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

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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

0 5

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

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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

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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

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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

Chapter 10


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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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Annex 1: Industry Cluster I


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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

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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

Documents

Monetary & Fiscal Policy in General