DPM Heng Swee Keat at the Debate on the Budget Statement

DPM Heng Swee Keat | 27 February 2024

Speech by Deputy Prime Minister and Coordinating Minister for Economic Policies Heng Swee Keat at the Debate on the Budget Statement in Parliament on 27 February 2024.

Mr Speaker Sir, 

I rise in support of the Budget, which lays out a confident path forward for Singapore, as our domestic and global environments change. 

I would like to focus on one key aspect of the Budget Statement – growing the economy, which is also one part of DPM Lawrence’s Forward Singapore agenda. The global economy goes through cycles, and we are currently facing a slow growth, high inflation environment. This year’s Budget, including the Enterprise Support Package and enhanced Assurance Package, is comprehensive and includes good support for companies and households to tackle immediate challenges. We also face sharp shocks to the economy from time to time, most recently with the COVID-19 pandemic. Colleagues will remember the five Budgets that we had to approve in 2020. Responsive monetary and fiscal policies can provide stabilisation through the cycles and shocks, to ensure that we do not fall into a deep hole. But in order to grow our economy sustainably for the long-term, we need to embark on structural changes and policies to transform our economy. Only then can we create good opportunities for Singaporeans and generate the resources for uplifting our people. Such structural policies include what Ms Denise Phua had said yesterday on potentially game changing investments to support and uplift workers, a theme which many of you have also spoken on.

So, growth is important, but it is also getting harder to achieve because of internal and external factors. As a small and open economy, Singapore depends on our connections to the region and the world to grow and thrive. Today, the external environment is more difficult. While globalisation over the past three decades has brought great benefits and progress, the mood has since shifted from collaboration to competition. This is in part driven by technological innovations, including automation and AI, which are reshaping jobs and competitiveness across industries and countries. Some major economies have turned more protectionist and insular, and even adopted industrial policy to support strategic industries. “Friend shoring” and “de-risking” are quoted as strategies to strengthen resilience. These have reconfigured economic linkages and global supply chains. From globalisation anchored in economic competitive advantage, we are now seeing fragmentations based on political alignment. This, together with the recent upsurge in geopolitical unrest, has brought new uncertainties.  

Our domestic environment is also more challenging. Singapore’s economic structure is now closer to that of a mature economy. The days of “catch up” growth are over, and our resource constraints – labour, land, carbon – are becoming biting. Economic growth is the sum of labour force growth and productivity growth. But with our ageing demographics, local labour force growth is shrinking quickly towards zero. So, we must therefore find ways to double down on productivity-driven growth. But this too, is hard. Many advanced economies have only managed to achieve average real value-added per worker growth of less than 1% per annum over the past decade. And even as we invest in strengthening productivity, such as growing depth in certain industries, it is impossible to match the scale and size of larger economies. 

Now, put together these sound pessimistic, but I am, in fact, upbeat about Singapore’s prospects. Overcoming challenges and finding new opportunities has been our DNA since Independence. Each time when the odds were against us, we rallied together, to find new ways forward. Our economy managed to chalk up growth of 5% in the 2010s, even as labour force growth slowed to 2.1% per annum. Our sound monetary and fiscal policies have enabled us to stabilise our economy through various economic cycles. They also provided the confidence for long-term planning by companies and households, and ensured sustainable economic growth. To continue growing the economy, we need structural policies to drive productivity-driven growth and take Singapore forward. We must continue to undertake and intensify our restructuring along three prongs. First, our economic transformation movement has achieved steady momentum. To sustain this, there must be shared ownership and leadership in the coming years. Second, we are shaping and strengthening our innovation ecosystem to enable high value, cutting edge work to be done in Singapore. Third, we must lean in to foster greater connection and collaboration, and strengthen Singapore’s standing as a Global-Asia node for technology, innovation and enterprise. 

Tuned for Transformation

First, on transformation. When the Future Economy Council was formed in 2017, a key piece of work it embarked on was the Industry Transformation Maps (ITMs). The ITMs were not merely about developing plans to be executed – the process of doing so was equally, if not more important. The process involved 23 industries each identifying trends, challenges and opportunities they faced, then developing strategies to enhance productivity; restructure jobs and reskill workers; strengthen innovation; and internationalise. The ITMs represent a more mission-focused and industry-driven approach to tripartism, where our government agencies collaborated with businesses and Trade Associations and Chambers (TACs), while our unions worked with companies to support workers’ reskilling and enterprise upgrading. Through the ITM process, stakeholders across each industry built trust, identified synergies, and shared resources and experiences. In so doing, they supported one another towards the shared goal of ensuring that their industry, enterprises and workers remained relevant and competitive. In 2021, the ITMs were refreshed to take into account post-COVID realities, including the importance of resilience and sustainability. 

This shared ownership of transformation is critical in today’s world of accelerated changes and shifts, as it affords greater agility in our responses. Government plans and programmes will remain important, but when enterprises and workers embrace transformation, they can be at the forefront of seizing opportunities. Now, in some countries transformation invokes anxiety and trepidation, as it is associated with job loss or companies being forced out of business. In contrast, our 2023 National Business Survey showed that almost all businesses polled recognise the importance of business transformation, up from 61% in 2017. Our workers are not only aware of the need to upskill and reskill, but have also taken action. Overall annual participation in SkillsFuture initiatives have increased from 380,000 people in 2016 to 560,000 people in 2022. While the efforts will take time to bear fruit, the indicators so far are positive. Even amidst structural shifts and sharp shocks from the COVID pandemic, our economy has performed well and enabled us to grow the economic pie for all Singaporeans. Between 2016 and 2023, our economy achieved real value-added growth of 2.8% per annum. In the same period, our productivity growth, in terms of real value-added per worker, was 1.7% per annum. This is stronger than that of advanced economies like South Korea, US, UK, Germany and Switzerland. With these productivity gains, businesses were also better able to cope with inevitable cost increases. Incomes rose as our economy and productivity grew.  The median income of full-time residents grew at 1.5% per annum in real terms, from 2016 to 2023. We will release a fuller report on the ITM efforts in a few months’ time.

We have been able to sustain this transformation and achieve good outcomes because of our unique approach to tripartism. This productive, collaborative relationship between employers, workers, and government enables us to shape transformation and growth to be fair and inclusive. It is a very precious asset to keep Singapore dynamic and harmonious. In a world that is more fast-moving and complex, working in concert is even more important now, so that we can harness one another’s strengths to move forward, faster and together. 

Transformation must be a sustained movement. Like any successful movement, it draws strength from the trust and confidence of each stakeholder to collaborate. I thank our many leaders in the business sector, unions, TACs, and academia for your contributions. One change I have observed, which we must build upon and expand, is how we have evolved our tripartism towards co-ownership and leadership. For instance, we convened the Emerging Stronger Taskforce at the height of COVID pandemic, to explore how Singapore could rebound stronger. A key idea of the Taskforce is the Alliance for Action (AfA), which mobilised private and public sector leadership to tackle specific, high-impact issues. We have launched several AfAs. For example, the Singapore Business Federation and leading business leaders proposed an AfA on business leadership development. This AfA put together a concrete set of initiatives to grow our local timber and groom global-ready talent. Another AfA on supply chain digitalisation led to the establishment of the Singapore Trade Data Exchange, or SGTraDex, a common data infrastructure that enables the trusted sharing of data across the trade ecosystem. Now, this has grown more pertinent with the supply chain disruptions that we are now experiencing from geopolitical unrest. So, let me thank members of the Emerging Stronger Taskforce and Minister Desmond Lee and Mr Tan Chong Meng for co-leading the taskforce. Our TACs have helped their members navigate challenges and seize new opportunities. During the COVID period, our Chinese, Indian, and Malay Chambers of Commerce and Industry encouraged and supported SMEs to digitalise, both to ride out the pandemic and to position themselves well once business resumed. NTUC has also been a significant leader in transformation. In line with its commitment that “Every Worker Matters”, NTUC has gone beyond the traditional notion of unions by partnering companies to transform and provide better prospects for their workers. Over the past five years, NTUC has worked with nearly 2,000 companies through the Company Training Committees (or CTC). Through ops tech roadmaps and skills gaps analysis, these Committees helped to uplift companies’ organisational capabilities and improve work prospects for their staff. Now think about it. It is highly commendable that NTUC is not fearing technology and how it will displace workers, but is instead taking concrete actions to uplift workers with technology. This will become even more important as technology advances and more of our workers grow older. So I hope that this House will embrace this same spirit when you are debating this importance of technology. One company which benefited from such a Committee was Elitez Group, which provides human resource solutions. Partnering the Food, Drinks and Allied Workers Union, Elitez Group tapped on the CTC grant to implement two business transformation projects.  These enhanced productivity and freed up capacity for its staff to be trained in higher-value tasks. As a result, 15 of their senior professional workers were upskilled and received wage increments. A small step, but a big lesson for everyone. It is also heartening to see larger companies serve as “SkillsFuture Queen Bees”, leaning forward to help other companies within their industries transform. For example, our logistics industry comprises many SMEs and is highly fragmented. ST Logistics, as the appointed SkillsFuture Queen Bee, shared its expertise and provided guidance on workforce transformation to smaller companies. By doing this, we upgrade not just individual companies, but tap on a broader ecosystem to achieve synergies and grow together. Most importantly, we should be proud that our workers are taking ownership of their lifelong learning journeys and career development. Some 192,000 Singaporeans utilised their SkillsFuture credit in 2022 for self-initiated learning. This is encouraging. Going forward, mid-career Singaporeans can use the new SkillsFuture Level-Up programme, with advisory and support from our agencies, unions and industry, to further their knowledge, skills and careers. This complements ongoing efforts to create pathways for continuous learning and upgrading through our Institutes of Higher Learning, often in the form of stackable micro-credentials to build industry-relevant skills. In fact, I would encourage colleagues to look at the websites of our universities to see the range of programs that they have. As Mr Darryl David said yesterday, we must strengthen the linkages between our IHLs, our businesses and unions further. Taken together, Singapore’s approach to transformation is a proactive and collaborative one involving different stakeholders. This is unusual and enviable, as it enables us to build capacity and capabilities not just in certain pockets, but across the board. This is how we ensure that the opportunities and benefits arising from transformation can be shared by all, and Singapore grows in an inclusive manner. 

An innovative ecosystem

I have spoken about how we are sustaining our transformation movement, through implementing the ITMs and strengthening collective ownership across different stakeholders. Let me now turn to another aspect of our next phase of transformation. I earlier mentioned how technology and innovation are reshaping competitiveness across industries and economies. This is something that the ITMs take into account, so that industries and companies can remain competitive and ahead of the curve. Mr Chris De Souza earlier spoke at length on AI, in particular generative AI, and so did Dr Tan Wu Meng yesterday. For Singapore, technologies such as AI and automation can augment our human resources. If we learn to use this well, artificial intelligence can be our augmented intelligence. So we should think hard about this, about how jobs and skills will be transformed with automation and AI, and in turn, how we can restructure our work and reskill our workers proactively to take advantage of these changes. So, Singapore’s next bound of growth must be powered by an economy that is technology-intensive, innovation-driven, and sustainability-focused, to provide good jobs for our workers. How do we achieve this? 

First, to capture new opportunities, we must be at the forefront of understanding, discovering and translating science and technology, to advance existing key economic sectors, while building capabilities for new economic drivers of the future. Researchers in our universities and research institutes to generate the body of basic scientific insights; Companies and startups to translate these insights or discoveries into innovations and solutions that can be applied to industry needs or market demands; and finally, the right training and support for workers to take on new jobs created by these opportunities, which I had spoken about earlier. This value chain is what we call the RIE – or research, innovation, and enterprise – ecosystem. The objective is to establish winning advantages in key economic sectors to strengthen Singapore’s position, uplift our local companies, as well as create good jobs and opportunities for Singaporeans. 

To achieve this, the government must work closely with our RIE stakeholders – researchers, Institutes of Higher Learning (IHLs), startups, local companies, and multi-national enterprises – to co-fund and grow the ecosystem. This requires proactive shaping and patient investment. Given our inherent small size, we need to develop our local researchers and nurture our enterprises and startups, while also attracting leading global companies and top research and entrepreneurial talent to form a strong ecosystem. Now, many members have spoken about AI – a form of deep tech.  Our biomedical sciences is another example of deep tech, where scientific expertise is critical but the impact may not be immediately apparent. Over the past two decades, we have steadily built up the ecosystem of researchers, companies and a skilled workforce. When COVID hit, these capabilities enabled us to contribute to the global fight, including the development of diagnostic tests. This patient investment has also nurtured Singapore startups like MiRXES and Lucence, whose groundbreaking solutions are making good progress in their next phase of development in large overseas markets like the US. As such, the additional S$3bil injection to our 2025 RIE plan, announced at Budget, is a timely one, as we seek to deepen capabilities in new growth areas like AI, sustainability and advanced manufacturing. Our efforts are going well. Singapore is ranked #5 in the 2023 Global Innovation Index, and the top in Asia. Many MNEs have chosen to site their R&D and innovation centres in Singapore. Total business expenditure on R&D has grown significantly over the past decade, on par with GDP growth. We also attract global startups, funders and founders to Singapore through a vibrant slate of events – from the Singapore Week of Innovation and Technology (SWITCH), to the Lee Kuan Yew Global Business Plan Competition. 

We have done well on innovation input – our institutions and researchers have developed strong niches in areas like biomed, quantum, and material sciences. We must now press on and continue to strengthen commercialisation and translational capabilities, to produce more “output” and capture value amid shortening innovation cycles and intensifying competition. mRNA technology, the basis of COVID vaccines, is a good example. While the scientific research had begun in the 1970s, it was only in the 2010s that drug companies saw the potential in nucleic acid therapies and invested in translating the science into therapeutics. This was how they were able to develop effective vaccines within such a short time span. With such a long gestation period, it is important that we proactively shape and grow the ecosystem with other RIE stakeholders, including global companies, startups and funders. 

Even as we continue to attract the right companies and stakeholders to grow our ecosystem, we can do more to deepen the innovation capacity of our students, researchers, and enterprises. We want to foster a generation of entrepreneurial youth, and there are opportunities such as the NUS Overseas College and the NTU Overseas Entrepreneurship Programme, to provide exposure to our students. Patsnap, one of our homegrown unicorns, is a product of such efforts. Co-founder Jeffrey Tiong first developed the idea of building a patent and technical intelligence search engine during his NUS Overseas College internship in Bio Valley in Philadelphia. Today, Patsnap has more than 12,000 customers in over 50 countries. For our researchers, the opportunity to work with other global researchers is a valuable one. Through our Campus for Research Excellence and Technological Enterprise (or CREATE), we are convening groups of top researchers from partner universities and local institutions, to address complex inter-disciplinary challenges in fields like urban planning and climate change. We have more than 20 corporate laboratories, such as Applied Materials’ partnerships with A*STAR and NUS, which is geared towards Advanced Packaging and Advanced Materials research for the semiconductor industry. It is especially heartening that Nanofilm, a nanotechnology unicorn spun off from NTU, recently set up a corporate lab there. We hope to encourage more of such examples, to inspire our students and strengthen our ecosystem. We also have the Industrial Postgraduate Programme, where students do full-time post-graduate studies while undertaking an industrial R&D project at participating companies, to help them gain industry-relevant R&D skills. In the area of deep tech, where innovation output is potentially high impact but the process is lengthy and high-risk, we are doing more to support venture building, complementing efforts by the private sector. The objective is to support deep tech startups in overcoming technical, financial and market challenges, and accelerating their growth. NUS’ Graduate Research Innovation Programme and NTU’s Innovation and Entrepreneurship initiative are two platforms to do this. Both universities recently partnered Xora Innovation to pilot the launch of deep tech startups that are globally competitive and can address large global market opportunities. Amperesand, the first deep tech startup supported under this partnership, has already raised over US$12M in seed funding to scale up its solid-state transformer technology for the fast charging of electric vehicles. Amperesand plans to deliver its first systems worldwide by 2025. 

We are also supporting our enterprises, especially SMEs to engage and participate in R&D, innovation and capability development activities. Our SMEs need not worry about their lack of scale, as they can tap on the research expertise and resources of our polytechnics to support them in their innovation journeys. There are 12 Centres of Innovation, covering sectors like aquaculture, built environment and electronics. The Enterprise Innovation Scheme provides tax deduction and allowances on qualifying expenditure like R&D, IP registration, IP Rights acquisition, training, innovation projects with IHLs. The T-Up Programme supports pioneering SMEs in developing innovative products and processes, by seconding public research scientists and engineers. Lion TCR, which develops new cancer immunotherapy products to treat life-threatening viral-related cancers in Asia, is one such example. With the support of two scientists from the A*STAR Singapore Immunology Network, Dr. Wai Lu-En and Dr. Sarene Koh, Lion TCR’s R&D efforts enabled its product offerings to be more cost-effective than current options. It also improved its production efficiency. This has fueled Lion TCR’s business growth and contributed to the company’s global expansion. For innovative local enterprises, joining up with larger companies provides opportunities to capture a steady stream of business and upgrade their innovative capacities. The aerospace industry is one such example. We just had the Singapore Airshow, and top global companies like RTX and Rolls Royce have chosen to anchor in Singapore to tap on our strong base of precision engineering companies. Avionics companies like Thales are also having a presence in Singapore. Under the enhanced Partnerships for Capability Transformation (PACT) scheme announced at Budget, SMEs can partner larger companies to scale up and go overseas. This is how we overcome our constraints of a small domestic market. This is also a win for larger companies, who can tap on the innovative capacities of the smaller companies to stay ahead of the competition. 

The RIE ecosystem is wide-ranging with numerous players. For it to work well and result in tangible outcomes for Singapore and Singaporeans, we must invest in the different domains, while weaving them together intentionally to build strong and reinforcing connections. Our IHLs and research institutes must continue to invest in basic research and building up world-class capabilities, while also linking up with the industry to translate peaks of excellence into viable commercial products. We must continue to encourage our local enterprises to innovate and tap on larger local companies and MNEs, to scale up and grow. The goal is for them to become key regional or global players in their own right, providing solutions that the market seeks. By developing a stronger innovation ecosystem, we create a conducive environment for leading local and global companies to deepen their presence here, and attract global funders and startups to be a part of our ecosystem. And in so doing, we sustain a virtuous cycle of creating more for Singaporeans and for Singapore.

A Global-Asia Node for Technology, Innovation and Enterprise

This brings me to my final point. Given today’s contested and uncertain world, Singapore must deepen our standing as a Global-Asia node for technology, innovation and enterprise, to create new value for ourselves, the region, and the world. Singapore is an outward-looking nation by necessity. It plays out in in the way we build transformative capacity across different sectors and stakeholders, and shape a strong RIE ecosystem that brings together the strengths of domestic and external stakeholders. These two elements reinforce our reputation as a trusted connector and node, and our value add in a more volatile and uncertain world. Our robust regulatory and legal frameworks are longstanding strengths that provide confidence that Singapore is a trusted and reliable partner. We have built up strong connections to the region and the world through our extensive set of agreements. We have 27 FTAs in-force, 42 international investment agreements, and around 100 avoidance of double taxation (DTA) agreements. And we have since innovated and evolved new forms of cooperation such as the four digital economy agreements. We have also strengthened connections to innovation nodes around the world through our Global Innovation Alliance. Our 21 nodes across Asia-Pacific, Europe and the US facilitate Singapore-based enterprises to explore new markets and reap synergies. Thus, even as the rhetoric grows and cooperation slows, businesses and countries know that Singapore continues to be a constructive and neutral location for business, innovation and talent. This is how EDB has, over the past two years, managed to secure investment commitments which are above its medium-to-long-term goals. The 2023 commitments are expected to create some 20,000 jobs with a projected contribution of $26.7bil in Value-Added per annum. It is also why Singapore is home to some 37,000 international companies and 7,000 MNEs, many of whom use Singapore as their regional HQ. Singapore continues to be the among the largest sources of foreign investments into China and India, reflecting our value as a gateway for companies to explore opportunities there as well as in ASEAN. 

We must therefore lean in to foster greater connection and collaboration at all levels. Domestically, it is about fostering co-ownership and leadership through the ITMs and our ongoing transformation effort, so that our industries, companies and workers are empowered and confident as they ride through new waves of change. It is about deepening linkages across our innovation ecosystem and connecting with other ecosystems and stakeholders, so that we can harness science and technology to find solutions to global challenges, and unlock economic value. And beyond that, it is about leveraging our trusted reputation and extensive networks to encourage like-minded partners to grow in Singapore, through Singapore, and with Singapore. 

Mr Speaker, Sir. Let me now say a few words in Mandarin. 

建国以来,新加坡经济发展迅速。我国能成功,除了国人不懈的努力之外,我们保持经济开放,促进贸易,吸引外资,也是成功的关键。今天,世界局势不稳定: 大国之间的博弈、战争、全球供应链受阻,等等因素,给经济前景蒙上了阴影。许多国人担心,我们的经济还会继续蓬勃、新加坡还能继续繁荣吗?







Let me now conclude in English. 

Mr Speaker Sir, the world may be more difficult, and our domestic constraints may be more challenging. But I have laid out the strong basis for my optimism, that a small and open economy like Singapore can continue to thrive and secure our next bound of growth. By serving as a trusted node and connector, we can create value by facilitating connections and building new linkages in today’s fractured global landscape. We can offer a strong innovation ecosystem with leading capabilities, talent and companies, making Singapore an ideal base to grow and build new ventures. And with tripartism fueling our collective transformative capacity, Singapore and Singaporeans can remain well-placed to partner others, and seize new opportunities with confidence.  This is how we can continue to keep our economy innovative and vibrant, and build a better Singapore with opportunities for all. 

Thank you.
Economy , Parliament