MOF Committee of Supply Speech 2017 by Second Minister for Ministry of Finance Mr Lawrence Wong

A. Introduction

A1 Madam Chairperson, I thank the members for their comments and questions for the Ministry of Finance.

A2 Three broad topics have been raised by members

a.   First, how the Government can help to build a stronger economy, through digitalisation of government services, procurement, corporate regulations and taxes;

b.   Second, there were queries on accountability, especially in relation to the government’s budget and government-linked companies;

c.   And Third, areas to fine-tune our social schemes and programmes.

A3 I will address the cuts on the first topic and SMS Indranee will take the other cuts.

A4 Madam, the key driver of the economy is our people and our enterprises. But the Government can and will continue to play an important enabling and facilitative role.

A5 Our efforts so far have yielded results. At the end of the Budget debate, the Finance Minister mentioned the improvements in productivity growth over the recent years. I would like to clarify that he  was in fact referring to the period from 2009 (which was the year the ESC based its recommendations) to 2016 – productivity growth in that period, as measured by value-added per worker, was 2.1% per annum. If we look at real value-added per actual hour worked (in other words VA per hour, and not VA per worker) – which is internationally recognised to be a better measure of labour productivity – growth was 2.6% per annum over the same period. 

A6  These are positive results. We must build on this momentum.

B. Economy Building

Continuing Service Delivery Transformation to Citizens and Businesses through Digitalisation

B1  Digitalisation efforts in the public service can play a role in our transformation efforts, and here I thank Mr Liang Eng Hwa, Ms Foo Mee Har and Mr Saktiandi for their suggestions.

B2  Our efforts to build a Digital Government are not new. In fact, it started in the 1980s when we first pushed for computerisation in a big way in the Public Service and we are continuing these efforts to more proactively use technology and data to improve our service delivery.

B3  In fact, now we are giving this a much bigger push with our Smart Nation efforts which Minister Vivian Balakrishnan highlighted and shared last Thursday. Our Digital Government efforts form an important part of the broader Smart Nation strategy. MOF works closely with MCI, PSD, the Smart Nation Programme Office and Government Technology Agency or GovTech to drive the Digital Government agenda by setting clear goals and maintaining central oversight. These goals include enhancing the efficiency of our services and ensuring that citizens and businesses are satisfied with them.

B4  As of 2015, nearly 90% of the most frequently used government transactions can be conducted online. This is a significant increase from 76% in 2013. Based on a survey conducted last year, 77% of citizens said that they were very satisfied with government digital services^[1].

B5  Our efforts have also received international recognition. In 2016, we maintained the top position on two rankings – the World Economic Forum’s Global Information Technology Report Index, as well as the Waseda-International Academy of CIO International e-Government ranking. These are international surveys which rank countries according to their efforts, results and potential in the area of Digital Government.

B6  While we have done well, we should not be complacent. Advances in digital technologies are evolving rapidly and we have to keep up. As Minister of State Janil Puthucheary shared yesterday at MCI’s COS, we also need to ensure that our digital services do not leave the elderly and the less tech-savvy behind, and extra support must always be there to help them when they need. One example is the Silver Infocomm Initiative which helps our elderly stay connected.

B7  Our aim is to make government digital services more pervasive more user-friendly, for both businesses and citizens, young and old. We want users to be able to transact smoothly with minimal assistance. Let me outline three broad approaches to  achieve this:

B8  First, we will do more to customise digital services to the needs of different stakeholders.

B9  Several government agencies have already been doing this. I am glad that Mr Liang mentioned the efforts of IRAS. In January this year, IRAS released the first phase of the redesigned MyTax Portal, which is more intuitive and mobile-optimised so that you can file taxes on your smartphone. Of the users surveyed, 90% expressed no difficulty in accessing the services after the revamp, as compared to 40% before, so it is a significant improvement.

B10  Second, we will leverage technology to simplify and streamline online services.

B11  As Ms Foo Mee Har mentioned just now, one inconvenience that you hear from people is that they need to submit the same data repeatedly to different government agencies, and provide supporting documents to verify their data. To address this, we launched MyInfo last year to allow citizens to automatically fill-up digital forms with just one click. This will reduce the time spent filling up forms or having to submit supporting documents like the CPF statement repeatedly to different agencies.

B12  Later in the year, all SingPass users will be able to make use of this MyInfo service to automatically pre-fill their basic details such as name, NRIC, address and contact number, as soon as  an online form loads. It will be an automatic click and the information will be provided. By 2018, citizens can look forward to this convenience for more than 150 government digital services.

B13  To extend these benefits to the commercial sector, we will embark on a pilot for citizens to use MyInfo when opening bank accounts. This will begin in the second quarter of 2017 with OCBC, UOB, DBS and Standard Chartered Bank.

B14  We will also continue to make e-payment more convenient, seamless, and user-friendly for citizens. Minister Vivian had already spoken about this earlier, and our plans to enable the transferring of funds on a mobile phone.  We are also exploring a one-stop platform for citizens to make payments to the Government through their mobile phones. This can potentially consolidate bills from different public agencies, saving citizens the trouble of having to go through multiple channels. 

B15  Third, we will continue to improve government digital services for businesses.

B16  In the same survey that we did last year, we found that 68% of businesses surveyed last year were satisfied with the Government’s digital services^[2]. This is compared to the 77% of citizens who were very satisfied as mentioned earlier. So clearly there’s still more work to be done on the business side.

B17  Many businesses need to go through the process of applying for grants and government licences.  We will strive to make these transactions more convenient.

a.   The Business Grants Portal was announced last year during Budget. It is a one-stop shop for businesses to identify and apply for the right grant.  The portal now offers six grants, including SPRING’s Capability Development Grant.

b.   By the end of this year, businesses can look forward to four more grants, including BCA’s Mechanisation Credits and NPark’s Landscape Productivity Grant. We will continue to review and streamline the grant application processes.

B18  For licence application, we have rolled out LicenceOne progressively since 2014 to provide businesses with a one-stop business licensing portal. The portal contains several pro-business features, like an integrated application for multiple licences from different agencies and an integrated dashboard to check the status of applications. Currently, there are over 80 licences from 16 agencies on LicenceOne. By FY2017, more than 100 licences will be available.

B19  Payment is also an important transaction for businesses. With more businesses now moving towards e-payments, we will improve the e-payment landscape to make it more convenient for them to transact with the Government.

B20  In June 2016, the Accountant-General Department or AGD launched the Vendors@Gov mobile app which caters specifically to the needs of SMEs that transact frequently with the Government. 65% of these businesses have since downloaded the app. In addition to submitting electronic invoices to government agencies, these businesses can also receive alerts on the status of their invoices and accounts and keep track of their projected cash flows. So this will save businesses precious time. Indeed, within three months of the launch, we saw a 21% drop in the number of payment-related enquiries. We are also very proud that AGD clinched the “best mobile government service award” at the World Government Summit last month.

Supporting innovation and growth through procurement

B24  Next, let me highlight how we support businesses through government procurement.

B25  Many members spoke on this  issue, and asked that the Government do more to support local companies especially SMEs through procurement. I understand these sentiments. Indeed Government procurement has played a useful role over the years in spurring lead demand, and building capabilities in certain industries like defence and water.

B26  But let us also remember that government procurement must first and foremost abide by the key principles of fairness, transparency and value-for-money. Our procurement processes are also governed by a clear set of rules, with checks and balances, calibrated to the value and risk of purchases. This is a point that I believed Ms Sun Xueling made about the needs to have safeguards against potential abuses. 

B27  So in our desire to help companies, we must never compromise our principles of government procurement. Government support should not become a crutch for uncompetitive companies.

B28  I remember what former civil servant Mr Philip Yeo used to tell us about his work at Chartered Industries, or CIS. He was chair of CIS for many years. CIS, if members would recall, was set up as an independent corporate entity, to manufacture small arms ammunition for the SAF. But as Philip Yeo used to remind us, then Defence Minister Dr Goh Keng Swee was insistent that CIS be treated on an arms-length basis – it had to bid for MINDEF work in competition with other foreign suppliers. So CIS was motivated and in fact forced to work hard to maintain a lean and efficient operation, and it rose to the occasion and delivered good service to the SAF, in competition  to foreign suppliers

B29  So that’s the approach we should take. Maintain stringent standards in government procurement. Ensure that these standards are fair, transparent and offer value for public monies. But at the same time as we go about this work, we also build capabilities in our businesses and  SMEs, and give them the maximum opportunities to win government procurement tenders on their own merit.

a.    I think this is a better approach than to artificially set aside a certain proportion of Government tenders for SMEs. 

B30  If you look at the statistics, so far, our SMEs are doing quite well. Each year, over 80% of government contracts, comprising about half of total government contract value, go to SMEs. This is a respectable result even when compared to the developed countries like the UK and the US. By  number of contracts, more than 40% were won by companies with revenue of less than $10 million. Of these contracts, almost half were won by micro-enterprises with revenue of less than $1 million.

B31  Going forward, we will continue to do more through government procurement. So let me elaborate on some of the measures.

B32  First, government agencies are making use of crowdsourcing methods to look for solutions. This approach is ideal for the Government to partner businesses, the community and individuals to reach out to smaller players to provide innovative solutions, which several Members spoke about.

a.    For example, at the recent  Designathon 2017, organised by the DesignSingapore Council, there was a focus on developing solutions for persons with disabilities., The winning team comprised students from the Singapore University of Technology and Design, and they developed a device for converting a manual wheelchair into an electric one at a fraction of the price of a regular electric wheelchair.

b.    Another example is an idea that emerged from HDB’s Cool Ideas Challenge. This is an idea for a safer gas hob because fires caused by unattended cooking cause a significant proportion of fires in residential buildings. So the students from Republic Polytechnic and  Anglo Chinese Junior College proposed a gas hob with a safety device that cuts off the gas supply when the flame goes out, preventing fires. They worked with City Gas,  and   Aerogaz,  commercialised the idea and eventually brought this to market in 2015. So crowd sourcing, I think, is a useful platform for Government to engage the community, engage small players, and come up with more innovative solutions.

B33  Second, government agencies will continue to ensure that tenders are appropriately sized to give SMEs a chance to compete for them, as suggested by Dr Tan Wu Meng and Mr Henry Kwek.

B34  Here, a balance needs to be struck. Some contracts need to be of a large enough size for the supplier to invest in innovative solutions or technology to improve productivity. At the same time,  government agencies are interested in ensuring that tenders are not too large, that only a very small number of suppliers can tender for the project. And that’s why, even today, a very high proportion, of about 90% of contracts called by government agencies each year, are below $100,000 in value. There were more than 30,000 of such contracts in 2016. Only about 5% of contracts are above a million dollars.  

B35  Several members spoke about construction projects, and when we think about construction projects, we think about the big ones entailing hundreds, and even billions of dollars. But in fact, for construction contracts, about 80% of them have values that are less than $650,000  and can be carried out by contractors registered with the Building & Construction Authority without a track record. More than 90% of construction contracts are less than $10  million, and are accessible to the smaller players.

B36  For some larger projects, where it is appropriate, the Government may call separate tenders for different parts of the contract, or different parts of the project, giving smaller companies an opportunity to participate. We are already doing this.

a.    For example, the construction of a single MRT line is often carried out in many parts.

b.    Separate tenders may also be called for individual MRT stations, or MRT stations with connecting tunnels, depending on the complexity of the railway lines. Often, smaller companies will tender only for the “station” project, and then larger companies will tender for the “station with tunnel” contracts. So this is already happening for MRT projects.

c.    Some smaller companies have also formed consortiums with others to tender for larger and more complex projects.

B37  Third, we will help SMEs without  track record to participate in government procurement and again, here, there were various suggestions made by members including Ms Cheryl Chan, Mr Chen Show Mao, Mr Saktiandi Supaat, Ms Sun Xueling, and Mr Yee Chia Hsing).

B38  Minister Iswaran had highlighted the new scheme called SPRING’s enhanced Partnerships for Capability Transformation through government lead demand, or Gov-PACT, in MTI’s COS last week. Gov-PACT provides grants to SMEs and start-ups to collaborate with and  undertake innovative projects initiated by Government agencies. SMEs and start-ups will be funded at various stages of product and solution development for these innovative projects

a.    So under this scheme, SMEs and start-ups whose projects are approved are eligible for up to 70% funding support for the qualifying development costs.^[3]

b.    One example is the Smart Elderly Monitoring and Alert System, which is now being piloted in Yuhua. The system helps families take better care of elderly dependents, by allowing them to monitor the safety of the elderly at home and sending them alerts when the mobile panic button is pressed during an emergency or when living patterns are out of the norm that  are detected. This is a very useful system that is now being piloted. HDB worked with the SMEs that were involved  to develop the business model, paired them with Telcos, and helped to deploy the system. And hopefully this works well in the pilot, and we can scale it up in more housing estates.

B39  Last year, we highlighted the Accreditation@IMDA scheme, which helps promising and innovative Singapore-based technology start-ups to establish their credentials.

a.    So far, the scheme has helped 59 companies by providing assistance to strengthen their products, and advice on  fund raising and business pitches.

b.    17 of these companies have been accredited, out of which 13 have won contracts. We expect more to do so over time. They will benefit from the $60 million of Government pipeline opportunities that have been generated to-date.

B40  A good example of an SME that has benefited is SenseInfosys. SenseInfosys focuses on data fusion, analytics, and fraud detection in military-grade intelligence projects in the security and maritime domains. Its product enables enterprises to analyse data to gain timely and accurate insights to improve their operational processes and make more informed decisions. The company was founded in 2013 and it received accreditation in May 2016. It subsequently went on to win six government projects when they were still a young company without a significant track record. And last year, the company raised $2 million from investors to help accelerate the company’s growth.

B41  We are also introducing platforms to facilitate small players to take part in government contracts.

a.    One such platform is GeBIZ Mall, which makes it easier for suppliers who want to sell to government agencies.

i.          Under GeBIZ Mall, Suppliers are given electronic “shelf-space” to sell their goods and services. Each supplier can list ten items on their online “shelf” for free. Government agencies can then buy directly from these suppliers if the purchases are below $5,000, or they can call for quotations.

ii.        Over the last five years, an average of 5,000 orders per year  have been placed through GeBIZ Mall. This amounts to a value of $3.5m per year. And we intend to encourage greater participation in this platform.

b.    We are also making it easier for agencies to buy from smaller players. GovTech has started an experiment, it’s a website experiment called govBuy. This allows government agencies to post small projects or tasks for IT programmers to work on. And no track record is required to participate in this platform

B42  So these are the various things we are doing, and there’s one more that we will do to promote  best-sourcing practices and innovative solutions.

B43 Several government agencies have already adopted outcome-based procurement where the desired outcomes are spelt out, giving tenderers the flexibility to propose the solution.

a.    MOF, for example, has been working with other government agencies to implement outcome-based procurement in the cleaning, security and landscape sectors.

b.    MOE has been doing this for school cleaning since 2014. For example, its tenders for school cleaning list the sites to be cleaned, the quality standards, and the key performance indicators. And tenderers have the flexibility to propose an operations plan.

c.    Various ministries are also adopting more outcome-based contracts for their security services. For example, MOM’s tender for the provision of security services^[4] lists several desired performance outcomes and then invites tenderers to propose technology to optimise manpower resources. And the examples of technology that had been proposed include an automated self-service system for pass exchanges, and a license plate recognition system. So through such outcome-based standards, we can encourage more innovative solutions from the private sector.

B44  In situations where the results are uncertain and some experimentation is required, we are encouraging agencies to adopt a spiral contracting approach.

a.    This means that the agencies will award the project in phases, starting with a more experimental phase. If the initial experimentation stages are successfully completed, then the subsequent phases of the projects are awarded to the same supplier to continue.

b.    One good example of this is what JTC did with the tender to remotely manage its facilities and estates. Tenderers were not confined to any particular solution. And the spiral contracting approach was used where, which started with a proof of concept to test out the solution on JTC’s premises, and then after the proof of concept,  an evaluation was made to see which is the best, and then a decision made whether to proceed with the full roll out of the solution. That’s another useful approach that more and more agencies are adopting.

B45  Mr Zainal Sapari gave various suggestions on fair procurement practices. To respond to his points on policy changes that affect cost, the government makes it a point to announce these in advance, as we have done with the introduction of the Progressive Wage Model. This allows suppliers to factor in their higher wage costs when bidding for contracts. If a contract had started before the announcement and would continue beyond the effective date of the new policy, MOF has asked buyer agencies to accede to requests by suppliers for mutually agreed termination to allow a fresh tender to be called.

B46  On the issue of liquidated damages, I will confirm that these are not intended to be punitive. The government’s procurement rules clearly require agencies to ensure that any liquidated damages imposed are commensurate with the losses suffered if the supplier fails to fulfil contractual obligations. We encourage the union and suppliers to seek clarifications and give feedback to the agency involved if there appears to be unfair clauses in their tenders.

B47  Dr Tan Wu Meng and Mr Zainal Sapari also spoke about government’s ability to shape labour market norms through responsible procurement.

B48  I agree with them and the Government will do its part. We want to work with service providers who are responsible employers, and who adopt good HR practices. So wherever possible, government agencies will take into consideration the HR and  tripartism records of tendering companies. In particular, we focus on the sectors that are more at risk of cheap-sourcing and suppressed wages, like the cleaning, security, and landscape sectors. For example, the Government buys only from accredited service providers that adopt the Progressive Wage Model for cleaners. We also proactively encourage service providers to adopt the National Wages Council guidelines on wage increments for their employees, and to factor in wage increments in multi-year contracts.

B49  As mentioned at MOM’s COS yesterday, we will also be putting in place further measures to safeguard the basic employment rights of outsourced workers under government contracts.

B50  Mr Liang Eng Hwa asked about capabilities in procurement. This is indeed an area of priority. We have started the work to build up capabilities to enable government agencies to be smarter buyers and we will continue to do so. This includes understanding the industry and technology  well, so that we can stay on top of what the suppliers are doing, and ensure that tender specifications are well crafted. These capabilities can help to minimise the likelihood of being locked-in to certain vendors, especially to incumbent suppliers, which is a point that Ms Sun Xueling made just now as well.

Continue to Strengthen Singapore’s Reputation as a Trusted International Financial and Business Centre, and Ensure Competitiveness

B51  Next, let me touch on how we can foster a corporate regulatory environment that allows us to be  competitive, while strengthening our reputation as a trusted international financial and business centre.

B52  Dr Tan Wu Meng raised several points about corporate regulations. MOF continually reviews our corporate regulations to ensure that they remain robust yet business friendly.

B53  Last year, ACRA had undertaken reviews in areas such as the requirements on holding annual general meetings (AGMs) and filing annual returns. We will simplify these requirements to give greater clarity to companies. We will exempt all private companies from holding AGMs, provided they meet certain conditions. We will also remove the requirement for companies and limited liability partnerships to use the common seals. This will help reduce business costs.

B54  Other than amending regulations directly, we are also cutting red tape and improving our systems and processes, to reduce compliance and regulatory transaction costs for businesses.

a.    For example, TradeFIRST (Trade Facilitation & Integrated Risk-based System) is an assessment framework that Singapore Customs uses to determine the type of trade facilitation that is to be provided to a company. The checklist was revised to reduce the number of criteria by about 50%. With the revised criteria, each trader can save around 14 man-hours of application time.

b.    Another example is the revamped electronic transaction system, BizFile+, which was launched by ACRA in January 2016. This system has streamlined processes, removed over 100 ad-hoc fees and included mobile options for key transactions. The enhancements will benefit 450,000 registered business entities.

c.    The tax-filing process will also be improved for businesses this year. IRAS has extended tax filing using a simplified corporate tax return to companies with annual revenue of less than $5 million, instead of $1 million. This will help an additional 28,000 companies ease their tax filing compliance.

B55  We will continue to review and strengthen our regulatory and governance framework so that it is more robust and transparent. We will amend the Companies Act to allow companies registered in another jurisdiction to transfer their registration to Singapore, or what is also known as inward re-domiciliation. This will make it easier for foreign companies to relocate their businesses here to tap on Singapore’s strengths and ease of doing business.

B56  We will also amend our laws to require companies and limited liability partnerships to maintain non-public registers containing the particulars of their beneficial owners. By enhancing efforts to combat money laundering and terrorism financing, this will strengthen our position as a trusted financial centre.

B57  Besides updating our corporate regulations, we also want to ensure that our overall regulatory environment remains conducive to business innovation. As the Finance Minister mentioned in his speech, we are creating more space for innovation. through regulatory sandboxes where rules are suspended to encourage innovation and experimentation. 

B58  Ms Cheryl Chan is right that in doing so, we also have to exercise judgement and make sure that we are fair to the different entities and particularly to ensure a level-playing field to all entities that are being regulated. There are also ongoing efforts by the Pro-Enterprise Panel to address regulatory concerns that businesses face. The Panel comprises both business leaders and senior public officers and  have received more than 1,900 suggestions, with over 1,000 of these linked to changes to rules and regulations.

Economic Competitiveness

B59  Finally, several MPs raised points about taxes. Assoc Prof Daniel Goh proposed for opt-in tax deferment for retrenched workers for six months. I believe that this is a point that Ms Foo Mee Har had suggested in the Budget debate and this was addressed by the Finance Minister. I will just reiterate that we already allow taxpayers on IRAS’ GIRO scheme to pay their income tax in up to 12 monthly interest-free instalments. A taxpayer who faces financial hardship may apply to IRAS for longer instalment plans.

B60  With regard to Mr Low Thia Khiang’s query on the considerations for introducing new taxes, I believe the Finance Minister has spoken about them in his Budget Round-up Speech. Let me just reiterate a few points

a.    First, we would all like the Government to do more, but we must always ensure that our fiscal system is one that secures a better future for the next generation, and not leave them with a bigger debt burden. Any programme we put in place must be sustainable for the long-term. That is why we are studying all options carefully to determine the best way to raise revenues to support our future expenditure needs.

b.    Second, we must ensure that the overall fiscal system remains competitive, supports economic dynamism, and reinforces individual effort. So whatever adjustments we make, these key principles remain. Then we can continue to keep our economy growing and create more jobs for Singaporeans.

c.    In this regard, Assoc Prof Randolph Tan is right that we also have to be mindful of income tax changes in other countries. Around the world, corporate income tax rates have been falling and some countries have announced plans to further reduce their corporate income tax rates. At 17%, our corporate income tax rate is still competitive internationally. But we will continue to monitor the trends and ensure that our tax system remains competitive and pro-growth.

d.    At the same time, I should add that our competitiveness is not just based on taxes alone. We compete on many other factors - our quality workforce, rule of law, good corporate governance and infrastructure. All this have helped to build Singapore’s reputation of trust, integrity and reliability; and given businesses the certainty to invest here for the long term. We will continue to build on these strengths and the CFE recommendations provide clear steps for us to take over the coming years.

e.    Finally, we want to maintain a progressive system of taxes and benefits.  It is a system where the higher income households contribute more of the taxes and the lower income households receive more of the benefits. This is also why we have designed our GST system with a permanent scheme of GST vouchers so that the overall system is progressive with the rich paying more. And this is how we help lower- and middle-income Singaporeans to have better lives, and build a society that all Singaporeans can truly benefit from. So we will continue to build on this progressive system of taxes and transfers, even as we consider revenue options for the future.

C.  CONCLUSION

C1  Madam Chair, the Singapore economy is now more complex and diverse than it was in the past. There are more interests and stakeholders involved. So no single command entity can drive our economy in command style. We need to forge stronger partnerships to reinforce our mutual efforts, tackle common challenges and move forward together. MOF and the government agencies are committed to  work together with all our partners  on this shared effort. I believe I have addressed Members’ questions on the first cut, and I will leave SMS Indranee to take the others. Thank you.

^[1] Quoted from GovTech G2C survey conducted in 2016 for FY15, for government e-services.

^[2] Quoted from GovTech G2B survey conducted in 2016 for FY15, for government e-services.

^[3] Development costs include manpower-related costs, professional services, prototyping-related services, technical support services, equipment, materials and consumables, and software costs as well as intellectual property acquisition.

^[4] At MOM’s Service Centres and headquarters.