As global monetary conditions tighten, interest rates are set to rise and small and medium enterprises in Singapore should prepare themselves for higher borrowing costs, Minister for Trade and Industry Lim Hng Kiang said on Monday.
"It would not be prudent for the government to lower borrowing costs for businesses artificially," he said, in response to a question by Mr Arthur Fong (West Coast GRC) on the impact of the rising interest rate environment as the United States tapers off its third round of quantitative easing.
What the Government will do, said Mr Lim, is continue to help SMEs raise their capabilities and productivity so they can increase their revenue to cope with the higher costs. Agencies such as Spring Singapore also ensure that credit remains accessible to SMEs through programmes such as the Micro Loan Programme, he added.
But the Minister also noted that the impact on Singapore is likely to be limited, as the global market is "likely to adjust in an orderly manner" to the tapering.
Mr Liang Eng Hwa (Holland-Bukit Timah GRC) asked a supplementary question on whether Japan's own round of quantitative easing might see another source of "hot money" flowing to Singapore, or competitive devaluation in the region.
To that, Mr Lim said that although the policies of major economies may differ, the overall global conditions still point to a tightening of monetary policies.
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Here are the written answers from Mr Lim during the first Parliamentary seating on Monday:
Incentive schemes to promote SME exports
Mr Chen Show Mao:
To ask the Minister for Trade and Industry (a) whether any of the current incentive schemes applicable to SMEs reward them for increasing their firm-level export intensity (i.e. their share of exports out of total revenue) among other metrics; (b) if so, which schemes are these and whether these schemes stipulate an export-intensity target or threshold; and (c) if not, whether the Ministry will consider studying the scope for including this ratio as a key performance indicator in the award of incentives so as to promote SME exports as a third pillar of Singapore exports and help develop the most export-ready SMEs into Singapore MNCs.
Mr Lim Hng Kiang:
MTI believes that it is important that we assist our SMEs to internationalise and capture opportunities beyond Singapore. IE Singapore works closely with companies to understand their business needs, growth potential and projects at hand in order to provide customised assistance.
We provide both broad-based and focused programmes which aim to facilitate business activities of internationally-oriented companies.
However, our schemes are not aimed at increasing firm-level export intensity.
Singapore is signatory to the WTO Agreement on Subsidies and Countervailing Measures (SCM), and therefore subject to the principles that govern subsidies and incentives given to companies. Incentives that are "conditional on export performance" are prohibited.
New growth areas to support the Singapore economy
Ms Tan Su Shan:
To ask the Minister for Trade and Industry (a) what studies are being done to identify new growth areas for the Singapore economy; and (b) what investments have been made to cultivate the new skills necess ary to enable the local workforce to fully participate in the knowledge-based industries that will support Singapore's future growth.
Mr Lim Hng Kiang:
Restructuring and moving our economy up the value chain is an integral part of our economic development strategy. The Government undertakes regular reviews and studies at both the whole-of-economy and industry levels to identify future growth opportunities. One past example is the Report of the Economic Strategies Committee in 2011.
Economic agencies such as the Singapore Economic Development Board (EDB) also constantly monitor global macro and industry trends to identify new growth opportunities. In recent years, EDB has seeded new growth areas such as data analytics and biologics. As announced in Budget 2013, EDB is currently developing a Future of Manufacturing plan taking into account global manufacturing trends and emerging technologies to identify new growth areas with the potential to create a range of new jobs for Singaporeans.
To ensure that Singaporeans have the capabilities and skills to take up jobs created in new growth areas, the Government invests heavily in our Continuing Education and Training (CET) system. The Government has put in place dedicated training programmes aimed at meeting the different upgrading needs of specific segments of the workforce, such as the Skills Training for Excellence Programme (STEP) for professionals, managers and executives, and Workfare Training Support (WTS) for lower wage workers.
In developing new industries or growth areas, our economic agencies also partner companies and education institutions to develop specific training curriculum and development opportunities to up-skill Singaporeans for the new sectors. An example is the Strategic Training and Attachment (STRAT) Programme under EDB which focuses on building new functional expertise and skill sets for new growth areas through on-the-job training. Trainees are sent to leading companies overseas to learn new skills. Since 2008, 485 locals have been trained through STRAT in areas such as cell therapy, medical technology, biologics manufacturing, digital media and nanotechnology.
EDB also works closely with education institutions to develop their curriculum to equip young Singaporeans with the relevant skills for these new sectors.