Monetary & Fiscal Policy in General
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Transcript of Monetary & Fiscal Policy in General
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Fiscal andmonetary policie
Chapter 6
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Chapter 6
Summary
There is a worldwide trend towards lower direct taxe
the burden of taxes on the economy as low as poss
of direct taxes on companies and individuals, to reforeign investment and talent, and encourage Sing
To balance the budget, we must make up by raising
Key Recommendations
Fiscal and Monetary Policies
Continue to pursue rational, prudent macroeco
fiscal discipline and a stable Singapore dollar.
Reducing Direct Taxes
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Chapter 6
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Raising GST
Raise the GST from 3 per cent to 5 per cent as soon
the-board coverage of GST, with as few exemptio
Provide an offset package to help Singaporeans
and ensure that most households, and all lower-
worse off during the transition.
Corporate Tax Reforms
Introduce group relief to allow local corporate g
losses and excess capital allowances of one comp
of another company within the same group.
Shift from a full-imputation system to a one-ti
simplify tax administration and compliance.
Exempt business-related foreign source income f
Allow more generous tax treatment of intellectu
Review and rationalise withholding tax provis
withholding tax regime does not discourage cros
disincentivise people and companies from locating
Consider giving tax deductions for mergers and a
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Personal Tax Reforms
Exempt individualsinterest income earned from o
tax.
Consider tax exemption for individualsforeign so
to Singapore.
Enhance tax treatment of stock options to encouroptions as a performance-linked compensation t
Exempt employment income attributable to tim
for temporary tax residentswho have not bee
long period before their current jobs.
Exempt tax on employerscontributions on behal
private pension funds.
Enhancing the Tax Incentive Regime
Enhance the tax incentive regime so as to attract
growth in new areas. Streamline and rationalise current incentives for
compliance.
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This policy has delivered results. Our inflation is oneWe have maintained confidence in the currency and
CPF savings. The stability of the Singapore dollar
exports by providing a conducive business environm
and investment decisions, and minimising earnings lo
rate volatility. It has also contributed to the continued
as a major regional trading, manufacturing and fina
The ERC strongly supports the continuation of this ap
Financial markets are becoming even more integrate
flows increase. Conducting monetary policy throu
become increasingly challenging. The Government mu
rate policy continues to be aligned with underlying
and stays focussed on the objective of medium-term
Fiscal Policy
In fiscal policy, the Government has adopted a disc
First, it has consistently kept the budget balanced,
surpluses in normal years, and building up our res
eschewed government borrowing and deficit spendin
and a heavy burden of national debt in many count
Singapore should maintain this conservative fiscal p
Chapter 6
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Looking ahead, it will become increasingly difficult tobalance the budget. With slower growth, revenue
there will be more pressure on public expenditures, e
other social needs. Singapores population is ageing, a
quality public services continue to rise. Singapore wil
in its security and economic infrastructure, to create a m
for investment and talent.
Nevertheless, we must endeavour to keep the Governme
only on what we need to and contain expenditures at
Shifting from Direct to Indi
Given the revenue needs of the Government, the ta
amount in the most efficient and equitable way. W
to indirect taxation, in order to keep income taxes on i
as low as possible. The tax regime is an important f
attractive Singapore is to investment and talent.
Reducing Income Tax Rates
While Singapore has one of the lowest income tax
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As global competition intensifies, a pro-growth tacreation of new economic activities and attract
increasingly vital to Singapores continued econo
competitive tax system to ensure the sustained gene
jobs for Singaporeans well into the future.
We recommend that Singapore cut corporate and pe
20 per cent over the next two years. With theseindividuals will be able to retain a higher portion of
thus be encouraged to create new wealth and gro
decisive move will strongly signal Singapore's intention
and talent across all sectors.
Raising GST
Given the need for continued fiscal prudence and the
and security climate over the medium term, it is im
loss arising from the direct tax cuts be made up, a
possible. To do this, Singapore should continue its
indirect taxes - a direction set out in the 1986 EcoSince its introduction in 1994, the GST has proved
source of revenue. Revenue from the GST enable
income tax rate from 30 per cent in Year of Assessm
cent in YA2002.
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GST Offset Package
As it will take time for the proposed tax changes to
paying jobs, we recommend that a GST offset packa
of measures introduced in 1994, be introduced to h
the GST increase. The offset package should ensure t
all lower-income households are no worse off d
Government should similarly set up a committee to
undue price increases, as was done in 1994.
Still a Progressive Tax System
Although the shift from direct to indirect taxes reduc
tax system, on the whole, Singapore still maintains a v
Before the changes to the tax system, the total tax
household1was about 15 times that of a low-incom
the tax burden of high-income households is only ar
lower-income in many European and US cities. This
consumption taxes, for example, 22 per cent VAT in Finand 17.5 per cent in the UK. In addition, most workin
pay income tax, unlike in Singapore where two-third
pay any income tax. The corresponding ratio of tax
low-income households in Kuala Lumpur and Taipei
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Chart 6.1 : Ratio of Tax Buincome to Low-
In fact, after taking into account government tran
and New Singapore Shares, the lower- and middle-incpay negativetax. For example, households in the
bracket faced an average net tax burden of -33 per
in the year 20002.Those in the next 30 per cent incom
net tax burden of around -8 per cent of household i
Chapter 6
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Helsinki
Dublin
Sydney
New York
Los Angeles
London
Taipei
K.Lumpur
Singapore
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Group Relief
As economies mature, corporate groups will become
current tax system taxes each company within a cor
entity, leading to economic irrationalities such as t
that register losses on a group basis.
In recognition of the fact that companies within a corone economic entity, and to encourage risk-taking and
introducing group relief for local corporate groups. A
the unutilised losses and excess capital allowances
against the profits of another company within the s
With group relief, companies would be better plac
risky ventures as they would be able to offset any against the corporate groups taxable profits from its
lines. At the same time, the corporate group can e
liability for its new subsidiaries. This provides compan
environment for innovation and risk-taking.
One-tier Corporate Tax System
We also recommend shifting from a full-imputat
corporate tax system. Under the one-tier system, t
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Exemption of Foreign Source Income
Most foreign source income currently received in S
further Singapore tax. This is because the existing t
foreign tax paid on foreign income to be relieved a
remittance. To simplify procedures and encourage the
Government should exempt business-related foreign so
By helping companies manage their business-related f
Singapore, this will boost Singapores bid to become
in an increasingly globalised world.
Intellectual Property (IP)
In the knowledge economy, intellectual property and
growth. As a late-starter in the IP industry, our tax syste
investment generating IP assets that could reap sig
when they are commercialised.
R&D is a significant element of the investment tha
allow tax deductions for R&D expenses incurred i
incurred by approved R&D organisations that condu
in Singapore. However, these concessions may not
increasingly conduct research activities in collaborat
or the R&D outfits of other companies
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Withholding Tax Mechanism
Withholding tax is a mechanism to facilitate the col
residents for income derived in Singapore. This is done
payer to withhold taxes due on the non-resident, on b
Authority of Singapore.
There are, however, certain problems with the curreFirst, many Singapore-based businesses have weake
vis the non-resident suppliers and invariably end u
withholding tax when those suppliers insist on net-of-
tax therefore inadvertently increases the cost burd
the administrative requirements can be quite onerous
that have numerous transactions with non-resident p
To ensure that our withholding tax regime does no
transactions and disincentivise people and companies f
in Singapore, we recommend a review of the withhol
should rationalise the scope of the withholding tax pr
improvements to the administrative process.
Enterprise Development and Expansion
The cut in corporate tax rate will result in significan
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To encourage consolidation in heavily fragmented ishould consider a tax deduction, targeted at small a
the front-end costs incurred in merger and rest
Government should also consider giving tax deduct
incurred prior to the startup of new businesses and
listing of companies to help promote enterprise dev
Personal Tax Reforms
The mobility of talent has increased dramatically with
are few barriers impeding talent from moving to whe
tax rewards are greatest. Besides lowering personchanges to the personal income tax system would
that Singapore can compete effectively in the globa
Interest Income and Overseas Income of
To encourage individuals to locate their funds in Sing
overseas funds, we recommend that the Government e
interest income earned from onshore bank de
recommendation to exempt business-related foreign so
the Government should also consider tax exemptio
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There are already several schemes in place to encouragas a performance-linked compensation tool. Howeve
entrepreneurial culture in Singapore and compete
recommend enhancements to the tax treatment of s
incentives available in other countries such as Irelan
Not Ordinarily Resident Scheme
To further enhance Singapores attractiveness as a hub
and centre for management of Asian business a
Government has introduced a Not Ordinarily Reside
accords favourable tax treatment for persons who h
for the preceding three years, but are currently basescheme, income attributable to time spent outside
Singapore tax, subject to certain conditions. We recom
monitor this scheme, with a view to making enhanc
Overseas Private Pension Funds
Currently, when an employer contributes to an ove
on behalf of an expatriate in Singapore, the contributio
tax. This makes us less attractive compared to cou
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Enhancing the Tax IncentivTax incentives have played a pivotal role in Singapor
strategy since the 1960s. For 30 years, tax incen
investment and create jobs for Singaporeans.
We agree with the 1986 Economic Committee tha
towards a low corporate tax regime, with minimal tagoal. By doing so, we will avoid inefficiencies in re
administration and reduce compliance costs for bus
Nevertheless, we believe that tax incentives will co
tool for attracting new strategic activities to Singap
and for maintaining competitive tax rates in sectors
in low tax environments.
We thus recommend two broad thrusts in enhancin
a. Enhance current incentives so as to attract new ac
in new areas.
b. Streamline and rationalise current incentives forcompliance.
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Wages and theCPF
Chapter 7
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Chapter 7
Summary
With greater volatility in the business cycle, our lab
flexible to keep structural unemployment as low as
must be more flexible, with wages linked less to the
more to his performance and his employers profitab
refocus the CPF scheme on the basic needs of worke
enough funds for retirement, healthcare and housin
burden on employers, especially for older workers. T
the financial security of our people, prepare ours
population, make our economy more flexible and re
and more dependent on individual drive and respon
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Chapter 7
"#
Key RecommendationsWage Competitiveness
Continue to raise real wages of Singaporeans thr
Continue to ensure that real built-in wage increa
increases at all levels of the organisation.
Wage adjustments to take into account glo
competitiveness vis--vis new players.
Enhancing Wage and Labour Market Flexib
Move away from the seniority-based wage syste
Accelerate the implementation of the Base-up W
the Competitive Base Wage System) to replace
system.
Companies to build up the Monthly Variable Comp
Those which have not yet created an MVC, and t
less than 2 per cent of workersbasic wages, to
cent immediately, out of their basic wages.
To build up variable components in the wages of a
higher variable components for managemen
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Refocusing the CPF System
Refocus the CPF on its core purpose of providing f
for the majority of our people, including saving f
ownership and medical needs, and addressing th
flexibility and lower-income earners.
Defer restoration of the CPF contribution rate bey
per cent, for two years.
Tripartite Cooperation
Further strengthen tripartite cooperation for impensure competitive wage levels and inject flex
labour market.
The NWC to continue to issue wage increase guid
on wage-related issues, including wage flexibility,
based to productivity-based system and portable
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IntroductionSingapore is entering a different phase in our econo
employment landscape is undergoing tectonic s
Singaporeans.
First, we must expect higher unemployment rates th
even after we recover from the recession. We will novirtually zero unemployment. Our economy is maturin
will mean higher levels of unemployment, both frict
will be more turnover in the job market, and retrenc
it harder to be re-employed, as the new jobs created
skills. This will be a particularly serious problem for ou
who still make up a significant proportion of our wo
countries have unemployment rates of around 5 peunemployment is typically 8-10 per cent. If we can
rate around 3-4 per cent in normal years, we will ha
Second, in the longer term, our changing demograp
employment landscape. The population is ageing rap
already a high of 78 years, will continue to increas
Singaporeans will grow, and our labour market and eadapt to this. Singaporeans cannot expect to work fo
live off their savings or their children for another 2
find ways to keep older people employed and workin
although not necessarily in the same job or at the sa
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they gain skills and become more productive, their w
they grow older and take on less burdensome or les
will plateau and eventually decline, and they must e
The CPF system, which is a major feature of the la
should be re-focused on providing for the three key ret
income, healthcare and home-ownership, at a basic
unnecessarily heavy statutory burden on employers, e
Wage Competitiveness
Wages form a key component of costs, and we must
is internationally competitive. This is especially iemergence of economies like China, with their low
industrious workers and professionals earning less tha
economies, including Singapore. While the econo
underway is unavoidable, we should not inadvert
retrench and relocate faster, by pushing up wage co
our overall competitiveness. We should continue exe
the economy has fully recovered from the recession
In the longer term, however, our aim is not to hold
of Singaporeans. Indeed the fundamental objective
is to raise the real wages of Singaporeans in order to
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"'
As wages adjust from year to year, we must make sur
increases continue to lag behind productivity increas
remain a guiding principle for the NWC in recom
guidelines.
Our wage adjustments must also take into accoun
developments in emerging economies like China. Over
of 2-3 per cent in real wages over the medium term,
Enhancing Wage and Labou
Flexibility
On top of competitive wage levels, however, we nee
flexibility. The external environment is constantly a
labour market demand is unpredictable. We need flex
so that workers can move smoothly out of old jobs
need to be flexible too, so that in a downturn employ
than retrench workers. It is far better for our worker
than no jobs at all.
The issues of wage flexibility and the problem of se
first highlighted in the 1985 recession. We have made
companies have adopted a flexible wage system with a
linked to the companys performance The average rati
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Competitive-base Wage System
The Base-up Wage System, recommended in 1997
seniority-based wage system, is founded on the pri
should be closely linked to productivity and perform
the long salary scale for job positions should be grad
desirable salary maximum to minimum ratio of 1.5,
to be agreed between union and management.
We should accelerate the implementation of the
replace the seniority-based wage system. To do so
adoption of the following principles:
a. Both unions and employers should work towards
to 1.5 within two collective agreements, i.e. 4 to
b. Companies, in consultation with the unions, could
ratio when job requirements change so that wor
rewarded based on the value of the jobs and the
We also recommend renaming the Base-up Wage S
Base Wage System to emphasise that wage inc
productivity growth so that we can stay competitive
MVC
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")
2 per cent or more MVC in their wage structure s
unions/workers whether a further percentage of basbuilding up the MVC further.
Variable Wage Component
While wages need to be flexible in order to adjust i
need some certainty in their income, so that they
major commitments, such as buying a house. There sh
balance between the fixed and variable components
We recommend that different ratios of variable c
different levels of employees. As the contribution of ma
top management, is more closely linked to the comvariable component should be higher than rank-and-f
ratios are:
a. Rank-and-file employees: 30 per cent of their
variable, comprising 10 per cent in MVC and 20
component;
b. Middle management: 30-40 per cent of their annual wc. Top management: Not less than 40 per cent of their an
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This is increasingly pertinent because the proportion
as Singaporeans work longer and the population aeconomic restructuring, workers will need to change
career. We should restructure provision of medical
be more portable and flexible.
We recognise that there is no easy, complete solutio
issue is whether these portable medical benefits sche
We are of the view that we should avoid doing so if plabour market more rigid and add to costs which no
to afford, especially the smaller companies which of
benefits to their workers. Our proposal is therefore t
which employers and unions decide to participate in
We therefore support the recommendation of the
Portable Medical Benefits to introduce a Portable (PMBS) with deductible and copayment elements.
As an alternative, we have, in consultation with t
Singapore and insurance providers, explored the possib
insurance product. The General Insurance Associat
Association have proposed the Transferable Medica
which could also meet the objective of allowing emmedical coverage when they change employment o
Deliberations on the TMI are still at the preliminary st
be found feasible, we recommend that a Tripartite T
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"!
To ensure that additional flexibility is given to co
business justifies it, the Employment Act2should beCommissioner of Labour to grant exemptions to
employ flexible work arrangements to meet these d
As the proposed flexible working hours scheme has
recommend setting up a tripartite taskforce to work ou
details and safeguards against abuses. The taskforce sh
the need to provide flexibility to companies withoutof workers, and productivity gains from optimal utilisat
should be shared with the workers.
Refocusing the CPF SystemSince its introduction in 1955, the CPF system has p
a sound framework to save for their own retirem
emphasis on individual responsibility. The role of CP
the years, and it needs to be refocused to keep the sta
as light as possible. This will contribute to labour m
In July 2002, the Government accepted the main ERC
to the CPF system (see Annex 1). These include:
a. Setting aside more in the Special Account;
b Increasing the Minimum Sum;
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In addition, the ERC notes that the Singapore economy
from the 2001 recession. Immediate prospects arein the US, Europe and Japan, and the likelihood of
uncertainties, we expect full recovery to come only
It would thus be critical for us to maintain our cos
we implement longer-term strategies to restructure o
the ERC is further recommending that the Gove
restoration of the CPF contribution rate, beyond its pfor two years. This will avoid adding to the statu
employers at a nascent stage of our recovery, and he
It will also send a strong signal to investors that Sin
to strengthen its competitive position.
We note that the Government has stated its inte
contribution rate to 40 per cent, when economic conthis progressive restoration of the CPF rate to 40 p
period. However, the timing and pace of the restoratio
economic conditions, especially Singapores cost com
countries.
To be sustainable over the long term, particularly in v
the CPF structure and contribution rates have to enough for these basic financial requirements, with
costs to a minimum. The lighter the statutory burde
it will be for Singaporeans to be employed and the
will be
Chapter 7
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$##
Singapore has come a long way from the days of
relations in the 1950s and early 1960s. Over the yehave developed close relationships, mutual confidenc
relationship has withstood difficult economic time
worked, we were able to turn the economy round
strengthened. The tripartite partners must work to
and other ERC recommendations.
The tripartite NWC, set up in 1972 to bring togeththe Government to guide wage adjustments each yea
forum. The annual NWC recommendations have for
rise in an orderly way, assuring Singapore workers
of growth, while avoiding any wage explosion that w
competitiveness. The NWC must continue to provide
focus on wage-related issues including wage flexibility
based to productivity-based system and portable me
Conclusion
Singapore faces significant economic and social chaWe need to bring about greater flexibility in the wage
to make quick adjustments to their wage cost in line w
conditions. With increasing job mobility, there is also
flexibility and portability in the provision of medical
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Safeguarding Funds for Ret
Key Initiatives
Increase the contribution rate to the Special A1 percentage-point to 5/7/9 (5 per cent for mem
7 per cent for members above 35 to 45 years, a
above 45 to 55 years) when the CPF contribut
per cent.
Increase Minimum Sum gradually as wages rise o
Limit CPF withdrawals for housing to 150 per cent starting 2002, and bring this Valuation Limit do
years. This cap should not apply to subsidised l
existing loans.
Enhancing Returns on CPF
Key Initiatives
F ilit t th i i f l t i t l
Chapter 7
Annex 1: Refocusing the CP
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$#%
Strengthening Provisions foNeeds
Key Initiatives
Reaffirm Governments intention to increase th
Medisave Account by 1 percentage point to 7/8/
35 years and below, 8 per cent for members abov
cent for members above 45 years) when the CPF c
to 40 per cent.
Increase risk-pooling via enhanced medical insu
framework of copayments and deductibles. Exp
insurance system and other CPF-based insurance
to operate and manage.
Enhancing Employability of
Key Initiatives
Keep the employer CPF contribution rate for tho
at its present level of 16 per cent, even as the rat
for those below 50. Allow CPF members aged 50
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Reducing Mandatory ContrHigh-income Earners
Key Initiatives
Lower the CPF salary ceiling for both employersan
from the current $6,000 to $5,000. Encourage employers to make appropriate adjus
to offset the CPF reduction and to reflect the em
Giving Low-income Earners
home Pay
Key Initiatives
Raise the employee CPF wage bands for low
$200-$363 to $500-$750.
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Land
Chapter 8
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Chapter 8
Summary
International competitiveness of land is not just abo
prices, but is also about optimising the value-adde
must therefore maximise the value creation from ou
keep the cost of land competitive, by managing the
and ensuring that the land market is flexible enough
work more effectively.
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Chapter 8
Key Recommendations
Role of Government
Ensure adequate supply of land to achieve com
Minimise Government participation in areas where strategic or socio-political considerations.
Develop a single mechanism to regulate the supp
government agencies into the market, to ensure t
properties from the various Government agencie
Maximising Value Creation
Consider ways to sell land in bigger pieces with m
phased development, like an integrated Business
development of the BFC will allow Singapore to
of business and financial tenants to strengthen
financial hub. Consider advancing transportation infrastructure
such as One-North, Jurong Island, Tuas and the pr
attractiveness of these areas to workers, compa
This would have to take into consideration exter
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Reducing Costs
Inject flexibility in Singapores land tenure sys
Charge a time-based enhancement levy for b
development charge by granting tempo
Sector-specific Recommend
Industrial Sector
Ensure an adequate supply of industrial land at iprices, so that Singapore can continue to attract h
investments.
Adopt a pay-as-you-use concept for the acquisit
wherever feasible, instead of requiring full pa
development potential of sites at the
Adopt a more responsive market-based approach
with rentals regularly marked back to prevailing
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IntroductionLand is one of the key factors of production and its c
Singapores overall cost competitiveness.
Singapores size sets a natural constraint on our su
Singapore will not be able to compete with the land
But international competitiveness of land is not jus
land prices. It is also about optimising the value-a
Therefore we need to maximise the value creation f
well as keep the cost of land competitive.
Role of GovernmentSingapores land sector is best described as
partnership the Government, as the largest sup
strategic orientation, while the private sector adds a
to changing market conditions. Broadly, the Governm
a. Directly intervening through its agencies like the Board (HDB), JTC, Urban Redevelopment Autho
Land Authority (SLA);
b. Influencing land supply by releasing land throug
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circumstances, in areas where there are no develo
considerations. This minimises the crowding out expands the available competitive space.
As the largest land supplier, the Government should d
to regulate and coordinate the supply of land and
the various Government agencies. There is a need
of land and properties from the various Governm
coordinated and controlled. The quantum of supplyreviewed and monitored to be responsive to market
The Government should also take into consideration
wide impact of policies on effective land supply wh
framework. Individually sound policies that add fl
site zoning scheme and making more State land av
have a significant, unintended and cumulative impaof available land.
Maximising Value Creation
The land sector should be viewed as an industry in i
sectors account for 18 per cent of Singapore s G
following measures to unlock value in land assets.
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Singapore to cater to the specific needs of busines
strengthen Singapores position as a financial hub.
A master developer of such a centre should be giv
design and phase the development of the project t
global needs. In addition, the Government can fac
the BFC by making the payment scheme as flexible
from several suitable anchor tenants should also be so
Consider Advancing Transportation Infras
Developments
The provision of transport infrastructure for strateg
case of the proverbial chicken-and-egg. The currenin transportation infrastructure (for example, rail or b
there is sufficient passenger volume to cover operat
However, the lack of transportation infrastructur
development usually diminishes its attractiveness, a
costs providing transportation for their staff. Takeup
and in turn, the time to reach the critical mass of paback. For certain key strategic developments (e.g. s
Island, Tuas and the proposed BFC), there is a poss
Government to jump startthese developments by
infrastructure before a critical mass of passenger
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development of the site with the MRT line also af
gains by allowing developers and the LTA to work support structure and urban design, avoiding dupl
construction costs.
Widening Initiative to Put Vacant State P
Interim Use
Vacant State properties and land not required for
term should be let out to encourage innovative use
adequately met by the market at the relevant time.
within or near housing estates could be put to recre
to add more life and vitality to the area and to enco
bonding.
Reducing Costs
The other dimension of enhancing competitivenessa function of many factors such as demand and sup
construction costs and pricing policies. We recomme
to reduce land costs in Singapore.
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There should also be greater transparency in curren
extension/renewal of leases. This would provide mcurrent owners of leasehold properties to make info
to upgrade or redevelop their properties.
Charge a Time-based Enhancement Lev
Temporary Planning Permission
Business startup costs can be lowered by granting
planning permission, and allowing them to pay a pr
full development charge, which poses a hurdle to s
out new business ideas.
Sector-specific Recommend
Singapore has adequate industrial land. Only about h
for industrial use is occupied. Our system of supp
leasehold basis also allows a turnover of industrial lposition to ensure an adequate supply of industr
competitive prices, so that Singapore can continu
manufacturing investment.
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JTC should take into account international prices whe
land. Although Singapore only has a limited supply oour capacity to manage this supply through the le
competitive prices in the industrial sector.
We should also increase the flexibility in industrial
the following measures to achieve this:
a. Adopt a pay-as-you-use concept wherever feasib
avoid tying down valuable capital resources unne
be allowed to pay for only the extent of land rig
maximum development potential of the land. The
in allowing for additional rights to be purchased
b. Adopt a more responsive market-based approach
With the shorter and less predictable business c
should review the automatic escalation feature ofand adopt a more market-responsive approach.
Residential Sector
Housing costs have a direct impact on the wages th
in turn impact economic competitiveness. In Singa
the population lives in public flats, public housing p
bearing on economic competitiveness. We recomm
a Re ie HDBs role in p blic ho sing HDB toda
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b. Relax flat subletting rules. HDB flat subletting
offer a wider range of affordable housing optionincome earners. It also offers a means of mone
whose most significant asset is property, hence he
rich cash-poor phenomenon.
The Government should also undertake a fundame
ownership policy to examine the optimal mix of ho
and their effects on areas such as entrepreneurial rformation and having a more tangible stake in the na
of housing policy on the adequacy of funds for retirem
and fostering a mindset of less reliance on Govern
also be examined.
Review of Specific Rules, Re
Practices
To maintain a flexible environment to allow market forc
we recommend the Government consider chang
regulations and practices:
a. Review the Planning Act to allow for longer te
without requiring subdivision to better meet th
longer tenancies;
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e. Grant more Gross Floor Area (GFA) exemptions t
of communal areas for residential developmencommercial developments so as to improve the
working environment.
Conclusion
Land is a platform for other economic activities. Ma
can deliver optimal value from land use and keep la
can prove to be a decisive factor in maintaining Sing
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Entrepreneurshi
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Chapter 9
Summary
For the longer term, our most basic strategy is to up
Singapore a knowledge economy, banking on creativi
the economy and tapping the potential of IT in all are
skills, we need to promote the spirit of entrepreneuadvantage of global markets and to create new idea
A key outcome of our efforts to promote entrepreneu
of strong Singapore companies which are entrepr
abroad to become international players. We also wan
of enterprising startups. At the same time, we must h
companies which face difficulties adapting to the neupgrade themselves and meet the needs of a new
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Chapter 9
Key Recommendations
Entrepreneurial Culture & Capability
Evolve new social values which celebrate entrep
by promoting a culture that accepts diversity an
broad notion of success.
Develop entrepreneurship programmes at all edu
Attract Global Entrepreneurial Executives (GEEs
flexibility in our employment pass system, and en
to help them settle in Singapore.
To designate a Minister (or Minister of State) to be
and driving initiatives for a more entr
Encouraging Growth of Enterprising Startu
Encourage the development of a more vibrant cu
Create a pro-enterprise environment by:
a. Imposing a sunset ru le on a l l l ice
b. Outsourcing licensing and other Governme
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b. Supporting and facilitating the establishment
that allows startups or emerging enterprisesissuance of shares, and for investors to trad
c. Implementing an equity financing scheme
Enterprise Development Scheme (SEEDS) to
enterprises other than startups with innova
d. Reviewing Government loan schemes suc
Finance Scheme (LEFS) and Regionalisation
ensure they are relevant to enterprises; and
e. Considering introducing a hybrid debt-eq
support emerging enterprises in their growt
either organically or through acquisitions.
Develop export industries with the capabilities tofranchise or license business concepts overseas.
Internationalisation of Major Singapore Co
Encourage large Singapore-based companies to i
a. Tax exemption for companiesbusiness-rela
remitted back to Singapore;
b Adopting a holistic approach in developin
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Helping Smaller, Traditional Companies Ada
Help smaller, traditional companies consolidate
their competitiveness by:
a. Creating an environment of change and in
enterprises;
b. Promoting a new orientation towards servi
a national movement for service excellence, d
programmes for domestic enterprises and pro
enterprises to develop suitable scriptin
c. Rationalising and restructuring the exce
enterprises, especially retail outlets in HDB
the use of financial incentives.
Role of the Government
Government-linked Companies (GLCs)
Government to own and control companies on
resources or public policy objectives. Non-strateg
Ensure GLCs are commercially run, with no interfer
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Chapter 9
Temasek Holdings to limit new investment to b
potential to internationalise, and are in new growsector deems too risky to enter.
Ministries and Statutory Boards
Institute a Yellow Pagesrule to avoid encroa
private sector.
Statutory boards to avoid corporatising regulat
lead to rent-seeking by the enterprise.
Proactively divest enterprises owned by statutory
through mandatory periodic housekeeping.
Statutory boards to avoid conflicts of interest. Th
utilise the name of the statutory board in the
board of directors should be independent of the m
board. We also need to ensure that these enterprises
while competing in the market.
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Chapter 9
Introduction
For the longer term, our basic strategy is to upgrade ou
a knowledge economy, banking on creativity and
economy and tapping the potential of IT in all ar
technical skills alone will not be enough. We will ne
in Singapore to find and develop new economic nich
opportunities for Singapore.
We cannot manufacture entrepreneurs but we can c
conditions that allow, encourage and facilitate e
forward, the challenge for Singapore is to create the de
to want to make it on their own rather than work fo
a change in the Singaporean mindset and will take t
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Entrepreneurial Culture
At the most fundamental level, we need to inculcate
in which Singaporeans want to be entrepreneurs. Th
the young in our school system, and must continu
institutions and extend even to entrepreneurship
workforce.
It also involves changing societys response to entreuphold successful entrepreneurs as role models ra
their affluence. It must be forgiving towards those
humiliate them or dampen their ability to start afres
More fundamentally, we must strike a right balance
safety nets for Singaporeans, and extending the nets
become dependent and reliant on the Governmenpromote enterprise and creativity is through less gove
than more. An individuals success must depend on h
rather than on largesse from the Government. Singa
incentive to be enterprising, and the competition w
and produce winners who can hold their own.
We therefore support the inclusion of an entreprenein the Ministry of Educations (MOE) Intermediate O
secondary and pre-university education. There alre
based initiatives that foster enterprise and innov
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Entrepreneurial Talent
Given the finite size of our talent pool, and the long
more entrepreneurial culture among Singaporeans, w
talent from abroad. Already an encouraging num
entrepreneurs have come to Singapore, to take adv
But we should do more to attract foreign entrepreneu
Executives (GEEs), with international experience aSingapore, to start and grow enterprises here, and act
entrepreneurs who do not have the experience of st
To do so, we need to tailor incentive programmes th
This would include:
a. Having sufficient flexibility in our employment
to come to Singapore without a well-paid job or facilitating the entry of their close family memb
b. Having EDB, together with the relevant agencies
programme to attract entrepreneurs to Singapor
the number of foreign incubation centres in Sing
c. Engaging various non-government associatio
Singapore.
In addition, to increase our chances of developing e
industry, there is a need to ensure that the private
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Implementation Strategy
The Government set up the Technopreneurship 21
1999 to oversee the development of technopreneursh
the scope of this effort, in 2001, the Government re
as the Entrepreneurship 21 Ministerial Committee.
encourage entrepreneurship and creativity, the Gov
a Minister to work with the Entrepreneurship 21 promote and drive the initiatives for a more entrepr
Growing Singapore Compan
A key outcome of our effort to promote entrepreneuof vibrant Singapore companies which can develop
tap new export markets, broaden our economic bas
more resilient. These Singapore companies will comp
help to support and anchor MNCs here.
Encouraging Growth of Startups
We need to encourage the growth of enterprising st
they are high-tech or low-tech whether they devel
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our own stable of local startups and SMEs. Not all
Hopefully, some will be successful, and in time will local companies, like BreadTalk, Coffee Bean, Tee Yih J
There are also some impediments in our business
startups.
Regulatory Landscape
Collectively, regulations can create significant barriers
the market. We recommend that the Governm
institutionalised and coordinated programme to cut
Government should also take enterprise-friendly
management, industry regulation, and procurement
The Government has already embarked on reviewing stymie enterprise. It established a More Vision,
movement in September 2000. This currently comp
a. The Pro-Enterprise Panel (PEP) which deals with
on Government rules;
b. The Zero-In Process (ZIP) which deals with non-band administrative) issues;
c. The Public Officers Working on Eliminating Red-
with internal feedback generated by public secto
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b. Ensuring the Pro-Enterprise Panel (PEP) set up i
Head of Civil Service will continue to maintain thpush to the pro-enterprise movement. The PEP sh
representation from the Singapore Business Fede
c. Allowing suppliers to retain IP arising from Gove
the Bayh-Dole Act enables SMEs, non-profit org
to retain IP that they create with federal fund
transfer of technology from laboratories to theconsider enacting a similar Act; and
d. Not ruling out products and services offered by
Government procurement, simply because they
track record. The Government should also con
Challenge to function as test beds for SMEsprodu
lead to significant improvements in public serviccurrent principles of openness, non-discriminatio
Government procurement.
Financing and Government Support
A key condition for entrepreneurs to flourish is the avarious stages of their enterprises. We propose the f
a. Encouraging cash flow financing. Financial instit
collateral in the form of physical assets Lendin
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b. Setting up a private equity exchange that allows
through the issuance of shares to selected investfor investors to trade their shares. An additional
exchange provides market valuations for startu
hence allowing owners to use their shares as colla
We propose that either the Singapore Exchange o
drive this project with the support of EDB and ad
Government;
c. Implementing an equity financing scheme simila
Development Scheme (SEEDS) to cover a broader
than limiting the scheme to startups with innova
d. Periodically reviewing Government debt financing
RFS which help local enterprises to grow domestic
that they are relevant in promoting entreprene
enterprises; and
e. Implementing a hybrid debt-equity financing sch
emerging enterprises seeking funding to finance
or through acquisitions.
Developing Capabilities to Franchise and Li
There are domestic enterprises in Singapore with ex
concepts that can be exported These businesses ar
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Competition Framework
Singapore does not have a generic competition law
like price-fixing and market division, and abuse of
market players. We have enacted such rules only for
and telecommunications, which are more prone to a
We therefore welcome the Governments recent a
generic competition law and set up an independen
two to three years.
Internationalisation of Major Companies
We have major Singapore companies which have
international stage, including Creative Technologies,
Corporation. We also have companies which have
global players, such as Ascott, Pacific International
Holdings, and Singapore Aircraft Leasing Enterprise. W
and other major Singapore companies with the scal
to venture abroad, to tap the opportunities in regiona
and India open up. Those which still lack scale at thiwhere scale is increasingly important, should be enco
to keep pace with developments, including growi
mergers and acquisitions.
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b. Developing a strong, global brand image for Sing
well-known for its strong leadership and the sucits economic plans and strategies. This should b
rounder image for Singapore as a global city of th
sports and culture also feature prominently. Go
coordinate their efforts to market this new bran
the same time, the Government should give more
efforts of Singapore-based enterprises, and pr
foreign investors and visitors, especially at exhibiby Government agencies;
c. Adopting a cluster approach when venturing over
have all the necessary competencies to compete
SPRING should identify and catalyse the develo
clusters which can venture abroad together. A go
mindset of partnership is the LIUP, which encouraSME vendors. We should expand the LIUP to cove
larger enterprises with experience overseas, lea
including SMEs, to venture overseas; and
d. Encouraging consolidation and strategic alliances
to be highly fragmented and getting them to band
groupings and strategic alliances will help them toin size. The Government can act as a catalyst i
services between different parties to form allian
different forms of consolidation and strategic al
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Helping Smaller, Traditional Companies Ada
Even as we help facilitate internationalisation of th
which are able to do so, we must not forget the gr
companies which face difficulties adapting to the new
These would include HDB retail shops and small in
parks which are considerably affected by the change
not have the economies of scale, lack management ex
hiring capable people because they cannot match thor offer the same kind of exciting career opportunit
We need to help these companies by facilitating their r
and upgrading so that they can adapt to the change
Fundamentally, the new environment requires an
these smaller domestic enterprises. Many of them new ways of doing business. They should adopt m
to doing business, and be encouraged to experiment w
products and services. The Government on its part sh
regulatory environment to ensure that rules and re
unintended consequence of hindering speedy i
We should also promote a new orientation towards semovement for service excellence can be initiated
orientation by the domestic enterprises. Publicity can
the benefits of good service. Effective training prog
crew training can be developed into suitable programm
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Role of the Government
The Government plays an important enabling role in
Singapore companies.
GLCs and Temasek Holdings
In the early years of Singapores development, wh
under-developed, the Government provided service
the economy, such as development banking, teleco
power. Today, the private sector is more sophisticate
well in allocating resources. With the business envi
it is private enterprise, not the Government, that i
about and best able to exploit evolving market trend
The Government should encourage the private sect
developing new business ideas. Its primary role is to
and provide opportunities for all enterprises to hav
It should intervene only under exceptional circumstan
The Government should therefore continue to allcommercial entities, which must compete on equ
without any special privileges. The recent announcem
is a major step forward. In line with the direction s
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b. The Government should not interfere with th
decisions of GLCs. These companies should not beservice'. This is defined broadly as any project or
would not have done if it were evaluated purely
c. The Government should constantly review the st
those which serve strategic purposes. Non-strat
divested in an orderly fashion.
Temasek Holdings should seek to maximise shareholdand benchmark the performance of its stable of co
peers domestically, regionally and globally. We a
Holdings reinforce its Charter in the following ways
a. GLCs are natural candidates for internationalisat
of management and the competencies that they h
Temasek Holdingskey mission should be to grow GLenterprises that are anchored in Singapore;
b. Temasek Holdings should make a conscious effort
world class managerial talent into GLCs.
members and management staff should be remo
c. Temasek Holdings should limit new investment to b
to internationalise. These are to be in new growth
sector in Singapore is unable or unwilling to un
large investment with long gestation periods.
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Chapter 9
Ministries and Statutory Boards
The primary role of many Government agencies is
certain industries in an impartial manner, and ensu
all market players. In carrying out their missions, m
also set up enterprises, which can also encroach int
sector. We therefore propose that statutory boar
disciplines when setting up enterprises:
a. Government to institute a Yellow Pagesrule. St
set up enterprises if private sector players perfor
be found in the yellow pages;
b. Statutory boards should as far as possible not corp
because these are often monopoly functions and
c. Even if setting up an enterprise under a statutorshould be proactive plans to encourage the priv
function eventually. There should be a mandato
say every three to five years, of all enterprises
statutory boards to decide which to divest
d. Statutory boards should avoid conflicts of interes
the enterprise does not utilise the name of the statmarket, and that the board of directors is indepe
of the statutory board. The enterprise should al
on its domestic business from the Government w
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Manufacturing
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Chapter 10
Summary
Many economies with Singapores level of per cap
sustain their manufacturing sectors as they find it m
in higher value-added, knowledge-based services
activities to other low-cost locations. Hence, the structeconomies such as the US, the UK and Japan typically
manufacturing base as a share of GDP with a rapidly
We will face similar challenges in sustaining Singapo
However, we believe that there is a future for ma
notwithstanding competition from developing count
with their low labour and land costs. We have com
remain a manufacturing hub. To do so, we need to
to Singapore, upgrade the sector, and move
production base, to become an innovative creator of pr
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Chapter 10
Key Recommendations
Continue to attract MNCs to provide access to
know-how and markets, and jobs for Singaporea
Continue to strengthen and grow existing electro
sciences and engineering clusters.
Grow new, potential growth areas includi
electromechanical systems (MEMs), nanotec
Increase productivity and contain costs in areas
costs, where possible.
Keep our doors open to foreign workers, while care
primarily through the levy.
Promote R&D, especially the cooperation and co
and processes between research institutes and lo
gap between research and commercialisation.
Strengthen patent protection laws, facilitate low-
Intellectual Property (IP) Academy.
Develop the right infrastructure for new growthfocused infrastructures for new technology indu
Develop supporting services, especially supply cha
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20 per cent or more to GDP over the next decade.
Singapore is a city-state, unlike economies such as
Pearl River Delta as a production base and can afford
base moved offshore.
To achieve this, we must continue to attract MNCs
technology, management know-how and markets. W
competitiveness, to ensure that we do not price ou
At the same time, we should focus on providing an attr
for value-added manufacturing, facilitating their ado
and development of new markets. This entails es
premier regional hub, which companies use as a base
manufacturing activities. In particular, we should
opportunities that lie in China, leveraging on our uni
leadership, financial centre status and bilingual mana
of China. With the right measures in place, we camanufacturing with continued investments an
The proposed strategies to further enhance and susta
advantage in manufacturing centre on:
a. Global leadership in niche areas through
enterprise development.
b. Value manufacturing, where there are synergies
end activities, closely integrated by multiple, IT-en
10.1].
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Singapore must no longer remain a mere manufact
to develop new capabilities to become an innovativ
businesses. Strengthening the close interlinkage
development, IP development and industry will
Key Recommendations
Enhancing Existing Areas of Strength and
Growth Areas
We have focussed on developing chemicals, elec
biomedical sciences as the four key clusters that form
value manufacturing base, upgrading and moving
chain over time. The chemicals and engineering clus
base for growth, constantly contributing about a t
value-add. Electronics has been a fast growth clu
current cyclical downturn. Biomedical sciences is
future. We must continue to grow these areas. The
for each cluster are attached as Annex 1 to this cha
Going forward, we need to identify and develop new Industrial information technology, nanotechnolog
alternative fuels and performance materials are prom
cut across various industry clusters and offer enormo
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Tackling Cost Issues
We need to maintain the competitive position of
productivity and reducing costs where possible, espec
a. Land CostLand cost is particularly important fo
maximise the value of land resources in Singapore
cost of land competitive. In particular, Singapore
at internationally competitive rates, and even cprofit share basis. The colocation with Riau sho
overall land costs; and
b. UtilitiesUtilities costs in Singapore are highe
Electricity, for example, is more expensive beca
hydro-electric or nuclear power. Transmission c
our urban environment, which require undergrouthis, however, we should encourage competition a
in order to promote efficiency, maintain competitiv
We should avoid cost-plus or monopoly pricing,
business costs.
Workers
Manufacturing will continue to provide good jobs
need to prepare our workers for the new manufactu
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Without foreign workers manning the night-shifts, t
jobs for Singaporeans. Production costs would go up
forced to move elsewhere, where workers are cheaper
We must continue to allow the manufacturing sect
of foreign workers. The inflow must be managed car
maintain our cost competitiveness, while avoiding s
should be done primarily through the foreign worke
some administrative controls where necessary. Thi
managing the number of foreign workers not only in
but in the other sectors as well, which allows the m
the foreign workers can be most efficiently deployed
Promoting Research and Development (R
To attract more foreign manufacturing to Singapore,
activities in Singapore, putting in place the infrastruc
manpower and attracting foreign researchers. We sho
and private organisations to cooperate with MNCs in R
the MNCs to base their product development and
should also continue to build up our international re
We have set up the Biomedical Research Council (B
Engineering Research Council (SERC) under the Agen
and Research (A*STAR) to drive the overall develo
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should not be on researchalone, but on develop
therefore concentrate on R&D in new growth areas to
and to spin off high-tech companies in these growt
RIs should also concentrate on developing R&D man
because a ready and abundant supply of highly train
manpower will be an important competitive factor
extend upstream beyond product and process develo
and technology development, and our industries bec
advanced and science-based.
To promote research and commercialisation of inno
recommend that innovation-oriented tax incentive
double tax deduction for patent filing costs for co
Singapore should also renegotiate current tax treat
to lower withholding taxes for IP income flow into S
research and academic community can be coupled w
given funds through venture capital schemes such
Development Scheme (SEEDS). Companies can be i
for new technologies through rapid depreciation allo
of acquisition and skills training.
Strengthening IP Protection & Managem
Innovation requires protection, and the acquisition o
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In addition, many industries have internationally
bodies, such as the Food and Drug Administration (FD
Authority (FAA), which certify products and facilities
government thresholds for quality and safety. Singa
recognition agreements with these global bodies to b
centre, which is in line with the existing image o
incorruptible.
Developing Cluster-focused Infrastructur
Each industry has a common set of services that
unique to that industry but used by all of the co
Companies in an industry tend to aggregate in location
is already in place, therefore making it quick and ef
Singapore should thus create cluster-focused infras
to achieve economies of scale, and bring in early inn
mass. We have started to do so. Jurong Island, whic
as a world-class hub for chemical manufacturing ac
of cluster-focussed infrastructure. Chemical com
pipeline corridors, buy feedstock and sell finished pro
outsource utilities such as fire-safety services, logistic
We should explore how this concept can be extende
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continue to maintain the excellence of underlying i
airport), we recommend further specialisation of SCM
In particular, Government-established organisatio
Institute-Asia Pacific (TLI-AP), which are maturing i
Asia Pacific, should be encouraged to share know
industry to spark innovations in SCM.
Securing Market Access
Market access is critical for the survival of manufac
support Singapores active participation in the WT
multilateral basis. Bilateral FTAs complement this by se
to our key markets. The Government should contin
our key trading partners.
Trade missions overseas, run by International Enterpr
key to market development, as they broaden u
opportunities for commerce. Such missions should
depth.
Taking Advantage of Low Cost Areas
Besides these initiatives, we should take advantage
Singapore including the Riau Islands and Southern M
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of system products. At the same time, they can use
cost yet nearby location for labour-intensive manu
and/or supported out of Singapore. This is a winningcompanies will find attractive and consider seriousl
China.
ConclusionNotwithstanding the intense global competition, Sing
investment location for MNCs. Many good manu
created from these foreign investment and more suc
the future. In the semiconductor industry, investors h
to build wafer fabs here. These significant long-te
MNCsconfidence and commitment to Singapore. the skills, adaptability and productivity of our worke
Manufacturing will therefore continue to play a
economy. By leveraging on our competitive advanta
supporting infrastructure and business environment,
as a global leader in value manufacturing, for the
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Electronics
Key Initiatives
Develop new capabilities in semiconductor equipme
industrial design as well as R&D in new technoand nanotechnologies.
Centralise cogeneration facilities for wafer-fab pa
per cent cost savings per participant.
Improve semiconductor-manufacturing infrastruc
of shared facilities including training.
Enhance benefits of twinning with Riau Islands b
and supporting industries.
Grow new industries in photonics, display, netw
products that benefit from existing clean room
Develop New Supply Chain Models including
warehousefacilities.
Establish specialised funds for wireless IC and fab
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Ensure supply of feedstock by deepening the level o
the potential of new developments in process te
Investigate feasibility of a common product grid on
supply chain management infrastructure.
Investigate feasibility of common waste treatmen
Encourage environment regulations based on sou
development.
Develop quality workforce policy.
Upgrade logistics capabilities to handle specialise
Build well-connected hub through web of FTAs.
Enhance supporting maintenance services, with em
capabilities in specialised equipment.
Biomedical
Key Initiatives
Develop a Plug & Playenvironment for both
including the support services that span the who
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Promote industry to move towards upstream acti
future manufacturing activities through facilit
centres of excellence/Luminary Centresin our ho
A*STARs research institutes.
Expand market access through improving the re
increasing recognition by foreign regulatory auth
Enhance marketing & communications strategy to
manufacturing.
Continue to nurture local venture capitalists (VCs
Transport
Key Initiatives
Maximise air and sea connectivity to strengthen
manufacturers.
Strengthen urban transport solutions offering
Industrialise shipyard operations and strengthen
knowledge-based activities.
Explore use of Riau Islands as an alternative for
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Services
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Summary
Even as we maintain manufacturing as a growth en
emphasis on growing our services sector, in the sam
the manufacturing sector. We must pay particula
services, as Singapore has the potential to become A
providing an array of world-class services. To tap th
to further upgrade areas in which we already hav
trading and logistics, ICT, financial services and tou
are globally competitive. We should also focus
regional hub for new areas like healthcare, educatio
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Key Recommendations
Focussing on Priority Areas
Develop areas in which we already have strong ex
logistics, ICT, financial services and tourism.
Grow new areas such as healthcare, educatio
Removing Regulatory Impediments
Put in place the right regulatory structure and fra
added, export-oriented services such as healthca
industries, while balancing domestic social conside
a. Setting a clear objective of promoting these se
value and therefore the need to review curr
b. Reviewing regulations that negatively impac
industries;
c. Reviewing whether the responsibilities of anbe separated from that of a promoter; and
d. Ensuring that the industry regulator is not a
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Stimulate sophisticated local demand, where app
a. Government outsourcing of activities includIT solutions;
b. Government catalysing experimental and
example, by leading ICT pilots and trials i
c. Promoting private endowments to educati
favourable tax treatments for gifts to non-p
industries.
Developing Manpower for Services
Conduct a comprehensive review of manpowe
industries especially in areas with good potent
services training at the tertiary level.
Land for Services
Consider providing land at institutional rates for th
and healthcare institutions.
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Introduction
In 1986, the Economic Committee recommended th
promote services as actively as the manufacturing
twin engines of Singapores economic growth. Since
in our GDP has risen from 61 per cent in 1986 to 65
of total employment has also increased from 64 pe
the same period.
However, the pace of growth of the services sector
even. The sector expanded at a rapid rate of 9.
1986-96, until the Asian Financial Crisis threw a spa
The crisis took a heavy toll on our services market in
1996 and 2001, growth of the services sector slow
cent per annum. Despite making good overall progr
sector, we have yet to develop it to its full potenindustries are not yet world-class, and trail behind t
productivity and capability.
A key factor is that we have not been as proactive an
the service sector as we have been in manufacturing.
services where notable progress has been made in re
deregulate the industries, we have allowed regulatorof services growth, partly because of genuine socio-
Going forward, we need to make focused, concert
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But because our resources are limited, we need to f
strong expertise in services such as trading and logi
and tourism. But to stay ahead in these industries, we n
ourselves, create more value and find new growth nic
identify and develop new growth industries as ad
services engine. In particular, there is potential for
regional hub for healthcare, education and creativ
recommendations for each of these areas are attached
On the whole, we need to actively create the condservice industries to thrive and flourish, by remov
growth and leveraging on enablers that can catalyse t
the following three broad thrusts.
Removing Regulatory Impediments
Compared to manufacturing, services are subject to
like education, healthcare and media have social or
Others require regulatory supervision to safeguard s
professional services. As a result, the social concern
have taken priority over the development of the eemphasis is thus weighed towards regulation rather th
for social policy reasons, we have deliberately restri
and lawyers in Singapore. In some service industries,
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Chapter 11
We need the right regulatory structure and framework
and measures to help resolve conflicting priorities an
for the exportable component to grow and compete
a. Set a clear objective of promoting these services
and therefore the need to review current regulat
b. Conduct regular reviews of regulations that negativ
of service industries, and recommendations should
or modify such regulations;c. Review in each service industry whether the role
separated from that of the promoter. There are
agency undertaking both regulatory and develop
to carry out its responsibilities successfully. But thi
rule. Different industries have different characteri
In some cases, there are merits in having the resexportable component parked outside the reg
healthy tension between regulator and promoter. W
effort to identify the approach best suited to the
to grow; and
d. Ensure that the regulator is not also a playe
Government should actively outsource services
than be a service provider.
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greater scalability. In any case, the greatest growth
the fast-rising regional demand, given the rapid d
India. We thus recommend the following to prodemand:
a. Marketing our service industries more aggressively
up Singapores branding as a world-class services h
services development effort. For example, we do no
British Council or Education Australia to market educ
students. Similarly, for healthcare services, we havecompetitors in marketing despite our superior clinic
b. Simplifying our procedures and regulations to m
for foreign students, patients, tourists and busines
to make use of our services. This includes easing ent
processing, and introducing green laneprivileges
value segments.
Domestically, we can further promote sophisticated de
local consumers who have sophisticated needs and
quality will encourage experimentation, innovative s
services. This will raise the overall standard of the l
enable them to compete effectively in the internatio
the following initiatives to boost sophisticated local
a. Government to outsource its activities whereve
management and IT solutions;
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Developing Manpower for Services
Developing manpower is a national imperative t
manufacturing and services. However, services are e
Until now, we have deliberately directed our educa
towards producing people with hard technical skills, r
education. This has produced a numerate, techn
supported a vibrant manufacturing sector.
Our overall strategy should maintain this bias toward
education. However, as we develop service industries w
we will also need to train and equip sufficient peop
knowledge to work in these new areas. We therefore re
review of manpower training for the service industri
address the absence of training of service at the tert
Land for Services
Besides manufacturing, we should set aside suffic
industries. For example, an education industry will r
of land for institutions and support facilities like studindustry too will need land for hospitals.
We should also ensure that our land cost for the ser
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Implementation Strategy
As the development of services involves issues that
various Government agencies, it is not practical
responsible for co-ordinating the diverse policy pos
different economic and social objectives. A distribut
the resources and competencies of the various econo
way to go. However, we should assign a Ministry t
and propose that MTI be designated for this taskchampion agencies for the respective service industr
coordination, improve client account management
and assistance programmes.
MTI and the various service champions can only ac
have the wholehearted support of the regulators. The
and social objectives will have to be managed. We setting up of a high-level Ministerial Committee on Se
for such policy debates to be conducted so that optim
Conclusion
We have what it takes to be a world-class services hub
will require a concerted effort on the part of both
industry players. There is a need above all for a chan
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Chapter 11
Annex 1:
Initiatives for New Services
Education
Key Initiatives
Develop tertiary education sector. A vibrant unive
attract and develop top talent, but also help to c
Build up commercial and specialty schools segme
of 40 high-quality schools, each enrolling at least 1
Make Singapore a centre for corporate training
Encourage more MNCs to anchor their regional tr
and promote reputable institutions to provide hi
training courses,
Position Singapore as a regional destination of hi
boarding schools. This would serve as an importan
foreign higher education institutions.
Develop supporting services, particularly in the are
and assessment.
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Facilitate the establishment of a quality assuran
commercial and speciality schools. This is to he
quality of their offerings, introduce transparencythe long run, safeguard and upkeep Singapore
quality education.
Streamline student visa requirements and process
students.
Healthcare
Key Initiatives
Review the regulations in the Public Hospitals and Mwith a view to relax restrictions on responsible, in
locally and abroad.
Establish and communicate an internationally rec
Singapores healthcare services sector emphasising
Establish a responsible healthcare consumer foru
on pricing and clinical practice norms.
Establish one-stop centres in key regional markets
for foreign patients to come to Singapore.
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Allow dual employment of specialists by the p
This would enable foreign patients to have b
expertise in the public sector.
Introduce, selectively, sub-vented healthcare at p
help generate economies of scale in the private
provide more cost-competitive services.
Encourage a Clinician-Scientist mindset by for ex
R&D time, and structuring an alternative career tr
Encourage physical clustering of basic and clini
private institutions, similar to that of successful
Mayo Clinic and Memorial Sloan Kettering.
Creative Industries
Key Initiatives
Embed arts, design and media within all levels o
drama and literature could be employed to he
language abilities.
Establish a flagship art, design and media univers
Establish a MediaLab in Singapore to nurture m
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Human capital
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Chapter 12
Summary
To successfully implement all these longer-term st
have the right hard and soft skills. We must focus
capital, ensuring that as many Singaporeans as poss
know-how and skills for a knowledge economy. We m
skills at analysing problems, communicating ideas,
must inculcate values such as resilience and openn
with outward-looking, global mindsets. At the sam
the habit of lifelong learning, and prepare adult wor
created. We must also open our doors to foreign tale
talent. This will help make Singapore a vibrant and
both local and foreign talent to work and play.
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Chapter 12
Key Recommendations
Developing the Full Potential in Every Indiv
Allow for the holistic development of youths thro
curriculum that allows for wider access to subjects
and the integration of arts and sports.
Give the universities greater flexibility in admissimeet student and industry demands.
Manpower Planning
Government to continue its role in national man
broader approach to allow greater fle
Fostering a Global Mindset
Develop in Singaporeans a global outlook, and
motivation needed to operate in an increasingly Facilitate the re-entry of overseas Singaporean s
into the special relaxation of mother-tongue lang
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Attracting Foreign Talent
Continue to attract foreign talent from all over thlocal talent pool.
Enhancing Human Capital Management
Raise the capabilities and professionalism of human
through training and a recognition scheme.
Set up a HR Centre of Excellence within the Sing
to drive excellence in HR practices in the private
SPRING Singapore to work with SME association
and competencies among SMEs.
Enriching the Environment
Support Arts, Culture, Sports and Recreation (ACSR
to recognise their contribution to national econo
Increase awareness and provide opportunities fACSR activities.
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Introduction
Human capital is a key resource for an aspiring global
major, vibrant cities from the rest. While Singapore m
a mega city like London or Shanghai, we can strive to
or San Francisco. Without our own hinterland, the
should endeavour to ensure that Singaporeans cont
as well as strive for excellence. These are amongst
for developing a dynamic knowledge economy in a
Education and training have been consistently high
Government spending. A well-educated, skilled an
enabled Singapore to grow and prosper economica
Our efforts to attract MNCs to develop a vibrant m
supported by a rigorous education system. We we
who were competent in vocational skills, technical exhow at the post-secondary level.
However, as Singapore charts a new economic cours
must adjust accordingly to remain relevant and resp
First, while we have been ranked top worldwide for te
and there has been a marked improvement in the ed
cohorts, our workforce still lags behind in worldwid
12.1]. There are thus gaps in our human capital dis
we will continue to need skilled knowledge workers a
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Second, while the manufacturing sector has maintain
to GDP growth over the past ten years, manufacturing
steadily The sector employed 28 per cent of the w