Opening Remarks by Mrs Lim Hwee Hua, Minister of State for Finance and Transport At The 3rd SME Credit Bureau Conference, 13 April 2007

Mr Kevin Koo
Executive Chairman, Dun & Bradstreet Singapore

Mr Lawrence Leow
President, Association of Small and Medium Enterprises

Ladies and Gentlemen

1. It is my privilege to join you this morning for the 3rd SME Credit Bureau Conference. The conference's focus on the Challenges and Opportunities of Globalization is an increasing area of interest -- and concern -- for SMEs.

2. The SME community is a key pillar of Singapore's economy. It contributes 42% of our GDP, and employs more than half of our workforce. SMEs are generally doing well. As a group, the top 500 SMEs here have increased total turnover by 30% to $13.5 billion and almost doubled net profits to $630 million over the past 5 years.

3. SMEs face strong challenges however, in the context of an increasingly globalised economy. While the rapid growth of trade links and the increase in global financial integration have provided greater opportunities, this has also widened the field of competition for all businesses. To stay competitive, SMEs have to keep up with innovation and technology changes; they also have to develop capabilities to expand into overseas markets.

4. The government's strategy is to leverage on globalization by positioning Singapore as a Global SME and Entrepreneurship Hub. Our aim is to develop a pro-business environment where enterprises can succeed in 3 key areas: namely, Launch and develop their business operations seamlessly; Upgrade their capabilities and business innovation levels; and Expand their operations beyond Singapore.

Launch and Develop Business Operations Seamlessly

5. To better enable SMEs to launch and grow their business in Singapore, the Government has adopted several pro-enterprise initiatives. These include: improving access to financing for SMEs; creating a business-friendly tax regime; tapping on business ideas from abroad; and providing broad support for businesses. I will elaborate on each in turn.

6. Many SMEs face challenges in raising capital for growth. To improve access to financing for SMEs, the Government has established various schemes; and will continue to explore other financing options. In 2005 for example, we initiated SME Access Loan, a securitized loan scheme that has to-date generated $100 million of loans for some 400 SMEs. In 2006, the Government worked with the Action Community for Entrepreneurship (ACE) to set up the first private equity trading platform (OTC Capital) to allow high-growth potential SMEs to raise capital in a relatively cost-efficient manner.

7. We have also enhanced our tax regime in response to feedback from SMEs to cater for their needs. Apart from lowering our corporate income tax rate to 18% from Year of Assessment 2008, we have increased the current partial tax exemption threshold for companies from $100,000 to $300,000. Start-ups can also continue to enjoy full tax exemption on the first $100,000 of their chargeable income in the first 3 years of operation. All these moves will make Singapore one of the most competitive locations in the world for SMEs and start-ups.

8. To further stimulate the local business environment, we welcome innovative business models and ideas from abroad. The EntrePass Scheme, which has been in place since 2004, enables global entrepreneurs and innovators to come to Singapore to start their business ventures.

9. To support SMEs' growth at various stages of development, we launched the EnterpriseOne initiative in 2006. EnterpriseOne provides SMEs with business information and advice in areas such as marketing and capability development. It comprises a web portal supported by telephone hotline and a network of Enterprise Development Centres (EDCs). The web portal attracts about 37,000 unique visitors per month, and the EDCs assist about 900 SMEs per month.

Upgrade SME's Capabilities and Levels of Business Innovation

10. To stay competitive in a globalized economy, it is also crucial for SMEs to keep pace with advances in technology and ideas. This brings me to the second key area of SME development in Singapore ? which is the need to upgrade SMEs' capabilities and levels of business innovation.

11. SPRING has established many programmes to develop the capabilities and raise the innovation levels of SMEs. For example, under the Local Enterprise Association Development (LEAD) programme, the Government together with 14 industry associations have committed over $65 million for industry capability development projects. Other recent initiatives are the $35 million Capability Development Programme (CDP) that supports SME-upgrading projects in specific sectors; and the $150 million Technology Innovation Programme (TIP) that aims to enhance the technology infrastructure support for product and process innovations in SMEs.

Expanding into New Markets

12. An SME with a good business model and value proposition to offer has a good chance to thrive in larger markets. The third key area for SME development is hence to encourage more SMEs to expand beyond the limited domestic market. According to the 2006 SME Development Survey report by DP Information Group, the percentage of respondents who had revenues originating from outside Singapore fell from 69% in 2005, to 59% in 2006. This is not a good sign. There remains significant potential for SMEs to expand their businesses overseas.

13. SMEs continue to face obstacles in internationalizing. Some of the top challenges cited by respondents to the 2006 SME Development Survey include: the presence of strong overseas competition; a lack of overseas business knowledge and contacts; and a lack of external funds and manpower for overseas expansion.

14. In recent years, the Government has been aggressively expanding our reach into new markets, helping our SMEs to open many doors. Apart from our extensive network of bilateral Free Trade Agreements (FTAs) and strong links within ASEAN, we have established inroads to other high growth markets. With China, for instance, plans are underway to further expand our bilateral trade and economic ties under the Joint Council for Bilateral Cooperation (JCBC), which was established in 2005. To encourage more SMEs to tap on these linkages, we set up the China-Singapore Economic and Trade Cooperation website to provide commercial information.

15. With India, we have in place a Comprehensive Economic Cooperation Agreement (CECA). Eubiq - a local manufacturer of plastic plugs and power supply systems - is a beneficiary of the agreement. Since December 2005, Eubiq has been exporting its products to India under CECA's preferential tariff rates and has seen its export sales to India increase by 15% from 2005-2006. Besides China and India, our links to the Middle East are also increasing through high level engagements and trade missions.

16. The Government has also rolled out various programmes and made available resources to promote internationalization. For example, IE Singapore's network of overseas centres is a key source of market intelligence for businesses planning to expand abroad. IE's Internationalization Roadmapping Programme (IRP) also helps Singapore-based companies develop a long term internationalization strategy.

Role of the Private Sector

17. I have outlined some of the Government's programmes to help SMEs in Singapore launch, upgrade and expand their business; but I must emphasize that these efforts are meant to complement and catalyze private sector initiatives.

18. In this regard, I am glad to know that private sector involvement in supporting SME growth is i ncreasing; this is a positive sign. I will highlight three areas that complement the Government's efforts.

19. First, on improving SMEs' access to Financing - more financial institutions and banks are offering financial instruments, such as installment loans and revolving credit lines, to cater to SMEs. Several banks have also been organising regular seminars to educate SMEs in financial management. SPRING has recently collaborated with the Association of Banks (ABS) and the financial community to develop a practical financial advisory guide for SMEs. I encourage more SMEs to tap on private sector financing for their growth.

20. Second, on Developing Technology Infrastructure to support SMEs - more industry associations and technology service providers are partnering the Government and research institutes in innovation technology research; this is taking place under SPRING's Technology Innovation Programme (TIP). A*STAR has also recently announced increased linkages between the research institutes and the industries. We hope to see further strengthening of technology collaboration between SMEs and large Singapore-based companies, as well as increased commercialization of upstream R&D by SMEs.

21. Third, on Expanding into New Markets - the 2006 SME Development Survey showed that majority of SMEs preferred to seek advice from business associates when expanding overseas. In this regard, SMEs should take advantage of Government resources, such as IE Singapore's International Partners' programme, to form international alliances with other Singapore-based companies. Such partnerships can achieve economies of scale and maximize chances of success for the SMEs in overseas markets.

22. We welcome and encourage more of such collaboration and resource-sharing within the private sector. The SME Credit Bureau for instance, jointly operated by Infocredit D&B and ASME, and supported by SPRING, is a prime example of how strategic partnerships can benefit SMEs. Since its inception in 2004, the Credit Bureau has contributed directly to the improvement of credit standing and information transparency within the local SME sector.

Conclusion

23. To conclude, I am confident that we are on the right path towards enabling SMEs to not only cope with globalization and its challenges, but also to ride on its opportunities. As we continue to enhance Singapore's pro-business environment, and as the local business eco-system continues to evolve, more SMEs in Singapore, both local and foreign, will be able to successfully plug into and benefit from the global economy.

24. I am sure today's conference speakers will be able to provide greater insight and advice on how businesses can better navigate and benefit from globalization. I wish you a fruitful discussion and a successful conference.

Thank you.