Speech by Senior Minister of State Lee Yi Shyan in Response to Motion by Teo Siong Seng on 'Voice of SMEs'

​SPEECH BY MR LEE YI SHYAN, SENIOR MINISTER OF STATE FOR TRADE & INDUSTRY AND NATIONAL DEVELOPMENT IN RESPONSE TO MOTION BY TEO SIONG SENG ON “VOICE OF SMALL AND MEDIUM ENTERPRISES”, 12 NOVEMBER 2012

1. Mr Speaker, Sir, I would like to thank Mr Teo Siong Seng for introducing this motion. Indeed, SMEs are the lifeblood of our economy. Although individually small, they are collectively a very key part of our economy. Our growth is closely tied to the success of our SMEs.  Our goal is to have a vibrant, resilient and innovative SME sector.

Business costs

2. My Ministry and the other government agencies pay close attention to the needs and challenges faced by our SMEs. Recently, as Mr Teo pointed out, some SMEs have expressed concerns about the costs of doing business here, particularly increasing rental and manpower costs.

3. Overall business costs have indeed risen in Singapore. The unit business cost index for the manufacturing sector increased by 4.6 per cent in the first half of this year, compared to a year ago. Given our size, the stage of our economic development, and the aspirations of Singaporeans, we cannot expect to compete on costs. Indeed, we must compete on value and develop new markets for our exports. We monitor our international competitiveness very closely.

Commercial rentals

4. Mr Teo expressed concerns about rising rentals for commercial space. While commercial rentals have increased since 2010, the increase has been moderating since the beginning of 2011. Commercial rentals remain below the previous peak in mid-2008.

5. Our objective is to maintain a stable and sustainable market where rentals are competitive and affordable for businesses. We do so by injecting adequate supply of commercial space to meet the medium- to long-term demand. MND had earlier announced that based on committed projects, we will have about 200,000 sqm of new office space and 90,000 sqm of new shop space per annum over the next 5 years. This is higher than the historical demand of 140,000 sqm of office space and 70,000 sqm of shop space over the last 5 years.

Manpower costs

6. Mr Teo also spoke about rising manpower costs, and difficulties in applying for and renewing work passes. To give our businesses ample time to adjust, the Government has since three years ago signalled the need to tighten the inflow of foreign workers. In fact, MOM announced a two-year schedule for foreign worker levy increases in Budget 2010. The qualifying criteria for the Employment Pass and S Pass have also been raised.

7. Earlier this year, DPM Tharman also announced the tightening of the Dependency Ratio Ceilings. We have to manage the pace of manpower tightening carefully to make sure that the changes are gradual and companies have enough time to adjust, and that it strengthens our competitiveness and does not stall growth. In short, we need to reposition ourselves for the future. We need to usher in a new phase of productivity-driven growth.

Productivity improvement – An imperative

8. To do so, the Government has established the National Productivity and Continuing Education Council (NPCEC) to champion and coordinate our productivity efforts. Already $950 million of the S$2 billion National Productivity Fund has been committed to support a wide range of productivity measures. These include the 12 sectoral roadmaps jointly developed with the key stakeholders, including companies themselves. We are encouraged by the fact that many companies have come forward to participate in productivity improvement initiatives.

9. One example is Lintech Engineering. Established in 1988, Lintech has grown to be a firm specialising in oil and gas engineering, welding and repair. Leveraging SPRING’s Technology Innovation Program, Lintech developed a fully-automated robotic welding system for repair jobs. Because the system runs completely unmanned, welding control personnel are now able to concurrently perform other tasks. The automation has led to faster and higher-quality welds with less consumable used. Overall, the firm raised its labor productivity by 300 per cent.

10. Recently, SPRING and IE Singapore have also raised their grant support level from 50 per cent to 70 per cent. SMEs can make use of the programs to build new capabilities in many areas - process automation, IT adoption, product branding, service quality development, human resource development and export market development. The programs are flexible and can be customised to meet the specific needs of the individual SMEs.

User-friendliness of schemes

11. We agree with Mr Teo’s emphasis for our assistance programs to be user-friendly. Currently, our agencies use a number of in-person and online channels to cater to the different needs of SMEs. The channels include public seminars and workshops, as well as the EnterpriseOne.com portal and call centre to assist SMEs in the enquiry and application process.

12. In addition, we also partner trade associations and chambers to reach out to their SME members. In 2011, the five Enterprise Development Centres assisted more than 12,000 SMEs, 14 per cent more than the year before. In all, SPRING and its partners1 served more than 112,000 SMEs in 2011.

13. But we want to do better. My colleague, MOS Teo Ser Luck, is currently chairing a review effort to ensure that our strategies, schemes and programs remain SME-friendly. The review will consider ways to streamline existing schemes and simplify application processes and reimbursement procedures. MOS Teo will announce the recommendations when ready.

14. Mr Teo has also highlighted that some SMES, have faced difficulties in claiming PIC as their equipment purchases did not fall within the approved list of equipment. Besides the approved list of equipment, companies can also apply for PIC for their equipment on a case-by-case basis. Where shown to improve their work processes and improve productivity, IRAS will allow the claim for PIC. Mr Teo gave two examples of PIC claims which were not approved.  MOF/IRAS will be happy to work with the Member to look into their PIC claims upon more information being provided.

Sir, I would like to speak in Mandarin.

为增长而转型

15. 新加坡要继续取得经济增长，并在全球经济保持竞争力，就必须实现经济转型，从而让企业达到更高的生产力和增长水平。这并非中小型企业独有的挑战。事际上，许多跨国企业因为无法与时俱进和求变创新，结果走向衰微，甚至被淘汰。这些企业当中，还包括了之前在各自领域中占领导地位的佼佼者。

16. 新加坡正步入下一个发展阶段，在土地和人力资源的供求方面，将更加吃紧。更准确地说，我们有足够的土地资源满足未来发展的需求，同时容纳适量的外来人员，以支撑国家的经济发展。但我们必须更谨慎地善用这些有限资源。我们的增长策略在根本上必须是健全、扎实的，同时透过持续不断地创新及价值创造，增强市场竞争力。

17. 议长先生，为了达到这个目标，我们必须加大力度进行经济转型。诚然，改革和转型的过程是艰难的。许多中小企业也切身体会到这一点。然而，当我们以其他领先经济体的产业作为标杆时，就会发现它们的生产力确实比我们国内产业的生产力高出百分之三十、五十、甚至是更高。这说明，我们现在所做的一切，并非天方夜潭，也不是遥不可及的。恰恰相反，提高生产力绝对是可行的。我们应该抱着势在必行的态度去面对这些挑战，积极向他人学习。我本身将在明年1月带领一个餐饮业商团到台湾，学习和了解当地餐饮业者的作业方式，希望我们的业者能从中有所启发。不断求新、创新、是企业的生存与发展之道。

总结

18. 议长先生，最后让我分享莆田餐饮集团的故事。许多人都知道，莆田餐馆最早在吉真拿路起家，售卖兴化菜肴，多年来只有一家店面。直到近年，莆田开始走向现代化，改变其商业模式，并扩充业务，开了好几家分店。在新加坡标准、生产力与创新局的协助下，莆田设立了中央厨房、采纳企业资源计划，并推行一套“5Ｓ营运管理计划”。建立中央厨房及科技的使用，让每家分店平均节省四名人力，也同时腾出多百分之十的面积，可以接待更多客人。此外，莆田也花了八个月的时间进行品牌重塑，推出新菜单，重新打造企业价值。不仅如此，它们也尝试店内销售很受欢迎的“辣妈”罐装辣椒酱。由此可见，中央厨房和企业资源计划帮助它们降低成本；增设分店和售卖商品，则有助提高营业额。莆田双管齐下，提高了生产力，也增加了公司的盈利。

(English translation – Paragraphs 15 to 18)

Restructuring for growth

15. Sir, for our economy to continue growing and remain competitive in the global economy, we must restructure and position themselves for higher productivity and growth.  This is not just a challenge facing SMEs. Many multinationals, some of whom used to be global leaders in their sectors, are facing relegation to obsolescence and insignificance because they have failed to adapt and improve.

16. In the context of Singapore, we will not have the luxury of land and manpower as we used to enjoy in our next phase of growth. To be sure, we will have sufficient land resources for future use, and can accommodate a calibrated inflow of foreign workers and talents to support our growth. But we have make use of these resources judiciously. Our growth strategy must be fundamentally sound, market-competitive, and underlined by constant value-creation and innovations. 

17. Sir, towards this goal we must re-double our efforts in restructuring our economy.  Yes, the process of change and restructuring can be painful. But as we benchmark industries in other leading economies, we know for a fact that others have achieved productivity 30 per cent, 50 per cent or even more than ours. Hence, we are not trying to do the impossible. On the contrary, raising productivity is achievable. This is why I am leading an F&B business delegation to study the best practices in Taiwan in Jan 2013. We have to learn from others and reinvent ourselves.

Conclusion

18. Mr Speaker Sir, let me end by a story. Putien Restaurant Group operates a network of Chinese restaurants serving Heng Hwa cuisines. For many years, Putien operated as a single restaurant at Kitchener Road. In recent years, Putien started modernising and adopted a different business model. It started to increase the number of outlets. Soon, with SPRING’s help, it set up a central kitchen, adopted Enterprise Resource Planning (ERP), and introduced the 5S Housekeeping Initiative2. Investing in a central kitchen and technology enabled them to reduce an average of four staff strength per outlet, and free up 10 per cent of each outlet kitchen space for more seating capacity. Putien also embarked on an eight-month rebranding exercise, re-positioning its value propositions with a new menu. In fact, it also started in-store merchandising by selling their popular “La Ma” (Spicy Mum) chilli sauce from their outlets for customers to enjoy at home.  So the central kitchen and ERP system helped reduce costs. Increased outlets and merchandising helped increase sales. Doing both helped Putien raise productivity and profits.

19. Mr Speaker, Sir, there are many other success stories in addition to the ones I have shared. Restructuring for higher growth and productivity is challenging but achievable. The Government remains fully committed to help willing SMEs on their restructuring journey. Together, we will be able to make the transition into a vibrant and highly-competitive economy. I echo Mr Teo’s optimism. We have done this before, and we can do it again.

¹ This includes SPRING and the 5 EDCs at ASME, SCCCI, SICCI, SMCCI and SMF.

² 5S is a Lean Manufacturing principle, and stands for Sort, Set, Shine, Standardise & Sustain.