Distinguished Guests,

Ladies and Gentlemen,

It gives me great pleasure to be here at the Singapore 1000 & Singapore SME 500 Awards 2003. This evening, we celebrate the achievements of top companies and SMEs in Singapore. They have done well despite the global economic uncertainty, the impending threat of war in Iraq and regional terrorism.

The companies gathered here this evening have shown great tenacity. These companies have distinguished themselves. They have exhibited strength and commitment to improve their competitive positioning, performance and service levels. In light of the economic uncertainties, the winners of the Singapore 1000 & Singapore SME 500 Awards, as well as all companies who have made it to the listings, deserve even greater commendation for their accomplishments. I have no doubt that they will continue to seek out new opportunities and challenges, and strive toward greater heights.

When Singapore first gained independence, our weak indigenous industrial base meant that we had little choice but to rely on external investments from foreign companies. Our strategy of bringing in foreign direct investments (FDI) has paid off well. Today, we have a network of over 6,000 MNCs in Singapore. They help to create high-paying jobs for our people, develop our professional and managerial skill sets and contribute a significant portion to Singapore’s GDP. Indeed, many of the Singapore 1000 companies are subsidiaries of MNCs. I believe that this trend will remain, and MNCs will continue to be major players in the Singapore economy for many years to come.

There will be, however, growing competition for FDI. Lower-cost competitors in the region, such as China, will increasingly give us a run for the money in terms of FDI attraction. This will be an issue if FDI is a zero-sum game, where an increase in one country comes at the expense of another. On the other hand, if the pie is getting bigger, and we maintain our share of FDI, we will be in a good position. Whichever way this pans out, it will be important for us to groom our own companies. We will need them if we are to capitalize on the opportunities offered by the emerging markets. We will also need them to serve as a vital plank of our economy.

While our domestic market is small, this should not be viewed as a handicap to local enterprise development. Small European countries like Finland and Sweden have produced successful international companies like Nokia and Ikea. Singapore too, can and must groom our own international companies. We stand at a point of time, where several things work in our favour. Barriers to trade and investments in foreign markets have declined substantially, aided by agreements in the WTO and bilaterally by our FTAs. Developments in information technology have dramatically reduced the operating distance between companies, their customers and their suppliers, making a global company not merely feasible, but highly desirable. New markets such as China and India beckon in the horizon, offering a large hinterland within easy access of Singapore. Indeed, the world is your oyster. The question is, do you have what it takes to realise it?

It has been said by Lester Thurow, in his book "Creating Wealth", that enterprises produce wealth in three ways: by introducing new technology, introducing new lifestyle and consumption, or applying existing products to new markets.

His observations have two implications for enterprise development. First, our companies must have the capabilities to innovate. This means that they must have access to technology, R&D, as well as other less tangible aspects such as branding and design. These will manifest themselves in a company’s product or range of products. Second, they must be able to capture their fair share of the fast-growing overseas markets. This is only possible with leadership from a strong management team, and backed by an international network and sound financials. Otherwise, they run the risk of falling behind their competitors.

Ultimately, a true "global champion" should possess the following capabilities – good product, strong management team, international reach, and sound financial position.

What is a good product today may no longer be a good product tomorrow. Companies therefore need to be nimble; they must continually innovate to stay ahead of their competitors by keeping abreast of changing global demand trends, and making effective use of technology. To this end, EDB’s Innovation Development Scheme encourages companies to engage in and develop capabilities in the innovation of products, processes and applications. This has to be supplemented by capabilities like a strong brand, marketing, product design and development, and e-commerce to help their products penetrate overseas markets.

To help more companies upgrade their capabilities, SPRING Singapore recently extended the Local Enterprise Technical Assistance Scheme (LETAS) to public-listed SMEs. Traditionally, public-listed SMEs were regarded as having sufficient means and in-house expertise to do their own upgrading. However, with the relaxation of SESDAQ listing conditions, many smaller companies have sought public listing as a means of obtaining financing, and some may still require assistance to upgrade their capabilities. They will now be able to do so through LETAS.

Besides capability building at the individual company level, these capabilities can be developed through greater collaboration and cooperation between smaller and larger companies. For example, EDB’s Local Industry Upgrading Programme (LIUP) has helped to foster closer business development ties between local companies and bigger companies, both MNCs and GLCs. For example, Philips Domestic Appliances & Personal Care has helped to enhance the existing technology of Amtek Engineering Ltd, resulting in better quality products and costs savings. Such collaborations strengthen and enhance the synergies of the different parties within a cluster, thus enabling our domestic sector to become more competitive. Participating SMEs can benefit through transfer of know-how in key areas like operational efficiency, technology, management and market development. Participating MNCs also benefit through more reliable supplier relationships and cost savings.

A strong management team is also needed to push our companies into the league of global giants. Here, a two-fold effort is involved. On the one hand, we need to draw in global managerial talent who have experience in leading international companies. On the other, we also need to develop local talent to take on such positions.

Despite the early departures of some top management from our GLCs in recent months, Singapore’s position toward international talent has not changed. We have always welcomed, and will continue to welcome, international talent to boost our own talent pool. Besides foreigners, we would also like to attract returning Singaporeans who have gained international exposure by working overseas.

Equally important, is an ongoing process of grooming our own talents to take on international managerial positions. As our domestic market is small, our managers need to prepare themselves for internationally-oriented work. When venturing overseas, "individual field craft" is important in helping companies establish personal relations and making deals. In this respect, the MNCs have played an important part in helping to groom local corporate leaders.

A critical component for any global company is international reach. Singapore has done much over the years to build global connectivity, and companies should seize on this. The mass of quality MNCs in Singapore provide a valuable international network. Additionally, we have concluded free trade agreements with New Zealand, Japan, the European Free Trade Area, the US and Australia. We are also negotiating FTAs with other key economic partners. Our growing network of FTAs helps our companies gain access to overseas markets. For example, the recently concluded US-Singapore FTA opens doors for Singapore companies wishing to export to the US, with the immediate removal of tariffs on 92% of our exports to the US, and the rest to be phased over within 8 years. Sectors that will benefit include: electronics, chemicals and petrochemicals, instrumentation equipment, processed foods and mineral products.

Smaller companies often find it difficult to venture overseas due to the lack of international contacts and experience. Taking a step back, even our larger companies are not that large on a global scale. For example, only 6 Singapore companies were on the BusinessWeek 2002 Global 1000 Scoreboard, which is based on market value. SingTel at #268 was Singapore’s largest company in terms of market capitalisation, but is only ranked 20^th when compared with other large global telcos.

One measure to increase the chances of success is to encourage our companies to venture overseas in consortia. These will be formed by companies within the same industry or along the same value chain. This approach helps to spread the risks, and also provides greater bargaining power. Focusing on industries where we already have existing strengths, the more established or experienced companies can lead the pack in overseas ventures. To achieve this, IE Singapore is organising more industry-focused missions. Companies have found this useful. In addition, Network China and Network India, both supported by IE Singapore, promote networking and collaboration between Singapore-based entrepreneurs and professionals, and their Chinese and Indian counterparts respectively. Together, they can develop new connections, exchange experiences and market knowledge, as well as jointly explore other markets such as Southeast Asia.

Companies also need sound financials to grow. Increasingly, corporate governance is a key factor in determining a company’s ability to get financing. There is now widespread recognition of this, following the Asian financial meltdown of the late 90s and the wave of corporate scandals that surfaced in the US last year. According to a July 2002 McKinsey survey, two-thirds of institutional investors would avoid poorly governed companies. On the other hand, an overwhelming majority was prepared to pay a premium for companies with good corporate governance practices. While good corporate governance does not guarantee profitable enterprises, it can strengthen a company and lower the costs of raising capital. Singapore has taken a string of measures to help bring about good corporate governance. For example, listed companies are required to disclose their corporate governance practices and give explanations for deviations from the Code of Corporate Governance in their annual reports for Annual General Meetings held from 1 Jan 2003 onwards. Singapore incorporated companies are also required to comply with the Financial Reporting Standards for financial statements covering periods beginning on or after 1 January 2003. The Financial Reporting Standards are based closely on the International Accounting Standards and International Financial Reporting Standards issued by the International Accounting Standards Board.

Access to capital is an oft-cited problem for growing companies. In September 2002, SPRING Singapore introduced the Loan Insurance Scheme. Under this programme, the government co-shares insurance premiums with the SMEs. With risk insured, and more flexibility for the participating financial institutions to package loan facilities based on the client’s profile, this scheme enables SMEs with a higher risk profile to obtain loans from the participating institutions. Since its launch, more than $6 million of loans have been approved. More recently, the Local Enterprises Finance Scheme (LEFS) was also extended to public listed SMEs.

In seeking financing to expand overseas, some companies have found that our financial institutions lack adequate knowledge of various industries and overseas markets to perform sound credit analysis. To assist companies to globalise their operations, sell in the global market place and leverage on global resources to grow, IE Singapore offers the Regionalisation Financing Scheme. This low-cost financing scheme is designed to help local enterprises acquire fixed assets to set up operations overseas.

Besides developing the right capabilities to succeed locally and overseas, the Government recognises the need to provide the necessary conditions for our companies to flourish. Importantly, a business environment that is good for MNCs may not work for SMEs. Therefore, we are taking steps to make Singapore more enterprise-friendly for businesses of all sizes.

For example, the Pro-Enterprise Panel acts on public feedback to remove unnecessary regulatory impediments that stifle business. We are also conducting a systematic review to streamline the licensing requirements for setting up businesses. We have also reduced corporate and top-tier personal income tax rates to 22%, with plans to further reduce them to 20% within 3 years. We will also enact a competition law within 2-3 years to prevent any abuse of dominance in the domestic market.

But the fact remains that the Government’s role is that of a facilitator. The Government cannot produce global champions, but it can create the environment and conditions that allow, encourage and facilitate the growth of such companies. Our existing strengths, such as our record of strong corporate governance and our international network of MNCs in Singapore, already put us in good stead.

The winners of the Singapore 1000 & Singapore SME 500 Awards are sterling examples of how private enterprises play a lead role in the economy. I hope that as you continue to seek out new opportunities and challenges, you will be inspired to grow and emerge as international Singapore companies. My heartiest congratulations to all the winners!

Thank you very much.

*****