SMALL MEDIUM ENTERPRISES AND MULTI-NATIONAL CORPORATIONS (Relocation)

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SMALL MEDIUM ENTERPRISES AND MULTI-NATIONAL CORPORATIONS:

(Relocation): 11.

Dr Amy Khor Lean Suan asked the Minister for Trade and Industry (a) how significant is the relocation of our small medium enterprises as well as Multi-National Corporations to other countries; (b) how will this trend affect our local job market; and (c) what measures have been or can be taken to counter any job losses due to such relocation.

The Minister of State for Trade and Industry (Mr Raymond Lim Siang Keat) (for the Minister for Trade and Industry): Mr Speaker, Sir, as our economy restructures, new companies are set up, while others may expand or re-locate. MTI does not track the number of companies that are set up overseas without a presence in Singapore . Instead of company level information, we track total FDI inflows and the net stock of inward FDI in Singapore . These macro-level figures provide an indication of the competitiveness of our economy, and its ability to generate jobs and economic growth.

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Between 1999 and 2003, EDB managed to attract net investment commitments in the manufacturing sector worth $42.9 billion, of which $33.4 billion was foreign investment. Total business spending by services firms was $9.3 billion over this period. EDB estimates that these investments, in total, would create about 111,000 jobs in Singapore when fully realised.

While some jobs have been lost due to relocation, the Ministry of Manpower's Labour Market Survey indicates that overseas relocation has not been the main cause of retrenchments. Of the companies that retrenched workers last year, only 7% did so because part of their operations were relocated abroad. According to the survey, the number of workers retrenched due to overseas relocation has been coming down in the past five years, from 4,455 in 1999 to 2,360 in 2003.

However, what is important is that, in international rankings, Singapore continued to be ranked as highly competitive. The 2003 World Competitiveness Yearbook ranked Singapore the second most competitive small economy worldwide. In new growth areas, such as outsourcing, we did well too. A.T. Kearney has ranked Singapore the fifth most attractive global location for outsourcing in its 2004 Offshore Location Attractiveness Index. Singapore ranked ahead of low cost Philippines and Brazil , as well as developed countries like Canada , New Zealand and Australia . Top Indian IT software companies have set up in Singapore , with many having their regional HQs here. As their operations expand, they would create many well-paying jobs in Singapore.

Dr Amy Khor asked what could be done to stem job losses. Attracting high value investments to Singapore must remain a key priority. Such investments can generate a variety of jobs for Singaporeans. For example, the expansion

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of Hewlett Packard's manufacturing activities in Singapore over the next five years is expected to add significantly to its current staff of engineers, IT professionals, as well as assembly line workers.

Promoting entrepreneurship will also lead to the creation of many good jobs. Between 1990 and 2000, local SMEs accounted for 52% of net employment creation in Singapore . We must continue to foster a conducive environment for entrepreneurship. As more people venture into business, start-ups will become an increasingly important source of employment.

Similarly, the development of new industries, such as the biomedical industry, as well as the expansion of services sectors like education and healthcare will create new jobs. We are also seeking to revitalise older industries, such as textiles, food and furniture. We will help companies in these sectors to upgrade and to gain a competitive foothold.

While many jobs will be created, not all will be jobs that Singaporeans are accustomed to. Therefore, workers must have the right skills and attitude to take on new jobs.

The Workforce Development Agency (WDA) has been spearheading efforts to re-skill our workforce. For example, in recent months, WDA has placed and trained some 200 Singaporeans for the electronics sector. WDA is doing likewise to train Singaporeans for the aerospace industry. A National Skills Framework is being developed to identify the industry-specific skills needed for our workforce.

Apart from skills, to create and maintain jobs, we must also ensure that wages are competitive, and adjust flexibly to changing business conditions. A survey commissioned by the Ministry of

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Manpower in 2003 found that workers are now more aware of the challenges of global competition and are prepared to accept variable wages based on performance. This resilience and adaptability of our workforce, coupled with sound policy measures and continuous restructuring by companies, will allow us to respond quickly to fast-changing economic conditions, and to generate new jobs and to create new sources of growth.

Dr Amy Khor Lean Suan: Sir, I would like to ask the Minister if the Ministry conducts a study to find out the key reasons for the relocation of SMEs and MNCs overseas and, if so, what have been the key reasons cited.

Mr Raymond Lim Siang Keat: IE Singapore, which is a statutory board with the mission of helping Singapore companies internationalise, conducted a survey in June 2003 of 200 companies and asked them for the reasons for overseas investment. About 87% of the respondents cited market seeking opportunities, while 49% cited lower cost of production. Other reasons of venturing abroad include skilled labour at the investing destination and developed financial and technological infrastructure.