Progress Report and Outreach of Productivity and Innovation Credit (PIC) & National Productivity Fund (NPF)

Date: 21 November 2011

PQ for Oral Answer:

To ask the Deputy Prime Minister and Minister for Finance (a) what is the level of adoption of the Productivity and Innovation Credit (PIC) and other productivity-related initiatives by the SMEs; and (b) how can the Ministry improve on its outreach to help SMEs fully leverage on Government schemes to help them transform and improve productivity to cope with the increase in levies for foreign workers and stricter criteria for S Pass applications.

PQ for Oral Answer:

To ask the Deputy Prime Minister and Minister for Finance (a) if he will provide a progress report on the effectiveness of the enhanced National Productivity Fund and the Productivity and Innovation Credit since their inception; (b) how many employers have drawn from them; (c) to what extent has productivity in these companies improved as a direct result; and (d) whether the effects translate to better wages and working conditions for workers.

Reply by DPM and Finance Minister Tharman Shanmugaratnam:

1. The Productivity and Innovation Credit (PIC) scheme was introduced in Budget 2010 and significant enhancements to the scheme were made in Budget 2011. We expect businesses to make their first PIC claims when they file their annual income tax returns by November this year.  Based on the tax returns that have been filed with IRAS so far this year, about 9800 or 20% had claimed PIC benefits.

2. It is therefore a little too early to assess the take-up.  However, IRAS has been putting great effort into promoting the PIC scheme, especially to SMEs.  Since last year, IRAS has sent brochures explaining the scheme to all companies, and conducted 130 seminars for some 19000 participants.

3. As for the National Productivity Fund (NPF), about $600 million has been committed for productivity initiatives. The National Productivity and Continuing Education Council (NPCEC) has identified 12 priority sectors to focus its efforts. These 12 sectors account for almost 40% of our GDP and 50% of the workforce. Productivity roadmaps for most of these sectors have been drawn up and endorsed by the NPCEC.

4. The NPCEC has also supported a number of "horizontal" initiatives such as the iSPRINT scheme, which incentivises SMEs to adopt information and communications solutions. These cross-cutting initiatives will raise productivity across many sectors.

5. Some examples of how the NPF has benefited companies and workers include the following:

a. In the traditionally labour intensive construction sector, about 900 companies have received help to adopt new technologies, build capabilities and train workers. For most of the other projects which are in progress, productivity improvements of at least 20% are expected upon completion. Some companies have achieved improvements of up to 70%.

b. Under the Inclusive Growth Programme (IGP), which aims to improve the skills and wages of some 25,000 low-wage workers, $26 million has been committed to some 450 projects covering 21,000 local low-wage workers. Two-thirds of the workers involved in these projects are expected to see their wages rise by at least 10% when the projects are completed. This is over and above the regular increments that the companies would have given to the workers. The training that these workers receive from the projects will also help them to perform higher value-added jobs in future.

Publicity of schemes to SMEs

6. Raising awareness and improving the access of SMEs to the productivity schemes is a continuous effort for all the government agencies involved.

7. Besides the efforts to promote the PIC scheme that I mentioned earlier, SPRING works closely with the Trade Associations and Chambers (TACs), the Enterprise Development Centres as well as industry experts to reach out to SMEs and encourage them to take full advantage of the schemes available. TACs can in fact play a larger role to promote productivity, including devising ways in which their members can collaborate to enhance productivity. The Government will lend them full support.