SMALL AND MEDIUM ENTERPRISES

SMALL AND MEDIUM ENTERPRISES: 10.

Mdm Ho Geok Choo asked the Minister for Trade and Industry (a) what is the increase in the number of small and medium enterprises (SMEs) in the last five years and which industries do they belong to; (b) what contributions do they make to the Singapore economy; and (c) what are some of the more pressing needs of these SMEs and how are they being helped.

Mr Lim Hng Kiang: Sir, between 2000 and 2004, the number of small and medium enterprises (or SMEs) increased by about 13,000. Today, we have some 133,000 SMEs in Singapore, which make

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up 99% of all our enterprises. About 94% of our SMEs belong to the service and commerce industries, with the remaining 6% in manufacturing . SMEs contribute some 42% of our GDP and employ 56% of our workforce.

Capability upgrading

The Member asked about the pressing needs of our SMEs and what we are doing to help them. A key concern facing our SMEs is the increase in global competition, especially from lower-cost competitors offering higher value-added activities. In this respect, we have various programmes, at both the industry and the enterprise level, to help our SMEs upgrade their capabilities and move up the value-chain.

At the industry level, we have the Local Enterprise and Association Development, or LEAD programme, which supports industry development efforts by able and willing industry associations. At the enterprise level, we have introduced the Capability Development Programme, which covers areas such as process improvement, strategic alliances, and certification of products and processes to international standards.

Companies can also leverage on the Technology Innovation Programme to strengthen their technology innovation capability and capacity. The programme provides SMEs with the expertise, infrastructure as well as the financial support for their research and other innovation related projects.

Financing

The second area that we help our SMEs is in financing. Access to financing, as we all know, is a key concern of our SMEs. In 2005, we extended some $800 million worth of loans to more than 3,600 SMEs through the various schemes, such as the Local Enterprise Finance Scheme

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(LEFS), and the Micro Loan Programme. The Internationalisation Finance Scheme was launched this year, making available $500 million worth of loans for overseas expansion purposes. To complement the loans, the Government has also made available equity financing, matching Government funds with private sector investments under the Start-up Enterprise Development Scheme (SEEDS) for innovative start-ups. The Business Angel Scheme was also introduced last year to spur the level of business angel investments in Singapore.

We are pleased that the private sector has recognised that not all SMEs are high-risk, and have introduced loans and services to cater particularly to the SME market. Several banks are even offering unsecured financing products to SMEs, in the form of instalment loans and revolving credit lines.

Accessing overseas markets

The third area of concern for SMEs is access to overseas market opportunities. To build up these connections, SMEs can participate in outgoing missions and fairs as well as the various IE Singapore’s networking platforms. Companies can also tap on the International Marketing Activities Programme which supports the activities organised by trade associations and chambers.

To promote our enterprises to the world, we recently launched the BuySingapore portal. This initiative is a national e-channel that leverages on the established Singapore Brand to acquire and disseminate foreign business leads to our companies.

The Government has put in place quite a comprehensive package of assistance to our SMEs. I assure Members that we will continue to improve and adapt our assistance as the needs of our SMEs evolve.

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Mr Sin Boon Ann (Tampines): Sir, one common feedback from the SMEs is the bewilderment over the sense of the many financing schemes that are available. I do not know if the Government is minded to put together all these schemes into one organisation. The Government has resisted the call for setting up an SME bank. I am wondering whether or not an alternative parallel organisation, which mirrors the functions of the bank and that supports these SMEs financially, in terms of the various schemes available, is something which the Government may consider.

Mr Lim Hng Kiang: We have debated this many times. We do recognise that there is a wide range of SMEs and we try to establish programmes that best suit the SMEs. At the same time, whenever there is a proliferation of such schemes, we try to streamline and narrow them so as to reduce confusion. I thank my colleague, Mr Inderjit Singh, for bringing together a group of people, trying to streamline and make it more comprehensive and more comprehensible to our SMEs. We must recognise that the needs of the SMEs are very diverse and this idea that a single entity or a single SME bank can meet the very vast needs of our SMEs has yet to be proven. Right now, what we are doing meets the needs and we continue to have dialogue with the various associations and the SMEs. The feedback we get is that the Government's approach is becoming more holistic and their needs are being addressed.

Mdm Ho Geok Choo: Sir, the 2006 SME's Development Survey found that there is a very low take-up rate of Government funding schemes. Only 8% of SMEs surveyed took up the Local Enterprise Finance Scheme; only 4% took up the Micro Loan Programme and only 2% took advantage of the SME Access Loans. What are the reasons for these very low take-up rates and what will MTI do to improve these rates?

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I would like to ask the Minister for Trade and Industry to critically review these schemes with the following parameters:

(i) the relevance of these schemes to the needs of the SMEs;

(ii) the promotion of these schemes to raise the awareness of these schemes; and

(iii) the workflow of SMEs applying for these schemes.

Is the application process, for example, too complex or too time-consuming? Are we disbursing the funds quickly enough for SMEs to use them in a timely manner?

Mr Lim Hng Kiang: I thank the Member for her feedback. These are areas which we will continue to look at to improve our processes. The very fact that 8% of our SMEs take up the LEFS scheme, to me, is a very good sign. First, the schemes are there. So if SMEs do not take them up, it does not necessarily mean a bad thing. But we will look into the take-up rates. It is not for lack of availability. The funds are there. There are also competing avenues for the SMEs. So it is not that they have to depend entirely on the Government for the LEFS scheme. The banks are coming in. We have an OTC market. There are many avenues. And it is good that our SMEs are self-reliant and they have their own financing resources.

Ms Lee Bee Wah: Sir, in view of the impending increase in CPF, does the Minister foresee that it will bring additional burden to the SMEs, in particular, now that the SMEs are also facing a steep increase in rental, labour cost, material cost, etc?

Mr Lim Hng Kiang: Again, let me thank the Member for raising this. We watch the business cost very closely, particularly the business cost of our SMEs. If the changes

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to the CPF that have been debated upon come about, obviously, the Government also looks at how to have countervailing measures to help the corporate sector, particularly the SMEs, to meet these challenges.