Speech by Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister for Finance, at the Singapore Heartland Enterprise Star Award 2015 Gala Dinner25 Sep 2015
Mr Yeo Hiang Meng, President, Federation of Merchants’ Associations, Singapore (FMAS)
Ms Lee Huay Leng, Editor, Lianhe Wanbao
Ladies and gentlemen,
1. This is the second year in which we are having the Singapore Heartland Enterprise Star Award, and I want to commend FMAS and Lianhe Wanbao for the tremendous effort they have put into the event.
2. I am delighted to join you in celebrating the success of the winning enterprises as well as in recognising the crucial role that our heartland enterprises play in the social fabric of Singapore. These home-grown businesses have been diligently serving our local community over the years, providing essential products and services with a personal touch. They also employ many Singaporeans.
Our homegrown SMEs must be part of the innovative economy of the future
3. Of course, our home-grown SMEs are not just a source of employment, and part of our social fabric today. They can and must also be a source of innovation, so that they are part of our future. Innovation in every sense – such as developing new brands, detecting new tastes and preferences in a new generation of customers, using new techniques to reach out to customers, and breaking into markets abroad.
4. Today’s award winners are each examples of innovation, each in their own way. They show that it can be done, even if enterprises are small. And by making innovation common among our small enterprises, not just the MNCs or large enterprises, we will make sure that the future Singapore economy is an inclusive one, with our home-grown SMEs being at the heart of it.
Re-focusing our efforts
5. We are restructuring our economy, amidst a tight labour market. We know the difficulties that SMEs face in this restructuring journey. We have to avoid taking extreme approaches along this journey, so that we help our SMEs survive and ensure that a large core of SMEs can do well in future.
6. Our approach cannot be to slow down or take a break from restructuring – if we do that, we will not see the breakthroughs needed in productivity, and Singaporeans will see no improvement in their standards of living. That is an unsustainable strategy. But neither can we rely simply on market forces and the competition for manpower in a tight labour market to shake-out firms and restructure our economy. If we rely purely on market forces, we may lose many good businesses along the way.
7. We are therefore taking a ‘middle’ strategy. We are gradually tightening the rules on foreign worker supply – we have not done this suddenly, but in steps over the last five years – and we are actively supporting SMEs who wish to upgrade and innovate.
8. We have seen strong take up of our schemes. The Productivity and Innovation Credit (PIC) is a good example. In the last year (Year of Assessment 2014), 61,000 companies or 44% of active companies took advantage of PIC.
9. We have achieved a good level of interest and take-up of productivity initiatives. We must now refocus our efforts, to achieve momentum.
a. We must focus more on real innovations, not just simple solutions such as purchases of basic IT devices. For the Government’s part, we will step up support for innovation, through targeted help for companies, rather than focused on broad-based support for basic solutions. The Budget this year sets out this direction – with increased support for every form of real innovation, beyond basic solutions – and we will take it further in coming years. For e.g., one of the schemes is SPRING’s Capability Development Grant, which we liberalised this year so that SMEs can get support more easily for their upgrading efforts.
b. We must also focus more on developing our people, in every enterprise. That is our most important objective – to enable everyone to discover their potential and feel fulfilled – and it is also how we get real value out of investments in hardware. Better management, and better development of people, is how we create value.
10. This focus – to develop our employees and management methods, and to innovate – builds on the broad-based achievements we have seen so far. The high take-up of PIC shows that broad-based spread of interest in productivity. However we have to ensure that business spending with PIC support has a meaningful impact.
11. We have in fact seen a surge in formation of sole proprietorships and partnerships, with many more seeking to take advantage of PIC. Last year, the number of new sole proprietorships and partnerships increased to over 1,100 per month (monthly net netting off those that exited), compared to the less than 50 per month in the preceding three years (2011 to 2013).
12. Some of these may have reflected genuine entrepreneurial effort, but it is the sharp trend that naturally makes IRAS worried. IRAS has been making checks to ensure the PIC system is not abused. It has detected cases of businesses sharing employees for purpose of claiming PIC cash payouts. It has also rejected many cases where employees were evidently engaged solely for the purpose of making such claims. Such moves by businesses do not contribute to improved productivity, and were never the intention of the PIC scheme.
13. We will spare no efforts to support innovation by SMEs. We will continue to review our schemes to ensure that they are easily accessed by such businesses, no matter how small. But we will also want to make sure that our schemes are not for those seeking to take advantage of government support without really upgrading business methods.
14. Our winners tonight are good examples of entrepreneurship and innovation.
a. Lijay Trading, an incense and candle company, realised they needed to capture a younger customer base in their traditional business segment. They created a range of creative and personalised products such as 'Mandarin Orange', 'Peach' and 'Pineapple' shaped incense targeting younger customers, and grew their sales in the process.
b. Another interesting example is Kwong Seng International which is pioneering innovation in noodles. The company self-develops and manufactures exotic flavours like pumpkin noodles, spinach noodles and wheat grass noodles to create new customer tastes.
The key role role of TACs
15. Trade associations and chambers (TACs) like FMAS play a key role in this journey. TACs as experts in the respective industries will be able to provide an accurate analysis of the needs of the industry’s SMEs and will be important partners in the sectoral tripartite committees (STCs) that will drive our SkillsFuture efforts. Since our announcement of the STC initiative in May, WDA has held over 100 engagement sessions with TACs to get a better understanding of the manpower needs and business challenges faced by companies. SPRING will also work with TACs to match SkillsFuture mentors to SMEs.
16. I would like to end my speech by highlighting another award winner tonight an example of what very small businesses in the so-called ‘old economy’ can achieve. Bee Choo Origin has grown to be one of Singapore’s household names for traditional herbal hair treatment. Mdm Cheah Bee Chew started the business fifteen years ago at home in Pasir Ris, with one steamer. They now have 6 outlets, managed by Mdm Cheah and her son. Plus they now distribute their hair products to more than 10 countries. Bee Choo Origin got to where it is by first going for ISO 9001 to improve its management system, and subsequently tapping SPRING’s Capability Development Grant (CDG) for a project that led to a significant reduction in customers’ waiting time.
17. My heartfelt congratulations to this year’s award winners. May you continue to inspire and show everyone what our heartland enterprise are capable of!