Speech by SMS Chee Hong Tat at the Singapore Business Federation Family Business Forum 2018

Speech by Senior Minister of State, Ministry of Trade and Industry, Mr Chee Hong Tat, for the Singapore Business Federation (SBF) Family Business Forum (FBF) 2018, Mandarin Oriental Hotel, Singapore (Oriental Ballroom), 27 September 2018

Chairman of SBF, Mr Teo Siong Seng,

CEO of SBF, Mr Ho Meng Kit,

Business leaders,

Ladies and gentlemen,

A very good afternoon.

Introduction

1.            I am happy to join all of you at the SBF Family Business Forum for the launch of the Young Business Leaders Network (YBLN). SBF is the apex body which represents the business community in Singapore. Its partnership with the government plays an important role in our economy, to promote trade and enterprise development.

2.            Many of you present today are our next generation of family business leaders and young entrepreneurs. You represent the new wave of enterprises that will take Singapore’s economy to greater heights in the years ahead.

Creating a Pro-Business Environment in Singapore

3.            The theme of today’s forum is “Drivers of Successful Family Businesses”. A vibrant economy needs a good mix of enterprises, ranging from start-ups and family businesses which are SMEs, to large local enterprises and MNCs. It is not choosing between MNCs and local companies; or between large enterprises and SMEs.  It is about growing a strong layer of highly competitive Singapore-based enterprises of different sizes to drive the next phase of our economic development.  

4.            For a small open economy like Singapore, our government agencies and government policies must be pro-enterprise and pro-innovation. We are committed to working with our businesses to achieve these outcomes. To remain competitive, we must, and we can, differentiate ourselves by having pro-business policies and regulations that position Singapore as an attractive place where ideas, talent and capital from the region can come together and produce results.

Enhancing the Government’s Procurement Framework to Encourage Enterprise and Innovation

5.            One such area is through the pro-active enhancement of government processes to support business growth and innovation. This includes government procurement, which seeks to maximise value-for-money purchases for the public service.  It can also be a useful enabler to support industry development and innovation.

6.            Today, I would like to launch a set of collaterals jointly developed by MTI and MOF, to highlight to our SMEs how they can benefit from government procurement projects through enterprise and innovation. Let me first thank Minister Ong Ye Kung, who led a major review in this area when he was the Minister in-charge of Public Service Innovation. This set of collaterals is a product of his efforts and the hard work of colleagues from MOF and PSD who worked together to enhance our procurement framework to benefit businesses.

How can Firms Benefit?

Firms can compete not just on price, but also on quality

7.            The government procures over $20 billion worth of goods and services from businesses every year. Our primary consideration in conducting procurement has been to ensure value-for-money purchases, as well as objective and transparent processes. These principles are important and remain valid. But more can be done to encourage innovation and support enterprise development.  Please allow me to elaborate.  

8.            First, the government will now use the price-quality evaluation method by default; a shift away from awarding contracts purely based on price. This price-quality concept is not new to the Public Service, and it has been more widely used over the years in areas such as IT and construction, resulting in better procurement outcomes. We will encourage all government agencies to apply this procurement method where possible.

9.            In this way, we are broadening the concept of value-for-money, going beyond just price to also take into consideration quality and the impact on economic, social and environmental factors. Businesses will benefit from this change, because they will not compete on price alone, which may lead to a “race to the bottom”. Instead, businesses can adopt a longer-term perspective and invest in capability building, so that they can differentiate themselves based on quality and other selling points of their goods or services. Over time, this will not only allow government bodies to maximise value-for-money based on both price and quality, but also allow companies to build up their track records and help them to win other contracts locally and overseas. 

Strengthen and streamline government procurement processes

10.        Beyond price-quality evaluation, we will also streamline our procurement processes. We want to make it more convenient and cost-effective for SMEs to participate. Today, more than 80% of all government contracts go to SMEs.  I hope this percentage can go even higher in future, and with active participation from more SMEs who see government procurement as a useful launch-pad to propel their business to greater heights. 

11.        I recently announced that MOF has removed the requirement for companies with an annual turnover of less than $5 million to submit audited accounts when they participate in government tenders.  We want to lower the barriers of entry, and encourage more companies to come on board. It is a win-win outcome.  SMEs get more business opportunities and government agencies have more suppliers to choose from. 

12.        The change came about due to feedback from companies to MOF and MTI’s Pro-Enterprise Panel (PEP). MOF decided to take a risk-calibrated approach: rather than have a blanket requirement for all companies to submit audited accounts, SMEs with a turnover of less than $5 million will be exempted. At the same time, there are safeguards to manage downside risks.

13.        I would like to thank MOF for working on this initiative with us. I am heartened by our public officers adopting a risk-calibrated approach for government procurement, coupled with appropriate safeguards.  This is an encouraging mindset shift which we want to extend to other policies and regulations. 

14.        As one colleague shared with me, government agencies should see our role as gate-keepers and not goal-keepers.  What’s the difference?  A goal-keeper tries to prevent everything from passing through whereas a gate-keeper exercises judgment and allows the right elements to go through.  The right balance is important.  It is not hands-off regulation which may lead to chaos and safety concerns.  At the same time, it is not being overly risk-averse and suffocating new ideas with stifling rules.  If we strike the correct balance and do it well, and I am confident we can, smart regulation could become a competitive advantage for Singapore.

15.        Let me share with you another example of how we are reaching out to the smaller players. Previously, individuals such as free-lancers tend to set up a company to register on GeBiz, which is the platform where government projects are listed for businesses to openly bid for.  We have clarified that free-lancers can open an account on GeBIZ in their personal capacity without having to set up a company. This will encourage free-lancers to participate, as they need not incur costs and set up a company just to participate in government procurement projects.

16.        Streamlining processes need to go hand-in-hand with strengthening our internal work culture and procurement capabilities. We want agencies and public officers to feel empowered when they embark on initiatives to facilitate enterprise and innovation. It is our responsibility as government leaders to provide our colleagues with a supportive environment to take calculated risks and try new ideas, and the assurance that they can fail safely.   

17.        Let me give another example. Many agencies may feel uncomfortable revealing their budget at the procurement stage.  This is understandable as it has been a long-standing practice in government procurement.  But we know it can sometimes be beneficial, for both the buyer and prospective vendors, to reveal an agency’s budget for certain types of projects, such as those that are more open-ended and require innovative solutions. Revealing the budget will help bidders focus on what they can offer within the cap, and the quality of their ideas and proposals. This may not work for every project, but there is certainly scope to try this approach for some of our contracts. 

18.        We are discussing with agencies to identify suitable projects which can benefit from this new tender approach.  The initial set of projects will require everyone to leave our comfort zones and take some risks.  There will be some trial and error, and it will be a useful learning process to help us enhance our processes over time.  If we refuse to try because we are afraid of failure, and prefer to stick to tried and tested methods, it is certainly safer and more comfortable in the short-term.  However, we will be missing out on new opportunities and better ways of doing things.  As Dr Goh Keng Swee said, “the only way to avoid making mistakes is not to do anything.  And that will be the ultimate mistake.”

19.        The government will also conduct more early supplier engagement, in a fair and transparent manner. This allows businesses to better understand the needs of the buyer and for the buyer to know the latest market offerings. Such open sharing of information helps businesses to have greater certainty and clarity before they submit their bids. It also promotes greater understanding across stakeholders, including the government, which will result in smoother implementation.

More value from investments with businesses

20.        To reap greater value from partnerships and investments with businesses on government projects, we will encourage agencies to offer longer contracts where possible, which will provide greater commercial incentives for companies to invest and deliver improvements. This contributes to the virtuous cycle within the tenure of the contract, where vendors can continue to deliver what they are good at, and strive to improve further. And with the improvement, agencies do not have to call for repetitive tenders or submissions, which in turn allows for greater certainty and a longer runway for companies to deliver their products and services.

More firms can participate in government procurement

21.        To encourage more businesses to participate in government projects, we will promote the use of crowdsourcing methods to generate more ideas and innovative solutions. Through methods like innovation calls and hackathons, we can tap on a broader group of suppliers and businesses, beyond the traditional method of listing procurement tenders and contracts.

What are the Opportunities for Firms?

Encouraging innovation through procurement

22.        With these procurement initiatives and changes, there will be more opportunities for local firms to implement innovative ideas and build up their track record to be competitive locally and overseas. Firms can look forward to working together with agencies on innovative ideas, as we will review and lift traditional procurement rules in selected areas, and allow agencies to experiment different procurement approaches through what we call ‘sandboxing’.

23.        Within the sandbox, agencies are given the green light to experiment and try different procurement approaches, so long as they adhere to key procurement principles. This allows innovative proposals and business models to be tested. The lessons from these sandbox trials will be shared across the Public Service, and where appropriate, serve as catalysts for changing existing rules and processes.

24.        A useful way to encourage innovation and enterprise is to capitalise on government-led demand to provide opportunities for businesses to prove their capabilities and establish track records.  For example, the Health Promotion Board (HPB) had a project for Singapore’s inaugural National Steps Challenge. It worked with Activate Interactive, a local SME, to develop the Healthy 365 mobile app, and provide steps trackers for the Challenge. All 100,000 trackers were taken up by our enthusiastic participants. Building on the success of the government-led project and its track record, Activate then went on to spin off another company – Actxa - to venture into the wearables industry. Actxa is now able to hold a place in the wearables market among well entrenched competitors such as Apple and Garmin. It is also developing new, innovative products and expanding into overseas markets.

25.        Another example where businesses have the opportunity to capitalise on government lead demand is through the Infocomm Media Development Authority (IMDA)’s “Accreditation@SGD” Programme. The programme accredits promising technology product firms to accelerate their growth. This is done by helping them establish credentials and build a track record through government and enterprise demands, and eventually, scale globally. Accredited companies will be considered first in the government’s IT projects. They will also be featured at IMDA events, and be invited to participate in thematic workshops to better match government lead demand with innovative ideas. Let me share some examples. 

26.        DC Frontiers was founded in 2011 to utilise proprietary Natural Language Processing and Machine Learning techniques to transform huge amounts of unstructured, un-validated capital market and corporate registry data into a reliable, contextualised resource for investigation and compliance works. Since being accredited, the company has grown significantly and is now serving close to 20% of all government agencies in Singapore. Leveraging this track record, DC Frontiers is now expanding beyond our shores to countries like China, India, and Indonesia.

27.      Trakomatic, founded in 2013, specialises in harnessing human behaviour data to provide insights for business owners. It uses advanced video analytics, where traditional CCTVs are transformed into “Smart IoT sensors”. These can conduct in-depth human behaviour analytics in physical spaces, helping organisations make data-driven decisions for their businesses. Since being accredited, Trakomatic has more than doubled its growth year-on-year, and its valuation has also rapidly increased.

Cascading procurement initiatives to the industry

28.        Taken together, the initiatives I have highlighted represent substantial improvements in the way government carries out our procurement. These enhancements reflect our commitment to use procurement as a way to help local companies innovate and grow, and to build capabilities and track records which can help them succeed when they venture overseas.

29.        As part of the outreach efforts, MTI will engage our TACs to communicate these process enhancements to their member companies. Please help us to spread the message so that more companies are aware of the opportunities and can benefit from them. 

Conclusion

30.        Let me conclude by thanking SBF for organising today’s forum, and the TACs, partners, and businesses who have come together to discuss ways to further strengthen our economy.

31.        The formation of the SBF Young Business Leaders Network is an important step to bring together like-minded enterprises and business leaders to learn from one another and find opportunities to work together. The government is committed to supporting you and working with you to develop a pro-enterprise eco-system in Singapore.

32.        Thank you.​​