Speech by Mr Lee Yi Shyan, Senior Minister of State for Trade & Industry, During the Committee of Supply Debate Under Head V

SPEECH BY MR LEE YI SHYAN, SENIOR MINISTER OF STATE FOR TRADE AND INDUSTRY, DURING THE COMMITTEE OF SUPPLY DEBATE UNDER HEAD V (MINISTRY OF TRADE AND INDUSTRY) ON MONDAY, 11 MARCH 2013

(A)   INTRODUCTION

1. Madam Chair, Minister Lim spoke about the urgent need for restructuring. The key to successful restructuring is sustained productivity improvement.

(B)    THE NATIONAL PRODUCTIVITY DRIVE IS PROGRESSING

2. Assoc Prof. Fatimah Lateef highlighted that the concept of productivity differs between sectors. Yes, it is true that different sectors measure productivity in ways that make most sense to them. This is why the National Productivity and Continuing Education Council (NPCEC) adopted a sectoral approach towards driving productivity growth. Consulting closely with the respective trade associations and chambers (TACs), we developed customised productivity improvement roadmaps to tackle the different challenges that each sector faces. We also complement macro-level measurements with sector-specific indicators.

3. Likewise, our public outreach effort is also tailored to specific sector. For instance, under the “Way to Go” national productivity communications campaign, we highlight stories of best practices in different industries. Many of you would have read some of the stories in Business Times and Lianhe Zaobao in the year-long education and outreach campaign.

4. Mr Sam Tan and Mr Zaqy Mohamad asked about the progress of these productivity efforts. Year to year, headline productivity numbers fluctuate. In 2010, our productivity shot up by 11.1 percent. In 2012, it declined by 2.6 percent. Productivity measures are sensitive to economic cycles. A sharp drop in product prices can for instance mask the improvement made in labour productivity. In the longer run, however, the value-added per worker ought to rise reflecting rising productivity. The Government remains therefore fully committed to helping our industries achieve long term and sustainable productivity growth.

5. Sector by sector, we are implementing customised productivity roadmaps systematically. In the retail industry for instance, 200 retailers have undertaken productivity and services upgrading projects. 200 CEOs and productivity managers have participated in training, and 14,000 retail workers took classes at different levels offered by Workforce Development Agency (WDA). Clearly a lot more retailers and retail professionals can benefit from these programs. And we have the capacity to train them.

6. Besides reaching out to more, SPRING will also go deeper. It will introduce more in-depth projects designed to help integrate the supply chain and promote wider adoption of technology, such as integrated Point-of-Sales systems and inventory management systems. Embracing technology at the industry level will bring about larger quantum of productivity improvement.

7. At the firm level, we also have committed $180 million in grants to about 10,000 companies. Among them, 90 per cent were small and medium enterprises (SMEs). Again, we have the capacity to fund more firm-level projects and we want more firms to step forward.

(C)   FOSTERING TRANSFORMATION AT THE SECTORAL LEVEL

8. At the national-level, we have committed about $1 billion from the National Productivity Fund (NPF) to support the many sectoral plans and horizontal programs. One new initiative we are introducing is the Collaborative Industry Projects (CIPs).

9. We will extend Collaborative Industry Projects (CIPs) to 6 more industry verticals led by SPRING, including Food Services, Retail, Food Manufacturing, Furniture Manufacturing, Printing and Packaging, and Textile and Fashion.

10. The objective of these CIPs is to help achieve a step change in the productivity of a large group of companies by encouraging them to work together in areas that can bring them the benefits of integration and economies of scale. To give an example, SMEs in the F&B sector can reduce their manpower requirements, by aggregating demand and collectively outsourcing their food preparation to suppliers. They could also pool logistics assets such as warehouses and delivery trucks to benefit from economies of scale. Hopefully, CIPs can also bring about greater integration in the supply chain and reduce wastage and inefficiency. CIPs could also potentially seed new players and modify industry structure in the longer term.

11. We will commit $90 million for such projects over the next three years in the six sectors led by SPRING, and will roll out the first call for projects in the second half of this year.

12. Madam Chair, I will now speak in Mandarin.

(D)   协助企业提高生产力

13. 除了继续加强各个行业的整体生产力外，个别公司更要采取实际行动，为提高生产力而作出努力。随着经济重组的工作加速展开，如今有更多企业意识到，要取得优质增长，唯一的途径就是通过提高生产力以及不断地创新、求变。

14. 政府将继续同各行业的企业紧密合作，以提高它们的生产力。我们也吁请更多企业善用各项援助计划，加强和发展自身的核心实力。企业需要重新审视它们的增长策略和基本商业模式，思考如何突破旧框，以发掘新的增长模式。换句话说，企业不能墨守成规，一成不变。

15. 企业在重组过程中，必然会经历转型之痛。我们也理解到商家所面对的各种困难和挑战。企业需要时间来推行提高生产力的计划，而这些计划也需要时间才能见效。因此，政府承诺支持企业,特别是中小型企业,渡过这个转型期。

16. 其实，我们周围不乏成功转型的企业例子，本地湿纸巾制造商“星洲清星”（Freshening Industries）便是其中之一。这家中小型企业创立于1994年。在当时，湿纸巾制造还是个尚未开发的市场。星洲清星却从不起眼的湿纸巾中看到了大商机。现在，这家企业为5000多家餐馆、大航空公司和国际连锁酒店供应湿纸巾，销售网络遍布三十多个国家。

17. 星洲清星的成功之道，是因为它走一个为客户“量身定做“湿纸巾产品的服务路线，为客户开发他们的专用产品。而且，星洲清星也非常善于利用政府所提供的各项援助计划。三年前，这家公司在企业发展中心生产力顾问的协助下，开始着手推行提高生产力。他们首先是通过生产力项目综合管理架构(IMPACT)进行初步生产力评估，跟着采用了5S 管理方法（5S methodology）来营造良好的工作环境， 最后再结合商业资讯和顾客关系管理软件的使用，来达到提高生产力的目标。此外，各级经理人员也接受培训，进一步提升他们的领导能力。

18. 以上这些项目都获得标新局和就业与职能培训中心相关计划的支持。有关的投资费用，也在生产力及创新优惠计划下获得津贴。这项提高生产力之旅为公司带来了回报，把生产力提升了超过百分之10，使它能够更好地应对劳动市场紧缩和商业成本上涨所带来的挑战。

19. 星洲清星是一个具有代表性的中小型企业。 它所面对的挑战和困难，也是其他中小型企业所熟悉的。 我们希望它自我提升的例子，能让其他企业有所启发。转型的过程虽然不容易，毕竟还是有企业做到了。 所谓有志者事竟成， 让我们一起努力。

(D) PRODUCTIVITY SUPPORT FOR BUSINESSES (Translation of Mandarin Speech, paragraphs 13-19)

20. Beyond the sectoral level, we also need individual companies to initiate change on the ground. As our restructuring efforts gather pace, more companies now recognise the importance of productivity and innovation as the only way to achieve quality growth.

21. We will continue to work closely with companies for productivity improvements across all sectors. We urge more to come forward and tap the programmes available to help them enhance and develop higher-value capabilities. In order to make the shift towards productivity-driven growth, companies will increasingly need to re-examine their growth strategy and fundamental business models, to contemplate new ways of creating value that they have not done before. In other words, they need to move out of their comfort zones.

22. It will not be an easy and straightforward road as businesses have to make difficult adjustments. We also recognise that businesses have many other concerns on their minds. Time is needed to introduce productivity improvements, and for them to bear fruit. The Government is committed to supporting businesses, especially our SMEs, during this transition period.

23. There are those who have managed this transition well. Consider the example of Freshening Industries, an SME manufacturer of hygiene wipes. This SME started in 1994, with humble beginnings, and it grew steadily through its pursuit of quality and development of customised products for each client. Freshening now exports to more than 33 countries and supplies to more than 5,000 restaurants, major airlines and global hotel chains. The distribution channel has increased to more than 35 countries.

24. Freshening’s success can be attributed to the company offering tailor-made services and customised products developed according to their customers’ needs. Freshening has also been pro-active in its pursuit to improve productivity, tapping into the incentives provided by the government. Freshening embarked on its productivity journey in 2010, with the help from a productivity consultant at an Enterprise Development Centre (EDC). It started with an initial productivity assessment through the IMPACT benchmarking tool, moved on to adopting the 5S methodology for workplace organisation before implementing other improvements like Business Intelligence and Customer Relationship Management software. Managers at each level were trained to upgrade their leadership skills to guide the effort.

25. All these improvements were supported by the programs from SPRING and the Employment & Employability Institute (e2i). The costs can also be reimbursed under the Productivity and Innovation Credit (PIC). The results have been tangible. An increase in productivity of more than 10% helped it cope with the tight labour market and rising business costs.

26. Freshening Industries is a typical SME, who faces similar challenges and difficulties with the rest. We hope their successful transformation will inspire many others to do the same. The restructuring process may not be easy, but there are those who have successfully done it. As the saying goes, when there is a will, there is a way. Let us work together.

(E)   SUPPORTING SME INTERNATIONALISATION

27. Madam Chair, as I alluded to earlier, everything being equal, raising sales of a company will also raise productivity. This is important because many productivity discussions focus on labour productivity and omit revenue generation and value creation, as Mr Inderjit Singh has highlighted. Internationalisation is very crucial in raising a company’s productivity. Singapore firms need to look beyond our small domestic market and tap into new regional demands.

28. The BreadTalk Group started as a one-shop company in year 2000. Today, the group has over 700 outlets under 8 brands in 15 countries. BreadTalk has tackled the productivity challenge from all angles. It has creatively differentiated itself through product innovation and has continually revamped its business model. It has evolved from one-shop to many-chains, one brand to 8 brands, in-shop baking to central kitchen and a local company to a regional player. These efforts have helped BreadTalk to grow its revenues and profits.

29. By expanding boldly into new overseas markets, BreadTalk has enhanced its competitiveness and enjoyed economies of scale. BreadTalk now has more resources to invest in technology and do product development. It enjoys strong brand recognition internationally.

30. Soon, BreadTalk will open its new international headquarters building at Paya Lebar. By then it will create more skilled and high-paying jobs for Singaporeans, in areas such as regional HQ management, product development, training and logistics, and so on.

31. From the above example, it is clear that at some point, our SMEs must transcend our small domestic market to realise their next stage of growth. Singapore is fortunate in that we are at the centre of growth in Asia, as Min Lim has highlighted earlier. China has a rising middle class of around 300 million, while India has 160 million[1]. Consumer demand is also growing in ASEAN economies with their youthful demographics. Our SMEs are indeed well-placed to take advantage of these opportunities at our door step.

32. Further away are emerging markets such as those in Latin America, Africa, the Middle East, Russia, Central and South Asia offering niche opportunities for our export business. Though less well known, Singaporean businesses are already trading with, or investing in some of these economies. With the right strategy, our firms will find niche opportunities in these markets.

33. Ms Jessica Tan, Mr Teo Siong Seng, and Mr Inderjit Singh will be glad to know that in 2012, IE Singapore assisted over 15,500 companies in their internationalisation drive, and supported 6,000 companies through its incentive programmes. IE also recently launched the Global Company Partnership (GCP) to help companies internationalise by providing support along four key areas: capability building, manpower development, market access and financing.

34. To help SMEs accelerate their pace of internationalisation, IE Singapore is launching an $18mil Market Readiness Assistance (MRA) program. MRA can be applied to individual company or trade associations.

35. For individual companies, IE will co-fund up to 50% of the eligible costs associated with foreign market assessment and market entry, including legal advice, tax advisory and consultancy services, up to a maximum of $20,000 per company per year. IE Singapore will launch this program on 1 April and expects to benefit up to 1,000 companies.

36. For Trade Associations and Chambers, IE will co-fund the cost of hiring of in-market agents to seek out overseas business opportunities for the association members.

37. In addition, IE will continue to organise iAdvisory Seminars and Clinics for companies seeking new markets or overseas growth. These seminars will cover topics such as issues related to tax regulations, restructuring and relocation.

38. Mr. Sam Tan asked how the government can help internationalising companies cope with manpower constraints. Under the Global Company Partnership (GCP) programme, IE will be setting aside $20 million to help businesses address three critical manpower challenges: (i) Attracting Talent, (ii) Developing Talent, and (iii) Establishing an International Manpower Strategy.

39. Under the program, IE will provide more overseas training opportunities and scholarships for local undergraduates to prepare them for international careers, match young talents to internationalising companies, and help key company executives acquire international HR expertise. Hopefully, our firms will learn to recruit, develop and retain talents suited for regional and cross-cultural operations.

(F)   CONCLUSION

40. Madam Chair, companies can raise productivity in many ways. Fundamentally, they have to find ways to raise revenues and reduce costs. Mr Zaqy Mohamad warned against “Poach-tivity” and “Property-vity”. We agree that in the long term, these are not viable strategies. By putting off much-needed productivity improvements, companies will eventually face a crunch again. Raising productivity is the only means to achieve sustainable growth. We discussed some examples of successful SMEs doing so. Their experiences show that it requires commitment and great efforts. But it is possible.

41. Many SMEs have told me they understand the need to change and restructure. The question now is not why and what, but how. So as we endeavour to create the most conducive support system for change, let us work together on the “hows” by gleaning best practices from other industries and markets, by brainstorming individually and collectively. I believe we can do it. In fact, we must succeed in order to arrive at the next phase of quality growth.