OPENING ADDRESS BY MR LEE YI SHYAN, ACE CHAIRMAN & MINISTER OF STATE FOR TRADE & INDUSTRY AND MANPOWER, AT THE 41st BLUESKY EXCHANGE ON WEDNESDAY, 27 JANUARY 2010 AT 7PM AT MERITUS MANDARIN HOTEL

Ms Olivia Lum, Group CEO and President of Hyflux,

Fellow members and friends of ACE,

Ladies and Gentlemen,

Good Evening,

Let me add my warm welcome to all of you to the 41st Blue Sky gathering. It is always a great pleasure to be amongst entrepreneurs – people filled with energy, passion and dreams.

The Singapore Economy

Last year this time, the world was threatened with the prospect of a deep and long recession. The mood was dark. There was certainly no “blue sky”. To prevent the collapse of the world’s financial system and to avert a deep recession, governments all over the world took unprecedented steps to stimulate their economies.

In Singapore, in response to the crisis, the Government introduced the $20.5-billion Resilience Package and SPUR (Skills Programme for Upgrading and Resilience). Two key objectives were achieved through our stimulus package - to provide liquidity to the financial market and small businesses; and to save jobs. This year, our economy is expecting to grow between 3 to 5 per cent.

Importance of Productivity

Now that we have stabilized the economy, the next course of action as PM has said, would be to increase our competitiveness by raising productivity. In the last 10 years, our economy grew by 5 per cent per annum but our level of productivity on the other hand, grew by around 1 per cent annually. What this meant was that we grew primarily not because we have become more productive, but just that we are getting more workers to do “more of the same". This growth model is clearly unsustainable.

Clearly, we need quality growth – one that is driven by innovation, better product and services, without the proportionate increase in manpower. PM has set the target to raise our productivity to 2-3 per cent per annum so that we can achieve a yearly GDP growth of 3-4 per cent over the next 10 years. Raising our productivity is therefore, both an urgent and long-term task.

Now, how do we raise productivity? At the industry level, industry associations should lead the way by identifying structural improvement which the industry can undertake as a whole. It could be training of workers, shared services, R&D or supply chain improvement. At the company level, there should be greater adoption of technology, business model innovation, process re-engineering, product development and service excellence. SPRING and other government agencies have a number of programmes to co-fund productivity-related initiatives undertaken at both the industry and company levels.

As industry and companies innovate, introduce newer products and more sophisticated service contents, our companies will need more skilled workers. This is why the Government has allocated $650 million to encourage companies to send their employees for training under SPUR (Skills Programme for Upgrading and Resilience). In addition, the Government will be setting up two new Continuing Education and Training (CET) campuses as part of a comprehensive master plan to improve training programme for working adults.

Entrepreneurship and Innovation

We are not alone in emphasizing the need to raise productivity, to build long-term strength. The New York Times columnist Thomas Friedman, recently wrote a piece calling on US President Barack Obama to focus on entrepreneurship and innovation to stimulate the economy. He argued that with more homegrown start-ups and entrepreneurs, there would be a wider pool of ideas and inspirations to draw upon and this in turn, would help to create good jobs that will keep America on the cutting edge. Thomas Friedman suggested mobilizing one million new start-up companies to invent more new products and services that make people more productive, healthier or entertained and with which America can then sell around the world. In his words, “if you want more good jobs, spawn more Steve Jobs”.

To me, Entrepreneurship as a means to job and wealth creation is one paradigm that deserves greater attention. In 2007, 34,000 start-ups in Singapore created some 242,000 jobs. Clearly, the more new start-ups formed every year, the greater the capacity will be for them to create new jobs over time.

Job creation aside, new start-ups will also add to the vibrancy of our economy. Some of them would grow to be large companies some day like Hyflux. If we look at our enterprise pyramid, we will see that of the 160,000 businesses in Singapore, 490 of them have revenues exceeding $100 million, 30 or so with revenues surpassing the billion-dollar mark. Yes, the 500 companies with sales more than S$100 million is constitute only just 0.5 per cent of the enterprises here. But if we could find a way to accelerate their growth, to double the number to 1 per cent, we would have a lot more capacity for jobs creation and wealth generation.

Encouraging start-ups and accelerating growing companies require a nurturing and supportive environment. This is what ACE has dedicated itself to do, in partnership with the public sector and others over the past 6 years. ACE worked tirelessly on improving access to finance, cutting red tape, promoting entrepreneurship culture and helping firms go international.

Going Global

For our firms to grow, they need the regional and world market. For our GDP to grow, we need greater external economic space. In other words, we need to encourage our businesses to internationalize, to be better at doing business overseas.

Thankfully, our companies have become more internationally-savvy compared to 20 years ago. Many are already aware of the need to internationalize and are gearing up for overseas growth. According to one survey, more SMEs have expanded overseas despite the downturn, from 65 per cent in 2008 to 68 per cent in 2009. The same survey also showed that almost half of the SMEs which were actively involved in overseas expansion earned revenue of more than $50 million.

To help companies venture overseas, the Government has put in place many assistance programmes to help strengthen enterprises’ capabilities for overseas expansion. For instance, IE Singapore’s International Partners (iPartners) programme supports SMEs to band together to compete more effectively for overseas projects. By ‘hunting in a pack’, companies can pool their resources and complement their product offerings to achieve economies of scale, reduce time-to-market, and pursue larger-scale projects. An example is the Singapore e-Government Services Alliance (SESA), led by anchor company Crimson Logic, together with Ditium Technologies, Elixir Technology, V3 Teletech and RSTN Consulting, to pursue e-Government projects in the Middle East market.

SMEs can also tap on IE’s International Marketing Activities Programme (iMAP) to join trade associations and chambers on overseas missions and trade fairs, in sectors ranging from furniture, to oil and gas, to seek out business opportunities and collaborations. To strengthen firm-level internationalization capabilities, IE Singapore’s capability development schemes on branding, IP management and manpower development were introduced to help SMEs gear up for overseas ventures.

Conclusion

Moving forward, the Government will be doing more to develop the SME sector. Raising productivity and getting more companies to go global will be our priority. Let us step up our efforts in raising productivity, innovation, process re-engineering and service excellence. Let us see to the births of more start-ups, and help them grow up and strong. Let us go into 2010 and beyond with confidence and strength. Thank you and enjoy the evening.