Singapore Government Press Release

Media Division, Ministry of Information & The Arts, #36-00, PSA Building, 460 Alexandra Road, Singapore 119963, Tel: 3757794/5

SPEECH BY DR RICHARD HU, MINISTER FOR FINANCE,

AT THE OFFICIAL LAUNCH OF INTERIOR ALLIANCE PTE LTD

AND OPENING OF SAMLO DESIGN HOUSE AT 59, SUNGEI KADUT LOOP ON 30 NOVEMBER 1996 AT 12.12 PM

Mr David Tan, Chairman of Interior Alliance Pte Ltd,

Distinguished guests,

Ladies and gentlemen,

Good morning,

Small and medium-sized enterprises or SMEs play a crucial role in the economic development of Singapore. They constitute more than 90% of total establishments and employ half the labour force. The SME sector helps to fuel our economic growth by supporting the multi-national corporations, generating export sales and serving the majority of the needs of domestic customers. In 1993, local SMEs contributed 29% to total value added.

We need a strong SME sector to sustain a healthy economic growth. For us to achieve this, our SMEs must make every effort to raise their productivity level and continuously innovate. Presently local SMEs' productivity lags behind that of larger companies by more than 50%. To improve productivity, SMEs must strive for more optimal ways to maximise their use of their resources.

With more companies plugging into the global markets, the SME sector is also no longer insulated. Competition is not restricted to the domestic domain but regional or even international. To remain competitive, the SMEs must shift their paradigm and channel efforts to rethink their strategy to meet future challenges.

I am pleased to note that our small local enterprises are taking heed of the competition and have taken positive steps to restructure their sectors. With the assistance of the Productivity and Standards Board, many have banded together to form economic groupings and franchises.

Economic grouping is an efficient business format for the SMEs to derive economies of scale and overcome their constraints of size and resources. Such an approach enables even the smallest of them to operate like a large company, increase visibility through better tradenames, enjoy economies of scale, leverage on each other's strengths and engage in joint activities. This practice is widely used by small firms in Japan and United States. This may explain why their SME sectors are more productive.

In a PSB survey conducted on SMEs which have joined an economic grouping, 75% of them agreed that it had helped them do better than before. Close to 80% reported sales improvement a year after joining the group.

The formation of Interior Alliance is another example of small local firms banding together. It is the first PSB assisted economic grouping which taps on the different strengths of partners to provide a complete one-stop interior design and renovation service to customers.

As an economic grouping, Interior Alliance projects that it is able to save $800,000 or 15% annually in operating costs. This can be achieved through having a central management system where members share lorries, drivers, and administrative and accounting staff. Also, it can now bid for multi-million dollar projects to increase sales.

I understand that half of the grouping members are housed in the same building. In resource scarce Singapore, productive use of land is important. I am pleased that Interior Alliance has been able to halve the amount of land used by putting its members in this three-storey building.

Finally, I hope this economic grouping concept will serve as a model for SMEs in other industries. On this note, I congratulate Interior Alliance on the formation of this economic grouping and the opening of this building. Thank you.

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