By TEH SHI NING

Challenges faced by small and medium-sized enterprises dominated discussion at the Economic Strategies Committee (ESC) Industry Forum yesterday.

Several suggestions cropped up, including setting up a development bank to provide dedicated SME funding, a government-run venture capital arm to invest solely in local SMEs, a unit to draw foreign SMEs here and, an SME Training Bus to provide mobile training for employees.

The perennial concern of SME financing was voiced by several of the 80 business participants present. They highlighted local SMEs' need to go abroad at an early stage, due to Singapore's limited domestic market. But this also means that their track record is often too scant to garner sufficient financing for overseas projects.

Finance Minister Tharman Shanmugaratnam, who chairs the ESC and sat on yesterday's panel, said that these issues are being studied, but that 'our aim shouldn't be to substitute for the market, but to catalyse and aid the market'.

Minister Lim Hwee Hua, who heads the ESC sub-committee, said that Singapore needs to find the balance between public and private financing too. 'Singapore, being a financial services hub, should really have no shortage of participants from the private sector - venture capitalists, or private equity. If government should play a key role, the form this takes needs to be looked at too.'

The issue of financing also raised the question of what the definition of an SME should be. Eligibility conditions for existing financing schemes defines an SME as one with a fixed asset investment of $15 million at most, and no more than 200 employees.

But, Simon Lee of the Singapore Contractors Association pointed out that small construction companies are often disqualified from these grants as their industry demands high employment and investment in physical capital. This definition is under review, said Mrs Lim, both for that reason, and because companies which are not actually small could qualify after restructuring their balance sheets. Also discussed was the possibility of classifying companies by their stage of growth instead.

Other suggestions were for the adoption of Japanese export house concept of sogo shosha, or that larger government-linked companies take SMEs along on their overseas projects, to help them gain experience and exposure.

But, Ricky Souw, CEO of Sanwa Group, thought this could make SMEs too dependent on bigger players and weaker in the long-run. He advocated more collaboration between SMEs instead, to venture abroad together, as did Mrs Lim. 'They should cluster together to provide synergistic solutions, which will be much more attractive,' she said.

'An SME in Singapore also has potential to use the network and market reach of MNCs and foreign SMEs in Singapore to raise their network and reach abroad,' Mr Tharman said, giving the example of Uhlmann, a German pharmaceutical company which has a tie-up with local manufacturing supplier Eng Tic Lee Achieve. Singapore has the advantages of 'market intelligence, networks, and knowledge of technology' which will allow local SMEs to partner, collaborate and move together, he said.

This article was first published in The Business Times.