Speech by Mr Teo Ser Luck, Minister of State for Trade and Industry, During the Committee of Supply Debate Under Head V

SPEECH BY MR TEO SER LUCK, 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

Mdm Chairman,

1. Let me first thank all the members for raising various concerns, issues and also suggestions on the SME sector. I am glad there is so much interest in this area, and many have also come up with some good suggestions to some of the problems that our SMEs face. We could consider them. 

2. Our SMEs definitely face challenges now – labour crunch, economic uncertainties. SMEs form over 90 percent or our registered entities in Singapore. They come in different forms, shapes and sizes – some relatively large, while most are medium to small to micro enterprises. Because of that, the challenges are great. When we implement the schemes and programmes, it cannot be one size fits all. You need to customise not only based on the size of the company and the different phases that they are in the business cycle, but also the sector, the industry that they are in. Nevertheless, we do our best.

3. As you know, in the budget that was announced by DPM Tharman, two-thirds of the $5.3 billion Transition Support Programme is expected to go to our SMEs. But the question would be, “How do we allocate the funds and the budget to effectively be used by the SMEs and truly benefit them ”

4. And we are fully aware of the need to help our SMEs succeed, and survive the economic uncertainties. So SPRING and IE Singapore have been working hard over the years to look at the different schemes, rolling out different programmes to help our SMEs.

SME Strategy Review

5. I have commissioned a review of all the SME programmes and strategies. And it revolves around a few key outcomes, some strategies and key thrusts. In summary, it revolves around three numbers 2-3-8 - two outcomes, three broad thrusts and eight strategies.

6. Many of the members had asked about the review– “What is the outcome of it?”, “What did you get out of it?”, “What are the new programmes?”

7. I am heartened to say that many in the business sector have come forward. Trade associations like the Singapore Business Federation – their SME Committee, the Chinese Chamber of Commerce and Industry and other trade associations, ASME, they have all given very good suggestions. In fact, many of the suggestions had been provided to the Ministry of Finance as well. So I thank them all for working with us to strategise for the SME sector.

8. Allow me to share the 2 outcomes of the review for our SMEs. First, we have two key objectives - we want a productive, vibrant and strong SME sector. Because with that, we are able to create good jobs - that’s the second outcome. We want good jobs, good quality jobs for our Singaporeans, for our workers.

9. And to do so, we will focus on helping SMEs along 3 broad thrusts. Basically, for any companies to work, we look at the revenue, the top line; we look at the cost component – how do you manage the cost, make it more productive, make the money work for you and then the bottomline. So first, the top line. We have to tap on opportunities for growth. Second, drive productivity, make sure it’s efficient such that the money that works for you gives you the return that you need to sustain your business. Thirdly, the Government will play its role to provide a conducive environment for the SMEs.

SME Review Thrust 1 - Opportunities for Growth

10. We want our SMEs to do well domestically and we also want them to grow overseas. We want to be able to create the opportunity for them to identify and exploit those opportunities.

11.     First, collaboration, which has to be supported by partnerships. We name this scheme Partnerships for Capability Transformation or PACT.

12. PACT currently supports large enterprises in qualifying advanced manufacturing parts and processes from Singapore-based suppliers. Many of the SMEs are actually suppliers – suppliers to MNCs, suppliers to big companies. The Government will expand PACT to include non-manufacturing sectors and a wider range of activities involving collaborations between large enterprises and the SMEs. And as long as they are suppliers and they circle around the bigger enterprises, they can work together to collaborate. Grants from EDB and SPRING will now be available to both large enterprises and SMEs to facilitate these collaborations.

13. First, large enterprises could transfer their knowledge and share best practices to SMEs in the course of supplier sourcing. So whether it is supplier sourcing, outsourcing practices and operations, they collaborate together. This will help SMEs improve their productivity. Very often, it is the Large enterprise that comes up with some state-of-the-art thinking or more advanced way of doing certain things – product development, logistics or operations in order to be more competitive. The supplier benefits from this. We want to foster collaboration so this a programme to help them partner together.

14. For example, local department store Metro embarked on a Mobile POS & Supplier Integration Project to upgrade its productivity. Nine of Metro’s SME suppliers were also upgraded as they had to build their competencies to integrate with Metro’s system. That helps to automate or computerise some of the processes between the supplier and the big company, so in this case Metro, and then the process will be more seamless and automated. That helps in the productivity drive of the small enterprises. Another form of collaboration is for SMEs to come together to develop and test innovative new solutions with large enterprises. Some Members have asked – how do you put in IT together for the different smaller enterprises? It can be driven by large enterprises to help the small enterprises to computerise.  One example would be the recent tie-up between local medical technology firm Awak Technologies and US medical giant Baxter International to develop and commercialise a wearable artificial kidney. And through partnerships and collaborations like these, our SMEs can grow and their capabilities will be strengthened and widened.

15. This is important because when they collaborate, opportunities are vast. When the suppliers and SMEs develop such capabilities, some of them can be exported – some of these capabilities can actually go overseas.

16. SMS Lee had earlier talked about the MRA (Market Readiness Assistance) programme. A few Members asked how large companies and small companies can come together to form consortiums and look for opportunities overseas.

17. This is how it works – you can’t look at the scheme by itself. Let’s say you want the big and small companies to come together. It can be under PACT – coming together, collaborating and then looking forward by tapping on the MRA. Develop the agents’ network or market representatives’ network out there. When the schemes are combined together, many companies will benefit. No one scheme can work alone. So if you integrate them together, it offers our businesses greater benefits.

18. We also have schemes to develop our more promising local enterprises to go overseas – and that’s the Global Company Partnership, as we handhold them to seek new opportunities. Some individual companies can be identified as star players and they can grow their footprints and network overseas, market their products and services overseas as well. This is where IE Singapore will customise some of their approaches – help them to grow overseas.

SME Review Thrust 2 - Productivity, Innovation & Capability Upgrading

19. Under the second thrust, productivity innovation and capability upgrading, we look at the cost component. How can they drive productivity improvements within the company? We look at the business model, the operating model, to make sure that the cost they are investing in the company will give them the returns that they need, and to make sure that the money works for them.

20. So the second thrust of the SME review is to enhance support for SMEs in productivity, innovation and capability upgrading. To advance beyond that, the Government will continue to support companies in capability upgrading. Last year, more than 5,600 companies benefited from capability upgrading projects supported by SPRING and IDA, and more SMEs can now tap on PIC bonus, can also tap on the Innovation and Capability Vouchers (ICV) too. For the micro-enterprises, ICV would be absolutely suitable and relevant. These are smaller-scale amounts – $5,000 – and on top of that, with the PIC bonus, they actually get the returns to the investments in assets and equipment that help them in productivity.

21. And very importantly, within the cost component, would be the issue of manpower and talent. Right now with the labour crunch, both at the mid and lower-level, where do you find the talent? I think we are especially concerned about the managerial level as well as the supervisory level. So we suggested that we can actually continue the education of our current SME workers to provide a pipeline for our SMEs. For current SME workers, we can continue to upgrade them – re-skilling, upgrading their knowledge and to enhance the human capital of SMEs, SPRING will also offer a suite of assistance to help SMEs groom their business leaders. For example, advanced management programme co-funds courses for SME CEOs through executive MBAs and executive development courses. And this is when the bosses go back to school, to learn strategic planning, and to learn how to run their businesses more efficiently. To strengthen the SMEs middle management, the Management Development Scholarship (MDS) co-funds scholarships for promising executives currently in SMEs to pursue MBAs and part-time degrees. Support is also available from WDA and MOM for older workers to upgrade their skills.

22. Many Members were also interested in the SME Talent Programme. This programme helps ensure a strong and deep collaboration between the ITE and the Polytechnic with the SME sector. Many of the graduating students or students in these institutions may not be very keen to join the SME sector as they feel that it may not give them the desired career path and stability. On the contrary, the SME sector could provide them the opportunity to be entrepreneurial and also broaden their experience in business. I had a dialogue with a group of polytechnic students recently and explained to them the SMEs’ appeal. For example, if the local talents are fed into SMEs, many of these SMEs would consider them as rare talents in their company. So whenever there are opportunities to go overseas, set up subsidiaries, venture abroad, or do market assessment, it will be given to that person. And I think that exposes the person tremendously, and broadens the horizons tremendously for the business sector itself. So you have got to do certain functions you have been trained in to broaden your skill sets. For example, if you are an accounting graduate from a polytechnic, or accounting in ITE, and you join an SME, you would not just do accounting but also have the chance to do sales, marketing, operations and IT.

23. When I talk to SME bosses, they are very open to this idea. They understand the difficulty of attracting talent and they want to retain them. So we are rolling out this SME Talent Programme to feed as many of the talents as possible into the SME sector to encourage our local graduates, our local talents to venture into the SMEs and be able to grow and broaden their horizons within the sector. That will strengthen our SME sector as a whole.

24. SME Talent Scheme will be made available for ITE and polytechnic students from their second year of study, depending on the course they pursue. Allowance and tuition fee will be provided. Training will be given upon joining the SMEs.

25. The Germans have their apprenticeship programme and here in Singapore, there are many scholarship programmes that are widely available. So the SME Talent Programme positions itself between apprenticeship and a scholarship programme. It gives the assurance of a job, it pays for you even if you are studying, and you will not just have an internship but an apprenticeship during the holidays working in a SME.

26. Low Yen Ling has talked about the golden years of workers where 60 becomes 40, and we truly believe in that. We want everybody to be actively ageing and also contributing back to the economy.

27. There are many existing schemes to do that. One of the schemes is the Business Advisors Programme. The Business Advisors Programme facilitates the process for the very experienced worker if you are working in an MNC or if you are working in another function, but would like to make a mid-career switch. Through the Business Advisors Programme, we will match you with an SME for you to provide an advisory role in SMEs. But if you can find the chemistry in the right company and the company finds that this is the right person, you may have an opportunity to join the SME you are working with. So the Business Advisors Programme is one programme that mid-career individuals or executives can consider.

28.     Now let me come to the question on productivity. On Mrs Lina Chiam’s question on plant and machinery, the PIC Bonus announced at Budget allows companies to receive up to $15,000 in cash over three years, and that is on top of the tax deduction that they already enjoy from productivity investments that qualify for PIC. And I encourage SMEs to tap on other kinds of programmes, not just PIC bonus. SMEs really have to re-look their business models and consider the type of schemes out there, and not just look at one scheme or two. The Wage Credit Scheme for example, cannot be looked at in isolation. Wage Credit Scheme should be looked at from the productivity angle as well – how productive can the workers be, have they hit the salary indicators within the company before you consider increasing their pay and taping on the wage credit. But, there’s only 3 years that you can work so there is a lot of urgency to it. A combination of schemes gives you the most benefit, and we want to encourage SMEs to tap on that. The Government can only do so much because the SMEs have the domain knowledge to know what they need, and that is why we need SMEs to come forward, to review their own model.

29. I also encourage SMEs to tap on the Collaborative Industry Projects (CIPs) which will help the sectors as a whole improve their productivity through shared services and other innovative solutions. One of the initiatives under IDA’s iSPRINT is to drive CIPs for infocomm technology solutions. With iSPRINT funding, Bugis Street Development implemented an integrated Point of Sale, Inventory Control and Cashless Payment system for 800 retail shops at Bugis Street. This allowed the retailers to lower the cost of technology adoption due to economies of scale while improving productivity and customer service at the same time. For the projects to be successful, you need a pro-active trade associations to take the lead as well as for clusters of companies coming together to drive the projects. Some examples are centralised kitchens and centralised logistics. Many of the outsourcing services make it possible to achieve economies of scale. This is extremely important for even the micro-enterprises, the heartland stores in the community, they can perhaps come together and look at procurement and joint promotions. This is where the SME centres, which I will touch on later, that will help network some of these things to make it possible, to work with businesses to make this collaboration possible.

30. Mdm Chairman, I would like to speak in Mandarin.

SME Review Thrust 3 - A Conducive Business Environment for SMEs

31. 中小企业策略检讨的最后一个重点是，为中小企业营造一个亲商有利的商业环境

32. 余振忠先生和罗文丽女士询问有关政府在融资方面，为中小企业和起步公司所给于的帮助。目前，本地金融机构在某种程度上，努力地满足了中小企业的融资与需求。许多金融机构也设有专门的借贷部门，为中小企业提供多样化及符合它们个别需求的金融服务。根据新加坡金融管理局2012年的中小企业融资常年调查，截至2012年6月，金融机构的中小企业未偿还贷款总额为645亿元。这是一笔非常可观的数目。由于金融机构拥有广泛的环球网络，因此跟一家由政府经营的中小企业银行相比，金融机构将能为中小企业提供更好的网络和融资的支持。

33. 然后在这同时，标新局也同14家金融机构紧密合作，通过与金融机构分担贷款风险，为中小企业提供融资。这些计划包括：为营运资本和贸易融资提供贷款的“贷款保险计划”（LIS）和“升级贷款保险计划”（LIS+）、为购买配备和资产提供贷款的“本地企业融资计划”（LEFS），以及为员工人数少过10人的微型企业提供融资的“微型贷款计划”。这些政府融资援助计划，将能够协助有潜能，但还未取得显著成绩的中小企业，进行有价值、但或许风险较高的项目。

34. 此外，标新局也通过“标新局起步企业投资计划”(SPRING SEEDS)等措施，为企业家和起步公司提供融资。这是一项以股份为基础的合资计划。

35. 连荣华先生、王鼎昆先生和谢世儒医生对政府准备如何促进中小企业对各种援助计划的认识，表示关注。我将以中小企业策略检讨中提到的两个策略来加以说明。这两个策略简称UP，也就是向上的意思，进取向上，象征我国中小企业和新加坡不断取得进步。

36. 我们将把设于新加坡中小型企业协会、新加坡制造商联合会、 新加坡中华总商会、新加坡马来商会和新加坡印度商会的五家企业发展中心 (EDC)，提升为一站式的中小企业中心 (SME Centres)。这么一来，政府将能更好地同中小企业保持接触，以及展开教育宣传工作。这些中小企业中心将是企业扩展商业人脉的中心点，而各个政府机构也能通过这些中心，向中小企业介绍各种援助计划。

37. 新加坡中小型企业协会在东北区发展社理会也设立了小型办事处，获得许多企业的好评。因此，我们将在中小企业集中度较高的地点，通过行业商会设立更多这类附属的小型办事处。

38. 一些中小型企业也曾向我们反映，政府的援助计划太复杂，不大容易了解。

39. 为此，标新局着手精简所有的援助计划，将现有的多项计划简化为并整合成为一项，称为“能力发展津贴”（Capability Development Grant），为中小型企业在提高生产力和能力发展方面给与扶持。同时，标新局也简化和统一了申请表格的格式，现在的表格只有两页长，以前共有十一页。另外，标新局也将推出一个新网站，让商家可以直接上网提交申请，从而减少企业的文书工作。能力发展津贴将从下个月1日起生效。简单来说，中小企业将依据五大区块，也就是：应用工具、赠券、津贴、税务优惠和贷款，获得它们所需的援助。

40. 标新局将在不久后宣布更多有关各项目的细节。我们相信，根据中小企业策略检讨所提出的建议，在各方面加以改进后，本地中小企业将能茁壮成长，而政府也将全力支持它们不断加强自身的实力。如此一来，大家才能共同提升，朝更美好的将来迈进。

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SME Review Thrust 3 - A Conducive Business Environment for SMEs (English translation for Para 22 - 31)

The final thrust of the SME Review is to create a conducive business environment for SMEs.

Mr Yee Jenn Jong and Ms Lina Chiam asked about financing support for SMEs and start-ups. Currently, the financial institutions (FIs) in Singapore already cater substantively to the financing needs of our SMEs. Many FIs have dedicated SME lending units, and offer a variety of banking facilities customised for them. Based on MAS’s Annual SME Financing Survey 2012, the FIs’ stock of total outstanding SME loans was S$64.5b as at Jun 2012, which is a very substantive sum. The FIs’ extensive global networks enable them to support SMEs much better than by a government-run SME bank.

In addition, SPRING works closely with 14 Participating Financial Institutions (PFIs) to provide financing support to such SMEs through the risk-sharing of loans made to SMEs. These programmes include the Loan Insurance Scheme (LIS) and LIS+ that provide loans for working capital and trade financing, the Local Enterprise Finance Scheme (LEFS) that provides loans for the purchase of equipment and assets, as well as a Micro Loan Programme for micro-enterprises with 10 or fewer employees. Such government financing support helps good SMEs, which may not have built up strong track record as yet, to pursue worthwhile, but possibly higher risk projects.

For entrepreneurs and innovative start-ups, SPRING also provides financing through initiatives such as the SPRING Start-up Enterprise Development Scheme (SPRING SEEDS), which is an equity-based co-financing scheme.

Mr Liang Eng Hwa, Mr Ong Teng Koon and Dr Chia Shi-Lu were concerned about how we can reach out to our SMEs. I will address this with the last two strategies under the SME Review. The strategies are represented by the acronym UP, as it represents progress for our SMEs and Singapore.

‘U’ stands for Upgrading our 5 Enterprise Development Centres at ASME, SMF, SCCCI, SMCCI and SICCI into SME Centres. These one-stop SME Centres will allow better outreach, education and engagement of our SMEs, and will become focal points for business networking and for all government agencies to reach out with their SME assistance programmes.

We have received positive feedback on the satellite centre set up by ASME in North East CDC. We will therefore work through the various industry associations to set up more satellite SME Centres in areas with a high concentration of SMEs.

‘P’ stands for simplifying Processes for SMEs to seek support from Government. We have received feedback that some SMEs have found it difficult to understand the schemes available to them.

SPRING has undertaken a streamlining exercise for their schemes to address the feedback. The various programmes which SPRING used to offer will be streamlined into one Capability Development Grant (CDG), which supports SMEs in productivity improvement and capability development. SPRING has also simplified and standardised its application forms to just 2 pages, and will be introducing a new online grant portal to reduce paperwork for businesses. The CDG will take effect from 1 April 2013. In brief, SMEs can now look forward to assistance in five easy-to-remember broad categories – toolkit, voucher, grant, tax incentive and loan.

SPRING will be providing more details on each of these recommendations. Based on our recommendations under the SME Review, our SMEs CAN do it, and the Government will seek to AMPlify their capabilities. This way, we can all head UPwards towards a better future.

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Supporting our start-ups and young entrepreneurs

41. We will try to create a stronger culture for start-ups, especially for our young, to step out of their comfort zone, and to start up their own businesses and take ownership. We need constant renewal of the business sector. New enterprises need to be injected and need to grow, and we need new products as well. So whenever we have entrepreneurship projects, we will do our best to support and hopefully, some of them can be successful and spark brilliance somewhere where the products and services become global and we can produce more global champions and regional champions in our business sector.

42. Mr Singh and Mr Vikram Nair have asked how we can develop start-ups and the entrepreneurial spirit in our youth. Developing innovative start-ups will remain an important focus even as part of this economic restructuring.

43. I have cited many of the help that the start-ups can be productive or can tap on the schemes. In ACE (Action Community for Entrepreneurship) which I chair, we have grants that have been given out. The grants used to be a YES! start up grant for those 26 years and below. But we have since opened up to benefit as many start-ups as possible. It does not have any age limit and it does not need to be technologically-focused. As long as you have a good idea, you are competitive, and you have differentiation, we will be there to provide support as best as we can.

44. But, to build an entrepreneurship culture, it has to go beyond provision of grants. We have to build an eco-system and a conducive environment for people to want to start business, and the business sector must be exciting enough, and the consumer market in Singapore must be exciting enough to be able to set up good businesses. We also need passionate individuals, and we need to inculcate them, starting from the young.

45. Last year, ACE rolled out an entrepreneurs-adopt-a-school programme. The entrepreneurs can adopt their alma mater, and they get involved in promoting entrepreneurship education within the school. We have been piloting this in a few schools, and have received very good feedback from entrepreneurs who were involved and had gone into the classes to teach the students about risk taking, and the students get a chance to be attached to the entrepreneurs themselves.

46. For the start-ups that are already in place, one example is the start-up launch pad. We provide the facilities where we could, and one very famous location is Ayer Rajah Blk 71 that has now become a test-bedding centre for new products, and for start-ups too. This is jointly initiated by JTC and MDA in 2011. Besides tangible assistance on space provided, Blk 71 also provides intangible synergies by creating a vibrant start-up community for networking and collaboration.

47. The networking and collaboration of start-ups are very important. In business, it is about your network, who you know, what you know, and where are the business opportunities. So mentorship is our focus, and also developing platforms where we link the capitalists to the start-ups so that they can get series A funding, they get second series funding to be injected into their business.

48. On cultivating young entrepreneurs, as I mentioned, it is about starting young. We go to the schools, and also universities as well. Universities and polytechnics have incubators. These incubators encourage start-ups, and encourage students to start their businesses, and they incubate over a period of time and hopefully, they graduate into the marketplace. Some of them, during the incubation period, already went into the marketplace to try and test the demand of their products and services, and they could continue to refine and tweak the best they can.

49. Over there, we have mentors to help them so they can trial and error, but this is not a rosy picture. Any start-ups, the probability is that more than half may not succeed. And that’s one thing that we have to teach our young, which is that they have gone on a journey of entrepreneurship, it’s about learning about failures, and not always wealth and successes. Learning about failures, and come back stronger, and be more resilient to try again. And that’s where we should be coming from, and that’s the best education we can give them.

Protecting Our Consumers

50. Mr Lim Biow Chuan has asked MTI to review regulations on time share products. The main legislation protecting consumers against errant timeshare companies today is the Consumer Protection (Fair Trading) Act, or CPFTA.  Under the CPFTA, CASE may obtain injunction orders against errant traders for unfair practices such as misleading claims and pressure selling, while consumers themselves may take civil action against them.  Besides the CPFTA, the Police can also take action against fraudulent timeshare companies under the Penal Code.

51. I announced at MTI’s COS last year that we will review the CPFTA. Since then, we have sought inputs from CASE and completed a study of overseas legislation in this industry to come up with a series of proposed amendments. So, these will include disallowing the collection of deposits during the cooling-off period, and requiring sellers to provide key information on the contract before the consumer signs it.

CONCLUSION

52. Mdm Chairman, the Government remains fully committed to support our SMEs in restructuring. The transition will not be easy, because of the economic uncertainties. And I continue to urge our companies to take advantage of the assistance the Government provides, and work together towards achieving quality growth. And all enterprises should come forward to learn more about the schemes, look at their business models, and continuously review what is most suitable for them, to be able to grow stronger. If they continue to face constraint and for some companies, raising productivity might take a much longer time, and we understand that. However, they have to take the first step. If they are willing to take that first step, there will be schemes available to help them.

53. Mr Zaqy Mohamad talked about social enterprises and I want to share with Mr Zaqy that social enterprises are part of the enterprise ecosystem, and they are registered as enterprises so they can also tap on the schemes. Social enterprises are one of the hardest organisations to run. But first and foremost, the business model must be viable, and sustainable. When you are commercially viable, then you can earn returns and sustain yourself to meet your social mission. We treat social enterprises as enterprises and they can continue to tap on the schemes.

54. Lastly, let me encourage companies to continue to look at the different schemes available. I know that there is quite an impressive range of schemes out there, so we will set up SME centres within this year, and we hope to roll out as many SME centres as we can. We have planned for 5 SME centres to serve as a hub with satellite centres as spokes. These satellite centres will be within the community itself, while the SME centres will be a one-stop shops that will be developed by the trade associations. Some Members have asked for the centres to be situated or located within their constituencies. Ms Jessica Tan, Mr Sitoh Yih Pin, and Prof Fatimah Lateef have mentioned that they would like some of the SME centres to be located there. We will study it and I think there is a possibility that an office or a satellite centre can be situated there and we will work with the trade associations to do that. And I think it is important for the community, the business sector and the government to all work together in this difficult time, in this transitioning process as the economy restructures, and we will go through that, every step of the way of this journey.

55. Thank you.