Opening Speech by Mr Lee Yi Shyan, Minister of State for Trade & Industry and MANPOWER, at the official launch of the EXPORTER DEVELOPMENT PROGRAMME, on 28 May 2009, 9 am at HYATT HOTEL GRAND BALLROOM, SINGAPORE.
Distinguished Guests,
Ladies and Gentlemen,
Good morning.
I am pleased to join you today at this annual Exporters’ Seminar organized by International Enterprise (IE) Singapore.
Exports and the Singapore Economy
The backdrop against which this year’s seminar is being held is markedly different from last year's. A year ago, whilst we were experiencing a slowdown in our exports, nothing was to prepare us for the rapid slide in our exports in the fourth quarter of last year and the first quarter of this year, when we experienced dips of about 27%[1] in our exports. The global landscape for exports remains stark. The World Trade Organization projects that the world’s overall exports will fall by an average of 9% in volume this year. The contraction will be particularly severe in developed countries, at about 10%, while developing countries will see exports shrink by about 2 to 3%[2].
Trade is the cornerstone of Singapore’s economy. Singapore has the world's highest trade to gross domestic product (GDP) ratio, with imports and exports amounting to 3.5 times its GDP[3]. With the close links between Singapore’s economy and the rest of the world, this also means that we will be more deeply affected when global markets fail.
With the current economic downturn and a weak global outlook for 2009, Singapore’s trade forecast for this year has also been revised downwards to contract by 22 to 25 per cent[4].
Our exporters need to be well-prepared to weather this downturn by remaining competitive and relevant to the demands of the global economy.
Challenges and Opportunities for SME exporters
Challenges
The drastic drop in global demand, liquidity crunch and the threat of protectionism are all challenges our SME exporters have to contend with in the face of one of the deepest recessions in history. With SMEs contributing 42% of our GDP while employing more than half the workforce, Singapore’s economic well-being is thus closely tied to the health of our SMEs.
The WTO World Trade 2008 Report[5] highlighted the growing stipulations by developed economies to buy local-made produce, hikes in import tariffs and restrictions in order to placate domestic industries and workers under economic pressure.
For Singapore, we cannot adopt such measures. We have always expounded ourselves as free traders, and we have thrived from being a free and open economy. We will need to continue working actively with like-minded countries to encourage them to keep their economies open to global trade. Singapore exporters can be assured that the Government will continue to work towards unfettered market access overseas through a commitment to international trade rules and regulations.
Overseas Opportunities
Our close engagement with neighboring Asian economies is a bright spot amidst the current uncertainty for Singapore exporters. Analysts expect markets such as China, India, Vietnam and Indonesia to continue to grow by 4%[6] or more this year. Singapore enjoys good economic relations with these Asian economies. We were China’s third largest foreign investor as of last year; India is our fastest growing trade partner among the major economies while our total trade with Vietnam has tripled in the past decade.[7]
Based on the 2008 SME Development Survey, the top export markets of Singapore SMEs are all in Asia - namely Malaysia, China, Indonesia, Thailand, Vietnam and India. In fact, in the past three years, SME exports have grown the fastest in China (26%), India (16%) and Vietnam (13%)[8].
The stimulus packages by Asian economies will help boost domestic demand, hence creating more supply opportunities for Singapore exporters. These packages include government spending on investments and infrastructure, taxation reduction and industry upgrading. Singapore exporters can in turn benefit from the influx of trade openings arising from these packages.
While traditional channels of revenue are presenting lower yields, the economic downturn has nonetheless opened up opportunities in other areas. Consider food consumption patterns for instance. Consumers are eating out less, and cooking more at home; while retailers are increasing shelf space for private labels, or house brands which are generally more affordable.
Food exporters who are quick to recognize the shift can seize the opportunity to gain a foothold in markets which they have previously found difficult to address, or to enter mainstream consumer markets. For example, the recent food safety scare in China has created an opportunity to push Singapore's trustworthiness in quality and safety to the forefront of the food industry.
Reinvention and Innovation to Seize Opportunities
It is heartening to know that there are companies who have managed to reinvent and innovate themselves despite the downturn, as a means to deal with the economic crisis. I would like to highlight two such examples:
Meng Chong Foodstuffs Pte Ltd
Meng Chong Foodstuffs is in the business of manufacturing preserved fruits. About 80% of the company's sales come from overseas markets in Malaysia, Indonesia, South Africa, and Australia. Despite a 30% drop in demand since last year, Meng Chong has managed to maintain its overseas sales revenue with its strategy of diversifying their customer base across different markets. This enables them to lower their risk exposure and be better positioned to weather the downturn.
Koki Singapore Pte Ltd
Koki Singapore Pte Ltd was established in July 1993 and has been representing Koki Japan for sales and service of the full product range of soldering machines, spare parts and accessories. About 99% of their sales come from overseas markets such as Thailand, Malaysia, Indonesia, Vietnam, India and China.
In 2006, Koki launched its own brand of Automatic Optical Inspection (AOI) Machine: I-Systems AOI. The intelligent I Systems AOI machine is designed to meet the most stringent demands of today's Surface Mount Technology (SMT) environment. It is also the fastest line scan optical inspection in the market with added features, which help give it a competitive edge.
During this downturn, Koki has taken several proactive steps such as implementing cost-cutting measures, taking up SME loans, rebranding the company and its products, as well as stepping up R&D activities.
Though sales have been declining, Koki is expecting market activities to improve by the end of this year or early next year.
The Exporter Development Programme
I urge SMEs to ready themselves to take on the challenges presented by the economic crisis. The Government has introduced a slew of measures to help companies cope with the downturn, including support to develop firm-level capabilities which are essential for sustainable long-term growth.
Today, I am pleased to share a new initiative by IE Singapore, the Exporter Development Programme, which is designed to nurture SME exporters. The are three components to the Exporter Development Programme – export learning, export coaching, and an overseas market visit – are designed to be a sustained and systematic approach to exporting. It is targeted at promising SME exporters with limited exporting experience, those seeking to enter new markets, or those wanting to review their overall export strategy. An initial fund of S$6 million dollars has been set aside to groom SMEs to become more competent exporters under this Programme.
The Exporter Development Programme advocates a 3-step approach: First, Learn the fundamentals of exporting through a customized export curriculum. Second, Strategies your export business with the help of an export coach who will provide one-on-one mentoring. As the German thinker Goethe once said: “Knowing is not enough, we must apply. Willing is not enough, we must do.” Therefore, the third step is to Apply your newly acquired knowledge and skills, and this is possible through an overseas market visit, which is a key component of the programme.
The Exporter Development Programme requires commitment, as well as investment in time and money from participants. Nevertheless, in learning how to undertake exporting in a sustained and systematic way, companies will be building the necessary foundation to enable them to grow into global companies through exporting.
I am happy to note that a pilot batch of exporters has graduated from the Exporter Development Programme. They comprise not just new exporters in their first foray overseas, but also companies who have been exporting for some time and who are re-looking their export strategy and exploring new markets. We look forward to hearing more from them on their experience and takeaways from the programme.
Recognizing Trade Associations and Chambers (TACs) as partners
In our outreach to SMEs, we recognize the importance of partnering closely with our trade and industry associations, and business chambers. This is especially pertinent for the Exporter Development Programme since the majority of association and chamber members are already involved in export activities.
At this juncture, I would like to commend the many trade associations and chambers for coming onboard and partnering IE Singapore to promote the Exporter Development Programme to their members. With their involvement, we hope the programme will benefit more than a thousand SME exporters over the next three years. We look forward to more trade associations and chambers joining us on this programme.
Conclusion
I would like to strongly encourage our SMEs to enhance their export competency and aggressively pursue new markets amidst this difficult economic climate. Build your competencies so that you are ready to capture new opportunities when the upturn comes. On the Government’s part, we will support you with the relevant assistance programmes, equip you with the latest in-market knowledge and facilitate a conducive business environment to help you ride on the wave of economic recovery.
Thank you.
[1] Source: IE Singapore, figure is based on year-on-year growth, as at Q1 2009.
[2] Source: WTO
[3] Source: IE Singapore
[4] Source: IE Singapore, Singapore External Trade March 2009 – announced on 14 Apr 09
[5] Source: WTO, 24 March 2009
[6]Source: Consensus Economics
[7]Source: www.singstats.gov.sg
[8] Source: SME Development Survey 2008 – DP Information Group