COS 2022: Clarifications on Exports, FTAs, and Productivity

MP Jamus Lim

Assoc Prof Jamus Jerome Lim (Sengkang): Thank you, Chair. I have three clarification questions: two for Minister Gan and one for Minister Tan.

For Minister Gan, he had gone into some detail in explaining the evolution of our economy toward exportable services. Just to help us get a better understanding, I wonder if he is able to give us some handle on the share of exports that are currently attributable toward services as opposed to more traditional goods.

I ask this in part because the traditional export-oriented industrialisation model for which Singapore subscribed to is such that it is targeted at goods export rather than services. And services exports are a relatively new and under-tested model. India and the Philippines come to mind and their experiences have not been as promising.

My second question has to do with FTAs and utilisation of these FTAs. Minister Gan had spoken about them. I wonder if he is able to share in terms of the average utilisation rate for all the FTAs that Singapore has signed.

I ask this because based on the available data, I see that, for example, the Singapore-US FTA’s utilisation is only at 15%, the Korea-Singapore FTA is 8%. This goes down to 3% for the Jordan-Singapore FTA and as little as 0% for the Singapore-New Zealand and Singapore-Panama FTAs. The premise of the question is whether we are devoting, perhaps, excess resources to signing new FTAs to the detriment of other positive initiatives by the Ministry.

My third question is directed at Minister Tan. Here I wish to echo Member Foo Mee Har’s call for expanding on-demand productivity enhancement consultation. This is in part because as a business school professor and also understanding the research, SME productivity shortfalls can actually be extensively explained by managerial deficiencies, such as old-school basics like proper inventory management and HR practices and bookkeeping, not so much the sexy tech upgrades that people often think of. So, here I wonder whether the Ministry will have some efforts to entail public-private partnerships in this particular aspect.

Mr Gan Kim Yong: Chairman, I thank Assoc Prof Jamus Lim for the question.

Services trade constitute about 40% of our total exports. So, it constitutes a very important component of our total exports and we will continue to help our companies to export our services. As I mentioned earlier in my speech, there are significant opportunities in the export of services, including the green economy as well as digital services. This will also include our professional services.

In terms of the FTA utilisation, for FTAs, we have to look at it carefully. On the one hand, FTAs provide preferential access for our exports in terms of tariff savings because they allow us to have tariff-free access to important markets. The tariff savings constituted, I think, if I remember correctly, about $1 billion last year. So, that is an important savings for our businesses. It means that, otherwise, they would have to pay $1 billion in tariffs to other countries.

But FTAs are not just about tariff savings because they also provide greater transparency for the rules and regulations that will allow our businesses to be able to do business in these countries more easily. Certain FTAs also provide protection in terms of our investments in these countries and that will allow our companies that have investments in these countries to have security with regard to their investment, to allow them to be able to operate freely within those markets.

So, I think we have to look at FTAs in its totality. It is not just specifically on tariffs but it allows many other forms of access. A lot of these access may not be recorded, including protection of IPs and protection of investments. And also, it provides a framework for data exchange. Some of these are very critical to our businesses when they do business in other countries. So, this is the overall benefit of FTAs for Singapore.

12.45 pm

Dr Tan See Leng: To Assoc Prof Lim’s point for on-demand consultancy productivity, today, all our SMEs are welcome to drop in to any of our SME Centres or Connect with ESG. On an individualised basis, as I have said, we try to not just have bespoke advice for the larger enterprises but to the extent that is possible, we try to cater and tailor it to SMEs. You can appreciate the fact that SMEs come from a very wide diaspora of different businesses, different sectors, different industries. So, in terms of trying to help them, to reach them, there is not a one-size-fits-all perspective.

With regard to public-private partnership, we have started PACT, as I have said earlier on. One of the examples that we have done is a company called Excelpoint Technology. I do not have all the details at this particular point in time to share, but I am happy to answer it separately. Importantly, we welcome this type of public-private partnership. If the hon Member Assoc Prof Lim can envisage that there are more of these partners, earlier on, towards the end of my speech, I have constantly encouraged SMEs to take that first step. If there are partners who are willing to partner us to expand the range of service offerings for our own local enterprises, to bring them, to groom them, to develop them into large local enterprises, and eventually, to become a Singapore global enterprise, I think we would very much welcome them.

We are all after the same thing in this aspect. What we are trying to do is to grow Singapore enterprises into large local enterprises, put them on the world map and, at the same time, offer our Singaporean employees, our Singapore Core, a chance at being able to go global. I hope that gives him the reassurance.

4 March 2022
Ministry of Trade and Industry

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