SPEECH BY MR LEE YI SHYAN, MINISTER OF STATE, MINISTRY OF TRADE & INDUSTRY AT THE ENTERPRISE 50 AWARDS GALA DINNER @ RAFFLES CITY CONVENTION CENTRE ON 3RD NOVEMBER 2006 AT 7.10 PM

Mr Seah Chin Siong,

Country Managing Director, Accenture

Mr Alvin Tay,

Editor, The Business Times

E50 Alumni and Entrepreneurs,

Distinguished Guests

Ladies and gentlemen

Opening Remarks

Good Evening. I am delighted to join all of you this evening for this year’s Enterprise 50, or E50 Awards Gala Dinner.

Each year, the E50 Awards identify the best amongst our local enterprises and brings them together, taking a little time out of their busy schedules, to recognize and celebrate their successes.

Together, the companies in this year’s list of E50 Awardees employ about 7,900 employees and in the past year, have S$2.5 billion in revenue.

This is a considerable achievement and each of you are significant contributors to the Singapore economy, playing a significant role in the future of Singapore’s economy.

SME Development Survey

Running a successful enterprise is not easy, to say the least. You need to maintain a positive cash flow, to find new markets and customers, to think of product development, to think about developing staff and empowering them. As owner and CEO, you need to look into the future, worry about competition, and build your team and organization.

Entrepreneurs are not only people with vision and passion, but they are also those who have the multiple skills needed to execute and to succeed.

Tonight, I would like to share with you some findings from this year’s SME Development Survey carried out by DP Information Group.

Manpower

In this year’s survey, 37% of SMEs singled out Manpower Issues as one of the top challenges to growth, a significant increase from 28% last year. This makes Manpower Issues now the second biggest challenge faced by SMEs.

Successful talent attraction, development and retention have always been key to the successful growth of a business. However for many employees today, to work for an SME still remains a second choice to working for an MNC or GLC.

To help SMEs address their manpower issues, we have in place today a number of grant and incentive schemes. The Skills Development Fund (SDF) provides funding for a number of training programmes for SMEs to upgrade the skills of their employees, equipping them with the necessary capabilities to grow your business.

For example, the Training Assistance Scheme (TAS) and SME Upgrading for Performance (SUPER) Scheme both provide grants to support general training and development needs.

To help SMEs develop talent for their overseas manpower requirements, IE Singapore has in place programmes such as the Asian Business Fellowship (ABF) and the Overseas Manpower Programme (OMP) to support SMEs in sending their staff overseas for in-market training to develop a pool of talent with in-depth knowledge of their business environment.

Strengthening IP

The top concern of SMEs in the SME Development Survey remains Competition which was nominated by 45% of respondents, down from 52% last year.

Singapore has traditionally competed on our costs efficiency and productivity. However the times when Singapore was an emerging economy are past. Local SMEs are now finding it increasingly difficult to compete based on costs alone. Many of our neighboring countries, with inherently lower labor and infrastructure costs, are in a better position to use cost advantage as their competitive edge.

SMEs therefore need to differentiate themselves from competition. They cannot compete in the “red ocean”, because competition is cut-throat and margin is razor-thin. They need to create new business models, products and services. They need to create their own intellectual properties and proprietary process or know-how. Our companies must compete with knowledge not labor input. They must compete in the blue ocean.

Example: Online Game Model.

Overseas Growth

Next, I would like to talk about overseas markets, and how our firms can seize the opportunities and grow with them.

The SME Development Survey has also noted that while Middle East and India are growth markets, Malaysia, Indonesia and China remain the markets of choice for overseas expansion. Of the companies surveyed with overseas operations, 64% have a presence in Malaysia, 51% in Indonesia and 41% in China.

However, there is a growing number of SMEs who are looking at opportunities in the emerging markets of India and the Middle East. According to the survey findings, 32% of SMEs with overseas operations intend to explore the India market during the next 12 months. The next choice is the Middle East, which is the target of 27% of SMEs, followed by Vietnam with 25%.

There are a few ways that SMEs should consider to help ease their entry into overseas markets.

One way is for SMEs to leverage on Singapore’s network of Free Trade Agreements (FTA). To date, we have concluded 10 FTAs with ASEAN (AFTA), New Zealand (ANZSCEP), the European Free Trade Association (ESFTA), Japan (JSEPA), Australia (SAFTA), the United States (USSFTA), India (CECA), Jordan (SJFTA) and South Korea (KSFTA). We are also currently negotiating bilateral FTAs with Kuwait, Qatar and Pakistan.

87% of the SMEs surveyed were aware of Free Trade Agreements, but most of them did not feel that they fully understood the benefits to them and only 11% had actually taken advantage of FTAs.

To help these businesses, IE will continue to work through multipliers such as industry associations and chambers, law or accounting firms to pass on valuable FTA skills to the SMEs.

Another way SMEs can ease their entry into new markets is to adopt a consortium approach for overseas expansion. This will allow SMEs to piggy-back on each other’s strength and knowledge to penetrate overseas markets, overcoming their size limitations, strong overseas competitions and lack of overseas business contacts.

Concluding Remarks

I wanted to just briefly share with you some of the highlights of the 2006 SME Development Survey, namely on three areas - on talent development, on the need for differentiation and on overseas expansion. And I hope this has provided you with some food for thought.

On this note, I would like to extend my congratulations to the 50 Awardees tonight and wish all of you much continued success.

Thank you and have an enjoyable evening.