​SPEECH BY DR KOH POH KOON, MINISTER OF STATE, MINISTRY OF TRADE & INDUSTRY AND NATIONAL DEVELOPMENT, AT THE SME CONVENTION 2016, ON 28 JANUARY 2016, 9.00 AM AT GRAND COPTHORNE WATERFRONT HOTEL

Mr Teo Siong Seng, Chairman, Singapore Business Federation

Mr Lawrence Leow, Chairman, SME Committee

Distinguished Guests

Ladies and Gentlemen

Good Morning

Introduction

• Thank you for inviting me to be your guest of honour at the SME Convention 2016. It is my pleasure to be here with you today. I would like to commend the Singapore Business Federation (SBF) and the SME Committee for organising this convention and I am pleased to note that this year’s SME Convention will also feature the inaugural Government Procurement Fair, which is supported by various government agencies. 

Economic Outlook

• The economic outlook for 2016 is challenging. The IMF expects global growth to improve modestly from 3.1% in 2015 to 3.4% in 2016, but with continued downside risks due to factors such as the ongoing slowdown in China. Domestically, our economy is projected to grow at a modest pace of 1-3% for 2016. For our SMEs in particular, business sentiment has been poor. The SBF-DP SME index for January to June 2016 was 51.1, down 0.8 points from the figure for the previous quarter. 

• Against this backdrop, it is important that our SMEs continue to proactively seek opportunities for growth by taking advantage of new market opportunities, and leveraging technology and innovation to improve capabilities. The Government will continue to provide strong support to our SMEs in this. 

Opportunities from Internationalisation

• Given our small domestic market, internationalisation is an important avenue of growth for our SMEs. The Government has supported internationalisation in two main ways.

• First, through our trade negotiations, we have improved market access for Singapore-based companies. We recently concluded the Trans-Pacific Partnership (TPP), the world’s largest free trade agreement to date. TPP countries account for 40% of global GDP and one-third of world trade. This free trade agreement aims to advance regional integration amongst countries in the Asia-Pacific. SMEs can look forward to new market access into Canada and Mexico, greater tariff elimination and more trade facilitative rules that will reduce costs and make it easier for them to participate in regional production and supply chains. In addition, TPP countries will set up user-friendly websites with information to help SMEs better understand regulations and procedures concerning intellectual property rights, foreign investment regulations, business registration procedures, employment regulations and tax information.

• In addition, the ASEAN Economic Community (AEC) was established in 2015. ASEAN comprises over 600 million consumers and has a combined GDP of nearly US$3 trillion[1]. It is expected to become the fourth largest single market in the world by 2030[2]. The AEC ensures that our companies are plugged into key supply chain networks, and this important growing market. Today, Singapore manufacturers can benefit from more affordable materials as virtually all products enjoy zero import duties into ASEAN markets. Our businesses can also look forward to a progressive reduction of barriers, such as foreign equity limits, in the services sectors of ASEAN member states. Stronger and more pro-investment rules have also enhanced protection for our investors in ASEAN. To help our companies understand and maximise the opportunities arising from the AEC, MTI has produced a handbook to illustrate the benefits of the AEC for our businesses. The handbooks will be distributed at the MTI Agencies’ booth, and I hope you will find them useful. 

• Beyond our work in lowering trade barriers, the government also has specific programmes to help our SMEs enter overseas markets. IE’s Market Readiness Assistance (MRA) helps companies newer to internationalisation with their first steps in this effort through workshops, consultations and financial assistance for overseas ventures, while its Global Company Partnership (GCP) provides more tailored assistance for companies that are in more advanced stages of internationalisation. Through the MRA and GCP, IE helped a total of 28,000 companies in 2014, of which 80% were SMEs. 

Opportunities from Large Organisations

• In addition to internationalisation, SMEs should also take advantage of market opportunities presented through collaborations with large organisations in Singapore, including the government. Working with such organisations allows our SMEs to build capabilities and a track record that can serve as a basis for future growth. 

• For instance, through the Partnerships for Capability Transformation (PACT) programme, SPRING facilitates collaboration between large organisations and SMEs. Since 2010, over 600 SMEs have benefitted from PACT. 

• One good example is HP Indigo’s collaboration with two local SMEs – Super Pak Manufacturing and Mega Plus Technology – to develop an environmentally friendly packaging for HP Indigo’s ink canisters. Super Pak specialises in designing and manufacturing packaging solutions and Mega Plus specialises in factory automation and robotics. Through this collaboration, the three parties jointly developed a new packaging that helped HP to improve its manufacturing process, and enabled Super Pak and Mega Plus to come up with a new product. As a result, Mega Plus has gained new knowledge about tooling while Super Pak has become a new HP supplier, recording revenue of $800,000 from this contract in 2014. Super Pak has since expanded to other product lines and manufacturing sites overseas.

Government Procurement

• The Singapore Government procures over $10 billion in goods and services each year, making government procurement another important source of opportunities for our SMEs. SMEs already have good access to government procurement opportunities. In 2014, about 80% of all government tenders valued at above $70,000 were awarded to SMEs. However, there is scope for SMEs to do more. The inaugural Government Procurement Fair, which is taking place this afternoon in conjunction with the SME Convention, seeks to inform more SMEs about the opportunities available from government procurement, help them to better understand the procurement process, and encourage them to bid for government contracts. I would like to take the opportunity to commend SBF for working with many government agencies to put together the Government Procurement Fair, and encourage SMEs to find out more about government procurement at the event. 

Leveraging Innovation and Technology

• For our SMEs to successfully leverage on these opportunities, they need to ensure that their capabilities are competitive. In particular, SMEs need to carefully consider how best to take advantage of new technology, and the opportunities for business model transformation that technology presents. 

• The government has several programmes to support our SMEs in capability upgrading and productivity improvement. For example, SPRING’s Capability Development Grant (CDG) provides financial assistance to SMEs for capability development and innovation. In 2014, SPRING supported more than 1,600 CDG projects, and provided more than $100 million in funding support to SMEs. To improve access and provide better support for SMEs, SPRING has simplified the application process for smaller CDG projects that require grant support of $30,000 or less. There are also programmes to provide expertise to companies seeking to develop new technology. For instance, in 2014, the Centres of Innovation (COIs) supported more than 400 companies through providing technology consultancy and training courses, and assistance for SMEs to test and develop their technology projects.

• One example of an SME that has successfully tapped on technology is Foodgnostic, which supplies baked goods such as cakes, pies and sandwiches to well-known local restaurants, cafes and hotels. Through SPRING’s CDG, Foodgnostic was able to automate some of their processes with new high-tech equipment. In doing so, Foodgnostic was able to reduce their wastage of cake batter to nearly zero, and save up to 70% in manpower costs. As a result, Foodgnostic has been able to price their product more competitively and expand into overseas markets. I hope that this will inspire more companies to take advantage of innovation and technology to upgrade their capabilities. 

Conclusion

• The Government is constantly reviewing policies in an effort to improve our support for businesses. Feedback from the businesses is important for this, and platforms such as today’s convention provide a useful channel for feedback. Several weeks ago, SBF released its position paper for a Vibrant Singapore that was shared with the Chair of the Committee on the Future Economy, Minister Heng Swee Keat. More recently, on Monday, the SMEC released a set of recommendations for Budget 2016. The Government will carefully consider all the feedback we have received, and work closely with the business community in developing future strategies for our economy. 

• On this note, I would like to thank SBF and its SME Committee for organizing today’s convention and the various Government agencies for supporting the event.

• I wish everyone a fruitful and pleasant day ahead. Thank you.​

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