mncs or smes: perspective from singapore
DESCRIPTION
MNCs or SMEs: Perspective from Singapore by Professor Tan Kim Song, Singapore Management University.Presentation was done at Empire Hotel and Country Club at the Local Business Development Forum organized by AsiaIncForum and Sponsored by BSP.TRANSCRIPT
MNCs or SMEs?
Perspective from Singapore
Local Business Development Forum 2010
18 November 2010 Brunei
Professor Tan Kim Song
Singapore Management University
ASEAN: Business Environment Rankings
Indicators Singapore Brunei Malaysia Thailand Indonesia
Global Competitiveness Index
2010-2011
3 28 26 38 44
WB Ease of Doing Business
2011
1 112 21 19 121
Source: Global Competitiveness Report 2010; WB Ease of Doing Business 2011
Foreign Companies vs. Local Companies
0.0
50.0
100.0
150.0
200.0
250.0
2000 2001 2002 2003 2004 2005 2006 2007
Local Foreign
$bil
56%57% 55% 53% 52% 51% 48% 49%
43% 44% 45% 47%48%
49%52%
51%
0.0
50.0
100.0
150.0
200.0
250.0
2000 2001 2002 2003 2004 2005 2006 2007
SME Non-SME
$bil
44% 46% 44% 46% 45% 47% 47%49%
56% 54% 56% 54%55%
53%53%
51%
Source: MTI, Singapore
Trends in the share of Value-Added by Ownership and Size
4
Foreign MNCs Dominate the Economy
Local
Non-SMEs
Dominated
Foreign SMEs
Dominated
Foreign
Non-SMEs
Dominated
Local SMEs
dominated
Electronics
Biomed
Chemicals
Precision Engg
Transport Engg
General Mfg
020
40
60
80
100
% V
A A
ttri
bu
tab
le t
o L
ocal
En
terp
rises
0 20 40 60 80 100
% VA Attributable to SMEs
Manufacturing
Foreign
Non-SMEs
Dominated
Local
Non-SMEs
Dominated
Foreign SMEs
Dominated
Local SMEs
dominated
5Source: MTI, Singapore
Wholesale & RetailFinancial Svcs
Real Estate/Biz Svcs
Other Services
Tpt & Storage
Info & Comms
Hotel & Restaurants
020
40
60
80
100
%V
A A
ttri
bu
tab
le t
o L
ocal
En
terp
ris
es
0 20 40 60 80 100
% VA Attributable to SMEs
Local
Non-SMEs
Dominated
Foreign SMEs
Dominated
Foreign
Non-SMEs
Dominated
Local SMEs
dominated
Services
Local Companies More Active in Services Sector
6
Source: MTI, Singapore
Why the Dominance of MNCs in Singapore?
MNCs are key contributor to Singapore’s economic success
Singapore able to attract MNCs through “efficiency”
Main economic/business policies geared towards satisfying needs of MNCs. SMEs neglected
Presence of large GLCs adds to challenges of SMEs
Recent Recognition of MNC-SME Imbalance
Twin effects of imbalance Unhealthy distribution of GDP
Weak Domestic Production Capability
Vulnerability of economy Compares badly with Germany, Taiwan, Korea, etc
Poor track records in innovation/productivity growth Shift of growth strategy from “efficiency-driven” to
“innovation-driven”
SMEs important to innovation
New Efforts to Help SMEs
What explains Singapore top rank in WB index?
Economies of scale identified as key SME challenge Regionalization/Internationalization seen as solution
Existing institutions to support SMEs Spring Singapore; IE Singapore; EDB
Recent measures: Job Credit Scheme; LIUP Scheme
ESC Recommendations
ESC Recommendations
Cross-border financing facilities to help SMEs internationalize Small domestic market a handicap. Not able to access
regional/international markets for scale economies
To develop specialist financing institutions like Export Credit Agencies and EXIM banks
To provide risk insurance for trade finance and overseas investments
To provide guarantees and co-financing with commercial banks on project finance
Catalyst growth capital: Government as co-investor for PE financing of Singapore-based SMEs Private sector investors to assess investment worthiness
ESC Recommendations
Empower trade organizations/chambers of commerce to drive SME growth and internationalization Currently mainly involved in manpower development,
networking, consultancy/information services
Government to strengthen their institutional capabilities to undertake bigger role in SME growth and internationalization
Drive productivity, capability and talent development programs
Consolidation and aggregation of resources for overseas expansion e.g. marketing, promotion, brand development etc.
ESC Recommendations
Government to help develop SME’s capabilities to support MNCs and large local consumers Help familiarize SMEs with qualifying process of MNCs
Share government’s future needs with SMEs
Enhance access to human capital Formalize long term arrangement for SMEs access to network
of advisors for strategic, functional and domain-specific help
Broaden scope for tertiary students’ internship with SMEs
Thank You!