Building World-class Singapore Enterprises

Mr Thomas Chua Kee Seng (Nominated Member) (In Mandarin): [Please refer to Vernacular Speech.] Mr Deputy Speaker, fellow Members of Parliament, good afternoon! Firstly, I would like to declare that I am the President of the Singapore Chinese Chamber of Commerce & Industry, and the Chairman and Managing Director of Teckwah Industrial Corporation. Today, the topic of my speech is "Building World-Class Singapore Enterprises." There are three key points: firstly, after undergoing more than two years of economic restructuring, our local business community is clearly divided, with the productivity and business efficiency of large enterprises being on the rise, while that of SMEs is on the decline; secondly, how can the Government tweak its policies, based on the different sizes and capacity of enterprises, to give appropriate remedy to fuel their growth; thirdly, how enterprises should make adjustments and determine their optimum positioning to ultimately become world-class Singapore enterprises. Please allow me to elaborate further.

Singapore's corporate landscape is a diversified one, where MNCs and government-linked companies co-exist with local enterprises. Among local enterprises, 99% are SMEs. This diversified corporate structure needs to be a symbiotic one to successfully spur Singapore's economic development. In 1980, Singapore's GDP per capita was US$5,004, and in 2013 our GDP per capita has soared to US$55,183. The growth is ten-fold. It can be said that MNCs, industry leaders and government-linked companies are the locomotive for the Singapore economy, while local enterprises follow closely behind to form the train for economic development. Under the leadership of the Government, all have surged forward to create an admirable economic miracle.

However, in recent years, as Singapore has moved into the restructuring of its economy, the business community has become split and the gaps between large enterprises and SMEs are widening. In May this year, Swiss business school IMD released its World Competitiveness Yearbook Ranking for 2014, and Singapore's overall competitiveness ranking improved from Fifth to Third. This good news was very well covered by the media. However, when I spoke to the business community about this ranking, they seemed

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confused. Why is there such a disparity between the sentiments of the SMEs and the Yearbook rankings?

Hence, I studied the findings of the Yearbook, and discovered that in terms of productivity and efficiency, the world ranking of Singapore's large enterprises was number 17 in 2011, whilst they moved up to number 14 in 2014, up three notches. The SMEs' performance was, on the contrary, the reverse, having fallen in ranking from number 24 in 2011 to number 29 in 2014. In other words, after we embarked on economic restructuring, the productivity and efficiency of Singapore's large enterprises have improved, while those of SMEs have suffered a decline. What causes greatest concern is that Singapore's SMEs' ranking falls far behind that of Taiwan, Hong Kong and Malaysia, and SMEs from China are ahead of us by four notches. Our ranking is 29; another country is also ranked 29 and that is Lithuania. At the same time, the adaptability of Singapore companies has plummeted from number 15 in 2011 to number 23 in 2014. These figures are rather sobering and deserve to be carefully examined.

Large enterprises are surging forward, while SMEs are faltering. The decline in companies' adaptability is not good for the healthy development of our country. This phenomenon can be attributed to the internal factors of the enterprise, as well as factors relating to the sudden changes in the external business environment. In 2010, the Government started to tighten its foreign manpower policy, encouraging local enterprises to raise their productivity and reduce their reliance on foreign workers. This is the right direction to take. However, in the process of implementation, we have seen the untimely departure of some well-trained and skilled workers. Enterprises find it difficult to immediately recruit qualified workers, resulting in a decline in productivity as well as disruption to companies' existing business plans.

At this juncture of economic restructuring, large enterprises and industry leaders have the ability to make necessary adjustments, and some promising SMEs are also gradually adapting to this new reality. However, majority of smaller enterprises are vulnerable to the challenges of the manpower policy and are particularly prone to changes in business costs. They are having a rather tough time.

Last month, the International Monetary Fund's report also indicated that the tightening of Singapore's foreign manpower policy has weakened Singapore's competitiveness and growth potential, but also noted that the measures to improve productivity could eventually help Singapore to achieve sustainable economic growth. Combining the analysis and findings of both IMD and IMF, it is evident that Singapore enterprises are already feeling the pain of economic restructuring. At this crucial time, everyone needs to grit their teeth and work even harder to overcome this most difficult period, before we can usher in a new phase of

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stable growth.

Hence, I would like to recommend that, in next year's Budget – pity the Finance Minister is not here – the Government should retain the productivity assistance schemes, giving a strong boost to enterprises and enabling them to overcome this period of economic restructuring. Effective measures that had been put in place in the last few years must continue, and the qualifying criteria should not be raised because of the abuse from one or two exceptional cases. Currently, many enterprises have already decided to adopt measures to raise their productivity; we have to give them time and space to do so.

Naturally, there are still some enterprises which are unable to adapt quickly to the restructuring of the economy, and we have to think of ways to help them. Even if they need to restructure, they need to do it within their capabilities. If they can only turn 180 degrees, let them do so; do not force them to turn 360 degrees. At the opening ceremony of the "National Productivity Month", Prime Minister Lee Hsien Loong likened the productivity drive to "a marathon without a finish line". I totally agree with this viewpoint. The most important part about running a marathon is in the mentality, and the enterprise has to have sufficient endurance, determination and be well prepared, broaden its visions, find an appropriate strategy, be adaptable, and press on steadily! Any ideas done too hastily or with a sprint mentality would not succeed.

The Government is preparing the 2015 Budget, and I take this opportunity to convey four appeals on behalf of the business community: firstly, we hope that the Government would not tighten the manpower policy further, and this includes the quota and worker levy; secondly, we hope that prior to the implementation of any new industry-related policies, the Government could engage in sufficient consultation with the business community, to improve effectiveness and lower compliance costs; thirdly, when enterprises recruit workers aged 55 and above, we hope the Government could provide healthcare and insurance benefits; fourthly, we hope that the Government would implement a policy specifying that large companies participating in tenders for large Government projects need to partner local SMEs.

There is always a physical threshold in running a marathon; moreover, every person's physical threshold is different. As long as this physical threshold is surpassed, it means entering a whole new realm. In Budget 2015, we hope the Government would draw up its policies taking into consideration the physical thresholds of various types and sizes of enterprises and continue to give impetus to businesses. To achieve this, there should be a dedicated agency with a very thorough understanding of local enterprises, particularly the SMEs, to take charge of coordinating resources and solving problems. I realise this request had already been raised twice by former Nominated Member of Parliament Mr Teo Siong Seng, but nothing has materialised thus far. Since the Municipal Services Office (MSO) has

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just been set up directly under the supervision of Minister Grace Fu, to coordinate the work of many Government agencies, this has given me confidence to revisit and surface this request once again.

At this time, I would also like to urge local enterprises to seize the opportunity to draw up their own marathon strategies, and to optimise all of Government's incentive schemes. We have to realise that even if the Government provides assistance, ultimately, it is the enterprise that has to run the marathon. The enterprise can only achieve a breakthrough and enjoy robust growth if it fully recognises its unique characteristics and leverages on its strengths. When we talk about building world-class Singapore enterprises, it is not only according to size or business performance. Rather, there has to be a unique business model which enables Singapore enterprises to gain more recognition, gain acceptance in more markets and become internationally renowned.

Do Singapore SMEs have the chance to become world-class enterprises? A 13-year-old teenager called Jodie Lai provided me with an inspiration. In the Asian Games in Incheon this year, Jodie won a gold medal in sailing. She is a Secondary 1 student in Raffles Girls' Secondary School. Based on Team Singapore's special selection system, Jodie was chosen to represent our country to participate in an international sports competition. Likewise for our local SMEs, if they are able to find their niche in Singapore's open economy and on the international platform, be prepared to work hard and cooperate with industry leaders, and leverage on our excellent infrastructure, SMEs would have the chance to become world-class Singapore enterprises.

Many details are involved in building world-class Singapore enterprises. Although IE Singapore and SPRING Singapore have always done remarkably well, we do hope that the Government would appoint a minister to personally oversee a special one-stop agency to help the SMEs. If this wish could be realised, then we would advance one huge step further in our ambition to become world-class Singapore SMEs. Next year, Singapore celebrates the 50th year of Independence, and I sincerely hope that even as we celebrate our golden jubilee and be encouraged by all our past achievements, we have to work hard at planning an even more beautiful development blueprint and action plan, so that future generations of Singapore would look back with pride on all we are working hard to put in place today.

Mr Deputy Speaker, first, let me thank Mr Thomas Chua for introducing this Motion, for very passionately reflecting SMEs' sentiment and for his four special requests.

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For Singaporeans to enjoy higher standard of living, we need to create good jobs and good jobs come from a vibrant, diversified and globally competitive economy. We can only be globally competitive if our companies are constantly innovating, transforming and creating products and services of higher value.

Given that we have about 180,000 businesses in our economy and the fact that 99% of them are SMEs which contribute 50% of our GDP with 70% of employment, we need a customised approach, as Mr Chua has suggested, to help our companies of different sizes in different industries to improve their productivity. Let me elaborate.

For the purpose of this discussion, let me focus my discussion on SMEs. For this very large group of enterprises, the Government introduced the Productivity and Innovation Credit (PIC) in Budget 2010. In the following three years, we have seen rising utilisation of PIC amongst active companies: it was 33% in 2011, 37% in 2012 and 40% in 2013. In all, companies have enjoyed $1.5 billion in PIC benefits, with SMEs making up around 95% of the beneficiaries.

Another popular programme SMEs have benefited from is the Innovation and Capability Voucher (ICV) administered by SPRING. Since 2013, SPRING has awarded 8,500 vouchers amounting to $42.5 million to SMEs for consultancy and capability building.

We monitor SMEs' receptiveness to the need for change and productivity upgrading on a regular basis. A recent DP Info survey shows that the proportion of SMEs seeking to improve productivity has continued to rise steadily, from 58% in 2013 to 87% last year. More than half of the SMEs surveyed are rethinking their business model.

As Mr Chua pointed out, many SMEs understand the need to moderate labour supply at the national level. The truth is that we still are adding workforce, new workers into our labour pool. In the first half of this year, we added another 11,200 foreign workers and 41,000 local workers into the workforce. And as the Prime Minister has highlighted at the opening of the National Productivity Month, we do not expect any further major measures to tighten the foreign manpower numbers.

Mr Chua has also made several points about employing older workers. We acknowledge that higher costs of medical and insurance premiums for older workers are characteristics of their employment. Therefore, a Special Employment Credit can help mitigate costs in this regard.

The current tight labour market has caused many SMEs to re-think their business model, which is essential to economy-wide restructuring. In addition, at the national level, we

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continue to see robust growth in net business formation. In the first half of this year, net business formation was 14,800 companies, compared to 20,000 in the whole of last year, 15,900 in 2012 and 13,800 in 2011. These new entries into the economy would add to the competition for workers in the labour market. This is another reason why existing firms need to raise productivity quickly. Mr Deputy Speaker, I would like to continue in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech on Pg xxxx.] Mr Chua has highlighted that enterprises differ by size and scale, and suggested that policies be calibrated according to the needs of our enterprises. I agree with Mr Chua and the Government does indeed take a differentiated approach when formulating policies relating to SMEs.

As mentioned in my English response earlier on, many SMEs have benefited from schemes such as the Productivity and Innovation Credit (PIC) and the Innovation and Capability Voucher (ICV). These schemes provide SMEs with funding and professional advice, and support SMEs in stepping up productivity in areas such as automation, IT solutions, financial and HR management, and innovation. Since the start of the productivity drive in 2010, we have invested more than $2 billion through the various schemes and helped more than 70,000 SMEs in raising their productivity.

To help more SMEs and micro-enterprises have better and faster access to such productivity schemes and its benefits, we have therefore expanded the SME Centres into one-stop Centres, doubling such Centres from five to 12. Seven of these Centres are located at CDCs or CCs, to make it convenient for SMEs to seek help. The Government has also set up the SME Workgroup led by Minister of State Teo Ser Luck, bringing together grassroots advisors, Government agencies and businesses on a single platform, to improve outreach to SMEs. Last year, our collective efforts through SPRING, the SME Centres and the SME Workgroup reached out to some 100,000 SMEs.

Although economic restructuring may be difficult, we have confidence in achieving our targets and we have to attain these targets. Currently, the Government is working with trade associations to develop industry-specific productivity solutions. One such collaboration in the F&B sector between the Government, the Restaurant Association of Singapore (RAS), the Singapore Food Manufacturers' Association (SFMA) and the Singapore Manufacturing Federation (SMF) has benefited 50 restaurants thus far. We hope that more trade associations and bigger companies can tap on initiatives such as the Cluster Initiative Programme (CIP) and the Call-For-Collaboration (CFC) programme, to come together as a whole to help SMEs develop and innovate.

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In addition, the Government is also working with individual companies to support business growth and internationalisation plans.

For example, under its Capability Development Grant (CDG), SPRING provides funding to SME to support areas such as raising service standards, technology innovation, leadership development and growing a global brand.

Through the Global Company Partnership (GCP), IE Singapore provides tailored assistance through assessing the business model and needs of each enterprise, and developing a support package for companies to go overseas in key business areas such as branding, IP management and supply chain management. IE Singapore also helps companies understand the opportunities in targeted market, links them up with in-market intermediaries and business opportunities and recommends the best market-entry models. Collectively, more than 2,000 companies have been assisted by SPRING and IE Singapore in 2013.

To ensure that our policies continue to meet the needs of our businesses, we have always been keeping close communication with industries and seeking feedback from them and the public. As an example, consultations for the Personal Data Protection Act (PDPA) were extensively carried out over three rounds over the course of one year. It took into consideration close to 1,900 responses from individuals and organisations, to seek a balance between the needs of businesses and individuals.

(In English): Mr Deputy Speaker, in English. Mr Chua has spoken much about world class enterprises. In my view, a world class enterprise has two important attributes.

First, it has a competent leader backed by talented people. As such, SPRING and IE Singapore work closely to help our enterprises develop systems that will attract and groom talents. Through SPRING's SME Talent Programme, some 400 enterprises have come on-board with 820 students for talent development.

In addition, IE Singapore's Young Talent Programme (YTP) has supported over 800 undergraduates through overseas exchanges, study trips and internships since 2013.

The second attribute of a world class enterprise is that its business model must stand out from competition, and sometimes with very few competitors. Consider the example of WhatsApp. When it was acquired by Facebook last year it had only 55 employees but worth US$21 billion. We all know that an SME with 55 employees is a small company, even in Singapore, but its business model sets it apart. The question is whether we can produce our

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own WhatsApp and Facebook – small but with world class capabilities.

Our tech start-up scene has grown and become vibrant. A study shows that in the past three years, at least 27 Singapore-based start-ups were bought out for more than US$0.5 billion. Each of them was worth US$18.5 million on average. Through Minister of State Teo Ser Luck's leadership at ACE and JTC's LaunchPad, the Government hopes to further enhance Singapore's environment for innovative start-ups.

We cannot hope to create world class enterprises by confining our revenues to Singapore's market, or depending on archaic business model. This is why, under the Research, Innovation and Enterprise 2015 plan, the Government has helped SMEs access public research capabilities in A*STAR Research Institutes, Centres of Innovation (COIs) and Private-Sector Translators (PSTs). As a result, over the period of 2011 and 2012, average R&D spending by SMEs undertaking R&D grew 25% from $1.27 million to $1.58 million in 2012. Revenue from commercialisation of products and services by SMEs attributed to R&D in Singapore reached $763 million in 2012.

Mr Chua has also raised a point about a dedicated agency to support development of SMEs. SPRING Singapore is, in fact, the de facto primary agency which looks after the SME sector, providing a broad range of programmes to support the capability development of SMEs. It works closely with other agencies to ensure alignment of programmes and strategies for the SME sector. A multi-agency approach with each agency looking at specific focus ensures that willing and able SMEs receive the level and type of support they need to thrive.

Mr Deputy Speaker, in conclusion, I have outlined how the Government has established a comprehensive eco-system to nurture and support the growth of SMEs in Singapore. I would like to assure Mr Chua that Government will do everything in its means to create a competitive and vibrant economy made up of many world class enterprises.

*Question put, and agreed to.*

*Resolved, "That Parliament do now adjourn."*

Adjourned accordingly at 7.15 pm.

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