Singapore to invest 3% of its GDP on R&D annually by 2010 - Singapore's Online Community

**djchris** · 16-02-2007, 09:44 AM

SINGAPORE: The government will pump S$2 billion into research and development this year to position Singapore as a centre for "high-trust" services in 2007.

The money will go into continuing the applied and academic research in the public research institutes, universities and hospitals.

By 2010, 3% of Singapore's GDP will be invested in R&D in biomedical science and science and technology annually, up from 2.4% in 2005.

The government says that while it does not expect short-term returns from the investment, R&D could spin off indirect economic benefits in the longer term.

To mitigate the risks of such R&D investment, efforts would need to be allocated to specific areas, said Second Finance Minister Tharman Shanmugaratnam.

"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 (Ministry of Finance) perspective, I am satisfied that this is a good use of public funds," said Mr Tharman.

R&D commitment is one component of the government's concerted effort to grow so-called "high trust" services in Singapore.

These include high-value, knowledge-based services in financial, legal and logistics sectors.

The asset management industry has seen double-digit growth each year over the past five years, driven by the wealth effect due in part to a strong stock market and robust economy.

To support the wealth management boom, the government is enhancing tax incentive schemes for Finance and Treasury Centres, Over-The-Counter financial derivatives, and qualifying debt securities.

To help local fund managers to source for overseas investors, the government is also removing the 80:20 rule that governs tax exemption for foreign investors in non-resident funds.

David Cohen, Regional Economist from the Action Economics, said: "The removal of the 80:20 rule would allow more flexibility for fund managers of foreign funds, make up for more flexible operation of portfolio management here in Singapore. Fund managers generally appreciate greater flexibility to take advantage of the returns available in the market."

In legal services, the government is introducing a tax incentive that allows 50% exemption for a law firm's qualifying income for international arbitration activities.

This is part of the government's effort to grow Singapore as a trusted centre for high-end arbitration work.

In the logistics, maritime and aviation services segment, the incentive period for the Approved Shipping Logistics Enterprise scheme will be extended from 5 to 10 years, while the Aircraft Leasing Scheme will be expanded to offer an additional 5% concessionary tax rate on qualifying leasing incomes.

"I will also expand the scope of GST zero-rating for international maritime and aviation services so that logistics companies here will pay zero GST when they incur expenses to service, buy or lease containers in Singapore," said Mr Tharman.

The government also plans to grow the alternative energy and gas industry in Singapore, to add to its current position as an oil hub.

It is building a billion-dollar Liquefied Natural Gas (LNG) terminal which will be ready to supply a third of Singapore's gas demand by 2012.

This will help to boost Singapore as an energy hub for the future. - CNA/ir