Kwek Hian Chuan Henry
COS Cuts for MTI
Riding on Rising Asia
1. Despite the global uncertainties, Asia is cited as a region of high growth. What are the Government’s plans to help Singapore companies take advantage of a rising Asia?
2. Can the government elaborate on what specific measures we are doing for key growth markets within Asia, as well as for various growth sectors?
3. Can the government also share more about the broad base measures we are doing to encourage Singaporean companies to internationalize, and our people to take on international careers within growing Asia? Are there any pressing gaps that our industries and workforce face that must be addressed?
4. Lastly, can the government share on the progress made to strengthen our Asia-specific market research firms, which was mentioned in the last budget?
We are working with China on commercially meaningful areas in its Belt and Road Initiative (BRI). The BRI has the potential to foster regional cooperation, enhance connectivity, and accelerate infrastructure development across Asia. Singapore companies are well-placed to tap on BRI opportunities.
a. For instance, Singapore and China have recognised our strong complementarities and are jointly developing the China-Singapore (Chongqing) Connectivity Initiative Southern Transport Corridor (CCI-STC), which aims to improve connectivity between Western China and Southeast Asia. Three Singapore companies – Pacific International Lines (PIL), PSA International and YCH Group – have entered into two joint ventures with Chongqing companies to steer the development of the CCI-STC.
We are also collaborating with the Government of Andhra Pradesh in India to develop the State’s new capital city of Amaravati, as well as promote greater economic collaboration with Andhra Pradesh.
a. In 2017, Ascendas-Singbridge and Sembcorp Development formed a Singapore Consortium to master-develop the commercial core of Amaravati together with its Government. Since then, our companies have been actively exploring smart city urban solution opportunities in Amaravati.
Closer to home, ASEAN has strong potential as a market. We are strengthening our engagements with ASEAN through both regional economic integration as well as bilateral initiatives with ASEAN countries.
Ms Cheryl Chan, Mr Henry Kwek, Mr Low Thia Khiang and Ms Sun Xueling asked about our plans to work with other ASEAN Member States to unlock ASEAN’s potential to benefit Singapore and Singaporeans.
As a region, ASEAN is making good progress in deepening economic integration under the ASEAN Economic Community (AEC). The prospects are good.
a. ASEAN is currently the sixth largest economy in the world and enjoyed a steady growth rate of 5% in 2017.
b. By 2030, ASEAN has the potential to become the fourth largest single market in the world after China, the US and the EU.
Despite the rising nationalistic tendencies and anti-trade sentiments elsewhere in the world, ASEAN has stayed on course in its trajectory of regional economic integration. ASEAN is also navigating the rapid pace of technological change and digital disruption.
a. For businesses seeking to enter or expand their presence in ASEAN markets and beyond, the AEC, since its realisation in 2015, has lowered entry barriers, reduced transaction costs, widened choices for consumers and generated job opportunities in the region.
b. Take for instance, Trends Home Electrical. The company started out as a single home appliance shop in 1998. Today, their products are carried by over 450 retailers in Singapore, Malaysia, Indonesia and Thailand. It has been using the ASEAN Trade in Goods Agreement since 2015 for its products to enjoy tariff savings, and has experienced a close to 15% increase in exports since then. Trends Home Electrical plans to continue innovating, upgrading its capabilities, and further expand into Southeast Asia to capture the growth opportunities there.
Update on ITMs
1. The Industry Transformation Maps is the cornerstone of our restructuring efforts. Since 2015, we have rolled out most ITMs.
2. Can the government provide a comprehensive update on our restructuring efforts? Can the government also share some of the early successes of restructuring?
a. Which sector has achieved rapid restructuring, and which sectors have been lagging? And what is the reason for the differing restructuring speed.
3. Specifically, I would like to ask the government for an update on the Lifestyle ITM?
4. Having said that, I would caution everyone against measuring our restructuring success using solely economic output statistics (e.g. value-add per worker, productivity changes). This is because it will take a few years, sometime 3-4 years, for new strategies to show up in output statistics.
5. So using solely output statistics now is not wise.
6. As such, can the government also share more on specific initiatives, which are more input indicators rather than economic output indicators, that are designed to aid restructuring?
Differentiated Policy Support
1. The recently released Annual Economic Survey showed improved economic performance in 2017. However, there was variation among sectors in performance and outlook.
2. Can the government provide a broad overview of how are various industries doing in terms of performance and outlook? Which sectors have high growth potential, and which are the ones that require significant transformation and restructuring? It is important that we set the appropriate aspirations for various sectors.
3. Also, how is the Government supporting the different industries to deal with their unique circumstances? In our ITMs, have we been able to bespoke our policies for various industries?
4. Moving forward, will we be able to have greater policy differentiation (e.g. foreign manpower) than what is done today? If so, the government provide examples?
As Mr Henry Kwek has noted, although our overall economic performance has improved, the outcome varies across sectors.
There are several reasons for this.
a. First, our sectors face a spectrum of external demand conditions.
Within the manufacturing sector, on the one hand, the electronics cluster saw strong annualised real value-added (VA) growth of 24.4% per annum (p.a.) between 2015 and 2017, boosted by robust demand for semiconductors to be used in smartphones and vehicles. On the other hand, the real VA of the Transport Engineering cluster contracted by 12.2% p.a. over the same period, due to the fall in demand for the marine and offshore segment.
b. Secondly, we see more success in sectors which are better able to tap on external growth opportunities.
For example, between 2015 and 2017, the real VA of externally-oriented sectors grew by 3.6% p.a. compared to 0.7% p.a. for domestically-oriented sectors.
c. Third, even among the domestically-oriented sectors, their ability to reduce manpower-intensity and raise productivity has varied. The real VA of retail trade and food services have grown over the past 2 years by 2.7% p.a. and 1.2% p.a. respectively. However, retail trade’s growth has been much more productivity-driven, with VA per worker rising at 3.3% p.a., unlike the decline of 1.9% p.a. in food services. Using VA per actual hour worked shows better productivity performance for both sectors, but an even wider gap between the two.
Given this variation, the Industry Transformation Maps (ITMs) aim to address each sector’s particular set of circumstances.
For example, the ITMs support our externally-oriented sectors’ growth, and aspirations for market leadership are basically channeled through the development of high-value capabilities.
a. A case in point is the Logistics ITM, led by EDB, which envisages strong growth – a CAGR of 5% between 2015 and 2020 leading to a nominal VA of $8.3 billion in 2020, and the creation of 2,000 new PMET jobs between 2015 and 2020. To achieve this, the ITM advocates the development of specialised logistics handling capabilities.
b. If I can illustrate, Tee Hai Chem provides specialised logistics services for chemical and pharmaceutical products. Over the years, it has become a market leader, even supporting MNCs in their overseas operations. SPRINGs programmes have helped the company develop these specialised capabilities, enhance its IT and HR systems, and upgrade its workers’ skills. As a result, the company has grown by nearly 13% p.a. between 2012 and 2016, and has created more than 60 good jobs.
For other sectors, the focus is more on productivity and becoming less manpower-intensive.
a. One example is the accommodation sector, which has achieved notable success over the last 2 years. The sector has seen strong real VA growth of 4.2% p.a. and even stronger productivity growth of 5.2% in terms of real VA per actual hour worked.
b. Recently, STB reported record international visitor arrivals (IVAs) and tourism receipts (TR) for a second straight year in 2017. Our hotels, which are a significant part of the accommodation sector, can continue to benefit from Asia’s growing outbound travel only if they can boost productivity and lessen their manpower reliance, while maintaining service quality.
c. Grand Park City Hall is an example of how this can be done. I recently visited the hotel which has tapped on STB’s funding support to adopt manpower-saving technologies. It is also part of a regulatory sandbox with MHA and STB that will pilot the use of facial recognition technologies for a seamless check-in process. Staff can thus be cross-deployed to better meet guests’ needs in other areas, and also learn new skills in the process. Altogether, the hotel is targeting a reduction in manning ratio of about 17%, while enabling its employees to do more value-added jobs.