Alternate Long-term Plans for SMEs with Factories in China

Mr Speaker, Sir, Mr Saktiandi filed this question earlier.

The global situation has now changed and the provinces in China mentioned in his question are no longer the places with the highest number of newly infected cases. Nevertheless, the essence of the question is still relevant as the principles and approach that we take can also apply to investments in other countries.

Sir, MTI does not have data on the number of factories our SMEs set up overseas. Singapore's Direct Investment Abroad across Hubei, Zhejiang, Henan and Guangdong contributes about 17% of our total Direct Investment Abroad in China.

The situation in China is stabilising with a progressive return to normalcy. Across China, many companies have gradually resumed their operations. A survey conducted in late-February by the Singapore Chamber of Commerce and Industry in China (SingCham) showed that around 70% of Singapore companies had started resuming operations. We can expect this figure to rise as the situation in China gradually improves. For example, data from middle of March showed that around 80% of Chinese workers have returned to work from their hometowns. The PRC Ministry of Commerce has also introduced measures to support foreign companies, including expediting licence approvals and resolving labour shortages.

Whether Singapore SMEs based in these four Chinese provinces will relocate their factories is a commercial decision that they have to make. Businesses regularly review their markets and supply chains. Given the size and growth potential of China's economy, many businesses are likely to see continued value in keeping some production capabilities close to their final demand markets in China.

SMEs that seek to relocate operations may tap on the Enterprise Financing Scheme (EFS) to purchase equipment, machines and business premises. SMEs looking to explore new markets may also benefit from Enterprise Singapore's network of Overseas Centres, the enhanced Market Readiness Assistance (MRA) grant as well as the Singapore Business Federation's advisory services on internationalisation.

Mr Speaker, I would like thank Senior Minister of State Chee for the answer that he has given. It is very reassuring that it is only 17% of production of Singapore companies that produce in China and it is testament to Singapore's diversification efforts in terms of manufacturing. But the reason why I am asking this question is because I am raising concerns about Singapore SMEs' exposure to China production, and as a result of the recovery out of China, my concern therefore, further in terms of my supplementary question is, in terms of supply change shifts and production network changes thereafter, even following this event, whether there will be immediate impact on Singapore companies in the future, and how MTI plans to tackle this issue in terms of supply chain shifts into Indochina, and probably into other areas in the future.

Sir, I thank Mr Saktiandi for his supplementary question. He touched on a very important point. Indeed, I think even before the COVID-19 pandemic, companies were already asking themselves how they can strengthen the resilience of their supply chains. And partly arising from the Trade War, people are starting to rethink how they want to structure their supply chains, where they want to focus different parts of the production cycle.

With COVID-19, I think many businesses are now going to face even greater impetus to re-look closely at their supply chain management to strengthen the resilience of their supply chains and not have over concentration in one or two areas, in one or two markets. This is something that I am confident businesses will seriously look at and not just in manufacturing, but I think, across different industries.

On the part of Singapore, we have started these conversations with our businesses and this is part of the process of helping them to transform their operations, helping them to emerge stronger after the crisis is over. We need to start doing some of these preparations now. While we tackle the short-term pain and challenges of the crisis, we also want to look at how we can help our companies to emerge stronger when this crisis is over. So, this includes raising productivity, this includes training their workers, how to adopt technology, but it also includes a careful and thorough review of supply chains and markets.