Mr Sam Tan at the the 3rd Enterprise Development Centre (EDC) Conference, 22 Mar 2011

SPEECH BY MR SAM TAN, SENIOR PARLIAMENTARY SECRETARY, MINISTRY OF TRADE AND INDUSTRY & MINISTRY OF INFORMATION, COMMUNICATIONS AND THE ARTS AT THE 3RD ENTERPRISE DEVELOPMENT CENTRE (EDC) CONFERENCE, NTUC AUDITORIUM, 22 MARCH 2011 AT 9.15 AM 

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

Distinguished Guests

Ladies and Gentlemen

Good Morning

I am pleased to join you today for the third Enterprise Development Centre (or EDC) Conference.

Economic Outlook -Opportunities and Risks

Last year, when I spoke at this conference, the world was just beginning its recovery from a massive global economic downturn. Since then the recovery has picked up steam especially in Asia. The Singapore economy has also rebounded with an impressive 14.5% GDP growth in 2010.We will continue to benefit from the continuing momentum of global economic recovery. This year, the economy is expected to post a healthy growth of between 4% and 6% in 2011.The crisis measures that we undertook to build resilience and maintain our competitive edge has also stood us well.

Going forward, the external environment will present us with both opportunities and risks. With Asia becoming a key driver of global economic growth, opportunities abound for businesses keen to capitalise on the emerging markets of Asia. At the same time, we will need to be watchful and prepared for bumps in the road ahead. Inflation is a growing concern not only in Singapore but worldwide. Disruptions to food supplies due to bad weather, and strong demand from rapidly growing economies are some of the factors that are pushing global commodity prices up. The ongoing unrest in Middle East has also driven up oil prices. SMEs are thus facing the challenge of rising costs.Another emerging source of concern is the disruption to Japan’s economic activities in the immediate aftermath of the Sendai earthquake. This could have some negative impact on trade flows between Japan and Singapore in the near term, although the full impact is uncertain as the situation in Japan remains fluid.

At the recent Budget, the government announced measures that will help companies become globally competitive and also provide support for companies to cope with rising costs.In particular, the government recognises SMEs' concerns on foreign worker levy increases and its immediate impact on business costs. I would like to assure SMEs that there is government assistance to help them raise productivity and reduce reliance on foreign workers. The first thing SMEs can do is to take advantage of the Productivity and Innovation Credit (PIC) scheme. PIC offers a 400% tax deduction for expenditures on each of the six qualifying items, including training, automation and R&D. Cash-strapped SMEs also have the option of converting their expenditures into a non-taxable cash payout, capped at $30,000 annually.

Besides PIC, I would also urge SMEs to apply for other government assistance programmes to help them increase productivity and build long term competitiveness. Officers from SPRING Singapore and the Enterprise Development Centres present here can advise and assist you.

Potential for higher Productivity

The number of SMEs in Singapore with sales turnover below $10 million is about 145,000, comprising 95% of the total number of enterprises. They employ 40% of total workforce [1].However, the value-add (VA) contribution by this SME cohort to our economy is only 16% and overall productivity is about half that of the national average.There is therefore much potential for our SMEs to grow even more by achieving higher productivity and in turn, strengthening their long-term competitiveness. In the last year, the government has introduced many measures to help our SMEs improve their productivity, let me give an update on some of these initiatives.

Dedicated

Productivity@Work

Portal

As part of a national effort to improve productivity, the SME-Productivity Roadmap, or SME-PRO in short, was introduced last year by SPRING Singapore and WDA. It aims to help SMEs take a systematic approach to tackle the root causes of productivity problems.I will now highlight two key initiatives under SME-PRO which I would like to urge SMEs who have yet to embark upon, consider doing so as soon as possible.

The first is the Productivity@Work website by SPRING Singapore.Through this self-help portal, SMEs can learn productivity concepts, access tools to diagnose their productivity performance, and leverage on resources and case studies for advice on productivity.The website has proven to be a popular resource portal. To-date, close to 45,000 unique visitors have used the website.

New Interactive IMPACT Assessment Tool

Productivity enhancement for a company starts with measuring its existing performance, diagnosing the gaps and doing a stock take of the current situation.To help our SMEs do this quickly and easily, I am pleased to share that a new online interactive assessment tool is now available at the

Productivity@Work

website.

The IMPACT Assessment Tool enables enterprises to pinpoint areas of strengths and weaknesses in productivity management, and the key levers to address to improve productivity.Furthermore, the company will receive a customised report with useful information to help it prioritise and tackle key deficiencies first.As the bank of cases starts to build up, comparative benchmarks will be developed for companies to take reference from.SPRING is aiming is to have 1,000 enterprises sign up and utilise the assessment tool annually.

Productivity Management Programme @EDCs

The second initiative under SME-PRO is the Productivity Management Programme, or PMP which was introduced in October last year. Spearheaded by our Enterprise Development Centres (EDCs), the PMP adopts a hands-on approach, providing face-to-face advice to SMEs to diagnose productivity gaps, educating them on the appropriate tools and techniques to improve productivity, and disseminating the relevant government schemes which they could use.I am pleased to note that within five months of PMP’s launch, the EDCs have reached out to about 1,000 SMEs and assisted 600 of them.

Let me cite one such case where a company benefitted from the PMP. Warburg Vending Pte Ltd, a provider of food and beverage vending solutions, wanted to develop an automated system that minimises human errors.With guidance and assistance from the EDC@SMa, Warburg automated its coin sorting and packing system, and computerised its data collection and inventory management. This resulted in a 63% improvement in turnaround time for coins exchanged, from eight hours to three hours.The implementation of a scanning and bar-coding system for its warehouse also eliminated manual counting and inventory recording, saving an estimated 10 hours, which is an 83% improvement in efficiency.

New On-line Services in EnterpriseOne

Enhancements are also being made to existing initiatives to provide even more support for SMEs. The EnterpriseOne website for example, currently provides a single point of access to a whole range of comprehensive information on assistance programmes offered by the government, business chambers and industry associations. Some 90,000 unique visitors have tapped on EnterpriseOne so far, and the site has an average of one million page views per month.

I am happy to announce that two new e-services will be available on EnterpriseOne.The first is the GeBIZ Alerts service.GeBIZ is the government’s procurement portal.With the alert service, a company can identify its area of interest and receive business leads posted on GeBIZ via its subscriber mailbox. The government will also benefit through more competitive bids.

The second addition is BizMap, which will help businesses explore premises available for rent or lease from agencies such as SLA (Singapore Land Authority) and HDB (Housing and Development Board).Businesses can search for properties based on location, rental rates, size and property types. The search results will then be displayed in an interactive map.With this, businesses can now conveniently search and compare the available rent and lease options, and hence make better informed business decisions on suitable premises. It is estimated that more than 30,000 businesses would benefit from these two new e-services.

Re-Definition of “SME”

To ensure our SMEs continue to benefit from the schemes, I am pleased to announce a new SME definition based on sales turnover and employment. With effect from 1 April 2011, an SME will be defined either as an enterprise with an annual sales turnover under $100 million, or as an enterprise with an employment size below 200.This new definition will apply to all enterprises across all sectors.

This re-definition is based on the recognition that quite a number of our SMEs today are asset-light. By using sales turnover instead of fixed asset investment as a criterion, the revised definition better reflects the changing profile of our SMEs. It seeks to ensure that small businesses which meet the new definition of 'small' either by sales or staff strength, will be able to qualify for support, regardless of their fixed assets. The new definition is also in line with international benchmarks in the United States and the European Union.

Conclusion

I would like to conclude by thanking the five EDCs for organising this conference. The theme for today’s conference is very apt. I urge all our local enterprises to make full use of the various measures that the government has put in place to build up your capabilities for long term growth, expansion and sustained competitiveness. On this note, I wish all of you a rewarding morning.

Thank you

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[1] As a reference, in 2010 there are about 154,000 SMEs in Singapore. They make up 99% of enterprises, employ 6 in 10 workers and contribute nearly half of total enterprises’ value-added in the economy.