24. Our key priority therefore is to ensure a strong, innovative, and vibrant economy. This is absolutely essential to secure good jobs and better lives for all Singaporeans, and on a sustained basis.
25. Since our early days of independence, we have been able to defy the odds and consistently achieve good economic performance. But we cannot afford to be complacent, especially in a more complex and volatile external environment.
26. In past years, some had suggested that Singapore should slow down; don’t have to grow so quickly. Indeed, this was what happened last year – our economy grew by just about 1%. But if we were to experience similarly slow growth for several years in a row, we will be in trouble. We will have no chance of improving our collective well-being. Singaporeans’ living standards will be dented. We will not be able to afford the social services we need. And in the end, lower-income workers and families will be hit the hardest.
27. We therefore make no apology for pursuing growth. To be clear, we are not going for growth at all costs. There is a limit to how fast we can grow due to the tighter constraints we face in land, labour, and carbon. But by focusing on productivity and innovation, we can push the frontier and grow at an average of about 2% to 3% each year over the next decade.
28. Now, this is an ambitious goal given our stage of economic development. But we must aim high, so that Singapore keeps moving forward, and our people continue to enjoy more opportunities and a better quality of life.
Anchoring Quality Investments
29. A crucial enabler for growth is our ability to attract high-quality and high-value investments to Singapore, because such projects bring the latest know-how and capabilities, and create good jobs for Singaporeans.
30. So far, our investment pipeline has been healthy. Despite a challenging external environment last year, EDB exceeded its targets, and brought in investments which are expected to create over 20,000 new jobs.
31. But the competition for investments is getting tougher.
a. Governments around the world are rolling out vast subsidies to attract investments, especially in strategic industries. For example, in November last year, Japan announced that it would allocate 2 trillion yen, or about $18 billion, to support its semiconductor industry.
b. We cannot afford to engage in a “bidding war” with the major economies.
c. But neither should we stand still and just do nothing.
32. We will therefore enhance our investment promotion toolkit by introducing a new Refundable Investment Credit. (See Annex C-1.)
a. This is a tax credit with a refundable cash feature. It will support high-value and substantive economic activities, including the setting up or expansion of manufacturing facilities; new innovation and R&D activities; as well as activities in support of the green transition.
b. Essentially, this new tax credit will help us stay competitive and attract investments from global companies with the right know-how, and create good jobs for Singaporeans.
33. To support this and other investment promotion efforts, I will top up the National Productivity Fund by $2billion.
Building on Our Strengths
34. Besides anchoring new investments, we must build on our existing strengths, and upgrade the sectors where we have competitive advantages.
35. These advantages did not come about by chance. They are the result of many decades of hard work to restructure and to upgrade our economy. We did not just keep costs competitive. We also enhanced our capabilities and moved up the value chain, so as to justify the higher premiums for operating out of Singapore. And we are pressing on with these restructuring efforts through the Industry Transformation Maps.
36. Take semiconductors as one example. Singapore is not the cheapest location worldwide. But we have many things going for us – our excellent connectivity, our reliability and stable business environment, and also a critical mass of leading companies based here. And they operate across the value chain, from design, to wafer fabrication, to assembly and testing. The companies here do not produce cutting-edge 3 nm chips, which you will read about in the media these days. But they have carved out a niche in other types of chips, like specialty chips and NAND flash memory chips. These are critical enablers of automation, 5G, electric vehicles, and they are in high demand. And that is how this little red dot can be a key node in the semiconductor supply chain – we account on our own for more than 10% of the global semiconductor market, and 20% of semiconductor equipment in the world.
37. Likewise in finance, we are a leading centre in Asia, supporting businesses from all over the world. During this period of global uncertainty, we have been able to distinguish ourselves as a stable and trusted financial centre. The major financial institutions are keen to do more out of Singapore, and we are seeing a continued inflow of investments, capital, and talent.
38. So whether in advanced manufacturing or high-end services, the strengths we have today are not easily replicated by others. But the global competitive landscape is ever-changing and other countries, you can be sure, are seeking to overtake us. So in this Budget, I will set aside resources to reinforce our competitive lead.
39. I will top up the Financial Sector Development Fund by $2 billion. This will give MAS more resources to take full advantage of current opportunities, and extend our lead in the financial services sector – not just to do more in the core areas of banking, capital markets, asset management, and insurance, but also to build capabilities in new areas like FinTech, as well as green and transition finance.
40. I will set aside more funds for R&D – Research and Development – because this is how we push the frontiers of innovation across the entire economy.
a. In 2020, we launched the Research, Innovation and Enterprise 2025 (or RIE2025) plan, with a commitment of $25 billion.
b. I will invest a further $3 billion in RIE2025.
c. This will sustain our investments in research, innovation, and enterprise at about 1% of GDP. The additional resources will go towards research and related investments in national priorities such as advanced manufacturing, sustainability, the digital economy, and healthcare.
d. Our investments in R&D will take some time to translate into concrete outcomes. But we must take a long-term view. For these investments help to develop a critical mass of capabilities, ideas, and talent. They enable us to sharpen our competitive edge globally, as a knowledge-based and innovation-driven economy.
41. Besides a steady commitment to R&D, we also need to harness the full power of technology across our key sectors.
42. One critical emerging technology is Artificial Intelligence. AI is not just about ChatGPT or Large Language Models. It is a general-purpose technology, like electricity, the internal combustion engine, the computer, or the internet. It has the potential to transform a wide range of industries, and to enhance productivity across many existing processes, from drug discovery, to organising warehouses, or driving vehicles.
43. Singapore is already recognised as a serious player in AI development. We aim to go further – to build new peaks of excellence, and crowd in private sector investments. We have set out the plans to do so in the National AI Strategy 2.0.
44. To support this strategy and further catalyse AI activities, I will invest more than $1 billion over the next five years into AI compute, talent, and industry development.
a. Part of the investment will be used to ensure that Singapore can secure access to the advanced chips that are so crucial to AI development and deployment.
b. We will also work with leading companies in Singapore and around the world to set up their AI Centres of Excellence here. We want these Centres to spur industry collaboration and innovation, and drive greater value creation across the whole economy.
45. In tandem, I will allocate additional resources to catalyse investments in upgrading our Nationwide Broadband Network. With the additional investments, we aim to enable mass market access to broadband speeds of up to 10 Gigabits per second in the second half of this decade. This is 10 times faster than the broadband speed in most homes today. This also ensures that our connectivity infrastructure will be able to support technologies like AI and immersive media, as they become more pervasive in the future.
Developing Our Local Enterprises
46. We will continue to do more to invest in and strengthen our local enterprises.
a. We are helping smaller firms harness technology through pre-approved solutions, many tailored to the needs of specific industries. This enables the SMEs to “plug and play” and quickly achieve greater efficiencies and productivity gains.
b. As companies grow, their needs will become more complex, especially as they go overseas. We are providing more customised support to help these companies scale up, and we will continue with these efforts.
47. One way for our companies to level up quickly is to partner with the multinational enterprises (or the MNEs) that are based here. The MNEs set high requirements and standards for firms that wish to partner or supply to them. We cannot force MNEs to choose only local suppliers. But we can and we will help Singapore enterprises to meet the high standards, and to form win-win partnerships with MNEs.
a. Let me share an example from the aerospace industry. Aerospace parts must meet stringent manufacturing and safety requirements. So aerospace manufacturers like Rolls-Royce are highly selective in who they choose as partners.
b. Zincode, a local company, was supported by the Smart Manufacturing Joint Lab. This is a collaboration between A*STAR, Rolls-Royce, and Singapore Aero Engine Services Private Limited. The company was supported by the Lab to improve its image processing capabilities. As a result, it qualified as one of the approved partners for inspection work at the Rolls-Royce manufacturing facility here in Singapore. Zincode has now successfully captured new opportunities from other companies in the aerospace sector, and benefited from an increase in sales.
48. We want to help more companies like Zincode raise their capabilities and win new opportunities. Today, we have the Partnerships for Capability Transformation (or PACT) scheme. This supports collaborations between larger companies and SMEs, in the areas of supplier development and co-innovation.
a. I will enhance PACT to support partnerships in more areas – including capability training, internationalisation, and corporate venturing.
b. With the enhanced PACT, we aim to help more of our local firms plug into global supply chains, compete in markets abroad, and grow to become industry leaders in their own right.
49. For firms to be competitive, they also need to embrace sustainability. SMEs today sometimes still treat sustainability as an additional imposition and cost. But going green can be a competitive advantage. Because the MNEs are already looking to reduce their carbon footprint, and they expect their suppliers to do the same. In other words, to play in the MNE value chain, our own companies must be “sustainability-ready”.
50. I will therefore extendthe enhanced support for green loans under theEnterprise Financing Scheme,and expand its scope to help more of our SMEs adopt green solutions.
51. I will alsoenhance the Energy Efficiency Grant. This was introduced in 2022 for companies in the Food Services, Food Manufacturing, and Retail sectors. I will extend thegrant to more sectors includingManufacturing, Construction, Maritime, andData Centres and their users. Beyond pre-approved energy-efficient solutions supported under the Grant, we will provide additional support for companies with more ambitious plans to reduce their emissions. (See Annex C-2.)
52. The Minister for Trade and Industry will elaborate on this and other sustainability-related measures at the Committee of Supply.
53. We are taking concrete steps to keep our economy competitive and vibrant, and to help our enterprises seize new opportunities. We will do whatever it takes to secure our place as one of the leading economic hubs in the world, known for our innovation, dynamism, and deep capabilities, with good jobs and opportunities for our people.