LOCAL INDUSTRIES AND MULTINATIONAL CORPORATIONS (Effects of economic slowdown)

Dr Augustine H.H. Tan asked the Minister for Trade and Industry whether the current economic slowdown has hit local industries more than large multinational corporations; how many local companies in manufacturing closed down last year; how many workers have lost their jobs; and what assistance the Government is providing to our local industries.

The Minister for Trade and Industry (Dr Hu Tsu Tau): Mr Speaker, Sir, in 1984, 66 manufacturing companies were dissolved. All these 66 were local. 81 manufacturing companies went into liquidation. Only one of these was foreign. Sir, there were a total of 147 manufacturing companies which closed down in 1984, and this is equivalent to 29% of the total company closures of 505 during the year.

However, this must be seen in the context of the total number of companies in Singapore which approximately now stand at 63,000.

On the question of retrenchments, in 1984 3,487 workers in the manufacturing sector were retrenched, accounting for 75% of the total retrenchments in the country as a whole, 4,694. We do not believe that retrenchment is now a serious problem, as most of those retrenched workers have been able to find replacement jobs, as our labour market is still fairly tight. In fact, I would like to join my colleague, the Minister for Finance, in assuring the House that the economy is not in as bad a state as some Members and the press might think.

While some companies have closed down, many more new companies have, in fact, been formed. In 1984, a total of 4,601 new companies were formed, against 505 closures. This includes the manufacturing and the non-manufacturing. Hence, there was a net increase of 4,096 new net company formations out of a total of 63,000 companies. This represents a growth in the company numbers rate of about 6.5%, which is in line with the growth of the economy.

The birth and death of companies is part of the restructuring process and also the evolutionary process of a dynamic economy. It is something which, I think, we have to learn to accept. It is indeed painful for those which have to close down, but we must look at the net effect on the economy as a whole. To put it into perspective, in Japan last year, 19,000 companies closed down. Amongst them were large steel mills, shipyards, oil refineries, because they were also going through a major restructuring process of upgrading themselves. I do not think anyone can claim that Japan's economy is in difficulties or that it is not a dynamic economy.

As for retrenchments, the picture is also not as gloomy as the press may sometimes paint it. As at 15th March 1985, 7,062 workers have been retrenched. For the first quarter of 1985 as a whole, we expect the total retrenchments to number around 1,000. In the last five years, for the period 1980 to 1984, the average number of retrenched workers in the first quarter of each year was about 1,300 so that the number of retrenchments expected in this first quarter is not out of the ordinary.

I would just like, Mr Speaker, Sir, to urge that perhaps occasionally the press might wish to consider printing some of the positive aspects of our economy rather than concentrate entirely on company closures and retrenchments. We could do with a bit of light relief from time to time.

Mr Speaker, Sir, coming back to the question of the Member for Whampoa, I would like to add that the Government does not find it necessary or desirable to provide financial support to companies facing winding-up action. However, the EDB has intervened in some cases to try and persuade banks to be more flexible in recalling their loans.

On the subject, Mr Speaker, Sir, of help for local industries, the EDB whilst actively promoting foreign investments places particular emphasis on helping local entrepreneurs. The Board's overseas and home-based officers work together to arrange joint ventures with foreign companies for sub-contracts for our local industries. Assistance schemes available to foreign companies are also available to local industries. They include tax incentives, Interest Grant for Mechanization Scheme and the Training Grant Scheme. The latter two schemes are funded by the Skills Development Fund. These schemes have benefited our local industries tremendously. Over the last three years, more than half the tax incentives, like pioneer status, investment allowances and export incentives granted, were awarded to wholly local-owned or local-foreign joint venture companies.

As for the Interest Grant for Mechanization Scheme, 69% of all grants or $33.7 million had been given to local companies as at 31st December, 1984. Local companies are also the major beneficiaries of the Training Grant Scheme. Of the $216 million of grants committed between 1980 and 1984, 65% were for local industries. In addition there were specific schemes which are specially designed to help small and medium-sized local companies. For example, the Small Industries Finance Scheme, Special Grants for Critical Supporting Industries, Product Development Assistance Scheme, Small Industry Technical Assistance Scheme, Development Consultancy Scheme and the Preferential Release of Skilled Workers from the EDB-Joint Industrial Training Centres. Details are given in the Annex (Cols. 1341 - 1342) which the Clerk has already distributed to Members. Annex (Cols. 1341 - 1342)

Mr Speaker, Sir, local industries are very important to our economic development. Their profits are retained in Singapore and accrued to our people. Hence, the Government has always been more generous in granting tax incentives and allocating specially-trained skilled workers to local industries. If need be, the Government will set up more incentive schemes to help local industries.

Dr Augustine H.H. Tan (Whampoa): Mr Speaker, Sir, the Hon. Minister seems to be implying that the press reports about bankruptcies and closures of companies have been a bit on the sensational side. Is he afraid that this may produce a panic situation?

Dr Hu Tsu Tau: Mr Speaker, Sir, I am not suggesting that the press has been deliberately playing up the bad aspects of Singapore's economy. I appreciate that from the press reporter's point of view it is easier to gather reports on retrenchments and company failures than to gather information on company openings and new employment opportunities created by new companies. I would merely ask them to try and present a more balanced view so that the world at large can understand that Singapore is not going down the tubes.

Dr Augustine Tan: Mr Speaker, Sir, the Hon. Minister mentioned that the EDB intervened in some cases to persuade the banks to be more flexible in recalling their loans. We all know that the EDB was set up to attract foreign investors to come to Singapore. So, were their efforts made largely on behalf of foreign companies or were some local companies involved as well?

Dr Hu Tsu Tau: Mr Speaker, Sir, the majority of these requests were in aid of local companies because, by and large, it is the smaller companies which are involved. The major multi-nationals normally do not require such assistance.

Dr Augustine Tan: In looking at the Annex, while the various assistance schemes given to industries, both local and foreign, look good and helpful, one element seems to be missing, and that is, of marketing. What is the Government doing in this respect to help our industries in marketing?

Dr Hu Tsu Tau: Mr Speaker, Sir, the Annex relates to schemes developed and administered by the EDB. We have a separate organization, the Trade Development Board, which specializes in marketing and the hon. Member for Chong Boon is, in fact, the Chairman of the Trade Development Board. This was set up about two years ago as a result of requests from the business community. It has expanded tremendously in the last two years and one of the areas where they are concentrating on, in fact, is marketing.

Mr Tan Soo Khoon (Alexandra): Sir, is the Hon. Minister aware that there is a distinction between companies which are formed and companies which actually commence business? If so, of the 4,601 new companies which were formed last year, how many have actually commenced business?

Dr Hu Tsu Tau: Mr Speaker, Sir, I am well aware of this. I did mention in my response during the debate on the President's Speech that one has to be cautious about looking at statistics because a large number of companies formed need not necessarily have such business. We do not keep a day-to-day check on the number of companies which have gone into operation. So I cannot give an immediate answer. But the statistics are readily available. If the Member wishes to have this, we will provide it to him.

Dr Augustine Tan: Mr Speaker, Sir, in the recent Budget Address, the Finance Minister gave a number of significant concessions like the suspension of the Payroll Tax and the reduction of the Skills Development Fund.

Mr Speaker: Dr Tan, where is your supplementary question?

Dr Augustine Tan: I am coming to it, Sir.

Mr Speaker: Come to it then.

Dr Augustine Tan: Some of the comments by industrialists have been that these concessions have been too few and make a negligible impact so far as their costs are concerned.

Mr Speaker: Your supplementary question, Dr Tan.

Dr Augustine Tan: Yes. Can I have the comment or the view of the Minister on this?

Dr Hu Tsu Tau: I am not entirely clear on the question, ie, whether the incentives were sufficient or there is a request for more of them.

Dr Augustine Tan: More.

Dr Hu Tsu Tau: It is something which I cannot really answer on behalf of the Minister for Finance. It is fair to say that whatever one grants to business people would not be sufficient because if I were a businessman I think it would be foolish for me to say that I have had enough. Inevitably, whatever is requested would be insufficient from somebody's point of view. But I think the Minister for Finance would take this into consideration in the light of the actual circumstances.