Speech by Mr Lee Yi Shyan, Minister of State for Trade and Industry and National Development, during Committee of Supply

SPEECH BY MR LEE YI SHYAN MINISTER OF STATE FOR TRADE AND INDUSTRY AND NATIONAL DEVELOPMENT, DURING THE COMMITTEE OF SUPPLY DEBATE UNDER HEAD V (MINISTRY OF TRADE AND INDUSTRY) ON FRIDAY, 2 MARCH 2012

“RESTRUCTURING: WE WILL DO THIS TOGETHER”

INTRODUCTION  

1. Mr Chairman, allow me to elaborate on two key strategies essential for our economic restructuring. 

PRODUCTIVITY SUPPORT FOR SMES  

2. Several members have spoken of the need for a nationwide productivity effort. We strongly agree. Mr Inderjit Singh champions for SMEs, would appreciate the fact that most of our productivity programmes are targeted at SMEs. In fact, we work closely with business chambers and industry associations to design productivity programmes that address SMEs’ needs.

3. From broad-based programmes like the Productivity and Innovation Credit (PIC), to the 16 sector[1] initiatives spearheaded by the National Productivity and Continuing Education Council (NPCEC), to many individualised programmes, we reach out to SMEs in different industries, of different sizes and at stages of growth. My colleague MOS Teo Ser Luck will elaborate on the various forms of support available to SMEs.

PRODUCTIVITY OF SERVICES SECTORS  

4. Ms Jessica Tan earlier made a number of excellent suggestions pertaining to boosting productivity in the services sectors. 

5. Out of the 16 sectors that the NPCEC is spearheading, 10 of them are services

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  sectors. We recognise that there is no one-size-fit-all solution for different industries, so we develop sector-specific productivity roadmaps. We also benchmark them against the best-in-class we can find and we want them to meet, or even exceed, their standards. 

6. Let’s consider the Food Services and Retail sectors. One peculiar aspect of these sectors is that manpower demand is concentrated at mealtimes and over the weekends. Working with the industry, SPRING, WDA and NTUC are piloting a “Part-time Pool” programme to create a ready and trained pool of part-timers, including housewives and students that Ms Jessica Tan mentioned, for deployment during peak service hours. This programme will alleviate these industries’ manpower shortage somewhat.

7. As Minister Lim shared, and as Members can see from the circulated brochure over here, there are many government assistance programmes for productivity improvement. Ultimately, however, our enterprises will have to take the first step. 

8. Consider the example of the Timbre Group. It runs popular live-music bars such as Timbre@The Substation. With SPRING’s support, the Group implemented an electronic system for song requests and dedication messages to be sent via SMS. This saves the waiting staff time from shuttling between dining areas and the stage, but the larger benefit was the new capability of customer profiling and engagement. With their customers’ contact information, the Group can now engage customers with announcements of future events and loyalty programmes. There are greater prospects for customer feedback, raising customer satisfaction and increasing sales. 

9. Indeed, the Timbre Group has observed higher productivity of 20% and they were also able to increase wages for all their workers by 5%. 

ANNOUNCEMENT OF LOGISTICS AND TRANSPORTATION PRODUCTIVITY ROADMAP  

10. As Minister Lim has announced earlier, we are investing $42mil to roll out the productivity roadmap for the Logistics and Transportation sector. This is a significant sector, for it accounts for 8% of the GDP and 6% of our workforce. 

11. The roadmap focuses on two areas. First, we will help the industry to deepen expertise and specialization in Supply Chain Management (SCM). By learning from global best practices, our SCM professionals will acquire the latest skills to run world-class SCM operations. 

12. Second, we will officially launch a Centre of Innovation for Supply Chain Management (COI-SCM) later this year to demonstrate to SMEs how others have embraced technology and knowledge tools. Located in Republic Polytechnic, the Center will provide SMEs with tailored consultancy services and it aims to help 1000 SMEs in the next 3 years. 

13. As logistics is a horizontal enabler for other industries, raising the productivity of this sector will also improve the competitiveness of other industries.

DEVELOPING PRODUCTIVITY EXPERTISE AND UNDERSTANDING  

14. Much has been said about the challenges we face in raising productivity across sectors. One key challenge is that, amongst our smaller companies, there is a lack of understanding about productivity. Companies also may not know how to apply this knowledge in their businesses.

15. To overcome these, we assist them in three broad areas: 

16. First, they can visit Productivity@Work website, this is a one-stop online portal to productivity information and resources. It includes an online Assessment Tool for SMEs to diagnose their productivity performance. This is the best place to start. Productivity@Work has attracted over 162,000 unique visitors since it was launched in 2010.

17. Second, companies can train their own employees to drive innovation and productivity in-house. This is why SPRING, WDA and the industry have collaborated to develop a programme called Productivity Manager Programmes for the Retail and Food Services sectors. Upon graduation, participants returning to their companies will be able to champion productivity efforts and drive changes from within.

18. Third, companies can visit the 6 Centres of Innovation to see real examples of companies with improved productivity. Seeing is believing. We hope to convince SMEs that productivity improvement is not an abstract concept but an attainable reality. 

INTERNATIONALIZATION  

19. Increasing productivity in-house is but one important aspect of productivity improvement. To overcome our small domestic market, many of our companies should consider venturing abroad. 

20. Mdm Foo Mee Har asked about our companies’ internationalisation efforts. 

21. On a macro basis, our exports of goods and services grew annually by 9 and 12 percent respectively over the past decade. By the end of 2010, our companies had invested nearly S$400 billion overseas. The DP Information Group

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  has also found that having international operations was the key to fast growth for Singapore companies. The overseas exposure potentially catalysed development of their products and services too.

Seizing Opportunities in Regional Markets

22. Our proximity to, and familiarity with regional markets in Southeast Asia, China and India, remains a key advantage for Singaporean firms seeking growth in the region. 

23. One company that has taken advantage of regional demands is Eu Yan Sang. Starting out as a Traditional Chinese Medicine retailer, the company today is an integrated global healthcare company. After the company’s IPO in year 2000, it not only expanded overseas R&D capabilities, manufacturing and retail operations in the regional markets, but also increased its product distribution networks to 12 overseas markets. The group’s revenue has since grown more than five-fold.

24. While regional markets remain our hinterland for growth, some of our firms, inspiringly, have established themselves further away in emerging markets.

25. Mr Chairman, I will like to now speak in Mandarin.

探索新市场 

26. 除了以本区域为腹地，本地企业也应该放眼新兴市场如非洲、中东和拉丁美洲，从中寻找新的商机。《经济学人》报告指出，未来的全球增长机遇有三成将来自中国和印度以外的新兴国家。对那些胆大和有创意的企业来说，这些较未开发的新兴市场，可能为它们提供特殊而有利的增长商机。

27. 我以庆竞汽车公司为例。庆竞汽车成立于1980年，从事二手汽车零件业。这家小公司的营业额多年来不超过1千万元。不过，因为一个大胆的决定，庆竞在2004年创造了新格局。常务董事徐珖雄先生当时发现二手车和汽车零件在非洲供不应求，而当地市场又却缺乏可靠和有效率的供应商。

28. 所谓，知易行难。对一家没有海外营运经验的小企业老板来说，要远赴非洲开拓业务，不论在财政或心理上都必须承担巨大的风险。但徐先生并没有因此而打退堂鼓。经过5年披荆斩棘，徐先生已在非洲的二手车领域站稳一席之地。如今，庆竞汽车在南非、肯尼亚和纳米比亚设有旗舰据点，并将业务扩充到非洲8个国家。在短短七年内，庆竞的营业额翻了十倍，成就斐然。

29. 我在去年11月访问肯尼亚首都内罗毕时，徐先生一身西装笔挺，以新加坡企业家的身份，到机场迎接我。当时我还误以为他是新加坡驻肯尼亚的大使！得知徐先生进军非洲市场的成功故事后，让我更加体会到这些扮演先行角色的企业所编织的联系网，将是我们中小型企业到陌生地区开拓商机时，最珍贵的资源。

Exploring New Markets (paragraphs 26-29 in Mandarin) 

26. Markets further afield like Africa, Middle East and Latin America are beckoning as new frontiers for trade and investments. Some studies suggest 30% of growth opportunities the world will see in coming years would come from emerging countries other than China and India. For the bold and creative Singaporean firms, the less-served and less-competitive emerging markets might offer them niche growth opportunities.

27. Consider Kheng Keng Auto. Founded in 1980, Kheng Keng Auto traded in used, car parts. For many years, it remained a small company with sales not exceeding $10 million.  In 2004, the fortune of Kheng Keng Motor changed.  Mr Cher then discovered that Africa actually had a strong need for used cars and used spare parts. But in the markets he studied, there were no reliable and efficient suppliers. 

28. But easier said than done. For a small company with no track record of overseas operations, it was a huge risk both financially and psychologically for Mr Cher to start something in Africa. Still, Mr Cher was undaunted. After 5 years of hard work, Mr Cher finally established himself in Africa’s used car industry. Today, Kheng Keng Auto has a presence in 8 African countries, including flagship centres in South Africa, Kenya and Namibia. Kheng Keng Auto’s sales increased ten-fold (+900%). It was an incredible story of adventure. 

29. I visited Nairobi (Kenya) last November. Mr Cher came out to receive me in suit and tie at the Airport as a fellow Singaporean. Initially I thought he looked like our ambassador there. It is such Singaporean network that our SMEs will find precious when going to unfamiliar territory.

30. Sir, to help more Singapore companies export and internationalise, International Enterprise Singapore (IE) has developed a comprehensive suite of programmes to assist SMEs. Through its 35 overseas offices and multipliers like the industry associations, IE helps companies export their products and participate in overseas exhibitions.

Government Support for Internationalisation

31. Mdm Foo Mee Har also asked how the Government supports our companies to internationalise. I would like to assure Mdm Foo that the Government is committed to supporting our companies under a 3-C framework: the first is Capital (for access to financing), Connections (for enhancing market access) and Competency (for capability development).

32. In 2011, IE assisted over 34,000 companies through its broad-based channels and provided 5,500 companies with financial support. IE will increase its level of funding for selected capability development programmes from 50% to 70% of qualifying costs. This means companies would pay only 30% share for the selected programmes in Design, Intellectual Property, Branding, Mergers and Acquisitions. 

33. This year, IE Singapore will also expand its suite of financing schemes to increase support for companies, especially SMEs, that are exploring new and less familiar markets. We will improve their access to trade financing as well as political risk insurance for overseas investments and projects. For example, a Singapore company may find it risky to trade with overseas buyers that it does not have an established working relationship with. To mitigate such non-payment risks and help our companies better manage uncertainties when exploring new markets, IE will work with industry players to develop a new trade finance scheme.

34. Mr Inderjit Singh has rightly highlighted the need for closer coordination across agencies in managing our companies’ internationalisation efforts. 

35. IE and SPRING regularly share databases to better serve existing clients and to identify new ones. For example, SPRING assisted Prima Taste and Gold Kili, two food manufacturing companies to redesign their products. IE linked them with foreign partners to build their brand awareness and participate in overseas business fairs. Soon, hopefully French consumers will be trying Chicken Rice and Laksa made from Prima Taste sauce kits, and Mongolian consumers will be sipping coffee made from Gold Kili mixes. Together, they bring part of Singapore’s flavour to these new markets. 

36. On a broader scale, the Government is increasing market access through Free Trade Agreements. MTI is negotiating significant trade agreements with the European Union and the countries of the Trans-Pacific Partnership. These agreements, when concluded, will improve our companies’ access to these markets.

CONCLUSION  

37. Mr Chairman, Singapore businesses must restructure to stay ahead. The road to restructuring may be arduous and even painful. For many businesses, I am afraid it is.

38. But we must not be daunted. The fact that many economies have succeeded in achieving higher productivity, shows that we can do the same if we apply ourselves to it. We need to think out of the box, innovate in-house and revamp our business models. 

39. Past success is no guarantee for future performance. Our firms must build on what they have to seize opportunities, no matter which sector they are in.

40. Ignoring new market trends can sometimes be fatal. Traditional book retailers like Barnes & Noble and Borders in the US are closing many outlets due to encroachment of digital media. Our businesses cannot ignore such trends, whether technological, market or social in origin. The earlier we detect and prepare for them, the better we can restructure for long-term economic growth, to achieve better wages for our workers and a vibrant, inclusive society. 

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The 16 sectors are: Construction, Electronics, Precision Engineering, Transport Engineering, General Manufacturing, Healthcare, Retail, Food Services, Hotels, Information & Communications, Logistics and Storage, Administration & Support Services, Accountancy, Financial Services, Social Services as well as Process Construction & Maintenance. 

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The 10 sectors are: Healthcare, Retail, Food Services, Hotels, Information & Communications, Logistics and Storage, Administration & Support Services, Accountancy, Financial Services, as well as Social Services Process.

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Sources: Based on DP Information studies and surveys. Latest study released in Aug 2010 highlighted that 44 out of the 50 fastest growing companies (FG50) have significant international revenue sources. This is verified by previous year’s FG50 rankings whereby companies that have internationalised comprised of around 80% of the FG50 companies.