Keynote Speech by Minister Grace Fu on "A New Vision for the Growth of SMEs" at the 17th Asia-Pacific Economic Cooperation (APEC) Small and Medium Enterprises Summit in Lima, Peru

Your Excellency Dina Boluarte, President of the Republic of Peru

Distinguished guests,

Ladies and gentlemen,

Introduction

Buenas noches. I would like to thank ComexPeru for the invitation to deliver the keynote speech on “A New Vision for the Growth of Small and Medium Enterprises (SMEs)”, at the 17^th Asia-Pacific Economic Cooperation SME Summit.

The New Global Operating Context for APEC

2. Since Peru last chaired APEC in 2016, the world has vastly changed. We meet at a time of accelerating winds of change, where the global order is shifting to become more complex, volatile and uncertain. First, there is increased economic fragmentation. Geopolitical tensions are reshaping how economies trade, invest, and manage global supply chains. When comparing the period from 2022 to first quarter of 2024, and the preceding five years, the International Monetary Fund estimated a 2.5 percentage points slower growth in goods trade between geopolitically distant blocs as compared to within blocs.¹ Second, there is a shift from rules to power. Trade-restrictive and protectionist measures are growing. These developments are not ideal for upholding global free trade and a rules-based multilateral trade system. It is thus ever more critical that APEC stays the course as an open, inclusive and consensus-driven platform, guided by the primary purpose to promote sustainable economic growth and prosperity in the Asia-Pacific region.

3. Even as we find ourselves navigating a more challenging global landscape, there are still exciting opportunities on the horizon that we can seize. The digital economy will remain a key driver for many APEC economies and continues to present good growth prospects for our region. Within Southeast Asia, the digital economy is projected to reach a value of US$1 trillion by 2030. As the move towards net-zero becomes a pressing imperative around the world, APEC economies can seize the growing demand for sustainable products and services. Economic growth for the APEC region is expected to remain steady at 3.5 percent in 2024.² This is testament to our capacity to adapt and stay resilient despite global uncertainties. There is reason to be optimistic.

SMEs – the Heart and Backbone of APEC Economies

4. Amidst these global shifts, our SMEs remain key players. They form both the heart and backbone of APEC economies. Within the APEC region, SMEs account for more than 97 percent of businesses and employ more than half of our region’s population. In Singapore, SMEs make up 99% of our businesses and employ 71% of our total workforce. Beyond the important economic role they play, SMEs perform a social function too. Not only do they provide a means to livelihood for more vulnerable segments within our economies, they are also instrumental in the development of local infrastructure and strengthening of community resilience. SMEs collectively are indispensable players in achieving APEC’s Putrajaya Vision 2040 and the Aotearoa Plan of Action, which seek to support economic growth that is strong, balanced, secure, sustainable and inclusive.

5. Many of these SMEs operate in informal sectors, particularly in the developing economies across APEC. Based on estimates by the APEC Policy Support Unit, the size of the informal economy within the APEC region was estimated to be about 13 percent of GDP in 2020.³ The considerable size of the informal economy presents a wealth of untapped potential. More can be done to the transit this group to the formal economy. This is a crucial step towards sustainable economic growth, since informality has been shown to limit access to finance, markets and legal protection. Historically, large informal sectors have also been shown to dampen recovery and are often associated with lower productivity, slower physical and human capital accumulation and social inequality, amongst other issues.⁴

6. Hence, when we talk about a vision of SME growth, our collective vision and agenda must include the transition of these informal SMEs to the global and formal economy. Only then, can we fully harness the growth potential of our SMEs and foster inclusive growth that benefits our people from all segments of our societies. While this is a complex and challenging area to tackle, I am glad to see Peru has prioritise this as a key part of APEC 2024’s inclusion agenda as APEC Chair.

Key Ingredients to SME Growth – the Singapore Experience

7. On this note, I would like to share Singapore’s experience by highlighting some elements that have been helpful in nurturing the growth of our SMEs and formalizing them as part of our economy. I hope that our experience can provide useful references and encourage a new vision of growth for SMEs - one that resonates with your economy’s distinct needs, circumstances and respective stage of development.

8. Let me share four elements that have helped Singapore build a vibrant ecosystem for our SMEs to thrive and participate more fully in the global and formal economy.

(I) Creating a Pro-business Environment Conducive for SMEs to Flourish

9. First, the business environment is a foundation for supporting enterprise growth and business formalisation. Often, inadequate support infrastructure, regulatory complexities and overly onerous compliance processes are key deterrents to growth of SMEs. To this end, Singapore has strived to provide a conducive, yet competitive environment for businesses to grow. We do so by providing reliable infrastructure, clear rule of law, and government services that are efficient, easy-to-use, without overly complex or excessive processes. These will not only promote a more business-friendly environment but also help to lower formality costs, making it less costly for companies to formalise their business operations.

10. Let me elaborate on some of the work we have done to sustain a pro-business environment in Singapore.

a. We have invested significantly in both our digital and financial infrastructure to support enterprise growth.

i. Apart from traditional infrastructure like data centres, broadband and mobile networks, we have layered on soft infrastructure, or what we also call “digital utilities”. An example of a digital utility is the Business sans Borders initiative.⁵ The Business sans Borders initiative allows our businesses to access business-to-business cross-border trade opportunities in a safer and fuss-free manner. It opens doors for our SMEs to connect with new opportunities beyond Singapore and gain access to supply chain connections, financing, and payment solutions previously beyond reach.

ii. Another example is a payment ecosystem that we have put in place. Our retail payments infrastructure, FAST and PayNow, has made it easier to transfer money electronically across bank accounts and e-wallets locally, often at no cost, and also supported our e-commerce growth.

b. To ensure that our regulatory regime continues to grow good businesses, the Government engages businesses regularly to understand their pain points. This is done through partnerships with our key Trade Associations and Chambers (or TACs in short), as well as the Pro-Enterprise Panel chaired by the Head of Singapore’s Civil Service. This Panel comprises both private sector and public service leaders, and comes together to identify and deliberate key regulatory issues concerning the SMEs.

c. In designing our government services, we sought to streamline the experience for businesses by providing a single touchpoint and making the process fuss-free through integrated platforms.

i. A recent example is the CORENET X digital portal, which was soft launched in December 2023. It streamlined the regulatory application process for construction by consolidating more than 20 approval touchpoints across multiple regulatory agencies into three main submission gateways – the design gateway, piling gateway and construction gateway. Businesses seeking to undertake building and infrastructure works can now coordinate their submission into these three gateways and receive a coordinated government response.

(II) Empowering our SMEs to go Digital and Innovate

11. Second, empowering our SMEs to go digital and embrace innovation are key enablers to uplift SME growth for Singapore.

12. Helping our SMEs keep pace with emerging trends and stay innovative provides them with the tools and agility needed to navigate a more complex operating environment and achieve more sustainable growth in the long term.

13. Today, digital transformation and innovation are 2 keys for our SMEs to lower business costs, enhance competitiveness, extend market reach, and enhance value through new products, services and markets. They unlock new opportunities for growth and enhance competitiveness of our SMEs, including those that are just taking their first step to register and formalise their business.

14. Let me touch on some examples.

15. Going Digital

a. We make it easy for businesses to start their digital journey, whether it is a newly registered SME or an established SME. This includes adopting digital tools, raising productivity and building capabilities.

b. We started the SMEs Go Digital programme to make adopting digital solutions easy and accessible.

i. SMEs can use the Chief Technology Officer-as-a-Service under the SMEs Go Digital programme to perform a self-assessment of their digital readiness and identify their digitalisation needs and gaps. SMEs can also engage digital consultants via the CTO-as-a-Service digital solution for customised advice and project management services.

ii. Another initiative under SMEs Go Digital is Grow Digital. It provides SMEs an avenue to access digital solutions to expand their businesses both locally and overseas through e-commerce platforms. By tapping on established business-to-business and business-to-consumer e-commerce platforms, it gives our companies a head-start in going overseas.

iii. SMEs Go Digital also provides SMEs with financial support and access to pre-approved and pre-packaged digital solutions and equipment to digitalise and improve their productivity via the Productivity Solutions Grant (PSG). SMEs that are interested in tapping AI in their operations may use many of the pre-approved solutions that have embedded AI functionalities.  There is also the Advanced Digital Solutions initiative which SMEs can tap to support their adoption of more advanced technologies such as AI, robotics and integrated solutions.

Innovation

c. Beyond digital transformation, SMEs may seek to transform and grow through innovation. To help those that lack the resources to explore ideas or test new technologies, we offer some solutions.

i. Our Centres of Innovation are one-stop innovation hubs that are set up in partnership with Institutes of Higher Learning and research institutes in sectors such as energy, electronics, food and precision engineering. They provide our SMEs with resources and facilities to develop and testbed solutions, accelerate their time-to-market and create new revenue streams. Many of such projects have helped to uplift the innovation capabilities of our SMEs and give them the confidence to continue innovating.

ii. One such beneficiary is Mencast Marine, a ship propeller manufacturer and repair service provider. Through its partnership with Singapore Polytechnic’s Innovation Centre for Additive Manufacturing, Mencast has developed the capability to manufacture its own components and produce new offerings such as materials for propeller repairs and modifications. This allows the company to reduce their reliance on external suppliers, optimise productivity and cost savings by over 20%, and better serve their marine and offshore customers.

(III) Supporting SMEs to Expand Their Horizons (in Global Value Chains and New Opportunities Abroad)

16. Third, Singapore has been a strong advocate in encouraging our SMEs to look beyond their existing value chains and seize opportunities abroad. As a small economy, Singapore and its companies must integrate with global value and supply chains and expand into overseas markets. Our SMEs can overcome internal resource constraints by connecting with larger markets, diversify their operations for greater resilience and access more diverse expertise.

17. However, gaps in capabilities pose real challenges for SMEs seeking to enter and move up the global value chain. In expanding overseas, access to resources such as finance, overseas market networks, and meeting regulatory requirements overseas are challenges that our SMEs face. How can we support our SMEs in overcoming these challenges?

a. Digitalisation and innovation, as I have mentioned earlier lay the foundation.

b. Sustainability is increasingly a requirement for global businesses. To help SMEs remain competitive while complying with the climate commitments imposes by global businesses, we support their sustainability journey through several ways including capability building and financing support through the Enterprise Sustainability Programme.

c. We work with industry partners and our Trade Associations and Chambers to provide support networks that help our SMEs capture overseas opportunities.

i. We help our SMEs build capabilities through the Partnerships for Capability Transformation or PACT initiative. PACT encourages collaborations between smaller and larger businesses, particularly in areas like supplier development and capability training. Such collaborations have enabled our smaller businesses to develop new capabilities required for greater global demand capture, including in emerging growth areas such as the green economy.

ii. An example is SATS, a Singapore-based company that is Asia’s leading airport handler and airline caterer. With PACT’s support, SATS conduct capability-building workshops to help their suppliers, which are mostly SMEs, track carbon emissions and implement decarbonization projects. Through these workshops, SATS has helped companies build their sustainability capabilities and some, secure sustainability-related certifications. These efforts have contributed to a reduction in SATS’ Scope 3 emissions. With PACT expected to facilitate another 100 PACT partnerships in the next five years, SMEs will benefit from more of such collaborations in future, by raising their capabilities and more effectively participating in the value chains of regional and global businesses.

iii. We also tap the extensive networks of our TACs to support our SMEs in accessing overseas opportunities. The GlobalConnect programme helps our SMEs expand through its consulting sessions and facilitation services.

iv. In addition, we support SMEs to assess finance over their business growth cycle, by providing loans through the Enterprise Financing Scheme (EFS),  or grants including the Market Readiness Assistance (MRA) scheme. SMEs with trade financing needs can leverage the EFS-Trade Loan up to S$10 million. Under the MRA grant, grant support is provided for our SMEs expanding into new markets, by defraying the costs of overseas market promotion, business development and set-up.

d. As trade friction rises, trade architectures are helpful to our businesses in tapping growth opportunities. These include new cooperation frameworks like our Digital Economy Agreements (DEAs) and Green Economy Agreements (GEAs).

i. We have four Digital Economy Agreements in-force – bilateral ones with Australia, Korea and the UK, and the plurilateral Digital Economy Partnership Agreement (DEPA) with Chile, South Korea, and New Zealand. This year, we have concluded negotiations on a Digital Trade Agreement with the European Union.

ii. We also have a bilateral Green Economy Agreement with Australia and a plurilateral Clean Economy Agreement under the Indo-Pacific Economic Framework for Prosperity (IPEF).

(IV) People are Central to Actualising Growth

18. A conducive business environment supported by enablers like digitalisation, innovation and access to external opportunities are our strategies to help enterprises grow and transit to the formal economy. However, the full potential of these strategies can only be realised when our workforce is to embrace them. This brings me to the final strategy – investing in our people as an anchor for growth.

19. Singapore places a strong emphasis on the development of our workforce through Continuing Education and Training (CET) initiatives. Helping our workers upgrade their skills improves their prospects for taking up better paying jobs in more productive sectors; and for those looking to shift towards formal employment, it helps them transit.

20. SMEs have thus been at the heart of our efforts in building a future-ready, well-equipped workforce in our SkillsFuture movement. This is our national movement to provide all Singaporeans with opportunities to develop their fullest potential throughout the lives. We work closely with Institutes of Higher Learning, training providers and enterprises to expand industry-relevant training opportunities for our workers to upskill and reskill.

a. We partner Institutes of Higher Learning to deliver a wide range of CET programmes. A modality that has shown encouraging results is the work-study programme, which combine institution-based learning and structured on-the-job training. Involving companies in curriculum development ensures that skills that are directly relevant to the industry are taught. At the same time, trainees can develop work-relevant skills and be work-ready upon graduation.

b. We partner enterprises to develop the skills of their workforce. For example, we work with industry leaders, we call them the SkillsFuture Queen Bees, to champion the SkillsFuture movement and mobilise other companies in their sectors, especially SMEs, to get started on skills training.

c. We have Skills Frameworks to guide enterprises, education and training institutes as well as individuals in their skills development journey.

21. Apart from workforce development, another important aspect to investing in our people is in safeguarding their well-being, particularly the more vulnerable segments of our workforce. We work closely with the labour unions, the employers through our tripartite framework.

a. Two months ago, we passed the Platform Workers Bill. This Bill enhances the protection of our platform workers, such as ride-hail and delivery workers, in three key ways:

i. Better support in housing and retirement adequacy through the Central Provident Fund (CPF) system, which is Singapore’s mandatory social security savings scheme;

ii. Financial protection under the Work Injury Compensation Act in the case of work injury; and

iii. Better representation for such workers in worker associations.

Role of APEC

22. While we as governments can do our part to help our SMEs grow, the positive benefits from these efforts can be multiplied when supported on the global front.

23. As APEC member economies, it is important that we persist in integrating our economies and upholding a rules-based multilateral trading system to support the growth of our enterprises and for the betterment of our people. This involves continually seeking ways to expand and deepen our cooperation to harness the potential of our economies and benefit from mutual growth, including capturing opportunities in emerging growth areas.

24. For business leaders present in this room, there is an important role for you as well, in ensuring that APEC stays relevant and responsive to the needs of the region.

a. Within your sphere of influence, support your employees in their skills development journey, to better prepare themselves for not just the needs of the present, but also for tomorrow’s economy. Take steps to future-proof your business. Keep pace with emerging trends and technologies. Cultivate networks both within and beyond your region to access more market and partnership opportunities. This will help you scale your business, build capabilities and tap on more diverse expertise.

b. Help your governments better understand the challenges and opportunities in the business landscape. Make use of the APEC Business Advisory Council (ABAC) to provide your feedback and suggestions. In this way, you can help governments shape more targeted and relevant policies and help APEC as a community to stay connected to what’s happening on the ground.

Conclusion

25. As we strive towards a new vision for growth of our SMEs within the APEC region, one thing is clear. We cannot do this alone. We as an APEC region – as governments, business leaders, thought leaders and entrepreneurs – must each play our part. It is in harnessing the power of the collective, that we can more effectively support our SMEs, both in the formal and informal sectors, to reach their fullest potential and thrive despite headwinds.

26. I hope that Singapore’s experience has provided some valuable insights. For the benefit of our SMEs and the global economy, let us continue to keep the spirit of cooperation high and the APEC platform open. Only then, can we achieve a collective vision of growth for APEC economies that is strong, balanced, secure, sustainable and inclusive.

27. Thank you.

¹ Source: International Monetary Fund, World Economic Outlook: Policy Pivot, Rising Threats (October 2024).

² Source: APEC Regional Trends Analysis (August 2024).

³ Source: “Addressing Informality: Transition to the Formal Economy”, Carlos Kuriyama and Eldo Malba Simanjuntak, APEC Policy Support Unit, Policy Brief No. 57 (February 2024).

⁴ “Source: “The Long Shadow of Informality: Challenges and Policies”, edited by Franziska Ohnsorge and Shu Yu (World Bank Group, 2022).

⁵ operationalised by Proxtera, a company supported by the Monetary Authority of Singapore (MAS) and Infocomm Media Development Authority (IMDA