Introduction
Mr Lawrence Leow
President of the Association of Small and Medium Enterprises
Distinguished guests ,Ladies and gentlemen,
Good evening
First of all, let me congratulate the 18 th Executive Council of the Association of Small Medium Enterprise (ASME)!
The past one year has certainly been a very challenging year for all of us. We had to deal with problems one after another. Before we could get over the adverse economic impact from the Iraq War, another blow hit us – the SARS outbreak. Many industries were hit. The aviation and hospitality sectors were almost brought to their knees. I fully understand that as owners and CEOs of local SMEs, the challenges you faced were probably larger, relatively speaking, compared to bigger enterprises given SME's smaller resources. However, we have proven that Singapore is a place that can get things done. We stood united against each challenge. We fought with determination, perseverance and courage. We grew stronger and we learnt from experience.
SME Importance to Singapore 's Economy
Our local SMEs have contributed and will continue to contribute significantly to Singapore 's economic success. There are about 100,000 local SMEs, constituting about more than 80% of all commercial entities. One very critical area of contribution by local SMEs to the Singapore economy is that of providing employment. Our local SMEs accounted for about 49% of employment in Singapore in 2001. In that same year, the value added of our local SMEs amounted to $30.5b.
Another key contribution by local SMEs is their role as supporting industries for the multi-national companies. Our SMEs' robust support for MNCs has gradually become a plus point in attracting huge foreign investments into Singapore . In addition, through partnerships with MNCs, our local SMEs have built up core capabilities which enabled them to support MNCs in higher value-added activities.
The forward-looking and enterprising spirit of our local SME entrepreneurs is also important to drive our economy forward for the next phase of Singapore 's development. Tonight, we have with us many of you who have this spirit of enterprise. You are role models for our young entrepreneurs! Our budding entrepreneurs will need to have determination, discipline and the mental strength to push ahead. One will need the mental toughness to hang in there and win business battles. As successful entrepreneurs, you can encourage those entrepreneurs who try, fail and get up to try again. They can definitely benefit from your experiences and your contributions will certainly make a meaningful secondary impact on our domestic economy besides your own businesses.
I must commend the Association of Small and Medium Enterprises for the effort that it has undertaken all these years, to honour, recognise and motivate local entrepreneurs through its active involvement in running key national awards, such as the Entrepreneur of the Year Award and the Woman Entrepreneur of the Year Award. ASME has also established into an excellent platform for entrepreneurs from various sectors and industries to share and exchange ideas, knowledge and experience. I am confident that with the various activities and initiatives by ASME, local SMEs and new start-ups will benefit tremendously.
Wage Restructuring for Competitiveness
The economic roller-coaster that we have been through over the last few years, has forced many companies to examine costs closely. As wage costs constitute a large component of overall business cost, there is a need to re-look at our wage system. The current wage system in most companies is predominantly seniority based. The seniority based wage system lands companies with a larger proportion of longer-service employees with higher wage costs. The system does not stimulate higher performance. If the companies buckle under the higher costs, it is the older workers who face the greatest risk of being retrenched. We need to convert such a system to one that is linked to productivity and performance.
The wage system should be based on five principles:
These principles were set out in 1986. Most companies introduced the variable bonus.
Since the Asian financial crisis, the NTUC and unions have been urging employers to further restructure their wage systems by building up a Monthly Variable Component. The Monthly Variable Component provides immediate relief when companies run into cash-flow difficulties during sharp, unexpected downturns. Such flexibility can allow quick adjustment to wage costs without cutting headcount and thus saving jobs. When the company recovers, wages can move up again. The approach will also give workers a clearer formula to share the gains when the company performs well.
The Tripartite Taskforce on Wage Restructuring has been active in driving the process of wage restructuring since its appointment in May 2003. It has closely consulted managements of various sectors and industries to identify, understand and address the problems of implementing wage restructuring. It has also worked on a generic wage model, recommendations on “how to do” wage reform and implementation options for wage flexibility.
To ensure smooth implementation of wage restructuring, employers must communicate clearly to employees to make them understand the purpose of wage reform. Employees need to know what to expect before they can begin to accept anything. There must be transparency and information sharing at all times to buy in the changes. NTUC and the unions have been working with employers to implement the competitive base wage system so as to move away from paying according to seniority.
Some employers have said that they are afraid to restructure their wage system, for fear of their employees moving to other companies that do not restructure. I would like to make two points.
Firstly, If the restructured wage package is seen as a pay cut, then workers will dislike it. But if the restructured wage package is seen as providing greater job stability with a fairer share of the upside, then workers will accept the package.
Secondly, employers should get their act together. One good approach is to work together in the same sector, to settle the key features of the wage system appropriate for the sector. Then each company can implement the new package, with variations if they wish.
Other employers have said that the flexible wage system is difficult to implement. Yes, it is difficult when you do not know how to do it. That is why the Tripartite Committee has not only set out the principles, but also shown how others have done it. I expect more examples of successful cases to be shared in the months ahead, to guide other employers in their efforts.
Economic Performance and Union Collaboration
There are signs of recovery for the Singapore economy. Government economists have reported that Singapore 's growth figure for the year would go way beyond the private sector's estimate of 3.9 per cent. More jobs are in the pipeline, with the manufacturing sector reporting at least 50,000 job openings this year. Generally, economic performance is expected to be better in 2004 than last year. However, I urge everyone to remain vigilant. It is not the end of the battle. We have tougher battles ahead. We should not detract from wage restructuring which is integral to Singapore 's long-term strategy to stay competitive in the global economy.
Conclusion
Over the years, we saw some of our local SMEs grow into regional and global players. These success stories are encouraging and inspiring. However, the operating environment is changing very quickly. Our local SMEs might have to negotiate steeper turns and bends to achieve the same level of success. An increasingly integrated global economy will present more intense competition as well as more opportunities. Hence, local SMEs should invest in their own future by taking the necessary steps to enhance competitiveness and upgrade their business capabilities. It benefits local SMEs to work with the unions on wage reform, job redesign and skills training, as the goals for both parties are not divergent. NTUC and the unions are willing to collaborate with our local SMEs in labour matters to work towards continued economic growth for all.
With that, I would like to conclude and let me wish you a pleasant evening!
Thank you.
