ANNEX Measures to Strengthen Competitiveness
This annex provides a more detailed description of the various measures that the authorities have announced or implemented to strengthen the competitive base of Singapore in the transition to a knowledge-based and globalized economy.
1. Information and Communication Technology 21
To bring an integrated perspective to the promotion and development of the information and communication technology (ICT) sector, a number of relevant government entities were merged into the Info-Communications Development Authority of Singapore (IDA Singapore). Under its auspices, ICT 21 Masterplan is being pursued with the following three key objectives:
Develop the ICT sector as the key sector of growth in Singapore’s economy. Foreign and local companies will be encouraged to develop and produce new products for the regional and international markets, with a view to position Singapore as a leading innovator and exporter of ICT products and services in the global marketplace.
Use ICT as a common platform to boost the performance of Singapore’s knowledge–based economy. The government will strive to build new and better ICT capabilities in every major economic sector.
Leverage on ICT to enhance Singaporean’s standard of living in the information society of the future. Key initiatives include Singapore ONE, e-Citizen and e-Government aimed at delivering a whole range of online interactive services for public convenience.
2. Liberalization of Telecommunications Industry
Starting with the corporatization of SingTel in 1992, market competition was introduced into the telecommunications sector in Singapore.
In April 2000, full market competition was introduced in the telecommunications sector, with 58 new business licenses issued for new entrants to the market and new businesses by incumbents. The government also lifted the direct and indirect foreign equity ownership limits for all public telecommunication licenses.
The broadband open access regulatory framework is under review to promote the interactive broadband multimedia industry. In addition, the government has pledged to continue to offset the costs of infrastructure and equipment needed to provide broadband access to residential and commercial buildings.
3. Enhancing Corporate Governance
The Ministry of Finance, together with the Monetary Authority of Singapore and the Attorney-General’s Chambers, is sponsoring a comprehensive review of corporate regulation and governance in Singapore. Three private sector-led committees will be given up to a year to come up with their recommendations on the major aspects of corporate regulation and governance in Singapore.
The Committee on Company Legislation and Regulatory Framework will review Singapore’s corporate law and regulatory framework, comparing Singapore’s approach and legal structure with the standards and best practices in major business jurisdictions. The committee will also provide proposals to enhance efficiency and reduce red tape in the administration of corporate regulation.
The Committee on Disclosure and Accounting Standards will review the process by which accounting standards are set, maintained and regulated in Singapore, in comparison with overseas jurisdictions. It will also review the development and promotion of best practices in disclosure requirements.
The Committee on Corporate Governance will review the development and promotion of best practices in corporate governance, relative to international best practice benchmarks such as the OECD Principles of Corporate Governance. The committee will look at how to develop and promote best boardroom practices, and improve the training of company directors.
4. Strengthening the Corporate Sector
Trade 21 sets out the objectives for Singapore’s trade development in the next five years, which are necessary to ensure a supportive external environment for the corporate sector.
Merchandise trade to grow by 4–6 percent annually to S$500 billion;
Offshore trade to grow by 3–5 percent a year to S$220 billion; and
Services exports to grow by 5 percent a year to SW billion.
Under Internationalizing Singapore Enterprises program, the TDB will provide support to companies at the three stages of international market development.
Preparation—international market evaluation and assessment, packaging and design development;
Developing access—international contact development, establishment of commercial presence; and
Positioning—international brand development, image enhancement.
The Small and Medium Enterprises 21 (SME 21) program will be implemented over a tenyear period to create vibrant and resilient SMEs, through the following key initiatives:
SME Mentoring Program allows SMEs to learn from the experiences of established company directors. A network of advisors will act as an external “board of directors” for SMEs to advise on strategic issues faced by the company.
CEO Learning Circles provide CEOs of SMEs a platform to network, share and exchange experiences. A consultant will facilitate the discussion so that the sessions are conducted in a systematic and structured manner.
Technology Network Program will facilitate connections between innovative SMEs, aspiring technopreneurs, researchers and venture capitalists. SMEs will be able to acquire new technologies more rapidly.
At the sectoral level, SMEs will be encouraged to develop collaborative partnerships and alliances for greater synergy. In the retail sector in particular, SME owners will be encouraged to make use of business groupings and other tools and technologies like supply chain management to increase their operational efficiency.
To upgrade the construction sector, support will be provided to promote training in core skills for the construction industry as well as encourage wider adoption of industry standards.
Foreign SMEs will also be attracted to Singapore to set up operations or to link up with local SMEs in collaborative partnerships.
5. Manpower 21
Manpower 21 is intended to develop the Singapore workforce as a key source of competitive advantage that will support economic growth in the knowledge economy, based on lifelong learning and innovation.
An enhanced Manpower Information System will be developed to provide relevant and timely information to policy makers, employers, training providers and individuals.
A National Skills Recognition System will be established to develop definitive workplace skill standards and accord recognition to the training that meets these standards.
To encourage more employer-based training, the ceiling of the Skills Development Fund levy was raised from $1000 to $1500, to be implemented from July 2000.
The appeal of Singapore to foreign talents will be enhanced by strengthening the operations of Contact Singapore, a resource center that gives information and advice on education and career opportunities in Singapore.
Guidelines will be issued to allocate foreign workers from low to high value-added sectors, to contribute to raising the skill profile of Singapore’s workforce.
Improvement in HR practices will be encouraged to attract and retain talents, both domestic and foreign.
Efforts will be increased to encourage World-class institutions that carry out R…D in workforce training/organizational development and high value-added global manpower companies to set up operations in Singapore—examples include the United States-based National Training Laboratories and the Center for Creative Learning.
Self-regulating manpower industry association will be formed to develop a vibrant manpower industry.
6. Technopreneurship 21
To build a conducive environment for the creation of knowledge-based, high growth companies in Singapore, initiatives are being undertaken in four areas: pro-enterprise environment, financing, facilities, and education.
Tax treatment of Employee Stock Options (ESOPs) was improved first by allowing the deferment of tax payment resulting from qualifying ESOPs, and the authorities are reviewing further steps to improve the tax treatment for ESOPs in high tech startups.
Under Technopreneur Investment Incentive Scheme, qualifying investors and individuals will be allowed tax deductions on losses incurred from the sales of qualifying shares or from the liquidation of an approved technopreneurial start-up.
Bankruptcies resulting from normal business risks are given appropriate differential treatment from bankruptcies due to misdeed or mismanagement.
Technopreneurs will be allowed to use their residential premises as home offices.
The government tendering procedures were modified to facilitate tender awards to the start-ups without conventional track records.
Technopreneurship Investment Fund (TIF) of US$1 billion will be used to co-invest with private sector to provide seed money for technopreneurial start-ups. The TIF fund managers will also work with private sector venture capital firms to stimulate the venture capital industry in Singapore.
The Buona Vista area is earmarked as a focal point for the development of a science and research center. The area is intended for social and residential uses as well as industrial and commercial uses.
The National University of Singapore and the Nanyang Technological University have announced a new university admission system from year 2003 that will include reasoning tests, project work and extra-curricular activities to supplement the current reliance on exam results.
7. Liberalization of Electricity Industry
The liberalization of the electricity industry in Singapore began with the corporatization of the electricity and gas department of the Public Utilities Board (PUB). As a result, the electricity industry currently has three generation companies, one grid company (PowerGrid: transmission), and one electricity supply company (PowerSupply: sales). The government has recently announced measures to further liberalize the industry, by allowing full competition in the contestable parts of the market—generation and retail sales in particular.
Temasek will divest all three generation companies with no limit on foreign ownership, to increase competition and raise the industry standards to international levels.
To bring about retail competition, the electricity retail business of PowerSupply will be divested from April 2001, and several customer service functions—including meter-reading and field services—will be taken out of PowerSupply to prevent these activities from becoming barriers to entry. These measures are anticipated to bring in full competition for large industrial and commercial customers from April 2001. Retail competition for smaller customers is anticipated to take place after 2002 following the completion of a detailed study of the effect of competition on households.
Regulation of PowerGrid
Since the transmission and distribution network is suitable for a natural monopoly, the grid industry will continue to be regulated through performance standards and incentives to improve efficiencies.
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Prepared by Roberto Cardarelli (x38059) and Jaewoo Lee (x37331), who are available to answer questions.
Address by Deputy Prime Minister Lee Hsien Loong at the official launch of Info-Communications Development Authority of Singapore, December 3, 1999.
The results here are open to potential measurement problems given that the data for Singapore and other countries come from different sources.
The relation between the price-average cost margin (P/AC) and the markup of price over marginal cost (P/MC) can be written as follows: P/AC = (CU/RTS)(P/MC), where CU refers to capacity utilization and RTS refers to the scale of economy measured as the ratio of marginal cost to the minimum average cost.