COMMENTARY•DANALYSIS
For SMEs, the three seeds of success

By RAYMOND LIM

Today, nine out of 10 companies in Singapore are small and medium enterprises(SMEs). They employ half of our workers and contribute a third of total value-added.

It is vital that we have a strong east of entrepreneurial SMEs. But what does it mean for and SME to be entrepreneurial? From what I have seen. They have three hallmark qualities.

First, entrepreneurial SMEs are constantly on the lookout for opportunities. They are attuned to the pulse of the local market. They are quick to find niches where they have a competitive advantage. They keep abreast of developments in foreign markets and leverage new platforms to take their products and services overseas.

One such new platform is the United States-Singapore Free Trade Agreement. This was passed by the US Congress earlier this month and is expected to come into force by January next year. The US has committed to eliminate 92 per cent of current tariffs on exports from Singapore to the US, immediately upon entry into force of the trade pact.

This will benefit sectors such as electronics, chemicals, petrochemicals, instrumentation equipment, mineral products and processed foods. For example, with the lower tariffs. Woh Hup's manufactured sauces will be 3 per cent to 6.4 per cent cheaper for US consumers.

Second, entrepreneurial SMEs thrive and build on innovation. They distinguish themselves from their competitors by constantly improving on their products and services.

One way which SMEs can sharpen their innovative and technological edge is to tap on our universities and public research institutions. Over the years, they have accumulated a wealth of intellectual property (IP) through their research and development activities.

Such IP can be applied to improve existing products and services, or even create new ones. SMEs should work with the technology transfer offices of the Agency for Science, Technology and Research (A*Star) and the institutions to explore how this IP can be commercialised.

SMEs may also wish to tap on the Government's Growing Enterprises with Technology Upgrade (Get Up) programme, which harnesses the existing schemes of our economic agencies - A*Star. Economic Development Board. International Enterprise Singapore, and Spring Singapore - to help growth-oriented SMEs.

Innovation is not the prerogative of the high-tech sector. SMEs such as the Gim Tim Group of Restaurants, for example, have shown that a creative touch can also invigorate traditional trades. In addition to providing traditional dinein and catering services, Gim Tim has a Gourmet Swat Team.

Under this concept, conventional trucks are transformed into mobile kitchens by outfitting them with kitchen facilities. This enables Gim Tim to bring its culinary services to the doorstep of its customers and cater freshly cooked food for large-scale events. Business is especially brisk during festive periods and religious occasions such as the Hungry Ghost Festival. I understand that during these times, Gim Tim's chairman rolls up his sleeves and helps out with the cooking!

Third, entrepreneurial SMEs are not handicapped by their size. Instead, they use their size to their advantage. They stay nimble and adapt quickly to changing market conditions. They enjoy firstmover advantage because they react to opportunities before their competitors do. They mitigate their size disadvantage, by forming mutually beneficial partnerships with other companies.

An example of such an SMEs is the Pet Lovers Centre, a provider of pet care accessories and services. Together with 10 other companies, Pet Lovers Centre has formed an economic grouping called the Pet Safari. The grouping includes pet retailers, pet boutiques, grooming service providers, and veterinary service providers. By leveraging each other's complementary strengths, Pet Lovers Centre and its partners hope to capture a greater slice of the pet care market in Singapore.

Entrepreneurial SMEs are important to Singapore's economy not just because they create value and jobs. They also play a catalytic role in making Singapore and entrepreneurial economy.

In order to compete successfully with larger incumbents, and establish a foothold in the market, they have to offer innovative products and services. A strong group of entrepreneurial SMEs therefore creates a vibrant churn of ideas and new products.

These innovative SMEs serve as positive role models for other start-ups and aspiring entrepreneurs. Their presence helps to entrench the spirit of entrepreneurship in our culture. A core of them increases Singapore's attractiveness to innovative companies.

Innovation does not thrive in a vacuum. It needs a vibrant enterprise ecosystem where there is cross-fertilization of ideas. Thus, the more entrepreneurial companies there are in Singapore, the more attractive Singapore will be to the best global companies and entrepreneurs.

[ The writer is Minister of State for Trade and Industry and Foreign Affairs and also Minister of State in charge of Entrepreneurship. This is and edited excerpt from his speech at the E50 Leaders talk yesterday.]