Mr Lee Yi Shyan at the 21st Annual (2007) Singapore 1000 & Singapore SME 500 Awards

SPEECH BY MR LEE YI SHYAN, MINISTER OF STATE FOR TRADE AND INDUSTRY AT THE 21st ANNUAL (2007) SINGAPORE 1000 & SINGAPORE SME 500 AWARDS, AT THE ISLAND BALLROOM, THE SHANGRI-LA HOTEL SINGAPORE, FRIDAY, 18th JANUARY 2008

Mr Lee Keen Whye, Chairman, DP Information Group,

Ladies and Gentlemen,

Good Evening.

It is my pleasure to join you this evening for the Singapore 1000 and Singapore SME 500 awards ceremony.

Introduction

To say that this event brings together the most influential Singapore’s business community is no exaggeration. Together, the companies in Singapore 1000 and Singapore SME500 generated more than $1 trillion in combined revenue. Their contribution to the Singapore economy is multi-faceted and evident.

8 years ago in 1999 when the first list was compiled, the combined revenue of all Singapore 1000 companies was merely $462 billion. Last year, the combined revenue tripled to $1.29 trillion. Over the last decade, the composition of our top 1000 companies have also diversified in tandem with global market demand. Today, we are seeing more companies from the wholesale, manufacturing, and the logistics sectors. Of the list, 50% of the companies are new joiners to the top 1000 list over the last five years.

The SME 500 companies too have been growing at a healthy and encouraging rate. Their profits have increased more than 9 fold from $70.3 million in 1999 to $665.5 million last year. It is heartening to note that 34 of our SME 500 winners have graduated to the Singapore 1000 list at the last awards.

The continual churn of our top enterprises and SMEs reflect the dynamics of the changing economic landscape. It also raises the question of what does it take to stay at the top over a sustained period. While our enterprises strategies for the future and compete by re-inventing themselves, the Government is continually thinking of ways to sharpen our economic competitiveness and enhance our business environment so that enterprises shall thrive.

Focusing on building up long-term strengths, our enterprise development efforts focus on three main thrusts. These are:

a. Creating a pro-enterprise environment

b. Adding to R&D depths

c. Capability building of enterprises.

Let me elaborate.

Creating a pro-enterprise environment

For the longest time, we have recognized that a pro-enterprise environment is a source of national competitiveness. And yet we know that the competitiveness gap can be narrowed by competition that emulates our policies. The job of upgrading even the best business environment is therefore an unending task.

In this regard, we will continue to invest extensively in our infrastructure to improve the logistical network of our businesses. Our investments in industrial estates, ports and airports have given both large and small enterprises access to excellent connectivity. Our building of more MRT routes and the various measures aiming at creating free-flowing roads are also part of effort to prevent efficiency and productivity loss. Congested roads and fast moving business do not go hand in hand.

Besides physical and hard infrastructure, we are also fine-tuning our soft-infrastructure such as our tax regime. The Government announced last year that the corporate tax rate will be reduced by two percentage points to 18% to keep up with the declining global corporate tax rates. In addition, we will also be increasing the corporate tax exemption threshold from $100,000 to $300,000 this year to encourage start-up formation.

We also appreciate that challenges faced by small enterprises are different from large enterprises. To render Singapore’s attractiveness for business formation and growth, we have set up The Pro-Enterprise Panel (PEP) to cut red tape. Heading by the Head of Civil Service, and staffed by private- and public sector representatives, the PEP has attracted many feedback and suggestions from the business community to simplify government regulations and reduce unnecessary compliance cost. Since its formation in 2000, the Panel has implemented over 800 suggestions, or more than half the suggestions received.

To ensure that we are in tune with the private sector thinking, our government departments regularly invite the private sector to give their views and suggestions. One such collaboration is the Action Community for Entrepreneurship, or ACE for short. This is a public-private partnership that drives entrepreneurship movement in Singapore. Through its 4 action crucibles, ACE seeks to contribute to the entrepreneurship scene by (a) building a strong entrepreneurship culture in business and schools (b) addressing the financing gaps in funding (c) mentoring young enterprises for growth and international expansions and (d) further simplifying rules and regulations in Singapore.

Taking the whole-of-government approach to economic competitiveness, our efforts in creating a pro-enterprise environment have paid off. Singapore’s top position in the World Bank’s 2007 ranking of 175 economies for the “ease of doing business” is testament that we are moving in the right direction.

In addition, Singapore is also ranked the world’s second freest economy according to the Index of Economic Freedom by The Heritage Foundation, and the second most competitive economy in the IMD World Competitiveness Yearbook last year.

Adding R&D depths

At a per capita of US$33,700, Singapore can no longer compete on cost. Our ability to apply knowledge, to integrate inter-disciplinary knowhow, to innovate and create our own intellectual properties will be the key determinant of our future competitiveness. It is with this in mind that we have been actively promoting R&D activities to drive Singapore’s transformation into an innovation-driven and knowledge-based economy.

Under the Science and Technology Plan 2010, the Government has set aside $7.5 billion to invest, attract and encourage R&D in Singapore. The Government also targets to achieve a national R&D spending of 3% of GDP by 2010.

Based on Singapore’s latest national survey of R&D, private sector R&D spending increased by 9% to $3.3 billion in 2006. National R&D spending has also increased from $4.58 billion to slightly over $5 billion, which is about 2.4% of GDP.

We will continue to attract global R&D and innovation centers to set up their headquarters in Singapore. Besides infrastructure such as the Bio polis and Fusion polis to house A*STAR’s Research Institutes (RIs), we are reinforcing our foundation on focused research to help support our industry clusters. This is coupled with a rigorous policy of attracting and training a core group of research scientists who are working on collaborative flagship projects with the industry.

Capability building of our enterprise

Third, we will continue our concerted efforts to develop the capabilities of our enterprises, in particular our SMEs.

SMEs form an important pillar of our economy. SMEs comprise of 99% of establishments in Singapore, employ 62% of our workforce and contribute 46% of our GDP. They form a broad base from which new business models and innovative ideas sprout, and tomorrow’s multinationals emerge.

SPRING Singapore, the champion agency for SMEs, has grouped their programme framework under 4 headings: money, management, capabilities and markets. This framework builds on the pro-enterprise environment that we have built up over the years.

Money

Access to financing is always a key concern for start-ups and SMEs. The Government has worked with the financial institutions to catalyze new financing solutions and evolve a spectrum of financing products that start-ups and SMEs can tap on.

Schemes such as Start-up Enterprise Development Scheme (SEEDS), Business Angel Scheme (BAS) and the Growth Financing Programme (GFP) provide equity financing for start-ups from the seed to expansion stage. SMEs can also tap on the Local Enterprise Financing Scheme (LEFS) for fixed rate loans, as well as the Internationalization Finance Scheme (IFS) for financing overseas investments. Last year, these financing schemes had assisted more than 4,000 enterprises.

Our agencies’ efforts are yielding good results. Banks have been independently pushing SME products in the past few years. Many banks now have relationship managers specifically to handle SME accounts.

In addition to traditional products such as trade financing, hire purchase and property financing, banks are now also offering credit cards, cash management services, investment banking facilities as well as unsecured loans for SMEs. There are more financing products customized for SMEs’ needs than anytime in the past.

Management

To grow to the next league, SMEs need strong and qualified leaders. Under the newly-launched Management Development Programme, SPRING is partnering SMU, NUS and NTU to develop post-graduate and executive development courses that are customized for the CXOs of SMEs. These courses aim to upgrade the business management and leadership expertise of SME leadership, enabling them to acquire the latest know-how the chart the strategies for their companies.

Capabilities

Apart from management training for the individuals, there are comprehensive programmes helping enterprises or the entire industry to upgrade.

At the enterprise level, we have programmes, such as the Technology Innovation Programme (TIP) and the Capability Development Programme (CDP) that SMEs can tap on to upgrade in the areas of innovation and technical capabilities, and offer higher-value added activities.

At the industry level, through the Local Enterprise Association and Development (LEAD) Programme, SPRING works with 16 industry associations, including the Association of Singapore Marine Industries, Singapore Food Manufacturers' Association (SFMA) and the Singapore Furniture Industries Council (SFIC), to implement industry-specific programmes and build collective competencies.

Markets

Beyond capacity and capability building, SMEs need to venture overseas for sustainable growth. To help them in their internationalization efforts, the Government offers a comprehensive suite of assistance, ranging from loans to trade missions.

At the home front, IE Singapore has a suite of programmes and services to help Singapore companies internationalize, such as the iAdvisory, the International Business Fellowship Programme and iPartners. An average of over 30,000 companies have been assisted through IE's broad-based services and about 50% of these companies are SMEs.

The iAdvisory and International Business Fellowship Programme aim to develop the capabilities of our companies by tapping into the knowledge and expertise of a talent pool of international experts.

In addition, through the iPartners programme, we encourage Singapore-based companies to band together when venturing abroad. To date, 29 iPartners consortiums comprising 150 companies are expected to generate almost $3 billion in combined overseas sales by 2011.

We also have a network of 11 free trade agreements (FTAs) and 14 mutual recognition agreements (MRAs) to help our enterprises serve other markets.

Conclusion

While we celebrate the achievements of our corporations this evening, we are constantly reminded of the volatility and turbulence of the globalized economy. The current unwinding of the US sub-prime market, high energy prices, the prospect of a US recession etc. makes our business projections of the immediate quarters much harder but this should not cloud our vision of what we want to go and where we want to be.

In fact, our single-mindedness in building long-term strengths, achieving sustainable growth, our investments in our infrastructure, in our capacity to innovate and generate intellectual properties we can own should help us ride through the near term ups and downs and secure a long term future. Focusing on the long term positions will give us the confidence to sail through any near term storms.

On this note, I would like to add my heartiest congratulations to all the award recipients for their sterling performance and leadership in their respective sectors. I wish you many more successes in 2008 and beyond.