Mdm Speaker,
I’m glad that this year’s budget has continued with the precedent set by previous years’ budget where the government has taken on a larger spending to accelerate the transformation of our economy to enhance job opportunities as well as income for Singaporeans.
I believe that we must persist in our efforts to restructure our economy. We must ensure that our businesses, including our SMEs as the largest contributor to local employment, to remain vibrant and robust; and continue to create new and provide better jobs for Singaporeans.
In recent years, small and medium enterprises (SMEs) have experience significant challenges in their operations. These challenges are largely of two nature, i) Manpower shortages, and ii) rising costs of business.
i) Manpower shortages
Shortage of labour has always been one of great concern to our local SMEs. Although this is not a new concern, this problem has becoming even more acute given last year’s announcement that the growth of foreign labour will be tightened. Many F&B outlets today are struggling to hire their next wait staff and it is not uncommon to see recruitment ads outside restaurants and F&B outlets inviting walk-in applicants. This uncomfortable reality that there will no longer be easy access to foreign labour is one that is here to stay and will be one that many SMEs, especially F&B owners, find hard to face.
A recent commentary in ZaoBao highlighted the plight of one successful Singaporean Bak Kut Teh hawkerpreneur who has to close shop due to manpower shortage. Because of the revised quota system on foreign workers that restricted him from employing foreign wait staff and the lack of Singaporeans willing to be F&B assistant, he had no choice but close his business when he can’t cope with his outlet’s popularity. His business failed not because he is incompetent in his hawker craft. On the contrary, his business failed because his stall is too popular and he cannot cope with operating under the current manpower constraints. His story is not an isolated one and I urge the government to continue to support our SMEs transit into a new lean work structure of having to do more with less; and at the same time, consider helping SME owners who have taken significant steps to improve their business operations, through innovation and automation, to keep their experienced foreign workers.
I welcome the budget’s announcement to extend and enhance current schemes such as PIC and ICT, because these schemes had genuinely helped our SMEs. For example, over the last two years, NTUC’s Hospitality and Consumer Business Cluster (HCBC) has worked with number of F&B outlets, hotels, and food manufacturers to innovate and automate previously labour intensive processes. With such assistance, Shunjuu Izakaya has increased their service efficiency by helping them set up a mobile order and payment system. Similarly, Holiday Inn Atrium implemented a RFID laundry system to replace their previous manual laundry tracking system, as a result, the number of workers required to do the jobs have reduced and our local matured workers now find the redefined job Easier, Smarter and Safer (ESS). Innovations and automations such as these have help companies cut down their reliance on labour and free up their existing manpower to be redeployed to other areas of work that requires more human touch points such as customer engagement. The government must continue to help companies adopt newer technologies to improve productivity, reengineer the process to cut down reliance of number of people. On this note, I would like the Finance Minister to consider extending the PIC Bonus together with the PIC extension. I would also urge Minister to review the PIC criteria which required at least 3 local employees working in the company. Many local SME have very lean operation, thus the proprietors are working to serve their customers too, but they are not considered as 1 of the 3 under the existing criteria.
While schemes such as the PIC, Wage Credit and WorkPro have generally helped our SMEs transit into a leaner workforce with higher productivity, they are subjected to abuse. In one of my interviews with Straits Times, I have highlighted how one such abuse has taken place. The example I raised was consultants charging exorbitant “administrative fee” when helping companies apply for PIC. Recently, one employer told me, a consultant has approached him and guaranteed him to get $40,000 grant from the government schemes. The consultant requested him to pay 25% of the grant received as service fees.
I applauded the relevant ministries for making the current application process as straight-forward as possible, and the SMC Centre are providing free service to companies, there is need to further generate awareness and I think the government should put in place measures to stem dubious consultants from charging exorbitant “administrative fee” or taking a cut out of the grants, so that companies that needed such assistance will be protected from exploitation, at the same time, protect the integrity of these schemes by ensuring that the grants are channeled to the right purpose.
SME owners must be self-reliant and recognize that these support schemes are not indefinite and definitely are not panaceas. Unless SME owners themselves are committed to restructure their businesses and change their current operational processes, these schemes may actually work to their disadvantage when they expire, leaving SME owners without a buoyant to stay afloat. Therefore, I also urge SME owners to challenge tried and tested procedures.
Bake Mission is an example of a company that challenge tried and tested procedures. Through the Inclusive Growth Program (IGP), HCBC and e2i has helped Bake Mission tapped on the available funding and helped change the bakery’s work flow and processes. In the past, workers had to manually arrange pastries on baking trays after they were produced by a machine. Now, the pastries are arranged on a tray with a purposefully designed conveyer belt system. Another change that had taken place is the use of a packing machine that packs pastries uniformly and efficiently. With these changes, Bake Mission managed to redeploy their excess manpower to other functional areas and their overall business profits have grown. These gains are shared with their Singaporean employees, leading to an average of 12.5% increase in staff wages. Given the current tight labour market, it is important for business owners to emulate companies like Bake Mission to streamline their operations.
Another example is Arrow Tyres. It specialises in the business of retailing tires, sports rims and basis vehicle maintenance. The business is located in the heartlands of Hougang serving primarily customers in the vicinity. Over the years, the company has marketed itself through online marketing and customer referrals resulting in a growing business. The boss Mr Alvin Boey was recommended by a friend to visit the SME Centre to explore how he can leverage on government schemes to grow his business. During the advisory process, Mr Boey shared that most of their customers would visit the workshop during lunch hours and the technicians would have to change the tyres efficiently to serve more customers due to limited time. In particular, Mr Boey shared that special tyres like RUN-ON-FLAT tyres would take a longer time for a tyre refitting on existing machines as the process is fully manual and requires 2 technicians to operate the tyre changing machine.
The business advisor advised the company to consider the possibility of upgrading the equipment to reduce the manpower needed and improve efficiency to reduce the time take for each tyre change. Upon the guidance and assistance of the SME Centre, Mr Boey successfully applied for PIC which allowed him to purchase a new tyre refitting machine with a compressed air-powered assisting arm that could reduce the effort and time needed to refit tyres.
As a result of the purchase, the company is now able to improve the speed of changing tyres and hence serve more customers. The time taken to change RUN-ON-FLAT tyres have been also reduced by more than 50% with a tyre change requiring only 1 technician.
This year’s budget has announced more assistance to help SMEs improve their productivity. With more productivity schemes being implemented, I wish to renew my call for the government to consider granting short-term transitional DRE to companies which have embarked on the relevant schemes with investments and made significant efforts to reduce foreign workers reliance in long run. Some companies, due to the nature of the business they are in, find it hard to cope even when they have implemented productivity and innovations plans. The government should recognize the efforts of these companies and consider giving them some leeway. Let’s be reminded that the fundamental purpose of productivity schemes is to help businesses transit, not stifle their operations and expansions.
To be sure, the problem of labour shortage is not limited to frontline service staff in the F&B. SMEs also face manpower shortage at the executive and management level. Even though SMEs today employ about 70% of our workforce and comprise nearly 99% of businesses in Singapore, our local graduates continue to favour jobs in MNCs. In 2013, Universum surveyed more than 6000 students from our local tertiary institutes on which company they would like to join upon graduation. Granted that there are some overlaps in the listing, no local SME made it into the list of top 60 companies that our local graduates aspire to join.
We need to make employment in SMEs an attractive option for our local graduates. Many SME owners lament that they are unable to attract our local graduates to their join them and assume the chief reason behind this is because they are unable to remunerate our graduates on the same level that MNCs can. This assumption is somewhat inaccurate. Starting from Edward Locke in 1967, 50 years of management research has shown that pay is only one of the many facets of job satisfaction and is one, among many considerations, that tertiary job seekers have. What our graduates want are challenging and meaningful work, career progression, personal growth on the job, nurturing leaders, and a fair remuneration system.
We need to make every SME job a better job. To attract our university and poly graduates to join SMEs and retain them in those jobs, we need to work towards the professionalization of our SME where there exist a clear and structure career progression framework for our graduates, similar to those in larger organizations. More importantly, we need to provide our graduates with opportunities for personal growth on the job and give them meaningful and challenging work that rival what they would get in MNCs. A few structured initiatives that I found particularly useful is the National Retail Scholarship jointly administered by Singapore Retail Association (SRA), WDA and SPRING, SPRING’s SME Talent Program, and ASME Max Talent. I strongly urge SME business owners to leverage more on these programmes. For example, the Spring’s Core Executive Programme administered by NTUC by have supported SMEs in retails and F&B sectors to recruit 198 graduates.
Recruiting is just the first step. Young graduates want to grow on their job. NTUC’s Ong Teng Cheong Institute has over the years provided training and development programs to our union leaders. I believe that the Human Capital and Leadership Institute (or HCLI), a joint initiative between MOM, EDB and SMU, can potentially play a more active role in helping Singapore develop our SME managerial talents. I urge the relevant ministries to consider recalibrating HCLI’s strategic agenda and using it as a vehicle to help develop and uplift managerial qualities in our local SMEs. We need to make personal growth and development opportunities attractive in SMEs by training a pool of managerial talents that can coach and mentor our young graduates, at the same time, giving our young graduates in SMEs a chance to participate in high quality leadership development programs that would otherwise be available only in MNCs.
With these various initiatives in place, I believe the overall quality of our SME’s operations and human capital will be raised, and in the long run, help nurture more SMEs with managerial talents and potential to take the Singapore brand name abroad successfully.
ii) Raising business cost
Besides wages, rental is the next largest contributor to the rising cost of business. Based on quarterly real estate statistics released by URA, retail rental and price of commercial properties have risen steadily since 2009 and it was reported last month on Sunday Times that young entrepreneurs are forced to wind up their businesses due to escalating rental cost. In my constituency, Mr and Mrs Tan, an elderly couple who have been running two coffeeshop stalls for almost 20 years; are forced to wind up their business citing unbearable rental cost as the main reason.
While retail and commercial rental in Singapore have not reached the run-away stage in some other countries, examples from these countries would serve as timely reminders on how unchecked increase in retail and commercial rental will adversely impact our SMEs and Singapore’s competitiveness. Take the example of Hong Kong – CBRE, a company specializing in real estate services, has rated Hong Kong as the world’s most costly retail destination for many years running. According to CBRE’s research, retail rental in Hong Kong can be as high as USD3900 per square foot per annum (Singapore is USD455). Unlike Tokyo where local landlords have tried to preserve traditional culture and business like hole-in-the-wall ramen-ya by charging reasonable rent, landlords in Hong Kong have, on some instances, demanded rent increase of as much as 60% during rental renewal. The run-away situation in Hong Kong rental market has eroded Hong Kong’s economic competitiveness and has caused many Hong Kong SMEs who cannot afford the sky-high rental to shut down. In place of traditional retail outlets are new shops selling baby milk formula, pharmaceutical products, and luxury items that cater to wealthy Chinese tourists. As a result, the commercial scene in Hong Kong is severely altered with many Hong Kongers lamenting the loss of a sense of familiarity and home. I hope Singapore do not go down that route.
Many are worried that the institutionalized landlord are killing the goose for the egg. While I believe most people would recognize that increase in rental is inevitable in long term, it is to our detriment if rental are raised to suffocating level within too short a period of time, especially if such increases are going to threaten the survival of our SMEs and the vibrancy of Singapore’s local business. First, traditional businesses and SMEs operating on with thin profit margins are forced to wind up because they can’t keep up with the rent increase. Second, high rental is going to stifle entrepreneurship and deter young entrepreneurial Singaporeans from striking out on their own. Third, for SMEs to survive, they inevitably will have to pass on the rental increase to consumers, making consumers worse off. Many SMEs I met hope our institutionalized landlords can consider limiting rental increase to a set percentage of promised rates of returns on REITs and be transparent to tenants on how rent increases are computed. Would the Government consider extending the cooling off measures that stabilizing residential property market to the industrial and commercial property market?
Besides escalating rental cost, many SME owners have highlighted that due to power asymmetry between them and large institutionalized landlords, they are subjected to unfair terms and conditions imposed by these landlords. One example is having early termination clause that allows landlords to terminate tenants’ rental with pre-termination notice but not allowing tenants to do the same. Tenants who wish to terminate their rental early have no choice but to serve out the entire lease, often having to suffer on-going financial losses. In the event where landlords actually allow for early termination, they would typically impose heavy financial penalties on the tenants. Another of example of questionable practice would be when landlords offering very attractive initial rental to entice companies to set up shop in their premises and subsequently jack up the rental sharply during lease renewal. Tenants are caught with either having to pay the much higher renewal rental or to close shop and lose their initial investment. Unfair practices such as these places our SMEs in a Morton’s fork dilemma where all options are undesirable options that leads to significant financial losses. Many hope the Government could help to promote contacts with fairer terms and conditions that offer equal protection to both landlords and tenants.
Conclusion
As we believe the best ‘welfare’ we can give Singaporeans, is to ensure full employment, we have to do all we can in ensuring a healthy growing economy with good job opportunities so Singaporeans can lead a better life. So, we must the recognize SMEs as a core of our economy and Value Every Job, Value Every Worker in SME workplace in this transition and transformation process.
