Mr Lee Yi Shyan at the Family Business Conference, “Building Synergies Beyond Generations”

SPEECH BY MR LEE YI SHYAN, MINISTER OF STATE FOR TRADE AND INDUSTRY, AT THE FAMILY BUSINESS CONFERENCE, “BUILDING SYNERGIES BEYOND GENERATIONS”, SATURDAY, 6 JANUARY 2007, 10AM, NGEE ANN POLYTECHNIC CONVENTION CENTRE

Mr Chia Mia Chiang, Principal, Ngee Ann Polytechnic

Distinguished Speakers and Guests,

Ladies and Gentlemen,

Good morning.

Introduction

It is my pleasure to be here with you at this Family Business Conference. In the first week of 2007, I wish everyone a happy new year. May the year ahead present opportunities, ignite aspirations, and spur all of us on to seize the day. I am also delighted to note that today’s event is organized by a group of final year business students from Ngee Ann Polytechnic. Though your good work, you show that you are entrepreneurial and resourceful.

Business opportunities abound

We live in an exciting era. Globalization has brought about enlarged markets and new opportunities. The Chinese and Indian economies have become sizable consuming markets themselves. These large markets are platforms for new and large enterprises to emerge. Consider 亚洲周刊Asia’s top 1000 companies. The number of Chinese companies in the Asia 1000 list has increased steadily from 39 in 2004 to 63 last year, a rise of 60%.Meanwhile, Singapore companies remained relatively constant, capturing 44, 43 places in the list. Going forward, however, companies in large and fast-growing economies have the external conditions to grow faster. For Singapore enterprises, unless we are plugged into these markets, we risk lagging behind.

Beside China and India, the Middle East economies also present exciting opportunities. It is estimated that there is more than a trillion US dollars’ worth of planned and active infrastructure projects in the Middle East. In Saudi Arabia, about US $624 billion worth of projects is being planned over the next 15 years. Some Singapore companies have been quick to seek out these opportunities. A number of our architectural firms have been appointed as chief master planners and project managers for projects from shopping centers to marinas. We also have companies which have made their successful foray into the GCC (Gulf Cooperation Council) markets: Examples include SembCorp's US $1.7 billion joint venture with the Abu Dhabi Water and Electricity Authority to acquire an Independent Water and Power Plant, and Keppel’s S$1.7 billion contract to develop a solid waste management facility in Doha.

Our enterprises need to identify suitable opportunities to establish footholds in these markets to chart future growth. To fully capture these global opportunities, Singapore companies must be able to scale up their operations quickly. This is to secure international projects of fairly large sizes. If our enterprises ride on them, they would grow by an order of magnitude. If they miss the opportunity, they might be relegated to a lesser league in international competition. Public and private enterprises face the same challenge as they are presented with the same opportunities. Family businesses are no different.

Companies need to engineer and manage growth

Enterprise grows through a life cycle. According to Larry Greiner there are six phases in business organizations. First, at the start-up phase, a company’s founders concentrate on creating products and markets. Second, leadership drives business growth, and the business is organized by functional structures. In the third phase, the organizational structure becomes decentralized and greater autonomy is given to units handling different technical and geographical areas. Fourth, systems and procedures are introduced to achieve greater co-ordination necessitated by the earlier devolvement. In the fifth phase, emphasis is on team action for quick resolution of problems that require interdisciplinary expertise. In the sixth phase, extra-organizational solutions are used, such as creating a holding company or a network organization composed of alliances and cross-ownership.

The key here is that different competencies are required at different phases of growth. Among these critical competencies are product strategy, human resources, organizational strength and ability to structure a firm’s production value chain using cross border resources. Public and private companies need the same competencies to succeed.

Are family-run or family-owned businesses particularly good or handicapped at acquiring these competencies for growth? There are plenty of examples arguing for either way: family businesses that have succeeded with keeping the businesses within the family members; and others that have achieved great heights by hiring professional managers at the helm.

My own belief is that successful companies are successful because they are well organized and well run. They have access to the best resources and the best people. They have business models that are superior to the competition. Whether they are family-run or owned is not important. As long as they are able to assemble the necessary ingredients for success at every stage of growth, they can enjoy sustainable profitability.

Government assistance for enterprise growth

In order to grow and to capture international opportunities, our enterprises need to further upgrade, innovate and internationalize. Indeed, growth is a complex, multi-faceted subject, involving not only managerial talents and human resources, but also building up of aspects such as financial resources, R&D, and market networks.

The Government supports local enterprises in their critical development stages. Let me highlight some key schemes.

SPRING Singapore is the local SME Champion and runs many schemes to help SMEs. For example, the Local Enterprise Finance Scheme, or LEFS, provides loan facilities for enterprises to upgrade and expand local operations. The Technology Innovation Programme, or TIP, covers various aspects of SMEs’ technological innovation needs, such as development of technology infrastructure, secondment of experts and supporting technology innovation projects.

For overseas expansion, IE Singapore has the International Partners Programme, or iPartners, to support companies with complementary capabilities to band together and maximize international success in foreign markets.IE also launched the Internationalization Finance Scheme, or IF Scheme, last July, to offer asset-based financing as well as working capital and structured term loans supporting overseas projects and sales orders.

Conclusion

This conference is appropriately entitled “Building Synergies beyond Generations". I am sure you will hear many insights on “building a lasting future beyond genetics” from our practicing and successful entrepreneurs. Let us work together to build a robust economy comprising many long-lasting, successful companies.

Thank you.