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 FRIDAY, 2 MARCH 2012

 “RESTRUCTURING: WE WILL DO THIS TOGETHER”

 Speech 1: Supporting SMEs in Restructuring for Growth

Mr Chairman,

NEED FOR BUSINESS RESTRUCTURING

1. Our business sector is undergoing restructuring, with slower economic growth being forecasted. There is a clear need for our SMEs to restructure for growth is clear. And some have expressed concern about how SMEs will cope with our constraints. Many raised the issues on labour and manpower.

COPING WITH MANPOWER CONSTRAINTS

2. Those who raised the manpower issues, including Mr Vikram Nair, asked if there are measures to help SMEs cope with the recent changes in Dependency Ratio Ceilings (DRCs) and Foreign Worker Levies (FWLs), and whether the Government can help SMEs to hire more Singaporeans.

3. The Ministry of Manpower is providing a two-year transition period to help companies to adjust to the tighter Dependency Ratio Ceilings (DRCs). The Foreign Worker Levy (FWL) increases are also being implemented gradually in stages from July 2010 till July 2013.

4. In the long run, however, companies must find business models that will optimise limited manpower resources, and explore more innovative ways to attract Singaporeans.

5. MOS Lee shared how the “Part-Time Pool” Programme will help SMEs in the retail and food services sectors optimise their deployment of manpower. Let me add that the sectoral productivity roadmaps also include industry-level initiatives, such as job redesign, to make jobs more attractive.

6. Mrs Lina Chiam asked how foreign workers are linked to our economic strategy. Foreigners complement our local workforce. Our workforce, our Singaporeans, remain the core. In the new and promising sectors like data analytics which my Minister mentioned earlier, foreign talent supplements our local talent base. They can provide new skills, impart those skills and capabilities to us, and help us grow new clusters and move existing ones up the value chain. And the objective is to develop our individual workers, skilled talent and businesses to move up the value chain.

7. Personally, I am a beneficiary of the system, having worked for US and UK companies. I remember the times when I just entered the logistics market years ago. Those days, Singapore did not have much expertise in supply chain management. I had the privilege to work with a foreign engineer who was skilled in industrial engineering. Industrial engineering was not a popular area at that time. Neither were courses in industrial engineering widely offered. This engineer taught me about process flow in warehouses and helped to upskill me.

8. I am an accountant by training. Without his generosity or graciousness to impart me with new skills, I would not have been able to develop the skills required to carve out a career in the logistics sector, and to manage a company like DHL.

9. Therefore, Singapore must remain attractive not just to our own home-grown talent, but also talent from overseas.

10. Meanwhile, other foreign workers take up jobs which Singaporeans may not be very keen on, but are necessary for the economy as a whole. They complement our local workforce and help our sectors to grow, especially in emerging markets in the new economy.

11. In the last decade, this has helped us to be nimble and responsive, growing faster in years when conditions were favourable to make up for the years when there were downturns. Even as we restructure the economy and slow down our foreign labour inflow, we cannot afford to close our doors to all foreigners.

12. Let me assure Mrs Chiam that we will continue to groom Singaporeans for industry positions, even in areas like the aerospace cluster.

BUILDING CAPABILITIES FOR THE LONGER TERM

13. The immediate concerns of SMEs on manpower and other business costs are very real. But this cannot be their only concern. Short-term measures and assistance can help them today, tomorrow and maybe next month. But it cannot help them for longer into the future.

14. Building new capabilities is a necessary step that SMEs must take. Only then can they sustain profitable businesses in the longer term.

15. However, the Government understands that SMEs may be apprehensive to invest in the future, especially given the uncertain global economic outlook. Therefore, we put in place assistance schemes to support SMEs in their journey of restructuring. We work together with the trade associations and SME sector to provide various schemes and programmes for SMEs’ needs.

16. In 2011 alone, SPRING assisted more than 3,900 SMEs in their upgrading projects under the Capability Development Scheme (CDS) and other programmes. Another 5,100 loans amounting to $1.4 billion under various government loan schemes were also extended to SMEs to finance their business expansion.

17. SMEs have used these schemes to upgrade, automate, cut costs, tap new markets, expand capacities and increase their revenues. Koufu Pte Ltd

18. Let me give an example. Koufu is one of Singapore’s largest food court operators with 53 outlets island-wide. It firmly believes in process improvement and has undertaken several capability development projects. The company recently integrated its supply chain management system and implemented an inventory management portal that helps its outlets to procure faster, reduce paper work and increase sales per man hour by 10 percent.

Enhancement of Capability Development Scheme (CDS) and Introduction of Innovation & Capability Voucher (ICV)

19. To encourage more SMEs to upgrade, SPRING will enhance its support for the Capability Development Scheme and Innovation Voucher Scheme for the next 3 years.

20. Support under the Capability Development Scheme will increase from 50 percent to 70 percent of qualifying costs. The scope of this scheme will also be expanded to include automation and business transformation projects.

21. I would also like to mention the Innovation Voucher Scheme. Based on feedback from SMEs, they are also interested to strengthen capabilities in the areas of productivity, HR development and financial management. Hence, we have decided to extend the IVS to cover 3 new areas – productivity, HR development and financial management. These enhancements will benefit the smaller SMEs in particular. These are the areas that they have to focus on, so as to better manage costs and remain sustainable.

22. To reflect its expanded scope and purpose, it will be renamed as the Innovation & Capability Voucher (ICV). The ICV can be used for diagnostics, feasibility studies, process upgrading, customised training, product or services development, and the adoption of quality and standards.

23. Many of our SMEs understand the benefits of upgrading, and have tapped on the Government’s support to lower their cost of upgrading. We would like to create the greater awareness for other SMEs to understand how to tap on these schemes to help themselves.

24. Borrowing Mr Liang Eng Hwa’s analogy on paddling faster, I would like to encourage the business sector to paddle faster on a bicycle. The road is now a little bit rough. If you keep using the same tires, they will deflate faster and need more pumping and you may find that you cannot maintain the speed, or go faster. It is time to think whether you need a new bicycle or even just a new spare part of the bicycle or an all-season tyre, so that you can go on the rough road, and go fast.

25. This is an important aspect for businesses to consider – to relook their business models, business functions, products and services, retention of talent, and how they operate on a day-to-day basis.

26. So I urge the rest of our SMEs, even the micro-enterprises, to review the schemes and see how they can help them.

ROLE OF MTI & TACs IN ADDRESSING NEEDS OF THE BUSINESS COMMUNITY

27. Apart from scheme enhancements, we will continue to reach out to SMEs through various channels, such as the Enterprise Development Centres, EnterpriseOne (E1) call centre, seminars and workshops.

28. I would like to assure Mr Teo Siong Seng that MTI, as the lead economic agency, will continue working with other agencies to build a pro-business environment. We will continue to deepen our understanding of business needs and challenges, and coordinate with the other agencies such as the Ministry of Manpower, to holistically address the concerns of our business community.

29. Trade Association and Chambers (TACs) also have a vital role to play in helping the industry and SMEs to restructure. They can do so in several ways – First, help government agencies to better understand the needs and aspirations of the industries and the SME sector. Second, help SMEs understand the various upgrading programmes and schemes available, and how to tap on them. They are the bridge.

30. And I would like to quote one good example. Singapore Business Federation (SBF), in working with the Government, set up the SME Committee (SMEC). The SMEC provided seventeen recommendations on how the Government could help the SME sector through the Budget. Initiatives as such will encourage other trade associations and chambers to act as the bridge between the Government and businesses, and help us design schemes and draw up programmes to help the business sector.

BUILDING AN ENTREPRENEURIAL SINGAPORE

31. Mr Chairman, as many Members have also mentioned, seeding and nurturing innovative start-ups is an important aspect that is one of the Government key objectives in developing the economy and business sector. We believe that generate a pipeline of promising enterprises can support our economy and create good jobs for Singaporeans.

32. Besides co-funding programmes such as the SPRING Start-up Enterprise Development Scheme (SPRING SEEDS), SPRING also administers the Incubators Development Programme (IDP) to provide innovative start-ups with critical resources, such as mentorship and shared business services. SEEDS and IDP support entrepreneurs of all ages.

33. Ms Jessica Tan has mentioned that it is important to build an ecosystem for entrepreneurs and start-ups.

34. Today, we ensure that aspiring entrepreneurs do not come to the government just to get the grant. They must think beyond the grant. We believe that a good ecosystem to help them achieve their first order is more important than just providing seed funding.

35. How do we help them to achieve their first order? It is through building the ecosystem, including a network of contacts, and opening paths for them. But our entrepreneurs have to carry on the baton, bite the bullet and go for it.

36. We have set up an Overseas Chapter under the Action Community for Entrepreneurship (ACE), and we hope that this Overseas Chapter will not only help entrepreneurs broaden their network in Singapore, but also link Singapore start-ups to the overseas market. So if you are an entrepreneur or start-up, and you would like to venture overseas, you can tap into a network of other Singaporeans and successful entrepreneurs overseas who have come together to help you. This is very much like the Silicon Valley model.

37. This is at the beginning stage, but I am sure that we will be able to develop this Silicon Valley model both locally and overseas.

CONCLUSION

38. Mr Chairman, in conclusion, let me reiterate that it is vital to restructure our economy in order for Singapore to grow and remain competitive amidst a rising Asia, and as the landscape for businesses continues to be intense and dynamic. We need to do so urgently, so that we can effectively tap on the opportunities for growth in Asia.

39. The Government is committed to supporting our SMEs as they restructure for growth, and to bring them through this journey and process. We hope that with our support, SMEs can better grasp opportunities for growth, and in turn create better jobs for Singaporeans.

Speech 2: Consumer Protection for Timeshare & EDB’s Non-Compliance with PSD Directive

Mr Chairman,

CONSUMER PROTECTION FOR TIMESHARE

1. Let me now address Mr Lim Biow Chuan’s question on consumer protection for timeshare.

2. The main legislation protecting consumers against errant timeshare companies is the Consumer Protection (Fair Trading) Act, or CPFTA.

3. In April 2009, based on feedback from CASE, MTI strengthened the timeshare-specific provisions in the CPFTA. We extended the mandatory cooling-off period from three to five days, introduced a 60-day refund period for contracts cancelled within the cooling-off period, and extended these provisions to timeshare resellers, in view of the rising complaints against resellers.

4. Complaints on timeshare operators filed with CASE have since fallen significantly from 571 in 2009 to 358 in 2011, but I do understand that they are ranked third in the number of complaints received.

5. MTI is looking into Mr Lim Biow Chuan’s suggestions. We are studying if further enhancements are needed, and intend to consult the public later this year.

EDB’s NON-COMPLIANCE WITH PSD’s DIRECTIVE

1. Let me also address Mr Low Thia Khiang, who asked about EDB’s non-compliance with PSD’s Directive.

2. The approving authority for setting salaries and other conditions of service in Statutory Boards is the Permanent Secretary (PS) of the supervising Ministry. MTI delegated this authority to Chairman EDB with effect from February 2007 because the Chairman plays an executive role in managing the organisation.

3. Changes to EDB’s salary structure included making improvements to how EDB computed its annual corporate bonus quantum. The computation method was revised to better link EDB’s corporate bonus to organisational performance, and is now based on EDB’s performance in attracting investments, the performance of the industry sectors under its charge, and the organisation’s ability to generate operating cost savings. Those are the KPIs for this Statutory Board as a whole.

4. EDB also integrated all salary grades into one holistic scheme to allow capable non-graduate officers to progress into graduate level salary grades. If not, they will have to transfer from a non-graduate scheme to a graduate scheme in order to progress.

5. These changes are steps taken in the right direction. The lapse was in not seeking the views of PSD. This has since been rectified. A clear understanding on the specific areas that require MTI and EDB to seek the views of PSD has also been established between MTI and PSD. The Statutory Board is accountable to MTI, and MTI will continue to have oversight.