Debated in Parliament on 21 Oct 2013.
Mdm Speaker, I beg to move, "That Parliament do now adjourn."
Question proposed.
Mr Teo Siong Seng.
Thank you, Mdm Speaker. In Mandarin, please.
(In Mandarin): [Please refer to Vernacular Speech.] Mdm Speaker, hon Members, good afternoon. Firstly, I would like to declare that I am the Immediate Past President of the Singapore Chinese Chamber of Commerce & Industry (SCCCI) and the Managing Director of Pacific International Lines. In November last year, I gave a speech in Parliament to articulate the needs of our SMEs and reflect their challenges and aspirations. Today, one year later, I would once again attempt to convey the voice of our local SMEs on the topic "Sustainability of Small and Medium Enterprises".
In the past two years, the Government has launched many assistance schemes to help local enterprises grow and increase productivity. Our businesses have also done their utmost to innovate and adapt by trying out new initiatives. Some have relocated their production bases to neighbouring countries to reduce their overheads. The SCCCI, which positions itself as an effective bridge between the Government and the private sector, has always strived to promote mutual cooperation. As we assist the Government to promote its policies, the Chamber also gives timely feedback to relevant Government agencies on the challenges faced by businesses on the ground.
What are the main challenges being faced by the businesses currently? This month, SCCCI announced the findings of its 2013 SME Survey. A total of 516 companies participated in the survey, out of which 97.7% were SMEs. We were pleased to note that the direction and attitude taken by the Government and SMEs towards increasing productivity is in sync. Out of the companies surveyed,
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84% indicated that they were working hard to make adjustments and implementing various measures to increase productivity. This is extremely heartening news. However, we should also reflect over this situation: if the Government and the business community share the same views and attitudes about this new strategic direction, why are many companies still struggling? What effective measures can we take to achieve the desired goal?
The survey showed that the two salient challenges faced by local SMEs are manpower and business premises. Manpower challenges have become a reality. Businesses are well aware that there are no shortcuts to solving manpower challenges and there will be no U-turns to the Government policies. Hence, we hope that the Government would be able to provide affordable space for the local SMEs. From the perspective of the business community, it does not matter which Government agency is responsible – be it JTC, SLA, HDB, NEA or any other agency. They only hope to find the solution to their challenges once and for all.
SCCCI organises monthly lunch dialogues with our trade association members on their challenges. We obtain a great deal of feedback through these dialogues, and the most frequently raised issue relates to business space. Industries which have been affected include metal and machinery, timber, food and beverage, furniture, vehicle trading, food import and export, hortiflora, flower wholesale, bakery, and coffee shops. They have all conveyed the same issue. Evidently, the challenge posed by business premises is a common and predominant challenge to local companies.
The challenges with regard to business premises fall into two categories. The first category pertains to the renewal of land lease, while the other is on the spiralling escalation of rental costs for factory and retail space. For example, there is no guaranteed lease renewal for a JTC factory upon the completion of the 30-year lease. In addition, some industries are unable to receive a definite answer on whether they can renew their lease for land managed by SLA. When businesses are unable to renew their leases, they would need to identify alternative industrial space quickly upon being notified of the lease termination. Moreover, moving business operations is also an extremely costly affair. Besides moving costs, fixed asset investment and renovation expenses, many facilities and equipment are disposed of in order to restore the industrial space to its original condition.
Many trade associations have relayed such a grievance to SCCCI. For example, businesses in the metal and machinery as well as timber industries need to use and stock much heavy duty equipment. Finding a suitable location
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and moving operations are no mean feat. Such equipment cannot be stacked up due to loading and safety considerations, and thus require sufficient land.
Now, let me relay a case regarding a florist. Being a florist in Singapore is not that easy, even if Singapore is considered a garden city or, as we now position ourselves internationally, a city in a garden. Mr Tan Peng Kheok, Chairman and Managing Director of Prince's Flower Shop, started his operations at Toh Tuck Road in 1956. To date, he has moved a total of seven times. His current operation is based at Sungei Tengah Road. However, his 20-year lease will end in November next year and he is unsure whether the lease could be renewed. According to past experience, each move will cost $2 million, which includes setting up new flower beds as well as irrigation and drainage systems. Heavy flowerpots and unsold fresh flowers at the original location are difficult to move and, therefore, need to be discarded. Mr Tan's current wish is simple. He hopes that the relevant agencies could provide an early indication to businesses on whether leases can be renewed. With this certainty, businesses will be able to plan ahead for the facilities required, raise capital and find new locations. Mr Tan's wish is shared by many SMEs as well.
Businesses in the service, retail and food and beverage industries are most affected by rising shop rental costs. Currently, JTC and HDB divest many commercial spaces to private owners or establish Real Estate Investment Trusts (REITs). Under the management of private companies, rental periods are very short, with renewal being required once every three years on average. Not only is the increase in rent extremely steep with each renewal, profits also have to be shared with property owners. Practically all businesses from various industries have aired their grievances regarding REITs. In their words, "We are simply working for REITs."
With regard to commercial space, many businesses reminisce about the time when JTC and HDB provided affordable space for business operations. With increasing proliferation of free market forces, I hope that the Government would increase its support for the large number of SMEs. These SMEs comprise those in traditional industries, those which provide support services to multinational corporations, new hi-tech start-ups, and many which are closely connected to the basic needs of Singaporeans. More importantly, these businesses hire 70% of our country's workforce and provide suitable employment opportunities for people from all walks of life.
Recently, JTC has launched 18 units of Small Footprint Standard Factories for rental to SMEs. In addition, HDB has announced the revision of its tenancy policies together with the building of new neighbourhood centres in HDB
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estates. This is an excellent start. I hope that this model can be expanded to provide more SMEs with affordable space for business operations.
A suitable location is essential for business operations. Any business model would require planning and time for implementation. If the issue of space becomes a constant uncertainty, businesses will be in a nomadic state; unable to implement long-term plans and lacking confidence to invest in fixed assets, employee training and upgrading and, particularly, in equipment that would improve productivity. If this continues, the overall competitiveness of local enterprises will be seriously affected. Businesses understand that there is a limited supply of land in Singapore. However, our businesses hope that early notification on the possibility of future renewals can be given before the expiry of the land lease. This would give businesses more leeway to adjust and find alternatives. This is a better option than having to tackle the difficulty of finding a new location at short notice.
Additionally, a common challenge reflected by businesses with regard to the Government is the lack of coordination among Government agencies. This has left enterprises totally exasperated and at a loss. In actuality, it is a good thing that each Government agency has a clear mandate and cooperates through the division of labour. However, businesses sometimes face great difficulty or are perplexed when approaching Government agencies to solve an issue. When looking for assistance, businesses have to hop from one agency to another. Despite the good attitude shown by each Government agency, they are still unable to solve the problems at hand.
A few weeks ago, Prime Minister Lee Hsien Loong shared the story of "catching snakes" at the Public Service Leadership Advance. Different agencies would be required to handle the issue depending on the location of the snake. Of course, the conclusion of the story was that all animal-related issues would be handled by the Agri-Food & Veterinary Authority of Singapore (AVA) now and there is one hotline for the public to report such issues. Compared to catching snakes, the problems faced by SMEs are even more complicated and involve many Government agencies. We hope that there can be one agency for SMEs to approach directly for help. This agency can then take the lead to provide coordination services with other Government agencies.
In August this year, Prime Minister Lee Hsien Loong announced at the National Day Rally that an SME Workgroup would be established so that grassroots political leaders, business organisations and Government agencies could work together to examine issues pertaining to SMEs. The workgroup consists of 16 Members of Parliament, nine business chamber representatives,
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three business leaders and nine Government Ministries and agencies. This is a good start and shows that the Government places great value on SMEs. However, it is essential to have the right remedy to deal with the situation. With an accurate solution, challenges can be dealt with in an efficient manner. The opposite would be true with an inappropriate solution.
SMEs and their employees are the core of Singapore and have their roots in the country. If Singapore can be likened to a flourishing tree, then the SMEs and employees are the roots of this tree. Only when the root system is well-developed and healthy can nutrients be transported effectively to develop lush leaves and branches. When SMEs are developing healthily, their employees can have better livelihoods and the country will maintain its stable development.
I have constantly reiterated that helping our local enterprises restructure is not something that can be completed overnight. It requires consistent effort from the Government, businesses and employees.
To sum up, in order to help our local SMEs achieve sustainable development, businesses have three items on their wish-list. Firstly, they hope that the Government can take a clear and long-term approach with regard to planning land allocation, adjusting Government policies and increasing productivity. This would allow SMEs to simultaneously make long-term plans. Secondly, businesses hope that there can be an over-arching agency to handle SME matters and coordinate with other Government agencies to guide businesses to the relevant parties. Thirdly, the policy criteria set by the Government are wide-ranging and numerous.
We hope that the Government can be more sympathetic towards the situation of our SMEs and lower the compliance costs related to the implementation of Government policies. This would alleviate the burden on businesses already coping with the double-whammy caused by manpower and rental cost pressures.
Mdm Speaker, I would like to thank Mr Teo Siong Seng for introducing this motion on Sustainability of Small and Medium Enterprises (SMEs). SMEs are an important part of our economy. They make up 99% of companies, employ 70% of our workforce and contribute to 50% of our GDP.
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The need for SMEs to restructure and improve productivity is clear. Our challenges, in manpower, land and energy, are especially sharp because we are a small country. We need to manage our resources carefully. SMEs which rely heavily on manpower or land have faced rising costs. Singapore Chinese Chamber of Commerce and Industry's 2013 SME survey has found that many businesses understand the need for increased productivity, and are working hard to do so.
Mr Teo has highlighted the difficulties our SMEs face with rental increases. The Government's overall objective is to maintain a stable and sustainable market where rentals remain competitive and affordable for businesses. While HDB does not divest its commercial space to private companies or owners or established REITS, we have released a significant amount of land through the Industrial Government Land Sales (IGLS) programme. And over the next five years, about 340,000 square metres of new multiple-user factory space will become available each year. This is higher than the annual demand of 220,000 square metres over the last five years. We have also released smaller IGLS land parcels with shorter tenure, to provide more affordable options for SMEs.
Over the next five years, about 230,000 square metres of new office space and 120,000 square metres of new shop space will be completed each year. This is higher than the annual demand of 140,000 square metres of office space and 70,000 square metres of shop space over the last five years.
Commercial rentals declined slightly in 2012, after increasing in 2010 and 2011, and have remained relatively unchanged in 2013. Current commercial rentals are still below the previous peak of mid-2008. The Government will continue to monitor rentals carefully, and we will also introduce additional measures if necessary.
JTC develops long-term land use plans which are regularly reviewed. The plans ensure that there is sufficient affordable land and space for genuine industrialists to support and develop our manufacturing sector. Importantly, the land use plans also ensure that the productivity of the land continues to improve.
Mr Teo raised the issue of lease renewal. Singapore is a small island nation, and all land, including land for industrial space, is precious. So, every single application for lease renewal is assessed to ensure that the industrial use fits the long-term plans in strengthening our economy, and the land productivity continues to improve over time. As a result, some companies may not be able
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to have their leases renewed.
JTC actively engages its customers at least six years before the expiry of their lease, and provides at least three years' notice if a lease cannot be renewed. This way, companies have enough time to find alternative premises.
To provide more options for companies, JTC is developing infrastructure projects which reduce business costs for SMEs through innovative designs and provision of shared capital-intensive facilities. SMEs can consider moving to these developments, which include the Small Footprint Factories Mr Teo has mentioned, and the Surface Engineering Hub and MedTech Hub, which will be completed by early 2014.
The advantages can be considerable. For example, Globaltronic Precision, which makes chemical products for the aerospace, marine and medical sectors, relocated in July to JTC's Small Footprint Factory in Buroh Street. Their rental decreased by close to 40%, even though the total floor area remained the same, and productivity increased significantly.
JTC has been engaging many industries, such as furniture and food manufacturing, to understand their infrastructure needs. In the next phase, it will be by cluster development and more of such projects will be announced in due course. Mdm Speaker, I would like to continue in Mandarin.
(In Mandarin): [Please refer to Vernacular Speech.] Mdm Speaker, we will continue to pay close attention to the needs and challenges of our SMEs. I chair the SME Workgroup which Mr Teo mentioned, which brings together grassroots advisers, Government agencies and business representatives in a concerted effort to address SME issues.
The grassroots advisers have started holding dialogue sessions with SMEs to share ideas for improving productivity and to hear their concerns. The SME Workgroup will take the feedback raised and study how we can further help companies during this restructuring period.
There are many Government schemes available for businesses to build capabilities and improve productivity. During the SME Review last year, SPRING and IE Singapore streamlined their Capability Development and Internationalisation schemes to make them more accessible to our SMEs. Hence, it is not that SMEs have nowhere to seek help, but that some of them do not know the agencies to approach and which schemes are relevant to their
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needs. Just as the Government has a hotline for catching snakes, we also have the EnterpriseOne hotline, which enterprises can call to get comprehensive information on Government assistance schemes. The hotline number is 68981800. Businesses can also access the EnterpriseOne website for the same information.
Companies which prefer face-to-face advice can approach any of our SME Centres or satellite SME centres. The Government has expanded the Enterprise Development Centres (EDCs) into a one-stop SME Centre and set up five satellite SME Centres at the Community Development Councils (CDCs). These centres offer comprehensive advisory services to SMEs and help them understand the Government's various assistance schemes, making it easier for them to get help. Since the launch in April, the SME Centres have reached out to more than 7,200 SMEs to explain and promote Government help for raising productivity. We will work even harder to reach out to about 20,000 SMEs per year, up from the 14,000 SMEs under the EDCs.
Let me share with Members one example. Roxy Apparel is a small retailer that specialises in tailored menswear. Roxy tapped on SPRING's Capability Development Grant (CDG) to increase productivity and improve customer experience. The company put in place an IT infrastructure to better engage customers through their website, online store and the online community. It also simplified its in-store and online ordering through an iPad interface, allowing each sales employee to reduce administrative tasks and serve the customers more effectively. The company's labour productivity has improved by 20%.
This and many other examples make me optimistic that businesses are making the necessary changes to improve their productivity.
Mdm Speaker, for our economy to continue to strive, our SMEs must continue to prosper. The Government is paying close attention to the concerns of our SMEs, and will support them in their transition to higher productivity.
Our SMEs understand this and I am pleased to see that many SMEs have come on board this restructuring journey. We have many schemes; our concern is that SMEs do not use our schemes. We will reach out to and assist all able and willing SMEs.
The Workgroup I chair will do the utmost to find ways to help SMEs so that they can access the schemes most relevant to them. Enterprises, on the other hand, should also do an internal check to see in which areas innovation and
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changes are needed.
We hope that SMEs will be able to take root under this big tree of Singapore and prosper. The Government must work hard; at the same time, the enterprises must also work harder and transform. So long as we work together, through productivity improvement and innovation, we can achieve quality growth and create good jobs for our people.
*Question put, and agreed to.*
*Resolved, "That Parliament do now adjourn."*
Adjourned accordingly at 5.50 pm.
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