Committee of Supply – Head V (Ministry of Trade and Industry)

Thank you, Mdm Chair. I have three points to raise. First, on the high cost of business

In his round-up speech, the Deputy Prime Minister and Minister for Finance stated that the Government had taken the middle path in restructuring the economy. I am afraid the middle path that the Government thinks is right is not middle enough for most SMEs. Can I ask the Deputy Prime Minister if he has looked at whether we have a dual economy growing where SMEs face one cost structure and larger MNCs and GLCs have another because of better support from the Government? Perhaps, this is why an average middle path from the

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Government's perspective looks good enough because it is an average of unequals.

Just look at some of the indicators. Among the top 1,000 SMEs in Singapore, data compiled shows that the hospitality and F&B sector is the only one that has contracted by as much as 7.7% in each of the last five years. There were also more loss-making SMEs among the top 1,000, rising to 130 from the previous year. Among the top 1,000, 13% of them are already loss-making! I cannot imagine how many more of the 200,000 or so of our SMEs are loss-making, reflecting that costs are spiralling out of control.

Next, on industrial and commercial land. I want to repeat my call and many from the SME sector for the Government to take a serious look at the industrial and commercial rental markets, as rents are killing companies' cost competitiveness in almost every sector of our economy, not just one. We need to implement ideas, such as rent control – which I believe the trade associations and chambers (TACs) had suggested – and restricting industrial land for owner occupation instead of allowing such properties to be used as investment properties. JTC needs to become a bigger player in the local industrial land space if we want to moderate rentals. The Minister should also have rolled back more of the REIT incentives so that we do not have too many focusing on financial engineering without adding real value to our economy. The Government should also never have allowed some companies, which had preferential land allocation or preferential prices for land, to subsequently sell them into industrial REITs. REITs should only be restricted to properties originally purchased from the open market. Otherwise, it helps create a dual economy, and regular SMEs are disadvantaged as they do not get the land allocated to them.

Third, a first and one stop SME agency. The current Government approach of many agencies supporting SMEs at different stages of their growth and for different needs has run its full course. It is time we relook our approach of managing SMEs. Many say that they are confused by the number of assistance schemes and the various agencies that they have to visit for each of these schemes. They are unhappy that they have to be passed from one agency to another for different needs and sometimes fall through the cracks without help. We must realise that they have businesses to run and cannot be figuring this out or going door-to-door to deal with onerous administrative requirements, as they are very small.

Recently, the Singapore Business Federation (SBF) and its SME Committee, too, urged the Government to establish a single agency as opposed to a multi-agency approach. It said that under the multi-agency approach, each agency tended to rely on its own mandate and KPIs, and I agree with this. Moreover, the current multi-agency approach adds to red tape and delays response time for many of these companies.

There must be a reason why so many of us involved in the SME community feel the need for such a single SME agency, so I urge the Government to not write this off. In fact,

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SBF is very closely linked to the Government. SBF also made this call this year. Many other agencies made the call many years before. So, there must be something wrong and we need to do something about it.

During the Deputy Prime Minister and Minister for Finance's closing speech last week, I was shocked to learn that the net new company creation in the last five years was 100,000 companies. This is a huge increase in only five years. Does this mean that SPRING has also an additional 100,000 companies to support? Can I ask the Minister if SPRING's manpower has increased in proportion? If not, we can understand why SMEs feel that not sufficient support is going to them.

While MTI tries to figure out the right time for this single agency to be set up – which I think will happen one day – may I suggest an interim solution of a "First and One Stop SME Agency" approach where companies only need to approach one agency for all their needs and that agency will help SMEs identify the kind of help needed, coordinate with the different economic agencies and then bring the right assistance to the companies.

Obviously, SPRING is well positioned to do this by extending its scope of work beyond the schemes it currently administers. And SPRING will also need a lot of manpower and resources and I hope that the Government and the Deputy Prime Minister will allocate more for them.

For companies, they will just see one agency and we present just one face of the Government. In the background, the Ministry can allow the various economic agencies to continue to work the way they are currently working. Thus, SPRING can become something like a Municipal Service Office (MSO) for SMEs.

SPRING has already set up an outreach mechanism through the SME Centres. This structure should stay to be the outreach arm. I believe if the Government can help SMEs on these three fronts: by addressing the cost of doing business, reducing their land and rental costs, and streamlining the assistance to them through a stronger and more focused SPRING looking like a MSO, the Government would have greatly helped SMEs, which play a critical role in our economy that provide jobs for seven out of 10 Singaporeans here in Singapore.

Mdm Chair, I believe the Ministry is heading in the right direction to recognise R&D as one of the key drivers to help SMEs sustain and compete.

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A recent Parliamentary Question (PQ) by Member Assoc Prof Randolph Tan just last month, revealed that just 500 claims were made on PIC amounting to $619 million, which is less than 1% of the 75,300 claims made in total. This is a small take-up rate by businesses. What are the Ministry's plans to boost R&D adoption by SMEs?

Many businesses that submitted technology-related R&D claims gave feedback that the overall process, especially the many queries from the officers, is often tedious. Often, the officers did not understand the subject matter involved and these businesses either got rejected or gave up mid-way. Perhaps, having the IRAS or the tax officers fronting this scheme may not be the best interface for the industry.

I would like to propose that MTI consider allowing a different agency, perhaps, even SPRING, as Member Mr Inderjit had just suggested earlier, to make the technical assessments because they understand growth requirements of businesses, to front the R&D claims and then pass over to IRAS for processing.

Based on the Australian government Department of Industry's Innovation Australia Annual Report of 2012 to 2013, they processed about 11,000 claims amounting to A$19.69 billion. While Australia's GDP is four times that of Singapore, the number of claims lodged in Australia was about 20 times greater and the total expenditure claimed was also about 35 times greater than Singapore.

In such environments, are there more businesses claiming because there is a simpler, more business-friendly evaluation process? I understand that R&D definitions are fairly similar across mature economies, so the level of rigour should be similar.

Mdm Chair, to support the growth of our home-grown companies and help them build their expertise and brands, the Government has been providing various assistance schemes, such as the broad-based Productivity and Innovation Credit (PIC) and Innovation and Capability Voucher (ICV) schemes.

I am heartened to note that awareness of these schemes is high and they are increasingly popular among SMEs, as the SME Development Survey and a Singapore Chinese Chamber of Commerce and Industry survey had found. More SMEs are also accessing manpower-related schemes, such as the Workfare Training Scheme and the Workfare Income Supplement Scheme.

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May I ask the Minister if there are plans to enhance targeted assistance scheme tailored to individual companies' needs? If so, how can such targeted Government schemes benefit more SMEs?

The supplies for this company come in odd-sized wooden crates, so storage is a big challenge as is moving them around in order to access the supplies you want. Doing so also normally involves extensive manpower and space. So, in an effort to raise productivity, the owner, Jason Tan, spent many sleepless nights working with engineers in the marine industry to come up with this: a system of metal crates which are strong, durable, stackable and offers easy access. This Mild Steel Racking system not only improves space efficiency as the crates can be stacked neatly from floor to ceiling. It enables a safer and leaner work environment as his staff can now access the supplies effortlessly through a forklift.

But when Jason made a PIC claim for this racking system, it was rejected as it did not "automate or mechanise" his business processes. My appeal to SPRING under the Capability Development Grant was also unsuccessful as the project was deemed not to have involved technological improvements required or meet the value-add requirement. Whilst this racking system did not cost much, Jason and his team felt it was one of the most critical initiatives they had taken to make their business more efficient and manpower-lean.

Madam, I would like to ask the Minister whether we should encourage SMEs to pursue these kinds of initiatives, even if they may not involve breakthrough technology or automation. This sort of "low-tech" or "no-tech" productivity efforts is nevertheless innovative and achieves meaningful productivity boost for small companies like Little Ferry.

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How will the Capability Development Grant be enhanced, as announced, to enable a broader definition and interpretation of innovation to support such ground-up productivity improvements that help to improve workflow in incremental steps.

Mdm Chair, entrepreneurs have highlighted the increasing cost of doing business in Singapore, as have many SMEs. And according to the 2014 SME Development Survey that was conducted by DP Information Group, which covered about 2,800 SMEs, about half, or 48%, of the businesses cited high manpower costs as their top business concern and one-third, about 31%, cited high rental costs as the other main problem.

In a separate survey conducted by the Singapore Chinese Chamber of Commerce and Industry last year, 83% of SMEs surveyed struggled with increasing business costs. This was an increase of 8% over the same period the year before. Almost half also faced thinning profit margins. The main contributing factors were – as one would expect –escalating manpower, land and rental costs.

Another problem that I would like to bring up here is this issue of increasing compliance costs, such as licence fees, which are increasingly becoming a significant business cost and concern in Singapore.

In our tight labour market, the problem of increasing manpower cost will not be solved anytime soon. I would like to ask the Ministry what the Government is doing to ensure that Singapore remains a cost-competitive and business-friendly environment. In addition, what measures will the Government implement to encourage more SMEs to access schemes and grants to help them grow?

Several Members have spoken on issues that affect our SMEs. I want to thank them for their comments and suggestions.

Creating a vibrant, productive and competitive SME sector is crucial to our restructuring efforts. Restructuring has not been easy for many individual SMEs. The Government adopts a middle-of-the-path approach to cater to the different tiers of SMEs because they are of different sizes and scale in their nature of business.

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So, the restructuring process will be faster for some but may be slower for others. We have to moderate the pace and adjust the kinds of schemes to help them adjust to the pace of the restructuring. But, on the whole, we are seeing many positive signs that the SME sector is trying to transform and also improve capabilities.

More SMEs are internationalising and investing in technology. The entrepreneurship scene is also robust. Firm formation rose from 54,000 companies in 2010, to 77,000 in 2014. In comparison, firm closure has held steady at between 40,000 to 42,000 in the same period. So, the net formation is positive and is on an upward trend. Mdm Chairperson, may I now speak in Mandarin, please?

(In Mandarin): [Please refer to Vernacular Speech.] Mr Thomas Chua asked about traditional sectors. Many of our industry sectors, particularly the more mature or "traditional" ones, have a substantial base of well-established SMEs. Many of these companies have grown up with Singapore. They are household names and are important links in our business ecosystem. As our economy restructures, traditional companies, too, will need to evolve to compete effectively and face new challenges.

These SMEs are often family-owned, and face particular challenges with regard to succession planning and talent attraction. Nonetheless, SMEs in such "traditional" sectors can continue to grow if they are able to build a strong talent pipeline, innovate, and proactively pursue growth through innovation and opportunities to expand their business overseas.

Mr Yeo Guat Kwang talked about the story of two men being chased by a tiger. The ending of the story is that one guy managed to escape from the tiger by taking off his shoes and climbing up a tree. However, he could not stay up in the tree forever. The one who fastened his shoes ended up being eaten. This tells us that we have to be flexible in order to survive. But if we want to expand the story further, the one who hides in the tree cannot stay there forever; he has to find ways to jump from one tree to another tree; or to think of ways to subdue the tiger that is waiting at the bottom of the tree. This means he needs to innovate and adapt to the changes. We must move forward; we cannot just stay there and wait forever.

Similarly, our businesses and SMEs need to continue to explore and find new ways to improve their operations, to innovate and use information technology to turn traditional industries into advanced industries.

There are many successful examples of companies in "traditional" sectors that have positioned themselves well for growth. Old Chang Kee, for instance, has become one of

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Singapore's successful household brands. It grew from a single hawker stall in 1956, to become a listed company. It has about 80 local outlets today, as well as an overseas market presence in Malaysia, Indonesia and Australia. The company has continuously transformed its businesses to keep up with the changing times. With the support of SPRING, Old Chang Kee launched Curry Times Tingkat brand in 2013. This is a fully self-service concept restaurant where customers order and pay for their food via a kiosk. Customers then collect their food when their number tags are called. This allows them to run a quick service restaurant with only five staff, compared to the usual 15 staff required.

Everyone has a role to play in strengthening our SME sector. The Government is committed to helping companies in all sectors improve their productivity and competitiveness. Our broad-based schemes are available to all SMEs, whether in traditional or new sectors and some can directly help SMEs in traditional sectors to address the challenges they face. I will talk about some of these schemes later in my speech.

At the same time, Trade Associations and Chambers (TACs) would also need to come forward to organise the industry and raise the competitiveness of the SMEs. I sincerely agree with what Mr Thomas Chua had suggested.

Mr Chua had asked about how the Government can support the development of TACs. Given the size and range of the SME sector, Government agencies, TACs and other partners need to work together to effectively reach out to SMEs. For example, through the Local Enterprise and Association Development (LEAD) Programme, the Government provides funding support to TACs for industry development projects and to upgrade their own capabilities.

We recognise that larger TACs in Singapore have stronger secretariat teams and sizeable membership bases and are better able to roll out initiatives to benefit the industry. On the other hand, there are also many smaller TACs which are not able to provide similar services due to resource constraints.

To help smaller TACs, JTC will be setting up a Trade Association Hub, the TA Hub, to cluster different TACs under one roof. This will benefit TACs in three ways.

First, this can facilitate collaboration amongst TACs and companies across different industries in areas, such as skills upgrading and business co-creation. This is similar to Mr Thomas Chua's example on the food manufacturing industry. They will benefit from this.

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Secondly, smaller TACs will be able to leverage on large TACs which can provide expertise in secretariat support and organisation needs.

Thirdly, TACs can also reduce operating costs and optimise resources through sharing facilities and amenities. Ultimately, TAC members will benefit from the broader range of programmes which will be made available to them, and also from the improved convenience when TACs are housed together at the TA Hub.

I am happy to announce that the TA Hub will be located at JTC's iHUB, which most of us would recognise as the old Jurong Town Hall. This is where Singapore's early industrialisation policies took shape, in the face of the challenges we faced during our nation-building years. We hope that this will serve as inspiration to our local industry, and especially our SMEs, to continue to transform and raise productivity.

(In English): Mdm Chair, please let me continue in English. We will continue to grow the SME sector through three key strategies – innovation, collaboration and internationalisation. Senior Minister of State Lee Yi Shyan had talked about internationalisation earlier, so, I will elaborate on innovation and collaboration.

In his Budget Speech, the Deputy Prime Minister and Minister for Finance stressed that we must make innovation common and widespread in our economy. To encourage innovation among our SMEs, we have expanded broad-based schemes like the Innovation and Capability Voucher (ICV) and Productivity and Innovation Credit (PIC). These schemes are designed to help as many companies as possible. Mr Thomas Chua would be happy to note that many SMEs from the traditional sectors have benefited from these Government schemes.

Ms Foo Mee Har, Mr Gan Thiam Poh and Mr Zaqy Mohamad have asked about targeted Government schemes to promote SMEs' transformation. We recognise that each sector and even individual companies have different challenges. Hence, we have introduced targeted schemes to focus our efforts on priority sectors, or raise productivity in specific ways unique to the company or industry. The Capability Development Grant (CDG), which Minister Lim had talked about earlier, is one such programme. It is tailored to the capability development needs of individual SMEs.

Let me highlight how targeted innovation through the CDG has helped our companies raise productivity. Food manufacturing company Foodedge Gourmet, for instance, tapped on the CDG to cover 70% of the qualifying costs to build a brand new ice cream production line. Foodedge is a food supplier to cafes, restaurants and hotels, and ice cream is one of its key products. Since 2014, with the introduction of this technological innovation, the

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company has been able to introduce new products, such as salted caramel almond ice cream, pistachio ice cream and locally-inspired sorbets like Soursop and Lychee. Furthermore, Foodedge was able to increase its ice cream production capacity by five times while requiring less manpower, who were redeployed to other areas. This enabled the company to supply more ice cream locally and explore export opportunities in the region.

As mentioned by Minister Lim, the CDG will be enhanced by simplifying the application process for projects below $30,000. For such projects, companies do not need to submit detailed project reports. We used to require them to submit detailed forecasts in terms of the project's value-add. Instead, there will be just five easy-to-answer guiding questions to describe the projects briefly, as long as they can prove how they can improve their processes or productivity. In addition, the number of fields in the simplified application form will be further reduced, so companies need not provide detailed projections on the impact of the project. I have heard Ms Foo Mee Har's example of Little Ferry Agencies and how it has customised its racking system to make it more efficient and in its processes. I used to be from the logistic industry and I can understand what kind of racking system they had. Technological applications may not be applicable here. Nevertheless, we want to encourage such innovative ways of changing a company's process or racking and shelving systems. Under the enhanced CDG that was announced this year, this type of projects could be supported.

The Government will be extending this enhanced support level for CDG of up to 70% of the costs for three more years until March 2018. We will also put in more resources to scale up the teams managing the CDG to reach out to more SMEs, so that more companies can benefit from this programme. Mr Inderjit Singh had asked for more resources for SPRING. I thank him for his request and I agree with him that because there are about 180,000 SMEs and if we want to help them to improve productivity, there is a need to give SPRING more support.

As we pursue innovation, we need to recognise that there are areas that we need to and can develop further, especially given the rapid rate at which companies in other countries are innovating. For instance, in e-commerce, there is scope for us to catch up with the likes of South Korea, China and Japan. Internet retailing made up only 3% of total retail sales in Singapore, compared to 12% in South Korea. Mr Inderjit Singh had also mentioned about rental costs which I will address later. E-commerce is one way to bypass some of these costs. In my own personal experience, I have just bought a very specialised skipping rope that can spin a lot faster. I thought that we did not have this in Singapore, but I found a place where I could purchase such a skipping rope and it was at a warehouse here. When I bought the skipping rope, I went to the warehouse and I thought because it was a warehouse, the rental would not be so expensive. The skipping rope cost me $24. Another friend of mine bought a similar skipping rope online via a Chinese Internet retail site and it was delivered to

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his house. He paid $8.

While our small market size poses a natural obstacle to scale, there is clearly scope to improve and new ways to do business. The Government has taken some steps to give e-commerce a stronger push. For instance, SPRING has worked with partners to organise workshops to educate retailers on topics like digital marketing and data analytics to help traditional retailers understand opportunities in e-commerce. SPRING has also supported digital consumer campaigns, such as the "Great Online Shopping Festival" in February, to drive sales for participating retailers.

In addition, SPRING, IDA and other agencies are working with industry partners to develop a common platform to facilitate e-commerce activities across various online marketplaces. This platform will include integrated warehouse functions, inventory management solutions and order fulfilment capability. This will benefit SMEs which want to adopt e-commerce but are unable to afford the initial outlay. In addition, by streamlining the logistics chain, participating SMEs can reduce the time taken to process and manage orders by up to 45%.

The reality is that competition will only get stiffer – from newcomers who are starting to differentiate themselves and from existing companies that have already begun to transform. The Government will continue to support our SMEs, but I also urge our SMEs to stay committed to the journey of innovation and raising productivity.

Collaboration is the third key strategy to grow the SME sector. Collaboration helps our SMEs build track records, pool resources, share best practices and create new business opportunities.

Minister Lim had earlier mentioned how SMEs can collaborate with large organisations and benefit from the PACT programme. Let me just update Members that SPRING, under the PACT programme, over a short period of time, has facilitated 85 projects that benefited 570 SMEs. We want to continue to encourage SMEs to collaborate with one another. They can come together for business opportunities and they can also pool their resources to look at new ways to keep costs down.

The other programme is the Collaborative Industry Projects (CIP) Programme. It has been a key initiative to promote the adoption of shared services among SMEs. For this, we would need the TACs to take the lead and to help to bring projects together. Through the CIP, SPRING works with industry players and partners, such as TACs, to drive mass adoption of innovative and productivity-raising solutions tailored to the specific industries. So far, we have 15 projects that have benefited 240 SMEs. I know more will come on as many of the

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TACs are already planning new shared services to be provided to their members.

SPRING is currently working with its partners on a number of projects, two of which will be rolled out very soon. One of them is the e-commerce project which I had mentioned earlier. The second project is a platform for shared HR services. Together with industry partners, SPRING will be setting up a common pool of HR solution providers, which micro enterprises and SMEs can tap on for HR systems and services. Participating SMEs can benefit by outsourcing their administrative HR activities, so that they can focus their limited manpower on their core functions.

Both projects are open for enrolment starting from 1 April 2015 and we are targeting to enrol 50 companies each. I encourage our SMEs to come on board these two CIP projects.

Ms Foo Mee Har also asked what more the Government can do to help companies appeal to the hearts of their workers and motivate them. Fostering a positive workplace culture and increasing employee engagement is a key concern for the National Productivity Council (NPC).

To improve employee engagement, we need to raise the quality of leadership and management within our companies, especially SMEs. Research has also shown that well-run companies are more productive. In this regard, many SMEs have tapped on grants like the ICV and CDG to raise their HR capabilities. We have now widened access to the CDG as well as made it simpler to apply. With this greater access, more, including the micro and small enterprises, can now tap on CDG to do more. PIC may not be readily available for them, but they can approach the SME Centres for help in tapping on grants. The business advisors in the SME Centres can better understand what their needs are. The SMEs do not need to remember any of the schemes. They just need to approach the Centres.

In addition, helping SMEs attract talent is also crucial. Mr Thomas Chua had mentioned that this is important to the renewal of our traditional companies. We have launched the SME Talent Programme (STP) quite some time ago and it was introduced to address SMEs' need for talent, by matching promising students from ITEs, Polytechnics and Universities to some of our growing SMEs.

I am pleased to share with you that this programme has gained traction over the past two years. Seven TAC partners are now on-board. Since the programme launch in June 2013, there have been 530 internship matches and more than 450 job matches to 240 companies. For instance, through the programme, Keystone Cable was matched with four candidates who will be groomed to play key roles in its business operations and to drive the company's overseas expansion. To me, this is a win-win situation where promising students are given a

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headstart in their careers, while SMEs have the option of tapping on a pipeline of talent.

Government schemes are available for all SMEs to tap on. But companies must take the lead and strengthen management. They must recognise their workers' skills, value and train workers. As mentioned by the Senior Minister of State, the SkillsFuture Council (SFC) will promote continuous learning and skills mastery to support workers as they improve their productivity. We look forward to SMEs' support of the SFC's work.

One key plank in our outreach efforts is the SME Workgroup, which I have chaired since 2013. Many of our hon Members are also in this Workgroup. Members of the SME Workgroup, together with representatives from Government agencies, such as MOM and IRAS, have been conducting dialogue sessions with SMEs to understand their challenges and concerns. We also share with the community about Government policies and how these can be helpful to SMEs. As part of our outreach efforts, we established a network of 10 SME Centres in 2013 and added two more in 2014, where Business Advisors are on hand to advise SMEs how they can improve productivity or business capabilities. To date, the SME Workgroup and the SME Centres have collectively reached out to over 60,000 SMEs.

The SME Workgroup has provided useful feedback to the Government on various issues concerning SMEs. As a case in point, the Government released more detailed retail and industrial rental market data earlier in January this year following feedback from the SME Workgroup and SBF as well. Such information can help our retail and manufacturing SMEs make more informed decisions on setting up outlets or factories or renewing leases for their current premises. The industrial rental data, as well as the commercial rental data, are released on the website. Companies can compare and look at it at the street level, cluster level and the floor level as well. So, when they make the comparison, they will make more well-informed decisions. JTC is constantly monitoring industrial rental movements and also releasing land where necessary. In terms of commercial and retail rentals, we hope that this information that is provided to the market is helpful for the tenants, as well as the landlords, for their negotiations. We want to encourage fair practice. As long as there is fair practice, I think this information will be helpful.

I would like to take the opportunity to thank members of the SME Workgroup for their contributions. Through their efforts, we have identified some of the key issues affecting SMEs today and have taken steps to address them. I look forward to working with all of them in 2015.

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Mr Inderjit Singh and Mr Thomas Chua talked about a one-stop SME agency. The SME sector is an important part of our economy. I believe Ms Denise Phua as well has also talked about a one-stop SME agency. It is a very diverse group – ranging from micro enterprises in our HDB neighourbourhood shops to high-tech startups to local companies which are already successfully exporting to overseas markets. Every SME comes in different forms, have different natures of business, need different skills and are in different phases in their business development. So, it is not easy just to have a one-stop agency. But we take the point that we could make it easier for the SMEs, wherever they are, whoever they are, to access to a first-stop. It would be very challenging for one agency to cover all areas.

Let me say that SPRING Singapore is the lead agency looking after the SME sector, providing the majority of Government programmes and grants to support the capability development of SMEs. SPRING reaches out to every segment of the SME sector; from retailers with fewer than 10 workers, to globally competitive SMEs. SPRING also provides a range of assistance, from basic ICV to customised CDG and financing schemes.

SPRING will work with other agencies to make sure that that first-stop is possible. Whether it is increasing resources to do that, I think it is most important that we train the existing officers and staff, both at the SPRING level. Maybe, some of the larger companies would have to go to SPRING officers to look at their more detailed operational and business needs, whereas the micro SMEs can access the SME Centres in the HDB heartlands. The micro-businesses could approach the SME Centres which would coordinate with the rest of the agencies. The SME Centres will play that role.

We will train our officers to be able to coordinate and put forth the schemes available and to be able to give the appropriate advice or coordinate the resources to give that advice under one roof. As Mr Inderjit Singh has pointed out, the current network of SME Centres has provided useful touch-points, and we will enhance that.

There are many good examples where SMEs have benefited from the SME Centres. For instance, with the assistance of SME Centre@SCCCI, one company called Skylace Enterprise was able to improve its HR and financial management capabilities by tapping on SPRING's ICV and WDA's Age Management Grant. So, that is two agencies supported by one SME Centre facilitating the process. This is one example. We know that more needs to be done and we will make sure that it gets done to address some of the gaps in the marketplace today.

To make grants more accessible, we will be rolling out Phase 1 of the Business Grants Portal (BGP). We want to do that, not only on the ground and physically, but on the Internet, online, we are going to do that as well. There is the BGP which we are going to bring in, involving about 10 agencies – namely, SPRING, IE Singapore, WDA, Design Singapore, Maritime Port Authority (MPA), Media Development Authority (MDA), Infocomm

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Development Authority (IDA), Singapore Tourism Board (STB), Building and Construction Authority (BCA) and NParks – with all the 20-plus business grants under one portal.

Our vision is to streamline about 20 existing business grants into three key areas within one portal. SMEs visiting and accessing the portal, need not know what kinds of schemes or grants exist, but they look at it by category and then apply for the relevant one. It is very straightforward. These three areas in the portal are capability development, internationalisation and training. On this portal, companies will be guided through the process and given advice on the grants for which they are eligible. It will reduce the time required to search and apply for these business grants.

Since the inception of the Innovation and Capability Voucher (ICV) scheme in 2012, more than 16,000 vouchers have been awarded. A few service providers who are suspected of abusing the ICV are under investigation. This is one point I wanted to highlight – that there are some who abuse the system and some have inflated project costs for SMEs in various ways to claim the vouchers. Others have colluded with SMEs to make false claims. I want to say that we will be monitoring them very closely. We will ban them and there are some being banned already, and they are on our blacklist of consultants. We will continue to monitor them but we also need the feedback from the ground, to tell us who they are. We will list them, find out and gather enough evidence before we do so. We take a serious view of such abuses.

Mr Inderjit Singh asked about the startup ecosystem. Over the years, we have put in many different startups. International publications like the Economist and Harvard Business Review have started to write about our startup ecosystem entrepreneurship; most notably Block 71 LaunchPad. There is urgency for startups to have a place and quickly launch themselves beyond Singapore shores. As a start, Block 71 has now expanded. Block 71 is in Ayer Rajah and that is a LaunchPad itself. We have added another two blocks. So, there are three blocks for startups altogether. There are 500 startups there – many entrepreneurs.

In order for them to go beyond our shores, as a start, what we have done is there will be a "Block 71 San Francisco" which was opened in January 2015 to support Singapore startups venturing into the USA. This is a collaboration between NUS Enterprise, Singtel Innov8, Infocomm Investments (IIPL) and SPRING. And this is something that will encourage them. We will be planning other locations as well.

LaunchPad in Singapore will not just be limited to one area but it will be in different parts of Singapore. The second one will be near NTU, in CleanTech Park. These are the areas that we will be looking at. We have a vibrant startup ecosystem.

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We have also supported start-ups by making available financing in the early stages. For instance, the Government catalyses "smart money" through the Start-up Enterprise Development Scheme (SEEDS). Many enterprises have benefited from SEEDS and the Business Angel Scheme (BAS). These help our startups benefit from the expertise and go beyond the first phase of development.

SEEDS and BAS have done well, having catalysed close to $340 million cumulatively from about 500 private sector investors and funds into 240 investments.

We are committed to supporting innovation and entrepreneurship. We will enhance SEEDS and BAS by increasing the co-investment cap to $2 million per company and topping up the BAS scheme by $75 million to support more innovative start-ups. We will also pilot a venture debt programme to give high-growth enterprises access to an alternative financing instrument that can serve as a substitute for equity financing.

There is a window of opportunity for our SMEs over the next few years, so that the SMEs can work on some of the public sector projects. Er Dr Lee Bee Wah has mentioned that. We believe that there should be a fair and open competition among all companies, including SMEs. But, then, we want to make sure that there is opportunity available as well. Considering the fair and open competition, we will encourage SMEs to look at our Smart Nation Project.

SPRING, Action Community for Entrepreneurs (ACE), which is really in charge of fostering the entrepreneurship community in Singapore for startups, and also Chambers of Commerce will work with the Smart Nation Project Office to identify opportunities for our startups and SMEs to contribute to making Singapore a Smart Nation.

We want SMEs and startups to have the chance to participate in this project. The best way for us to help SMEs is to allow them to go into this competition to bid for it. We should not hold them back and set a very high barrier to entry. But they have to prove themselves based on their own merits, to be able to bid for them and win those projects. We will make sure that we take note of that and advise the good companies, some of the good startups, to bid for some of the Smart Nation projects.

Mr Liang Eng Hwa, Dr Chia Shi-Lu, Mr Yeo Guat Kwang, Mr Gan Thiam Poh, Mr Inderjit Singh and Mrs Lina Chiam, in their earlier speeches, asked about business costs. The increase in business costs for the manufacturing sector moderated to 0.7% in 2014 from 4.1% in 2013, while the increase in unit services costs for the services sector remained at below 2% in the last two years.

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We have also noted the point about rentals. I have mentioned that and I will not mention that again. Furthermore, utilities costs for both the manufacturing and services sectors declined in 2014 compared to the previous year. This was due to a fall in electricity tariffs in the second half of 2014 on the back of the plunge in global oil prices. Let us continue to monitor that and see what we can do, like, for example, the way we have done it with the rental data.

Dr Chia Shi-Lu asked how the Government will ensure that Singapore continues to have a pro-business environment. We are always pro-business, we are always open and we always take in feedback. Let me give you an example. The Pro-Enterprise Panel (PEP) is chaired by the Head of Civil Service, with the Second Permanent Secretary of MTI as Deputy Chairman. What do they do? They actually look at some of the processes and streamline them, whether it is licence fees or process review. Since its set-up in 2000, the PEP has accepted more than 1,000 suggestions to improve rules and regulations.

Moving forward, in 2015, we will undertake more of such reviews of the costs arising from business regulatory compliance. As part of the review, the PEP will engage companies and gather their feedback, because this is part of their work throughout the year.

Mr Lim Biow Chuan has raised a few issues on consumer protection. Promoting fair trading and consumer protection is a collective effort by the Government, CASE and the industry.

CASE and STB have stepped up cooperation with relevant malls to improve information to the public on retailers who are the subject of a high number of customer complaints. I know everybody was concerned about Sim Lim Square's issues and the saga when it happened. Let me just give an update that CASE had worked with Sim Lim Square's Management Council to produce consumer alerts and advisory posters in English and Chinese. I understand that they are now placed at all the entrances, lift lobbies and even within the lifts of the mall. STB is also working with the Management Council to prepare public announcements on consumer advice in the four major languages.

On a broader front, MTI will work closely with CASE to step up broader consumer education. At the same time, we want to highlight that the Consumer Protection Fair Trading Act (CPFTA) cannot be a "one-leg kick" with everything encompassed, because it will be very messy. What we want to do is that we do not discourage retailers from doing their business, especially those good retailers. We know that errant retailers are the minority. We just need to catch them. This is under review at the moment and we have until mid-June to put it through, make the recommendation and make a public announcement.

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We thank Mr Lim Biow Chuan for his concern. We also need his help and support all the way through, to make sure that we can protect the consumers.

I am confident that we can overcome all the challenges, whether it is for SMEs or consumers, as long as the Government companies and individual Singaporeans work together as one to transform our economy and position ourselves to secure opportunities in this new global economy.

Thank you, Madam. I have two clarifications with regard to inflation and cost. Firstly, the MAS recently did an off-cycle adjustment to the Singapore dollar rate, slowing the appreciation trajectory. While it will help exporters, it has also led to the upsurge in Singapore interest rates. I would like to ask the Minister whether this sudden sharp increase in the Singapore dollar interest rate will have an adverse impact on our businesses, especially since many of them are still grappling with the rising labour cost and whether this weaker Singapore dollar will impact imported inflation, especially the imported necessities.

My second clarification is with regard to the petrol duty that was announced. Following the Budget announcement of a 20-cent hike in petrol duty, petrol prices were reported to have risen beyond the level of the duty increase. I would like to ask if the Ministry has carried out investigations on the matter and whether action will be taken against petrol companies which have unfairly raised the petrol prices.

First of all, this off-cycle adjustment was prompted because we have been receiving data and the inflation performance has been much more benign than we anticipated. Therefore, MAS felt it necessary to intervene ahead of its typical April schedule. Because of that, and due to the oil price decline, inflation is projected now to come in much lower. We expect the lower appreciation trajectory of the Singapore dollar not to disrupt the inflation numbers we have projected.

On interest rates, the pattern started way ahead of the off-cycle adjustment. If you track the interest rates in Singapore, this is prompted more by anticipation of the US Federal Reserve Board raising interest rates sometime this year. Being a very open economy, interest rates have moved in anticipation of that decision by the US Federal Reserve Board.

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Mdm Chairperson, for the petrol prices and duties, currently, the Competition Commission of Singapore is gathering information and engaging petrol companies about the reason and rationale for the price increase. While they are gathering information and the engagement is in progress, we do not have conclusive evidence yet. Nevertheless, we want to assure the public that, if they are found to be fraudulent or they are involved in anti-competitive behaviour, we will take action against them.

Madam, I have two clarifications for the Senior Minister of State. On the International Growth Scheme (IGS), I had asked in my speech about numerical targets for IGS as we have numerical targets set for the other schemes. So, I was wondering if there is any target set on the number of companies that will be on IGS over the next five years.

Second is that it is good to know that the number of Singapore companies with more than $100 million in sales has been increasing. One hundred million dollars itself may not automatically mean that the company is globally competitive because they have to have critical market share and strong branding. A whole-of-Government approach involving multiple agencies and research institutions may be necessary to help the companies in this competitive world. I would like to know what sort of whole-of-government involvement can our promising local companies get outside of MTI, for example, say, in trade diplomacy, so that we can move beyond schemes into grooming specifically very promising global leaders from Singapore.

Mdm Chair, I thank Mr Yee for his supplementary question and clarifications. On the IGS, it is a new scheme, and IE Singapore will soon release the guidelines of the scheme. We do not have any numerical targets as yet because of the way the scheme is structured. However, we really hope that the scheme will stimulate more companies to set up operations that will channel some of the income back to Singapore. However, at the same time, we also want to be sure that they keep Singapore as a core in their HQ functions so that good and high-quality jobs will be created for Singaporeans.

On leading Singapore companies, how do we grow them to $100 million or more? In fact, we take a very holistic approach to grooming them. Trade diplomacy is still within MTI's purview. So, whenever our companies are growing into the different markets, IE Singapore, for instance, with their 30-over offices worldwide, will provide facilitation. Sometimes, they will link them up with local partners; other times, they will advise them on how to

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understand local business regulations, as well as legal requirements.

Our companies are doing well. Of course, we have set an ambitious target of having 1,000 of them by 2020. This is an ongoing journey. Many of our companies are now working as a group to address opportunities that are available to a larger consortium of companies with a range of capabilities. So, I think many of the examples, such as township, urban solutions, larger infrastructure development, typically involve both our larger leading companies as well as smaller companies going in as a consortium.

Working closely with the trade associations, SBF and some of the market organisations, we are quite confident that Singapore's external economy will grow.

On the SME Talent Programme and the matching of talents to the SMEs, would the Ministry consider recruiting all these talents under the Ministry and seconding them to those businesses requesting them? Of course, the cost will be borne by the businesses directly. That will expedite the whole process and also give more assurance to the talents.

There are many talents. Different talents study different courses. They also have different personalities, passions and interests. So, yes, there may be some that are possible where we can, say, second some of the talents under the agencies, not necessarily have to be under the Ministry, like the scheme where we also second some of our civil servants to private-sector companies. But if we want to do it as a big group, I think we need to look at their interests and so on.

Currently, it is best to let the students pursue their interests but we continue to promote what is good about joining SMEs. That is the most important priority today, as people sometimes just want to join the much larger companies, MNCs and so on. But we need to support our SMEs because they employ 70% of our workforce and they comprise over 90% of our registered entities in Singapore. We need to support them. There is an immediate need and gap to fill. It is not like we bring in all the best or all the talents and then, after that, we start to allocate. That adds on another layer to the process and may not help the SMEs directly and immediately, which is what we need to do now.

There are a few schemes. Let me make it simpler so that people will not be confused. The schemes are PIC, ICV and CDG. In fact, all of these schemes, we tier them such that the smaller and micro-enterprises can benefit from them. This year, we announced the enhanced CDG, which widened the process and access for smaller enterprises. We are helping our local enterprises a lot more than just helping the bigger companies.

In terms of applying for some of these schemes, in fact, I would say that any company just needs to approach the SME Centre and need not know what kind of schemes are available. They just need to tell them what needs to be done or what they hope to improve.

Let us, say, for example, they want to improve the human resource management of their company and they are growing from a small company to one of a larger size, and they want to know what they should do, what kind of schemes they can tap on. Business advisors can advise them. SMEs can tap on the schemes to support changes in HR, for example, implementing a HR software system or HR process. HR consultants can be engaged to advise the company to, say, look at your growth, your company's projection of how much manpower will be added in one year, two years, and what you should do in terms of, say, HR manual, HR processes, interview appraisals and so on. The companies can then make it more structured.

Those companies that have participated in the SME Talent Programme have to undergo an assessment of their HR system because we want to make sure that the HR process is tightened and that there is a proper prospect and career path for those who want to join the company. A lot of SMEs that join the SME Talent Programme end up having to implement a more structured approach to its HR resource management. Then, we can recommend ITE, Polytechnic and University graduates for internship or job placement.

So, when SMEs approach and apply for whether it is ICV, CDG or PIC, it is not necessary for them to know and understand every scheme because we know it can be confusing. The reason why we introduced so many schemes is because we definitely want to help the SMEs of different sizes. That is exactly why when we launched it, it is just to highlight the need and highlight the fact that there is such a programme to help them out there. So, this is how we can address the issue.

Madam, the Minister of State mentioned that instead of having a one-stop, he is suggesting to provide a better first-stop. So, I hope the Minister of State can elaborate further on how this first-stop can really help. We know that

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many SMEs would like something that is more concrete and for someone to hand-hold them so that they can find a better solution for this.

As for the one-stop service centre, it seems that the Minister of State also suggested that the current SME Centres will be able to do the job. I also want to ask the Minister of State, does the Ministry have plans to extend these SME Centres to collaborate with more like-minded organisations, instead of just the SCCCI and ASME?

I thank Mr Yeo for the suggestion. We can pursue a vision of hand-holding, but I can tell him, it is very tough. Why? Because there are 180,000 SMEs in Singapore. They are of a different nature of business and are of different sizes. Instead of raising expectations and say I have every officer, 180,000 officers, one to hand-hold each SME, or I can have one officer for many SMEs. Sometimes, I do not think we have as much domain knowledge as the businessmen themselves or those who set up the companies themselves.

So, it is best that we make sure that there are different resources available to them, but these resources might rest with different agencies. That first-stop can help to coordinate resources, to discuss with the entrepreneur or the business person on what they need. You bring in all the resources and we coordinate. That is exactly where I see the SME Centres and also the business advisors playing that role to say, yes, you need HR, you need WDA's support; or, yes, you have this certain need and there is a scheme in SPRING Singapore that can help you. If you need to go overseas, I can coordinate with my colleagues in IE and facilitate the process.

One thing we will try to do as a first-stop agency is that we can have this vision when the SMEs come to the SME Centre to relate their cases. And they would only need to tell their story once. We will try to do that. Whether it is through technology or information or whatsoever, we will try to do that. Put it down in one standard template and say, this is the story, and you tell that story once and we coordinate the officers to meet the SME and then see what can be worked out to address the issues.

As far as working with more than chambers of commerce or trade associations for the SME Centres, we are definitely open to all these ideas. As long as the organisation is a non-profit organisation and they would like to engage the SMEs to help the SMEs improve and also, at the same time, for their own mission, whatever is their mission, let us say, to help Singapore as a whole in terms of jobs, workers or SMEs, we are open to suggestions and we would like to work with them as well.

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Mdm Chairman, I would like to ask the Minister of State on the subject of the petrol price hike. Besides investigating on anti-competitive behaviour, is the Ministry also investigating them on profiteering? And, indeed, if there is profiteering, is the Government or the Ministry going to take action against the petrol companies?

I thank Er Dr Lee for the question. We have to gather information and, whether it is profiteering or anti-competitive behaviour, we still need to gather information and look at what act was committed, and whether it has been a fair practice or not. At this point in time, it is still too early to make any conclusion or judgement and I do not want to raise expectations and, say, end of the day, yes, we found something. We have not. We are engaging them right now and we are collecting information. But as I assured Members just now, we will take action if they are involved in any of the practices that is unfair or anti-competitive.

I am glad the Minister of State spoke about MTI being the first-stop. On my question of R&D, I spoke about R&D at quite some length. I just want to know, being the first-stop, whether MTI will be facilitating more R&D adoption claims, because 1% of PIC is certainly a low number. Is there any target to grow the adoption of R&D in the SMEs? That is my first question.

The second question is with regard to productivity. Senior Minister of State Lee mentioned last Friday in terms of secondary indicators, that there are some set by with BCA, for example. Is this also across all the major sectors where we can look at secondary indicators? Because one of the key feedback from industries is that they have no idea how far they are from the end and what is the end state for each sector. What is important for many companies is to know what is the Ministry's or Government's definition of success in productivity for each relevant sector.

Mr Lee Yi Shyan : Mdm Chair, let me answer the productivity questions. The National Productivity Council (NPC) has been working with the industry and we have developed 16 industry roadmaps. In each of these roadmaps, the industries have given feedback and we are in the process of structuring secondary productivity indicators.

As we have discussed, in the examples of construction industry and the retail industry, there are different measures to measure: the individual workers' productivity – how much that person can accomplish, either on the shop floor or construction site or factory; there are also productivity measures for the company as a whole – when all the individuals and automation and process re-engineering are put together, how much will the cost be reduced

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and how much the yield will be improved and so on.

Individual companies will have to work on specific data sets like these to measure themselves against their targets. However, the value-add per worker as an overall measure is still important because companies can go on producing more and more units, but if the prices of such units as reflected in their sales in international competition are coming down drastically, it will also mean that we are doing more but getting less overall. That, in economic productivity terms, means that we are not doing the right thing. Staying in this business probably cannot add to the wages of our workers. So, what do we do as a business, as a sector? That is where we have to make more fundamental changes to our business model or increase our ability to innovate and create products or services of higher value.

As we pursue incremental improvements in productivity, we also have to keep in mind some of the more abrupt and fundamental changes in the business model or products and services, so as to give us a quantum leap, a step change in the way we provide our value-add.

I want to thank the Member for raising this because, most of the time, we talk about value-add, and that is subject to business cycle fluctuations. While that is true, we also work on secondary matrices to make sure that our companies – on an individual basis and on a sectoral basis – are making improvement.

Mdm Chair, basically, we have to be realistic. When we look at the PIC statistics, the easiest thing that companies can apply for and the quickest way to get applications approved is the generic ones, whereas R&D is very specific and very in depth and we cannot expect too high a percentage. But we will continue to work to improve this. As Second Minister Iswaran mentioned the other day, the research institutes work with the companies, especially through the Technology Adoption Programme, and try to transfer the technology from the research institutes down to the companies. So, that process is working quite well.

Madam, I just want to ask a clarification on internationalisation. Singapore companies have done very well internationalising into China, thanks in part to the strong government ties, as well as agencies like IE Singapore helping to do the ground work.

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It is good, of course, but it also means that we are overly exposed to China's economy.

I would like to ask the Minister: does he envisage similar success in other markets? Can some of these be replicated elsewhere in terms of different geographical markets and whether we are too dependent on China's market and whether we should really make an effort to diversify from there?

A quick answer. Again, we have to be realistic. We can do much better in China and ASEAN than we can in Latin America and Africa. But we are continuing our efforts in Latin America and Africa.

I want to thank the Minister of State for agreeing to the suggestion of the first- and one-stop agency. We have higher expectations, so, I hope we can make it work.

But my question on REITs was not answered. There are companies that have yet to get direct allocation of land and, so, they got preferential treatment and perhaps, preferential prices. Later on, they turn this back into REITs which, I think, is not the right thing to do because they got preferential treatment. Are we having this practice and, if we do, are we going to stop this?

I thank the Member for the question. As far as REITs and the specific case in terms of preferential treatment are concerned, the Member may perhaps want to provide more information on the details, so that we can look at the specific case in question.

I have answered about REITs several times in this House, as well as about REITs' influence on rental. They may not be the dominating party in the cluster but, because REITs usually have a share of a larger part of a more attractive place, usually the prices and the rental prices go up. That is exactly why, working with the Singapore Business Federation and the SME Working Group, we came up with releasing some of the data to make it more transparent so that both sides, tenants and landlords, can go into a fair discussion on the negotiation of rental rates.

We do the best we can. We cannot interfere and intervene in the market. We provide the information as best we can to provide transparency for them to negotiate. So, as far as REITs and the specific cases are concerned, can the Member please give me more details offline?