforms for companies to develop, test and use new technologies.
ii. The solutions that emerge can be rapidly adopted in other parts of Singapore, or even exported overseas. We will provide support of up to $500 million for the two programmes, with additional matching investments expected from industry partners. (Refer to Annex A-2.)
B25. To improve our labour productivity, we will also expand the National Robotics Programme (NRP), to encourage wider use of robotics in the built environment sector, particularly in construction. (Refer to Annex A-2.)
Building Deep Capabilities
B26. Let me move on to the second key enabler – building deep capabilities in our firms and workers.
B27. In particular, capabilities to internationalise, digitalise and be more productive will be critical.
B28. For our firms, we will provide more targeted support to help them build capabilities to meet their needs.
a. Broad-based measures such as the PIC scheme have been useful in kick-starting a wider movement to improve productivity and to innovate.
b. I am heartened that many firms have embarked on this journey. We will now build on this base and take a more targeted approach, to help firms deepen the capabilities they need to continue growing.
B29. In April, we will merge SPRING and IE Singapore into Enterprise Singapore.
a. Enterprise Singapore will provide integrated support to companies, for internationalisation as well as the development of other capabilities, so as to help them compete better both locally and abroad.
b. We will combine IE’s Global Company Partnership grant with SPRING’s Capability Development Grant, to form an integrated Enterprise Development Grant (EDG).
i. The EDG will provide up to 70% co-funding for companies to develop a range of capabilities. (Refer to Annex A-3.)
B30. To further support firms to internationalise, I will enhance the Double Tax Deduction for Internationalisation (DTDi).
a. I will raise the amount of expenses that can qualify for the DTDi without prior approval, from $100,000 to $150,000 per year of assessment. This will take effect from YA2019. (Refer to Annex A-5.)
B31. As we strengthen support for firms to build capabilities, I will make adjustments to two broad-based tax schemes – the Start-up Tax Exemption and the Partial Tax Exemption.
a. These schemes help lower costs for smaller firms and start-ups, but do not directly help firms develop capabilities.
b. In addition, every profitable company should pay some taxes. This is sound and equitable.
c. So, starting in YA2020, I will make two changes to the schemes.
i. First, I will restrict the tax exemptions under both schemes to the first $200,000 of chargeable income.
ii. Second, for start-ups, I will exempt 75%, instead of 100% currently, of their first $100,000 of chargeable income from corporate tax. (Refer to Annex A-5.)
d. Even with these adjustments, corporate tax will remain low for start-ups and smaller firms. For a taxable income of $100,000, the effective corporate tax rate is 4.3% for start-ups and 8.1% for older firms, as compared to the headline rate of 17%.
e. In addition, companies, including start-ups and smaller firms, can tap on a wide range of Government support measures to build capabilities and grow their businesses.
B32. As digital technologies transform our economy, all firms must develop digital capabilities.
a. Since we launched the SMEs Go Digital Programme last year to support companies to digitalise, more than 650 SMEs have benefitted.
B33. This year, we are studying, with the Singapore Business Federation (SBF) and other industry partners, the development of a nationwide e-invoicing framework. This can help companies improve productivity and enhance cash flow.
B34. Besides our firms, we must train our people in digital skills.
a. Industry partners, like the Association of Small and Medium Enterprises, have brought this up.
b. Since we launched the Tech Skills Accelerator (TeSA) in 2016, over 27,000 training places have been taken up or committed.
i. Alvin is one of those who took up the training. Retrenched after 17 years as a systems engineer, he took up TeSA’s programme for cybersecurity, which equipped him with the skills needed to join ST Electronics as a white hat hacker – that is, someone who tests ICT systems for security loopholes.
c. We will expand TeSA into new sectors like manufacturing and professional services, where digital technologies are increasingly important.
d. TeSA will also support more people to learn emerging digital skills, such as in data analytics, artificial intelligence, the Internet of Things and cybersecurity.
e. We will set aside an additional $145 million for TeSA over the next three years. (Refer to Annex A-4.)
f. The Minister for Communications and Information will speak more about this at the COS.
B35. Besides digital capabilities, we must also build deep skills for workers of all ages.
a. There must be depth in whatever we do, because this gives us the foundation to innovate, and the ability to compete.
b. This is the essence of SkillsFuture.
B36. Industry partners have a big role to play here. Ultimately, the capabilities of a firm depend on the capabilities of its people.
a. I recently visited Infineon, a semiconductor manufacturer, which takes training very seriously.
i. Infineon plans its employee training and technology adoption in parallel, so that employees acquire relevant skills, and new technologies are used effectively.
ii. I was pleased to meet Madam Esah. Madam Esah started out doing manual work in the assembly line 42 years ago. As Infineon upgraded its production processes, it also redesigned her job, and trained her to use new machines.
iii. When I spoke to Madam Esah, she told me cheerfully, “I’m happy, I’m confident, I can do new things.”
B37. Madam Esah’s example shows that enterprise capabilities and human capital must be developed in tandem, and be integrated with a company’s overall growth strategy.
B38. We will continue to work with industry partners, to help the whole spectrum of our workforce develop deep skills. This will help our people to stay relevant and develop the cross-cultural skills needed to capture opportunities in the region and beyond.
a. For the young, we have schemes like the SkillsFuture Earn and Learn Programme, a work-learn programme, as well as the Go Southeast Asia Award, which matches undergraduates with regional internships.
b. For those with more work experience, we have schemes like the SkillsFuture Mid-Career Enhanced Subsidy and the Professional Conversion Programmes (PCPs).
i. In particular, the PCP for Southeast Asia Ready Talent will equip Singaporeans with the know-how to do well regionally.
c. For our corporate leaders, it is important that they have the skills needed to drive the transformation of their businesses and industries. To develop the next generation of corporate leaders,
i. We have the SkillsFuture Leadership Development Initiative (LDI). Since it started last year, companies have committed to train almost 200 Singaporeans, with over 180 more in the pipeline.
ii. This year, we will launch a new ASEAN Leadership Programme under the LDI, to help our business leaders build networks and plan business expansions in Southeast Asian markets.
iii. I am also happy to hear that SBF and the Singapore Management University (SMU) will pilot the SBF-SMU LEAD-CHARGE Initiative this year, to help SME leaders transform their organisations.
B39. Finally, as our workforce ages, firms must reconfigure how they operate, to harness the experience of their older workers and allow them to continue contributing meaningfully.
a. To support our older workers, we have raised the re-employment age to 67, extended the Special Employment Credit, and enhanced WorkPro.
i. With the close cooperation of the tripartite partners, Singapore’s employment rate for residents aged 65 and above rose from 14.4% in 2007 to 25.8% in 20175.
ii. We will continue to encourage age-friendly workplaces, and review how we can better support our older workers.
B40. As we develop our people’s capabilities, we may find that skillsets in certain important fields are lacking.
a. To plug these gaps quickly, we are piloting the Capability Transfer Programme (CTP), to support the transfer of skills from foreign specialists to Singaporean trainers and trainees.
b. The Minister for Manpower will elaborate at the COS.
Forging Strong Partnerships
B41. Mr Speaker, Sir, I have spoken about our efforts to make innovation pervasive and to build deep capabilities.
B42. The third key enabler is to forge strong partnerships.
a. Competition is not the only driving force in our economy. Cooperation is also key.
b. Where synergies exist, we can achieve more when we work together, and draw on one another’s strengths to address common challenges and capture bigger and better opportunities.
c. For example, Ascendas-Singbridge, along with IE Singapore, brought together a group of Singaporean SMEs specialising in Industry 4.0 technology solutions, to set up the Singapore Manufacturing Innovation Centre in Guangzhou, China.
i. The Centre provides these SMEs with a platform to co-create advanced manufacturing solutions with prospective Chinese clients, allowing the SMEs to reach out to the large Chinese market.
B43. We will continue to encourage our companies to form strong partnerships, both locally and abroad.
a. Industry partners, like the Singapore Chinese Chamber of Commerce and Industry (SCCCI), have made similar suggestions.
b. We will integrate various partnership support measures into a single PACT scheme.
i. Under PACT, companies can receive up to 70% co-funding, for projects undertaken in partnership with others. (Refer to Annex A-3.)
B44. For the three schemes that I mentioned earlier – PACT, the Productivity Solutions Grant and the Enterprise Development Grant – I will set aside $800 million over the next three years.
Partnerships in Technology, Innovation and Enterprise
B45. We will also strengthen our partnerships with overseas counterparts and anchor Singapore as a Global-Asia node of technology, innovation and enterprise.
a. This way, our firms and people can remain plugged into the latest developments all over the world, and create new ideas by interacting with people from diverse backgrounds.
i. Industry partners, like the Singapore Malay Chamber of Commerce and Industry, have pointed out that as our region grows, there will be important needs to address – in infrastructure, healthcare, and other areas.
ii. We need to develop a good understanding of these needs, so that we can innovate meaningful solutions to contribute to our region’s development.
B46. That is why we launched the Global Innovation Alliance (GIA) last year, for Singaporeans to gain experience and build networks overseas. We have made early progress.
a. Our universities have expanded overseas internship programmes to eight new locations, including ASEAN countries.
b. We also launched GIA Beijing and established BLOCK71 in Suzhou and Jakarta.
c. Besides venturing abroad, we will also bring global innovation to Singapore through initiatives like the Singapore Week of Innovation and Technology (SWITCH).
B47. As ASEAN chairman this year, we hope to make a meaningful contribution by developing an ASEAN Innovation Network. We hope this will strengthen the linkages among the innovation ecosystems in the region, and spark new collaborations and solutions.
a. The Minister for Trade and Industry (Trade) will speak more about our ASEAN plans at the COS.
Partnerships in Infrastructure Development
B48. In particular, as Asia’s growth will raise infrastructure demand, we seek to forge stronger partnerships in infrastructure development and enhance connectivity in the region.
a. China’s Belt and Road Initiative, Japan and India’s Asia-Africa Growth Corridor, and the World Bank’s Infrastructure and Urban Development Hub in Singapore are just some examples of efforts to promote infrastructure development in our region.
B49. To contribute to Asia’s infrastructure agenda, we will set up an Infrastructure Office.
a. This Office will bring together local and international firms from across the value chain – including infrastructure developers, institutional investors, multilaterals, and legal, accounting and financial services providers – to develop, finance and execute infrastructure projects.
b. The Office will enable infrastructure players to better tap on opportunities in the region, while supporting Asia’s infrastructure development and economic growth. (Refer to Annex A-3.)
c. The Minister for Trade and Industry (Industry) and the Senior Minister of State for Law and Finance will give more details at the COS.
Trade Associations and Chambers
B50. Our Trade Associations and Chambers (TACs) play an important leadership role in forging partnerships and driving industry-level advancements.
a. Through close interactions with their members, TACs understand their industries’ challenges and opportunities better than the Government can.
b. We have seen various examples of TAC leadership and partnerships, which have helped their members uplift capabilities and overcome resource constraints.
i. For instance, the SCCCI, with support from JTC and SPRING, has set up a Trade Association Hub (TA Hub) at Jurong Town Hall, where more than 30 TACs share facilities and resources. The TA Hub, along with the Trade Association Committee that SCCCI also set up, will encourage TACs to collaborate with and support one another.
ii. In logistics, four TACs, along with SPRING and the Centre of Innovation for Supply Chain Management at Republic Polytechnic, have come together to form the Logistics Alliance.
1. Last year, it launched the Transport Integrated Platform (TRIP), which integrates several existing systems into a single digital platform, to enable easier tracking of container trucks, and reduce idling time.
B51. The Government will continue to support such efforts, through the Local Enterprise and Association Development (LEAD) programme.
a. In the last two years, about $45 million has been committed through LEAD for some 50 projects. So I look forward to even more TACs and businesses coming on board.
Together, a Vibrant and Innovative Economy
B52. Mr Speaker, Sir, ultimately, all our firms and workers face the same major shifts in the global environment, which will bring greater competition and a faster pace of change.
B53. The specific challenges and opportunities will differ from industry to industry, which is why we have taken a sectoral approach for the ITMs.
B54. But the key enablers in every industry and ITM are the same – innovation, capabilities and partnerships.
B55. By fostering pervasive innovation throughout our economy, building deep capabilities in our firms and people, and forging strong partnerships locally and abroad, we can succeed in our economic transformation. We can create and sustain a more vibrant and innovative economy.
Last updated on 19 Feb 2018