COS 2021: Spending Wisely on National R&D

Assoc Prof Jamus Jerome Lim (Sengkang): Chairman, I wish to declare that I work at a research-oriented Institution of Higher Learning.

In 2017, our national expenditure on research and expenditure, as a share of national output, amounted to a low shy of 2%. This amount is actually below the global average of 2.3% and, perhaps, more tellingly, for a nation that seeks to be a knowledge-based economy is also significantly below the amounts that other technology-seeking economies have devoted. The United States, for example, spends 2.8%, Japan 3.2%, Korea 4.6% and Israel 4.8%.

Our companies are also decidedly old economy. Singapore has few firms for which intangible assets make up the majority of the balance sheet. Even one of the top Singapore-based Internet and E-commerce firms, SEA Limited, reports that only about 1% of its assets are intangible. 

There is solid evidence that R&D investments can improve and be a boost to productivity via catalytic effects on innovation. The need to boost productivity is especially poignant in light of Singapore’s poor productivity performance and in effect that has been collaborated study after study. It can also pay for itself since heightened productivity would itself grow out our GDP pie.

Increases in national expenditure appropriately directed for R&D is, therefore, an evidently attractive avenue for not just boosting productivity and, therefore, growth but also helping companies and our people stay at the forefront of advances in the digital economy and other artificial intelligence revolution, green technologies, modern manufacturing and biotech innovations.

Civil servants responsible for disbursing grant support for firms confidentially share that they often face difficulty in identifying and allocating grant financing. They add that local businesses remain reluctant to fully embrace R&D, even where financial support is available. It is critical that we convince as many local firms as possible, especially those in the SME sector, that their continued success hinges on cultivating and embedding an innovative mindset.

Just as pertinent, we have to be sensitive to the transition process and channel R&D funds away from certain industries that our economy has traditionally relied on such as petrochemicals, wholesale trading or back-office finance that we deem to be inconsistent with our 21st century economic model. Instead, we can re-direct R&D grants and subsidies toward the sunrise industries that the Government has already identified.

 Finally, I would caution this House that our notion of sectors deemed worthy R&D financing for innovation need not be wedded to solely high tech industries such as innovation and communications technology or biopharmaceuticals, but also much more traditional goods and services.

The vast majority of our government grants via A*STAR or IMDA, even when not explicitly earmarked for technology start-ups, are still heavily directed towards supporting business digitalisation. While important, innovation may occur in unexpected ways. For example, we can look at the continued refinement of modern Singapore cuisine, developing new techniques for sustainable landscaping and energy efficient building design, pioneering new elderly care methodologies, or identifying new tools to support advanced manufacturing, as Minister Heng has already emphasised.

More generally, candidate projects with the highest probability of success are seldom best identified via tightly defined conditions, which speaks to the need for us to be more accommodating in our assessment methods and more liberal in our qualification criteria for Government R&D grants. Under what conditions will MTI be willing to target and increase an R&D expenditure to bring us closer to the spending for technology driven economies? This amount, to be funded from public and private sources, will ostensibly be directed toward a broad range of innovative activity across the economy and especially in existing SMEs with innovative activity. 

Ministry of Trade and Industry
2 March 2021

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