Singapore’s small and medium enterprises (SMEs), which today constitute 99 per cent of all enterprises and provide 70 per cent of jobs while contributing over 50 per cent of the gross domestic product, were not the country’s intended engines of economic growth. There were therefore few SME-specific policies before the 1980s, when priority in policymaking was to attract foreign direct investments. Efforts to systematically develop local SMEs only truly began in 1989 with the introduction of the first SME Master Plan. In 2000, in response to rising competition from emerging economies in the region, the government launched the SME 21 Plan that set out to make SMEs more resilient and innovative.
Today, SMEs are viewed as major drivers of economic growth and not merely playing a supportive role to foreign multinational corporations. By 2020, the government plans to develop an additional 1,000 new SMEs to help propel Singapore’s future growth. Detractors however are quick to point out that instead of trying to increase the number of SMEs to create more jobs, it may be better to nurture SMEs that can compete more effectively, such as in Germany, Japan, and Taiwan. While this is hardly a new proposition, the intensifying competition from SMEs from emerging regional economies does point to the urgent need to re-examine how the competitiveness of local SMEs, especially those in the tradable sector, could be enhanced.
Mr Parth S Tewari, Head of World Bank’s Competitive Industries Practice, based in Singapore, has advocated the grooming of competitive SMEs, a term that refers to a relatively small number of SMEs that make a disproportionately large contribution to new jobs creation, income enhancement and significant productivity growth. The approach requires the government to focus on enabling high potential enterprises to grow rather than covering all the 154,000 SMEs in Singapore today. This “cherry-picking” strategy risks regulatory capture and market distortions and therefore stands in contrast with government’s current approach of not favouring specific companies.
IPS has invited Mr Tewari to explain his proposition, as well as Mr Inderjit Singh, an entrepreneur and MP of Ang Mo Kio GRC, to act as discussant at the closed-door session.
The discussions will be moderated by Mr Manu Bhaskaran, Adjunct Senior Research Fellow at IPS and Partner and Member of the Board of Centennial Group Inc., a policy advisory group based in Washington, D.C
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The series of CDDs focusing on issues confronting the SME sector in Singapore includes: