Mr Chan Soo Sen at ASME Installation Night 2006

SPEECH BY MR CHAN SOO SEN, MINISTER OF STATE FOR EDUCATION & TRADE AND INDUSTRY, AT ASME INSTALLATION NIGHT 2006 ON FRIDAY, 24 FEBRUARY 2006, 7.30 PM, AT PIONEER SPRING RESTAURANT, SAFRA MOUNTFABER

Mr Lawrence Leow, President of the Association of Small and Medium Enterprises,

Distinguished Guests,

Ladies and Gentlemen,

Good Evening,

Introduction

It is my pleasure to join you this evening for the installation of the 19th Executive Council of the Association of Small and Medium Enterprises, or ASME for short. I would like to congratulate the 17 Council Members on their appointment. I would also like to congratulate Mr Lawrence Leow, whom I understand, has been unanimously re-elected as ASME President for a third term. It is heartening to see so many like-minded people coming forward and volunteering their time and expertise to serve our SME community.

Importance of SMEs

Today, we have about 120,000 local SMEs. Together, they account for 90% of the establishments in Singapore, employ almost half of our workforce and contribute to a quarter of our GDP. In recognition of our SMEs’ importance to our economy and their vast potential, the Government has directed significant efforts at developing enterprise development strategies as a cornerstone of our economic development policy.

A Key SME Challenge: Access to Financing

While our SMEs play an important role in our economy, they still face fundamental challenges. By virtue of their size, our SMEs may face challenges in growing and expanding their businesses.

One common feedback from the SMEs is that they face difficulty in accessing financing. There are several reasons for this. First, many SMEs limit themselves to traditional sources of funds such as bank loans, as they are not aware of the alternative financing solutions available for their various stages of growth.

Second, SMEs lack the necessary track records and collaterals, which make it difficult for them to raise funds from the banks. The lack of credit information deters banks from lending to SMEs as it is more difficult to ascertain their creditworthiness. Unlike bigger companies, many SMEs also do not have enough resources and expertise in financial management to achieve a healthy cash-flow. This in turn affects their ability to secure potential lenders and investors.

To address these challenges, the Government adopts a two-pronged approach in close partnership with the relevant private sector players. First, the Government encourages the development of a wide spectrum of financing instruments that cater to the needs of SMEs at different stages of growth.

The various government financing schemes are designed and structured in a market-based manner with the participation of commercial players. For instance, to encourage the set-up of innovative start-ups, we have the Start-Up Enterprise Development Scheme, or SEEDS, where every dollar raised from a third party investor is matched by the Government. There is also the Trade Credit Insurance Scheme which provides SMEs with affordable trade credit insurance for their exports.

The Government also supports private sector driven initiatives, such as the SME Credit Bureau and Credit Ratings which help facilitate the evaluation of SMEs’ creditworthiness through greater credit transparency.

The second approach is to increase the SMEs’ awareness of financing instruments and government financing schemes. We partner regularly with the Action Community for Entrepreneurship, the Singapore Business Federation and other business organizations to organize or support finance fairs and seminars. We have also set up a network of Enterprise Development Centers, or EDCs, together with the key business chambers and associations. In fact, we had successfully set up the first EDC last March with the ASME.

I am pleased to hear that the EDC@ASME has assisted some 1,000 SMEs in various areas since its inception. For instance, Cactus Engineering, an SME in the oil and gas industry, needed a loan for its operations. It approached several banks, but could not convince any of them to extend a loan. It then approached the experts at EDC@ASME, who evaluated its case and linked it up with a finance company in their network. The result? Cactus Engineering was successfully given a revolving credit.

The private sector financing community has also been reaching out to SMEs aggressively over the last few years. Many financial institutions are increasingly focusing on SME financing and are developing innovative financing tools to cater to the different needs and profiles of SMEs.

In light of these efforts by both the Government and the private sector players, I am encouraged to hear that SMEs have seen improvements in the financing environment. In the latest 2005 SME Development Survey findings, almost half of the survey respondents have indicated that it is now easier to access funding compared to a few years ago.

While efforts are continuously made to improve the financing environment, entrepreneurs must remember that they themselves play the most important role in raising their own capital. They must show clear commitment and belief in their business, and strive to improve the financial management of their companies. All these will translate to increased chances of success in raising their capital.

Conclusion

The Government will continue to work closely with key private sector players, such as the ASME, in reaching out and assisting our SMEs.

On this note, I would like to express my appreciation to the outgoing Council for their contributions to enterprise development in Singapore. Once again, my heartiest congratulations to the new Council members. I wish the ASME every success in the years ahead.

Thank you.