Investing in R&D

Our second area of focus is to invest in R&D, to build up new capabilities that will help drive our economy over the long-term. We plan to invest 3% of our GDP on R&D annually by 2010 up from 2.4% in 2005.

This is a major commitment, both in terms of resources and talent. We are investing large sums of money. We are also gathering many very able people in the biomedical sciences and other fields of science and technology. They include Singaporeans who are doing post-graduate studies and embarking on careers in R&D, as well as globally renowned researchers who have uprooted themselves to come to Singapore because they know we are serious in our plans and ambitions, and want to work with us on this enterprise. On top of that, we are attracting world-class corporate R&D labs and grooming local R&D firms.

We do not expect short-term returns. This is a long-term investment, and clearly there are risks. We cannot be sure of success, and even if we succeed, many of the economic benefits are likely to be indirect. But the Government had considered this carefully, and decided that this was an investment we had to make for Singapore’s future. Over time, we will build up a critical mass of top-rate researchers in Singapore, who will create new intellectual property in our research institutes, universities and hospitals, and will bring in new, technology-driven activities which will spin off benefits to the rest of the economy. Our investment in R&D is critical, for Singapore to be a leading Asian hub for high-value, knowledge-based industries, even as Beijing, Bangalore and other cities catch up.

Since embarking on this endeavour in the bio-medical sciences and other areas of R&D that we are engaged in, we have made significant progress. But we are still on the early legs of a long journey. Other developed nations, including small ones like Switzerland and Sweden, have taken decades to get to where they are today. We need to persevere in our efforts, focusing our limited resources on areas in which Singapore can make an impact. That is the framework within which the Research Innovation and Enterprise Council (RIEC) pursues Singapore’s R&D strategies, and it will continue to guide us as we go forward.

It is too early to evaluate the results of our R&D initiatives. But from MOF’s perspective, I am satisfied that this is a good use of public funds. Hence, I will inject another $500 million into the National Research Fund that was established last year. Along with other R&D related expenditure in A*Star, MOH, MOE and other economic agencies, we expect a total of $2 billion of government expenditure invested in R&D for this year. These will go towards continuing the applied and academic research in the public research institutes, universities and hospitals.

Making Singapore the Best Place to Start, Grow and Globalise Businesses

Next, we have to press ahead in our efforts to create a vibrant and supportive environment for enterprises, big and small. Our strength and reputation as a base for MNCs and leading global companies is well known around the world. We will make Singapore equally reputed for being the best place for SMEs, local and foreign, to locate, grow and globalise.

I mentioned Rotary and Food Empire earlier. Both found themselves having to extend their reach out of Singapore at an early stage, and depend on markets abroad for most of their growth. In fact, about one-quarter of all our SMEs in Singapore now derive at least 50% of their revenue from overseas.

Many of our younger local players are going out to markets abroad at an even earlier stage of their growth. Dextrans Worldwide Group, founded just four years ago by two young Singaporeans, already has a bustling logistics business, managing inventory for major electronics manufacturers in China. Heulab was started by two NUS graduates in 2002 to create educational software on tablet PCs. Over 140 schools in Singapore, Australia, Taiwan and Qatar use their products to introduce creative learning in the classroom. All this in just four years. And Heulab was selected earlier this week as a launch partner for Microsoft’s Windows Vista Programme.

Dextrans and Heulab are part of a new generation of local firms, fleet-footed, unafraid to venture out to the world early, and at the leading edge of technology.

We are also seeing the rise of a new breed of players in the form of global SMEs - much smaller than traditional multinationals, sometimes run by small groups of individuals, rooted in one place but taking advantage of globalisation to expand rapidly. Some of these are fast-growing small companies - or ‘gazelles’ as they are called in Silicon Valley.

More of these global SMEs are now coming to Singapore. They want to be here because we are a place where they can access markets, talent and global financial services, and operate within a legal and regulatory framework that they are comfortable with. They may not make huge investments like the MNCs, but they add vibrancy to the economy and demand for financial and business services, IT and logistics. Many are now listing on SGX, and are expanding rapidly.

We should attract and root this new breed of players in Singapore. I mentioned Bob Chandran and Chem-oil, an example of a global SME we have brought to Singapore’s shores. Another is LMA, a medical equipment firm that was based in UK, which decided to establish a headquarters operation in Singapore to manage its global regulatory affairs, quality assurance, and R&D. It has operations all over the world, and its products reach patients in over 100 countries.

OLAM, too, shifted from London to Singapore. It has a presence in 52 countries, managed from Singapore. Last week, OLAM announced that it is tying up with Chinatex, a leading Chinese state-owned enterprise. They will jointly invest in Brazil to source soybean. They will also invest together in China to process soybean and supply cotton to the domestic market.

That’s how globalisation is being played - globalisation out of Singapore. We want to grow more Food Empires and Dextrans, and attract more OLAMs and LMAs to Singapore. We can provide the best conditions for them to start up, grow, raise funds, and reach out to markets in Asia and the world. We are already recognised as one of the easiest places in the world to do business. Each year, the World Bank compiles assessments of experts around the world. In its latest report, it puts Singapore as the most business-friendly economy in the world, ahead of New Zealand, the US, Canada, Hong Kong and the UK. After the recess, I shall announce how we will strengthen this further through our tax regime.