SINGAPORE BUSINESS FEDERATION (Mandatory membership)

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SINGAPORE BUSINESS FEDERATION:

(Mandatory membership): 2.

Mr Steve Chia Kiah Hong asked the Minister for Trade and Industry (a) what is the purpose of legislating for compulsory

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membership of the Singapore Business Federation ("SBF"); (b) how can business owners who find SBF irrelevant to their needs, terminate their membership; and (c) if the Minister will rectify this legislation to make it non-compulsory for small and big businesses which are not interested in joining the SBF.

The Minister for Trade and Industry (Mr Lim Hng Kiang): Mr Speaker, Sir, the establishment of the Singapore Business Federation with mandatory membership was proposed by the former Singapore Federation of Chambers of Commerce and Industry (SFCCI), as a new apex organisation to represent Singapore's business interests more effectively both locally and abroad.

The Government supported the Singapore Federation of Chambers of Commerce and Industry's recommendation and enacted the SBF Act in 2002. SBF membership was made mandatory as the earlier practice of voluntary membership by business chambers and associations had not been effective. The business community had remained fragmented, and lacked a strong and united private sector umbrella organisation. Compulsory membership would ensure that SBF has a strong membership base, and has the mandate of the entire business community. Compulsory membership of business chambers can also be found in France, Germany and Brazil, for example.

However, only local companies with paid-up capital and foreign companies with authorised capital of $0.5 million and above are required to be members of the SBF. So a total of 136,000 small companies, 26,000 partnerships and 114,000 sole proprietorships, have been exempted.

In addition, the SBF (Exemption) Order was passed by this House in 2002 to exempt all companies with zero

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employees. As a result, 6,000 more companies were exempted. To date, SBF has about 15,000 members or just 9.6% of all companies in Singapore.

If SBF decides that there should be further exemptions based on other clear criteria and recommends them to me, I will consider them.

SBF has been in existence for only four years, and we are seeing encouraging signs that more members are finding its services useful. Last year, members' participation in SBF events doubled from 12,000 in 2004 to 22,000. We are told that the recent Budget 2006 briefing, organised as part of SBF's regular updates on changes affecting businesses, was attended by over 1,000 members. We encourage the SBF to come up with more such activities, services and programmes that will deliver value to its members.

Mr Steve Chia Kiah Hong: Mr Speaker, Sir, the Minister has not answered my questions (b) and (c). How can business owners who find that the SBF's programmes and all those things not relevant to them, terminate their membership? And for those who do not want to join, can it be made non-compulsory for them?

Mr Lim Hng Kiang: Mr Speaker, Sir, I have answered the question. I said that if the SBF decides that there should be further exemptions based on other clear criteria, then I will consider them, meaning, if the members who think the SBF is irrelevant to their needs,

they should put up their case to SBF. And if there is a group of them who can demonstrate that the SBF is irrelevant and SBF also agrees, like what SBF has done previously for the small companies and companies with zero employees, then it is for SBF to put it up to the Ministry.

Mr Steve Chia Kiah Hong: So people who are not interested would have to

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petition to SBF to get themselves exempted. Am I right to say that? If the SBF does not agree for them to be exempted, there is no way for them to be exempted in this case. Am I right?

Mr Lim Hng Kiang: Mr Speaker, Sir, I have already explained that membership is mandatory. So people cannot say that they want to join or they do not want to join. At the same time, we have exempted significant groups of companies, so that only less than 10% are required to join. So companies who are in this 10% group, if they think that the SBF is irrelevant or they do not find value, then it is for them to put up a case to SBF so that they can get exemption as a class or as a group.

Mr Speaker: Last question, Mr Chia.

Mr Steve Chia Kiah Hong: Sir, I do not know whether the Minister has read Today's article on 2nd March by Mr Cheng Soon Tat. I think he gives very good arguments why membership should not be compulsory in the SBF, and also that the NTUC is able to actually advance collective interest.

Mr Speaker: What is your question, Mr Chia?

Mr Steve Chia Kiah Hong: My question is whether the Minister has read this article and agree with the point that there should not be compulsory membership for business associations, other than those that are required by law for the regulation of professional standards.

Mr Lim Hng Kiang: I have read the article and I have also read the responses by different groups. As I have explained in my answer, if you do not have mandatory membership, there is a problem of free riders. People will enjoy the benefits put up by SBF but do not pay the subscriptions. This was debated in 2002 and we decided to make it mandatory.

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Mandatory membership is not unique in Singapore. It is practised in many countries. In these countries, they find an apex umbrella business organisation is a very useful mechanism. Next, I have explained that even though it is mandatory, we have exempted a large portion of companies, especially the small companies. Finally, I have explained that more than two-thirds of the companies pay less than $400 subscription, or less than $1 per day. So it is not a very significant financial burden on these companies to subscribe and to be members of an umbrella organisation which is increasingly providing value for its members.