SMALL AND MEDIUM ENTERPRISES (Impact of economic recovery)

The following Question stood in the name of Mr Zulkifli Bin Baharudin -

Mr Zulkifli Bin Baharudin: To ask the Minister for Trade and Industry (a) why is it that a large number of businesses and employees especially those in the small and medium enterprises do not feel the impact of last year's economic recovery despite the robust GDP growth; and (b) is this situation likely to worsen in view of the likely slowdown in the US economy.

Mr Thomas Thomas (Nominated Member): Question No. 15, Sir.

BG George Yong-Boon Yeo: Mr Speaker, Sir, the overall economy grew by a strong 10.1% in 2000. All sectors enjoyed robust growth except construction, which continued to contract. However, the performance was highly mixed within each sector, with some segments doing very well and others not as well.

For example, although the manufacturing sector expanded by 15% in the first 11 months last year overall, this was due largely to the 27% growth in the electronics industry. The food and beverage, wood and paper products, construction-related materials, basic metals, petroleum and marine industries grew by less than 4%. These industries accounted for about one-fifth of manufacturing firms and jobs.

Similarly, in the retail sector, although overall retail sales grew by a strong 25% (in volume terms) in the first 10 months of last year, much of the growth came from the sale of motor vehicles, telecommunications equipment and computers. Supermarkets, provision and sundry shops, and watch and jewellery retailers experienced poorer business.

Because the growth was uneven, those in the slow-growing segments did not feel the effect of the recovery. Many of them are SMEs. In fact, many of them asked me, where was this 10.1% growth which was put out. The reason is that growth has been uneven and depending on where you are, you may, in fact, feel it even more strongly or less strongly.

As to the slowdown of the US economy, this would moderate our GDP growth. Most analysts currently expect the US to grow by 2.5-3% this year, down from about 5% in the year 2000. MTI projects that Singapore's GDP growth will slow down accordingly to 5-7% this year. But if there is a crash landing in the US, then the forecast will change.

Most businesses will be affected by the slower economic growth, but SMEs should be more vulnerable. SMEs will have to find ways to improve productivity, develop better products and explore new markets - not just SMEs, but all companies. And the Government has many programmes to help SMEs to do so.