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Speech By Mrs Josephine Teo, Minister of State For Finance And Transport At The Enterprise 50 Awards Ceremony

22 Nov 2012

Mr Alvin Tay, Editor, The Business Times

Mr Tham Sai Choy, Managing Partner, KPMG

Mr Linus Goh, Head, Global Commercial Banking, OCBC Bank

Friends, ladies and gentlemen

Good morning. It is my pleasure to join you this morning for the 2012 Enterprise 50 Awards. Congratulations to all the winners gathered here today.

2 The kind of butterflies in the stomach that a parent feels at the important milestones in the children’s education journey is very much like how entrepreneurs feel towards their businesses at critical junctures. Your business is always going to be your baby. Its success reflects on you. You nurture and tend to it, you want to help it to grow and it is not something that you are detached from. I am sure for the recipients of the E50 awards today, it is more than just a title. I think they feel that it is an important milestone and it is a recognition that you have done something right.

3 I would like to start by acknowledging some challenges that in particular, the small and medium enterprises face in Singapore today. Both Sai Choy and Linus talked about the uncertain external environment. Two other challenges, which you are familiar with, are the particularly tight labour market and the fact that Singapore is no longer a low-cost operating environment for businesses of any kind.

4 In terms of the global economic conditions, it will take time to settle. However, within Singapore, we aim to keep things stable and on an even keel. In terms of manpower issues, I think we all recognise that the key challenge is sustainability and how businesses in Singapore can grow. It is a difficult choice for us to make but if we look at the longer term rather than the immediate short term, we know that we cannot avoid a population constraint. We also have a better educated workforce, as well as an ageing workforce. So these are the pressures that you, as employers and business owners face.

5 The Government recognises the difficult transition that our businesses have to make and is committed in supporting you in this process. I hope that we can work towards a longer term viability for our SMEs by going through this journey together. If we were to cast our eyes five to ten years from now and ask “Can our businesses continue to thrive in that sort of timeframe?”, and then work backwards, it becomes very obvious that the transition has to be made, and the sooner we are able to make it, the better.

6 I thought I should mention briefly about the operating environment in terms of cost. It is an area that we should pay careful attention to primarily because cost can be a barrier to starting up. Cost can also be a barrier to start-ups growing to a certain scale and size. This cost is not a trivial matter, we have to examine it carefully and bring it down as much as possible. When you are a developed economy with a human capital of a certain quality and constrained by land size, it is quite inevitable that we are going to be a relatively high-cost environment.

7 However, there are three positives that give me confidence that we can do this together. The first is entrepreneurial attitude. Compared to when the E50 awards first started in 1995, I think they are completely different now. I remember I was involved in the very early stages of the E50 discussions. At that time, we were talking about how we can encourage more risk-taking behaviour and encourage young people to consider, apart from employment opportunities, entrepreneurial
opportunities. If we fast forward 18 years, I am glad to note that attitudes have changed a great deal. For example, in 1995, about 30,000 new firms were formed each year. Today, roughly 60,000 new firms are formed annually.

8 Let us look at the potential pool of entrepreneurs, and zoom in particular to university and polytechnic students. A survey was done worldwide called the Global University Entrepreneurial Spirit Students’ Survey (GUESSS) and Singapore took
part in it for the first time this year. The GUESSS report found that our university and polytechnic students have a very healthy level of interest in entrepreneurship. 80% of them showed Entrepreneurial Interest and about half of them thought about it quite seriously. This is on par with the OECD average and I think if we had done the study in 1995, I am quite sure that the climate would have been quite different. However, those actually taking the plunge in Singapore is only about half of the OECD average. So attitudes have changed, and we have not done too badly in translating those attitudes into action as well. We are getting there. Therefore, entrepreneurial attitude is one positive that augurs well for us.

9 We can see that many of our businesses are not content to be constrained by the existing conditions in Singapore. So some of them venture out to leverage on lower-cost environment elsewhere. An example is one of the recipients today. Rigel
develops green restroom products that are water- and energy-efficient. They design and prototype their products in their Singapore headquarters, and manufacture these products in their factories in China. The products are then sent back to Singapore for final testing. Through this strategy, Rigel has leveraged Singapore’s skilled manpower and China’s manufacturing expertise for optimum efficiency. There are many others like this company. I know several architects who, for large projects, use draughtsmen in Singapore and other countries like Thailand, for example. Technology allows them to operate on this basis with very little barriers. This is a second positive for our SMEs which are looking at ways to overcome the constraints they face.

10 The third reason to be optimistic is that in the World Bank’s Doing Business report published annually, Singapore has come out tops for the second consecutive year. In the Doing Business Report, they look at several factors such as how to start a business, and the time needed to pay taxes for example. They consider multiple factors and Singapore compares very favourably worldwide. So whilst within Singapore, sometimes we look at a difficult operating environment. If we were to step out of Singapore and look inwards, and compare Singapore to elsewhere in the world, our conditions are not too bad. We are actually quite supportive of businesses.

11 These three factors - attitudes towards entrepreneurship, how companies are responding by leveraging on other low-cost environment and lastly, our overall business environment - give us reason to believe that start-ups and SMEs can still have a reasonable set of conditions within which to grow their businesses.

12 If I could just end by sharing with you something that was said in 1995, when E50 first started. DPM Teo Chee Hean had spoken at the Rotary-ASME Entrepreneur award ceremony. He had highlighted that Singapore was not going to be able to compete on cost alone. He had talked about how business had hoped the Government could try and help by providing subsidies, making it easier for businesses. He said we cannot afford to protect our domestic sector, to shield the infant local industries in the hope that one day they will become large and efficient enough to compete on the world stage.

13 It strikes me that the challenge today has not really changed a great deal. Today, we also cannot afford to allow the environment to become unrealistically dependent on the continued growth of our workforce. It is something that will simply postpone the pain and cause us to adjust in a more drastic manner later o n. DPM Teo had said, “Even in such larger countries, such a policy is more likely to result in overgrown babies that never grow up and which are unable to wean themselves off protective barriers and subsidies. The consumer and taxpayer have to carry the burden.”

14 DPM Teo had said this in 1995 and yet 18 years later, we still have a vibrant and thriving entrepreneurial scene. I have every reason to be hopeful that our businesses can rise to the challenge. Our SMEs will be able to respond in a way that will help them to become stronger and continue to contribute to a vibrant economic landscape. On that note, congratulations once again and I wish you many more years of good growth ahead.

Thank you.