WP calls for SME-driven economic growth; PAP says Singapore needs both local firms and MNCs

SINGAPORE: The Workers’ Party (WP) on Wednesday (Aug 5) urged the government to focus on smaller companies to drive economic growth, while the People’s Action Party (PAP) said Singapore also needs multinational corporations to thrive.

The debate took place over a motion tabled by WP Members of Parliament (MPs) Kenneth Tiong (WP-Aljunied) and Jamus Lim (WP-Sengkang), who outlined the opposition party’s vision for an economy more centred on small- and medium-size enterprises (SMEs).

Associate Professor Lim said Singapore should gradually reduce its dependence on foreign investments and MNCs, arguing that the government’s recent Economic Strategy Review (ESR) still showed an “implicit bias” towards MNCs.

Responding to the motion, Second Minister for Finance Jeffrey Siow said Singapore’s economy needs both MNCs and SMEs to thrive, arguing that the two reinforce rather than compete with each other.

“We are not in a zero-sum situation. In fact, the growth of our local companies and our MNCs mutually reinforce each other,” said Mr Siow, who co-chairs the ESR committee on global competitiveness.

On the changes he believes are needed, Assoc Prof Lim called for a shift away from competing on low taxes, an undervalued exchange rate and “the wooing of footloose multinationals”. Instead, Singapore needs to focus on building stronger local enterprises and encouraging entrepreneurship.

“This means weaning our companies off a race-to-the-bottom focus on cost cutting as the only means to be competitive,” he said.

He noted that SMEs account for 99 per cent of registered businesses and employ 70 per cent of Singaporean workers, yet contribute only around half of the economy’s value added.

“If our SMEs are stifled because business or funding opportunities are crowded out by the bigger players, we will never discover our own homegrown, globally competitive unicorn,” he added.

Mr Siow said Singapore must work harder to attract foreign investment amid a more challenging global environment while continuing to support local companies.

The government provides nearly S$2 billion (US$1.56 billion) in direct grants to local SMEs every year, said Mr Siow, who is also transport minister.

Not all of these schemes are fully utilised and the government can do more to help companies make full use of the available support. If demand for them grows, the Ministry of Finance is ready to provide more resources, he added.

“Of course, if this was just about spending more money, we would already have many more world-class companies,” said Mr Siow. “But many of us understand that building a company is very hard.”

PAP MPs and Nominated MPs who spoke on the motion echoed his position, noting the importance of staying open and the role of MNCs and SMEs in Singapore’s economy.

MP Edward Chia (PAP-Holland-Bukit Timah) said Singapore’s economic engine should be powered by both dynamic local companies and global enterprises.

“Dynamic local companies matter, but we should not frame local companies and global enterprises as competing choices. Singapore’s success has never been built on such a false choice,” he added.

Global companies bring investment, technology and international networks, while local firms contribute agility, innovation and specialised capabilities, he added.

“Together, they create an ecosystem that builds capabilities, accelerates innovation, and creates better jobs and opportunities for Singaporeans.”

STAYING OPEN

Several PAP MPs argued that Singapore’s domestic market is too small to become the country’s primary engine of growth.

While domestic demand is important in sustaining heartland businesses, Singapore companies must compete in bigger markets, said MP Mariam Jaafar (PAP-Sembawang).

Stronger domestic demand alone would not generate the growth, wages and opportunities Singapore aspires to, she added.

“Our response has to be to help our businesses compete differently also,” she said.

NMP Mark Lee, chairman of the Singapore Business Federation, similarly argued that domestic demand can provide a buffer but not scale.

To grow, Singapore firms must venture abroad, find new customers, build new production capacity, acquire technology and participate in supply chains overseas, he said.

“The answer is not protection. It’s to help Singapore companies build the capabilities to venture abroad, anchor value here and become strong enough to compete,” he added.

Mr Siow agreed, saying Singapore should deepen its engagement with overseas markets rather than retreat from them.

The answer is not to turn inward, he said. “It is the reverse. To strengthen our companies, to compete more effectively in more overseas markets, with greater resilience.”

Many local companies grow and succeed because of their relationships with MNCs, not in spite of them, said Mr Siow.

These global companies also create high-skilled and high-paying jobs – more than two-thirds of senior management positions in MNCs in Singapore are held by Singaporeans, he added.

The resources Singapore commits to attracting investments do not come at the expense of supporting local enterprises, said Mr Siow, warning that reducing these efforts would risk driving both MNCs and local companies elsewhere.

“At a time when countries are spending more than ever to attract and reshore strategic investments, our response surely cannot be to do less. Giving up these investments would mean fewer high-quality jobs and fewer opportunities for Singaporeans.”

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