SMALL AND MEDIUM ENTERPRISES (Performance)

Mr Simon S C Tay asked the Minister for Trade and Industry how the small and medium enterprises are faring in the present economic recovery and whether there will be indicators for the SME and local economy, in addition to the gross national economic indicators.

The Senior Parliamentary Secretary to the Minister for Trade and Industry (Mr Tang Guan Seng) (for the Minister for Trade and Industry): Mr Speaker, Sir, on the whole, SMEs are enjoying better business growth in line with the overall economic recovery from the Asian crisis. For instance, the turnover of SMEs in the services sector has rebounded by 12.4% in 1999 from the decline of 7.9% in 1998. Growth has remained strong at 9.6% in the first half of this year.

However, the performance of SMEs is uneven and varies across industries. In wholesale trade, SMEs as a group are enjoying buoyant business, while in construction and real estate, performance is still weak, reflecting the different pace of recovery among sectors. Similarly, within the manufacturing sector, SMEs in fast-growing industries like electronics are enjoying better business than those in slow growing ones like ship-repair and furniture.

Even for industries that are recovering, some SMEs continue to face strong competitive pressures. SMEs are also more dependent on the domestic and regional markets compared to the MNCs. For instance, in the food manufacturing industry, feedback from the Singapore Food Manufacturers Association indicates that while business has improved by about 10% after the crisis, profitability has declined. This is due to higher operating costs and more intense competition from lower cost food manufacturers in neighbouring countries.

Our SMEs will have to find ways to increase efficiency and develop higher value products that can command higher price premiums. Fewer and fewer of them can escape the challenge of globalization and the New Economy. They have to leverage on technology, create attractive brands and packaging, and actively pursue alternative markets for growth. The Government has developed many programmes to help SMEs do this. In fact, there are 60 such programmes altogether.

The Singapore Productivity Board (PSB), in partnership with the private sector, has developed SME 21, a new plan to accelerate SMEs' development for the next 10 years. Strategies addressing the needs of SMEs at the enterprise, industry and broad-based levels would be rolled out within the next two years.

Mr Tay has also asked about the indicators for SMEs and the local economy. Currently, although we have some annual and quarterly data of SMEs and local enterprises for selected sectors like commerce and services, we do not have comprehensive indicators. This is partly due to the resources needed to gather statistics from SMEs, which number more than 100,000. These small companies also have greater difficulties than the larger firms in providing timely and accurate data. However, PSB will work with DOS and EDB to see how more and better indicators can be developed to monitor the performance of SMEs. The Singapore Business Federation, when it is formed, can also help to gather data.

Mr Simon Tay: Sir, the plan to consider giving more data and indicators for the SMEs is welcomed. Can we expect when this will be?

Mr Tang Guan Seng: As I said just now, PSB will have to work with DOS and EDB on this because the number is very big, more than 100,000. These SMEs have a problem with resources and we have to wait until the end of the year for them to submit their report and from there, DOS will take over and compile the data. When it is ready, we will make an announcement.