Second Reading Speech by Acting Minister for Transport and Senior Minister of State for Finance Chee Hong Tat on the National Productivity Fund (Amendment) Bill 2023

1 Mr. Speaker, on behalf of the Deputy Prime Minister and Minister for Finance, I beg to move, “that the Bill be now read a second time.”

Introduction

2 Sir, this Bill seeks to expand the scope of the National Productivity Fund (NPF) Act to cover investment promotion. 

a. Specifically, Clause 3(b) of the Bill amends the NPF Act to allow NPF funds to be used to anchor quality investments in Singapore.

b. Clause 6 of the Bill amends the NPF Act to extend specific powers of the Productivity Fund Administration Board (or PFAB), which administers the NPF, to also cover investment promotion activities.

3 Let me explain why we are making this change. Investment promotion has been a cornerstone of Singapore’s economic growth over the years.

a. Pre-independence, there was significant unemployment in Singapore. The Government quickly recognised that rapid industrialisation and investment from multinational enterprises, or MNEs, were needed to provide jobs for large numbers of unemployed workers.

i. To accelerate the pace of industrialisation and inflow of investments, Dr. Goh Keng Swee established the Singapore Economic Development Board (EDB) in 1961 to attract MNEs to Singapore. 

b. The Government built on the initial momentum to establish Singapore as a credible location for higher-value and more advanced economic activities.

i. We built up key infrastructure – we set aside industrial land, and developed our utilities, transport and communications networks.

ii. But hardware alone is not enough. We also invested in other intangible fundamentals – our operating software and the skills of our workers. 

iii. We developed our workers, equipping them with skills for the new jobs that would come.  We also fostered strong tripartite relations, as a foundation for economic stability and growth.

iv. We put in place a strong governance and legal framework, so that investors would have the confidence that their business operations and assets would be protected, contracts would be honoured and there is strong rule of law. 

c. With these conditions in place, we attracted MNEs such as Texas Instruments, Philips, and Panasonic (previously known as Matsushita) to set up in Singapore. They brought with them production capabilities and management know-how. Local companies that supplied to these MNEs benefitted as they built up capabilities and gained access to the global market. Similarly, workers employed by these MNEs and their local suppliers benefitted – they were able to earn a stable income and acquired valuable skills to progress in their careers. 

d. Through these investments, we grew our economy and created employment opportunities for Singaporeans over the years. 

4 Today, our economy is in a stronger position.

a. Singapore is a regional and global hub for many MNEs, and a leading international financial centre. 

b. We are a global trading hub with strengths in transportation and logistics, anchored by our world-class air and sea ports. 

c. We also have a vibrant manufacturing sector, with key segments like electronics, chemicals and biomedical science.

d. These generate good jobs for our people, and deepen the expertise and sophistication of our economy, which in turn enhances Singapore’s competitiveness against other cities.  

5 But we cannot take this for granted, as nothing in our story of survival and success is pre-ordained or guaranteed to last forever. We know that the external environment has become more challenging, and competition for investments is increasing. 

a. With the Base Erosion and Profit Shifting (or BEPS 2.0) initiative, we will have less scope to use tax incentives as a tool to attract new investments. 

b. At the same time, countries are intensifying their efforts to attract new investments, particularly in strategic sectors such as semiconductors and biomedical manufacturing.

c. Several countries have already announced generous incentives to anchor manufacturing activities. The US CHIPS and Science Act sets aside S$69 billion to support semiconductor manufacturing, R&D and workforce development. India has similarly announced a S$13 billion package to attract investments in semiconductor manufacturing.

d. We will not be able to, nor should we try to, outbid these major economies in terms of spending. But we will certainly have to do more to ensure that Singapore remains competitive and relevant on the global stage.

6 We must therefore double down on our productivity efforts and ensure that our workforce remains highly skilled and competitive. Only then can we remain attractive to foreign investors, grow strong local companies that can do well in domestic and overseas markets, and ensure that Singapore remains top-of-mind as a choice destination for investments and talent.

7 To demonstrate our commitment to attracting new investments, the Deputy Prime Minister and Minister for Finance announced in the FY2023 Budget Statement that the Government will top up the National Productivity Fund (NPF) with $4 billion and expand the scope of the Fund to include investment promotion as a supportable activity.

a. We are setting aside funds when we can, to ensure that we have the resources ready to anchor new investments when there are opportunities to do so. This is crucial because MNEs make their investment decisions based on business and investment cycles, which may not align neatly with funding mechanisms bound by the terms of Government.

National Productivity Fund

8 This Bill will amend the NPF Act to effect the changes announced at Budget this year. 

9 If Parliament approves this Bill, funds from the NPF can be used to support all three prongs of Singapore’s economic growth strategy.

a. We will continue to tap on the NPF to support local enterprises to improve productivity and generate greater value. One scheme that the NPF has supported is the Construction Productivity and Capability Fund (CPCF). It offers incentives to help firms adopt productive technology and develop their workforce to raise productivity in the construction sector. To date, the CPCF has helped over 10,000 companies, with more than 90% being SMEs. 

b. We also want to continue investing in CET and lifelong learning to further strengthen our human capital. The NPF supports initiatives such as the SkillsFuture Work-Study Programme, which has helped more than 7,000 fresh ITE and Polytechnic graduates deepen their skills through integrating on-the-job training with classroom learning.

c. With the proposed expansion, we will also be able to tap on the NPF to anchor quality investments from MNEs in Singapore. This includes the use of incentives to attract companies in advanced industries to make new manufacturing investments here. It can also support efforts by MNEs to train and upskill local workers.

Conclusion

10 Sir, as we compete for foreign investments, we will also continue with investments in our local enterprises, including our SMEs, to help more companies improve productivity and scale up their business.  

11 As I explained earlier in my speech, attracting MNEs to Singapore will benefit our local companies as they can access opportunities to get more contracts, enhance their capabilities, including upskilling of workers, and developing strong track records to support their overseas expansion.    

12 This is how we ensure that each new investment we bring in strengthens the vibrancy of our economy, enhances our competitiveness, and ultimately benefits Singapore and Singaporeans.

13 Mr. Speaker, I beg to move.