(Delivered in Parliament on 2 March 2018)
Managing Industrial Land Costs – Leon Perera
Developing a vibrant manufacturing sector is important for our economy. In addition to MNCs, we need to ensure local start-ups and Singapore SMEs in manufacturing, as these may, with supportive policies, be more likely to keep Singapore as a centre of gravity.
MOS Koh Poh Koon recently shared data on rental costs in reply to my PQ. The percentage of rental out of total costs may not be high now, but it may rise if technology replaces manpower, as may happen with AI and robotics. Industrial rentals have also seen volatility in the past. And Singapore does not have low land cost zones on the outskirts as other global cities may have.
Wil MTI consider setting a target for industrial rental inflation to stay in line with the CPI and adjust policies accordingly? Will MTI also thoroughly benchmark industrial rentals in other cities with big start-up sectors and publish the findings?
Business Succession Planning – Leon Perera
One consequence of an aging society is that many family businesses face the challenge of business succession planning. And it is a challenge, since some entrepreneurs do not have children or professional employees who want to take over, or they may have successors in mind but those successors are not yet able enough to take over.
In reply to a previous PQ, MTI confirmed that a number of schemes exist that can be used to support consulting to facilitate the business succession planning process.
I would like to suggest that MTI’s economic agencies make it a condition, or an advantage in applying for the grant, for the award of all grants for strategy development initiatives, like the CDG, MRA and ICV for example, to the effect that the SME should involve “next-tier” managers within their company, not only the senior management team, in working on the consulting project, so that those next tier leaders can get exposure and training.
This will nudge SMEs to pay more attention to grooming the next tier in their companies.
I declare that I am the CEO of a research consultancy that does work in this and other fields.
ASEAN Plan – Low Thia Khiang
Chairman Sir, We have been a keen proponent of the ASEAN Economic Community, the AEC. It was during the 13th ASEAN Summit in 2007 when Singapore was last the ASEAN Chair that the blueprint to establish the AEC was adopted.
If integrated as a single market and production base, the AEC will become the fourth largest economic bloc in the world, just behind the United States, China and the European Union. For Singapore, the AEC is not just an aspiration, but also a strategic necessity to mitigate the geopolitical risks of the region being mired in economic underdevelopment and political instability, and the region becoming divided and caught between the great economies of China, India and the United States.
The AEC was to be established by end of 2015, but ASEAN failed to achieve one-fifth of the 506 measures and had deferred them for 10 years to 2025.
Singapore is now ASEAN Chair again and we are in a good position to facilitate the economic integration. In January this year, Minister Lim Hng Kiang said Singapore will focus on the digital economy and trade facilitation. This seems to be rather low key compared to the work that is needed to push forward the already-delayed AEC.
Does MTI have a more concerted plan to develop the AEC while Singapore is ASEAN Chair? What can Singapore do to better integrate the most important sectors in the region, for example, the electronics sector, especially in the context of the other major shift in the disruption caused by new technologies?
PACT and the Infrastructure office – Low Thia Khiang
Chairman Sir, the Partnerships for Capability Transformation scheme, or PACT scheme, has been operating since 2010. It has been enhanced and extended a number of times to cover more sectors and co-innovation activities. The scheme seeks to support collaboration between large corporations and local SMEs. This is a worthy aim. The question is how successful has been the PACT scheme? What should be defined as success? How do we measure the success?
In my view, as this scheme is oriented towards a win-win partnership between large corporations and SMEs, with the aim of transforming the capabilities of SMEs, the crux of success lies in whether the SMEs gained in a transformative manner. In answers to past parliamentary questions, some figures have been given by the Minister. By mid-2016, over 700 SMEs and 130 projects had benefitted from PACT since 2010. But how many of these SMEs saw their capability transformed? What metrics do the Ministry use to measure the transformation?
In a 2014 article published on SPRING Singapore’s website. The article looked at how Keppel Shipyard joined PACT to improve the capabilities of its SME vendors and contractors.
Keppel Shipyard gave the example of using PACT to develop a semi-automated system to reduce the operating costs of blasting, cutting wastage by 20% and manpower by 15%. This fell short of the target for cutting manpower by 30%, and Keppel Shipyard said continuous funding from PACT was needed to achieve success. But this so-called success was defined in terms of productivity gains from the view of the large corporation and nothing was said about the capabilities of the SMEs and whether these were transformed.
Capability transformation of SMEs should be directed towards their empowerment to seize regional and international opportunities, rather than to be limited to serve the needs of large corporations based in Singapore.
To this end, it would be good to know the profile of the large corporations benefiting from PACT to date, whether these are largely GLCs or MNCs, and whether more could be done to link up local SMEs to international supply chains through PACT.
Chairman Sir, the setting up of the Infrastructure Office to seize the opportunities being opened up by the One Belt One Road Initiative is timely, I would like to know what is the plan and scope of the infrastructure office and whether the office will bring together local and international companies across the supply chain to seize the opportunities being opened up by the One Belt One Road Initiative?
Commercial Rental in the Heartlands – Chen Show Mao
Sir,
We learn from the Ministry that rental costs generally make up a small share of total business costs for SMEs in Singapore, accounting for 8% or less in most services sectors. In some sectors, it is higher. Substantially higher. Retail rentals make up 30% of total business costs for SMEs in the retail sector in Singapore. Presumably in the food and beverage services sector, rentals also account for a substantial portion of business costs for SMEs.
Commercial rentals have decreased over the last few years. As the Ministry said, On the back of the decline in rentals, only 13% of some 2,500 SME respondents in a survey cited high rental costs as one of the top business concerns in 2017. Looked at conversely, for these particular SMEs, high rental costs remain a challenge even in an environment of falling rentals.
It would not be far fetched to think that in this minority of SMEs that remain most concerned about high rentals, many are in the retail and food and beverage services sectors.
Retail and food are among the most important services we find in our heartlands. These businesses have a special importance in shaping our living environment and contributing to our quality of life in the heartlands. Innovation in their service offerings and business processes bring benefits that are felt immediately by the community. Can we encourage that? Could the Ministry consider targeted assistance for example rental rebates directed at qualifying start-ups and SMEs in retail and food services, so as to bring added diversity and vibrancy to our heartlands?