Business Opportunities for Smaller Local Companies

It has always been our objective to have the big companies work with the smaller ones in a partnership format or by forming a consortium to go overseas for projects, as well as to develop the smaller start-ups to increase their capabilities. We have developed several schemes and programmes for that purpose, one of which is the Partnerships for Capability Transformation (PACT) programme. It was introduced in 2010 with a budget of about $250 million under EDB to incentivise large companies to work with smaller companies to raise the capabilities of the smaller companies and enable them to become preferred providers or suppliers.

The PACT programme was further expanded last year. We have an additional $60 million over three years set aside for SPRING to engage these companies beyond manufacturing sectors. We enhanced it, broadened the sectors, so that more sectors would be able to use it. They support co-innovation projects between the large and smaller businesses.

PACT also helps smaller firms in three ways. First, PACT helps large firms to identify and partner local suppliers, local SMEs and helps these smaller suppliers learn best practices from the large companies. Second, PACT provides support for SMEs to upgrade their capabilities to meet global

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standards and become qualified suppliers of large companies. Third, PACT supports co-innovation projects, which I have mentioned, where large companies and SMEs work together to test-bed new types of technologies or innovation. This helps SMEs build up their portfolio and track record.

The take-up rate for PACT has been quite positive. Over the last year, 40 large organisations signed up for more than 50 projects, with another 70 projects in the pipeline. The on-going PACT projects are expected to benefit more than 300 smaller companies. Of course, we can do more. With 160,000 or 170,000 SMEs, we continue to encourage big companies to work with the smaller ones to tap on these schemes.

The Government also supports joint overseas ventures in order to develop global companies. IE's Global Company Partnership (GCP) grant supports companies working as a group to land overseas projects, allowing large companies to undertake internationalisation activities jointly with smaller companies, and they can share the costs. Support under the GCP includes prototyping and market testing for products, as well as overseas attachments to large companies to acquire new technologies and capabilities.

In addition to some of these overseas schemes, there are some of those programmes and schemes that can help smaller companies to market and promote their products overseas. We strongly encourage these companies to use them, as well as the programme where they can tap on the network of resources to find out more information about the overseas market. The Government helps to defray some of the costs incurred in finding out the information. We continue to encourage big and small companies to work together and also to tap on those schemes.

I thank the Minister of State for his reply. I just want to ask a couple of questions.

In terms of the PACT programme, when you look at innovation and co-development, do you also look at the payment terms? When it comes to big companies, they typically have economies of scale and they can demand longer payment term cycles. I have done SME dialogues where SMEs would complain that big companies expect longer payment terms and very harsh conditions of contract. This could be looked into. This is one aspect.

My second question is: in terms of putting all these companies together – it is related to the earlier question – how can we facilitate more to come together,

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especially when they have very varied interests in terms of objectives?

For co-innovation projects, usually there will be some costs upfront that would need to be paid. If let us say it is a cooperation between a large and a small company coming together to develop the project, we usually try to encourage them to tap on some of our research institutes or agencies like A*STAR and so on to help to facilitate the whole process so as to help not just the cash flow but, more importantly, the content of the innovation project. How we can help both sides.

SPRING, A*STAR and IE are agencies that are there to help facilitate the process, including resolving some of these issues. It is important for the SMEs, or even the large companies, to surface these issues so that they can work it out. We have done it before. We have overcome such challenges before to facilitate the process of bringing big and small companies together, especially going overseas.

These are companies with a very small market. The size of that company is only that big. If they individually go out there to bid for overseas projects, sometimes their probability of success is very low. We always encourage them to form consortiums, look at major projects, because at the government-to-government level, we have very good relations and the trade growth has increased in many ways, say, for example, in big markets like China. But the project in China is relatively large. We need these smaller companies to group together, look at the opportunities and go for them. And many other countries, for example, the Taiwanese, Japanese and Koreans, are doing the same.

In order to help facilitate that, we are now reviewing some of our programmes, schemes and policies to facilitate that process. At the same time, we are also trying to empower the associations that have been set up overseas, like SinCham, the different offices that are set up, empower them to be able to bring their companies that are overseas together. Essentially, it is both ways. Both here and there, we have to coordinate. SPRING and IE undertake such a role to facilitate this whole process. And we definitely want to beef up our resources to do that.

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