1. With your permission, Madam Chairperson, I have asked the Clerk to place booklets detailing our SME schemes on the Members’ seats. May I also have your permission to display some slides on the LED screens.

2. Several Members have spoken about SMEs and how restructuring has affected them. I thank them for their comments and suggestions.

3. We started on this journey of restructuring a few years ago with the aim of achieving a productive, competitive and vibrant SME sector.

4. However, this is not an easy journey. Anecdotally, I know that restructuring has been painful for some businesses. A clothing retailer told me that high rental costs have forced him to move to a smaller office, but his profit margin is still shrinking with the increases in foreign worker levies. Another SME in the precision engineering sector is relocating part of its business to Thailand and Iskandar Malaysia due to the rising costs here. 

5. Having said that, I also note that the SME sector has continued to grow at a relatively steady pace, with a net formation of about 14,000 new SMEs each year from 2010 to 2012.

6. Easing up on restructuring would not help our businesses in the long run. What we want to do is to strengthen, not weaken them. As our domestic economy continues to mature, our cost base will increase accordingly.  At the same time, our competitors will not stop innovating and moving up the value chain. If we continue with a “business-as-usual” mindset, we will be overtaken by our competitors. And they are not just another country or another city but within the industry and amongst SMEs. This will erode the competitive advantage that we have worked so hard to build. Change is never easy but it is necessary.

7. Most of the SMEs that I have spoken to understand this, and they have already started to restructure, or trying to figure out what they need to do to restructure. Surveys[1] have shown that more SMEs are measuring their productivity improvements. Many have taken up the various Government schemes. Mr Teo Siong Seng will be glad to know that most of these are available to all SMEs, including micro-enterprises, even those below 3 employees.

8. For example, more companies have made PIC claims. There were 45,000 PIC claimants in 2012, a 25% increase from 2011. More than three-quarters of these claimants were small and micro-enterprises.

9. Contrary to feedback that the PIC scheme is only meant for larger companies, micro-enterprises qualify for the tax deduction. Only the cash payout option requires businesses to have at least 3 local employees. Over 16,000 micro-enterprises have claimed for the PIC. In fact, micro-enterprises have shown the greatest rate of increase amongst PIC claimants, increasing by over 40% since 2011.

10. Let me also address Mr Teo’s questions in Mandarin.

11. 小商家，尤其是微小企业，对我们来说何其重要。张先生说，它们是我们文化的一部分，我同意他的看法。这些微小企业，很多是老字号。它们不仅在经济上为国家作出贡献，也是我们生活的一部分。因此，我们需要帮助这些微小企业和小商家，带领并鼓励它们求新、求变、求存。最好的协助就是引导它们。我们有许多生产力配套和援助计划，因此我们会给予微小企业适当的引导，帮助它们得到所需的资讯及了解现有的援助配套。微小企业本身也要下定决心，作出改变。有斗志，才有生存的机会，茁壮成长成为更强壮的中小企业。

12. Mr Teo Siong Seng has spoken of a SME co-ordinating agency. As the SME sector is diverse it is not easy for one agency to look after all SME issues. I can assure you that there is close collaboration between government agencies to understand SME issues and develop solutions to help the sector. We have also set up the SME Workgroup, which looks at the strategic measures and initiatives. SPRING, as an agency is always on the day-to-day basis to help the SMEs.

13. The SME Workgroup was set up last September, where we consolidate our efforts to reach out to and help our SMEs, gather more feedback from businesses, and provide recommendations to the various ministries on the SME assistance strategies and schemes that can be implemented. The Workgroup comprises industry leaders from trade associations and chambers, relevant government agencies, as well as several Members who are present here today. Mr Zaqy Mohamed and Mr Vikram Nair have asked for an update on the progress of the Workgroup.

14. The Workgroup and our partners such as the SME Centres and Trade Associations and Chambers have been actively reaching out to the businesses in their neighbourhoods. Over the last six months, we have reached out to more than 7,500 SMEs. I would like to thank all the Workgroup members and our partners for their hard work.

15. At the outreach sessions, SMEs have asked questions about various Government schemes. Most are technical questions which can be answered easily, such as queries about the application process for the Innovation and Capability Voucher, (ICV), or questions about the types of investments that are claimable under the PIC scheme. For cases which require more detailed advice, the Advisors have linked the businesses up with the SME Centres.

16. The Advisors have also received feedback that SMEs are hoping for more assistance to cope with restructuring. The Workgroup has consolidated the feedback, developed recommendations and shared them with the relevant Government agencies. Some of the recommendations have been adopted in this year’s Budget.

17. As DPM Tharman announced in his Budget speech, the PIC scheme will be extended for another 3 years up to 2018. He also introduced the PIC-plus (PIC+) scheme for SMEs, which raises the PIC expenditure cap by 50%, or up to $600,000, for each of the 6 qualifying activities.

18. We will continue to engage SMEs through the Workgroup to understand their concerns and needs. We will also keep close tabs on industry feedback, and calibrate the pace of restructuring to better support SMEs. The workgroup is a long-term committee. Its work does not stop with its recent recommendations. It will continue to engage and provide recommendations to the different agencies.

19. Let me now address Ms Tin Pei Ling and Mr Heng Chee How’s questions in Mandarin:

20. 议员陈佩玲和黄志豪询问，政府要如何帮助那些不知道从何着手、或使用政府援助计划来提高生产力的中小企业。

21. 首先，标新局和中小企业中心在举办活动时，以多种语言为中小企业进行讲解，包括英语、华语和马来语；所有宣传册子和资料也有多语言的版本。

22. 在这方面，我们也同各商会和中小企业中心密切合作，以扩大政府和中小企业的接触和联系面。我们至今共设立了11间中小企业中心，包括设在5个社区发展理事会的附属中小企业中心。

23. 目前，我们的中小企业中心有约60名商业顾问。他们为中小企业提供政府援助计划的相关信息，以及商业咨询服务。此外，商业顾问也主动上门到中小企业的公司或办事处，观察和了解个别企业的经营模式，才能依据个别情况提出改善的建议。这些商业也主动到社区的邻里商店和微型企业，为它们介绍政府的配套和援助计划，好让它们也能受惠。

24. 去年，中小企业中心共协助了超过2万家中小企业，这个数目比2012年增加百分之25。

25. 与此同时，我们也作出改进，让企业更容易使用政府的援助计划。去年，标新局将“能力发展津贴”的申请表格从原本的十一页，减少至两页。下个月，标新局将推出新的网站，进一步简化申请程序。中小企业日后可以上网申请津贴，整个过程更简单、快捷、便利。

26. 在座各位手上的这本小册子，里头重点介绍了中小企业在业务发展的各个阶段中，所需要并能够使用的援助计划。我们也计划通过商会和中小企业中心等多个管道，将册子分送给所有中小企业。

27. Mr Inderjit Singh and Mr Zaqy Mohamed have asked what the Government could do to help SMEs find suitable workers and cope with rising manpower costs, given our tight labour market.

28. Last year, we launched the SME Talent Programme to attract more young talents to work in SMEs. SPRING and its partner trade associations match students from polytechnics and ITEs with SMEs, and encourage SMEs to develop exciting career paths for them. Over the last few months, we have made close to 100 successful matches.

29. The Government has also been encouraging businesses to enhance their processes and adopt technology to optimise their manpower. We have adopted the suggestions by the SME Committee and SME Workgroup to enhance the ICV scheme beyond procuring consultancy services. Each SME can now use 2 ICV vouchers, out of their maximum of 8 vouchers, to implement solutions. These two vouchers can be used to purchase equipment, implement software applications without going through consultancy services. Business process change is also included if they serve the purpose of increasing productivity. SPRING will also be working with intermediaries to package these solutions for quick adoption and implementation by smaller enterprises.

30. Mr Zaqy Mohamad and Ms Foo Mee Har have asked about what the Government is doing to help businesses cope with rising land and space costs.

31. Singapore is land scarce and our land prices and rents reflect this. The retail rental index published by URA has grown at an average of 1.1% per annum over the last four years. Over the same period, rents for multiple-user factory space have increased at an average of 10.3% per annum. However, the increase for the whole of 2013 was at a lower 3.5%, indicating signs of moderation.

32. Rents for space are likely to moderate in the medium term as the Government has released a significant amount of land. Over the next 3 years, about 145,000 square metres of new shop space will be completed each year. This is more than double the average annual demand for such space in the last 3 years. Over the same period, an average of 500,000 square metres of multiple-user factory space will come on-stream each year. This is almost double the average annual space demand for such space in the last 3 years. We have also released small land parcels with shorter tenures as more affordable options for SMEs. As we roll-out more industrial land, we will also cluster some of these spaces for industry needs. We will also build factories that are customised for particular industries like the aerospace and food industries. These are helpful for SMEs as they are customised for their needs. But some may need to make a change in their process in order to fit in these factories. For example, the small footprint factories.

33. Mr Inderjit Singh and Mr Dhinakaran have asked specifically about the impact of real estate investment trusts, or REITs. We note that REITs are not the leading players in the rental space market. They currently only own about 13% and 16% of retail and industrial rental spaces respectively. Like any other landlord, they have to compete in the rental market to attract tenants and cannot charge excessive rents. 

34. Some REITs buy conveniently located properties, such as those near MRT stations. They also usually invest in asset enhancements and national marketing efforts which have helped to increase foot traffic to their malls, and raised the revenues of some retailers.  Hence, it would not be surprising if these mall owners charged higher rents.

35. Nevertheless, I would like to assure Members that we will continue to monitor the rental market, and will intervene if we see evidence of collusion or abuse of market dominance by any player, including REITs.

36. Some SMEs have shared that they faced significant rental spikes when their tenancies are renewed. The Government supports fair practices. To help businesses make more informed decisions about the rental market, the SME Workgroup has suggested that the Government share more rental information. MTI and URA have taken this feedback on board and we are looking into publishing more comprehensive shop rental data later this year to make rental pricing more transparent.

37. Madame Chairperson, let me now address Mr Yee Jenn Jong’s question on how we will help SMEs expand and grow.

38. The SME Committee has also shared about the urgent need for SMEs to revitalise their appetite for growth. The Government will encourage more private sector financing and facilitate internationalisation. DPM Tharman has outlined several initiatives in his Budget speech.

39. Under Phase II of the Co-Investment Programme, the Government has set aside government capital for two new funds to provide SMEs with both equity financing and debt financing options. The SME Co-Investment Fund II will make direct equity investments into companies alongside other private equity investors. The SME Mezzanine Growth Fund will provide a hybrid debt-equity financing option for SMEs that do not wish to dilute their equity. The funds will be managed by Heliconia Capital Management Pte Ltd.

40. DPM Tharman has also announced the enhancement of the Micro-Loan Programme (MLP) to support smaller businesses and start-ups. Young businesses face difficulty securing working capital loans as they lack business track record and collateral. So we will increase the Government’s risk-share from 50 to 70 percent for MLP loans to firms that have been registered for less than three years. We hope this will help to increase the incentives for banks to lend to them.

41. SMS Lee had earlier shared on IE’s plans to help SMEs venture overseas, through enhancements to the Global Company Partnership (GCP) and Market Readiness Assistance (MRA).

42. In addition, IE’s new Market Access Incubation Programme (MAIP) will help smaller SMEs and start-ups internationalise. It will support up to 70% of costs, such as airfare, accommodation, registration fees and booth set-up costs, when they participate in overseas events by approved incubators. These incubators will help to identify potential overseas markets, offer mentorship support and provide seed funding.

43. Taken together, our various programmes provide comprehensive help for all SMEs. Take for example Aftershock PC Pte Ltd, a company that builds customised gaming laptops. Aftershock PC started as a small operation with 3 employees and now has 11.  

44. It sought assistance from one of our SME Centres. The business advisor visited the company, noted that it needed more manpower and introduced it to the SME Talent Programme. Through the programme, it was matched with Mr Kwan Suan Qing. With SPRING’s support, it is co-sponsoring his final year in Singapore Polytechnic, after which he will join it as a full-time staff.

45. The advisor also recommended for Aftershock PC to automate its ordering process. Aftershock adopted the idea, tapping on the PIC to invest in a platform for customers to order its products online. This has made the orders more accurate and less labour intensive. So with government support, businesses are better placed to restructure and transform.

46. The Government’s aim is to help as many businesses as possible successfully restructure their operations. Nonetheless, some firms will find themselves in non-viable business lines. Ms Tin Pei Ling has asked about our support for displaced SME owners and staff.

47. Unlike Europe which faces structural unemployment, Singapore is in a full employment situation. Thus, we have focused our efforts on helping SME owners and employees move to new, higher-value sectors. The Government has a range of schemes to help firms do this.

48. The Government also supports training programmes such as those conducted by e2i, to help workers acquire new skills and do higher value work in new industry sectors. MOM will elaborate on these training schemes, and other forms of support provided for displaced workers.

49. Next, I would like to talk about MTI’s plans to promote entrepreneurship. Entrepreneurship is vital for vibrancy. It encourages people to embrace risk-taking and come up with new ideas.

50. To grow Singapore into an Entrepreneurship Hub, the Government set up the Action Community for Entrepreneurship, (ACE) 11 years ago. ACE’s mission is to develop an entrepreneurial culture, and a pro-enterprise environment. ACE and SPRING together provide access to funding, mentorship and infrastructure support.

51. As you know, since I took over ACE, one of the first things I changed was the ACE Startups Grant. There used to be age limit, but we have opened it up. There is no more age limit. The ACE Startups Grant provides first-time entrepreneurs with tax exemptions and generous funding support, matching $7 for every $3 raised by entrepreneurs for up to $50,000. SPRING’s Start-up Enterprise Development Scheme (SEEDS) co-invests with third party investors in promising start-ups. With this support, the number of active start-ups in Singapore has grown by almost 60% in the past 7 years.  

52. I would like to share with you the example of Ms Ee Poh Luan. She is a successful example of someone who made entrepreneurship a second career. Luan worked for 20 years in the communications sector before deciding to follow her passion in cooking. She signed up for 2 stints as a kitchen intern in different restaurants, and then decided to become an entrepreneur. She was awarded an ACE Startups Grant and was also assigned a mentor to help her develop a business model. Since the start of last year, Luan has been operating her gourmet food truck – the Kerbside Gourmet. This mobile kitchen is also a social enterprise and Luan channels a part of her profits to feed low-income families. It is not just about grants, but the network and mentorships that come along it. Mentorship is offered not only for grant awardees, but all who are interested to set up. We will do a match between mentors and mentees.

53. Mr Chen Show Mao has asked about support for older Singaporeans interested in entrepreneurship. Luan is actually in her forties. I am also in my forties. We are not old enough for the Pioneer Generation Package, but old enough to be cautious of risk. But we want to encourage seniors to embark on entrepreneurship. So we don’t discriminate on age or the type of business, that is to say whether tech or non-tech.

54. We can all be inspired by 69-year old Ms Shelley Siu, who founded The Singapore Shawl, a creative social enterprise, in 2003. The company designs shawls that feature Singapore’s culture, and makes them from eco-friendly products. Besides Singapore, the shawls are sold overseas in US, UK and France. Ms Siu said that her reason for starting the business was to give back to our community. She hires mostly senior citizens and those who are in need to work in the stores or as seamstresses.

55. As you may know, the Government have wanted to privatise ACE to keep the entrepreneurship landscape vibrant. This is in-line with the Entrepreneurship Review Committee’s (EnRC) recommendation, which was submitted this year.

56. Another significant recommendation is for the Government to provide more physical spaces to incubate start-ups. I am happy to share that JTC will be developing new incubation spaces at JTC’s one-north.

57. This builds on the success of the original start-up hub at Blk 71. Blk 71 has drawn global attention to our entrepreneurial culture. Earlier this year, it was covered in the Economist magazine, which featured the opportunities for start-ups to interact and work together.

58. Blk 71 currently houses 23 incubators, 250 start-ups and 1,000 entrepreneurs from the infocomms and media cluster. This compact 7-story block provides a collaborative environment for like-minded entrepreneurs.

59. By the end of this year, JTC will open two more blocks as part of an incubation cluster called JTC LaunchPad@one-north. Adjacent to Blk 71, Blks 73 and 79 will nurture the growth of start-ups and incubators in promising industries. The expansion will double the current community at one-north to 500 start-ups and 2,000 entrepreneurs, and provide more common spaces for start-ups to interact, share ideas and make deals.

60. Hopefully we can create our own mini-Silicon Valley. If there is sufficient demand, the Government will consider creating more start-up clusters around Singapore in the future.

61. We will share more details of JTC LaunchPad@one-north later this month.

62. Let me move on to the issue of consumer protection.

63. MTI recently announced changes to the time-share regulations that will take effect in April this year. These changes will expand the regulation’s coverage to cover relevant products such as holiday club memberships. They will also prevent companies from collecting a deposit from consumers during the 5-day cooling off period, and ensure that consumers have all the relevant information needed when making purchases.

64. Mr Png Eng Huat has asked about the recourse available to consumers who have already purchased timeshares and think that they have been scammed. Unfortunately, the regulations only apply to new contracts, and do not cover existing contracts. For clear cases of cheating, the party should make a police report. I urge consumers to consult the Consumers Association of Singapore (CASE) if they need advice.

65. While we cannot enforce the regulations retroactively, we can do more to ensure that our consumers’ interests are not adversely affected. CASE will reach out more to consumers to educate them on their rights, to reduce future cases of cheating.

66. The Government will continue to help SMEs enhance their productivity and develop new capabilities. We will also continue to cultivate a climate of entrepreneurship in Singapore.

67. SMEs and entrepreneurs must also take the lead and embrace the restructuring process. We are seeing progress but there is more to do. SMEs in countries like Germany constantly upgrade themselves so that they can become market leaders in their respective niches.

68. Our SMEs can do the same. Today, many home-grown brands have already and some are household names. Most Singaporeans know Jumbo Seafood and Eu Yan Sang. Other SMEs have achieved recognition overseas. Crystal Jade is popular in Hong Kong and OSIM has a strong reputation in China. These SMEs make us proud, and the Government will support more SMEs as they work to reach such heights.

69. With effort, I am confident that SMEs will continue to grow, and create good and better jobs for Singaporeans.

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