Tales of parent volunteers in schools

I was impressed with what I saw this week at a neighbourhood primary school in Pasir Ris. It is a typical neighbourhood school, not the ones that parents would do all sort of things to try to get their children into. In fact, there are only five primary 1 classes this year even though the school was allowed to take in more. In other words, parents could enrol their children into that school at any phase for primary 1 admission.

I was in the canteen with the vice principal when the shutters of a stall just opened. It was around 1130 am. I was curious why the operator would open only at such a late hour. The VP explained to me that the stall is run by parent volunteers. It opens faithfully every week on Friday mornings to teach primary 1 and 2 pupils to prepare some simple food and the parent volunteers would use the facilities to cook / bake / heat the food up for them. It is a programme they started this year on a regular weekly basis to get pupils to understand about food preparation and to eat healthy meals. That day was not a Friday. The school’s volleyball team was about to go out for a competition. The parent volunteers had come specially to prepare special food for the team to take away later. I was told this is regularly being done whenever children go out for competitions.

I have seen different types of parent volunteers, having been involved now for many years in this industry. Popular schools have many of them who join mostly just slightly over a year before their children were due to register for primary 1. They do all sort of things required by the school, but mostly to direct traffic during the busy periods of pupils coming into and leaving school. Volunteers include doctors, lawyers, company directors, managers and professionals who would clock in at least the minimum required hours for their children to qualify for admission at an earlier phase for primary 1 registration. They are not expected to stay as volunteers too long. Once the transaction is done, many would ‘vacate’ their positions for a new batch of parent volunteers to serve their duties.

Of course, that’s generalisation. There are always exceptions. I know of a mother whose two sons went into a popular chinese school and she continued to volunteer to do reading programmes for pupils right till her younger one finished primary 6. Some become active as Parent Support Group (PSG) committee members for several years.

Popular schools never had problems getting enough parent volunteers. A principal once told me she had to interview parents every year to select just about enough because she does not want to disappoint parents if there are more volunteers than sufficient places in primary 1 priority admission phases. She recounted a year where parent volunteers had to ballot and some had to be turned away disappointed after a year of faithful labour of directing traffic. That fate indeed happened to a friend of mine. He was disappointed at being unlucky in balloting in an unusual year of high demand for his choice school. Then at the next registration phase at the nearest school to this popular school, he said it was funny to find fellow ‘volunteer rejects’ there with him. Anyway, his son is now doing very well in this neighbourhood school.

Back to my story about that Pasir Ris-based neighbourhood school. The parent volunteers are everywhere, not just operating the canteen stall. They are also in classrooms for certain special projects that require more hands-on help. And they are regular. The same set of parents come weekly to help in the same programmes so there will be some continuity and familiarity with the pupils and in what they need to do.  So I asked the VP if it was difficult to get parent volunteers organised to this level of activism, especially when parents need not volunteer to get their children into his school.

He told me it has been a four-year journey since they started trying to engage parents more. Each year, the commitment level grew and the school became more confident organising parents into more programmes. Some ideas were initiated by the parents themselves, such as wanting to do something to ensure healthy eating for the younger pupils and involving them in food preparation. It requires the volunteers to be regular to ensure the programmes can go on weekly without fail. Of course, these involve those who are full-time homemakers. The VP did say they do engage the working parents to volunteer as well, but on occasional projects.

It is wonderful if parent volunteerism is truly at that level, where the desire is to want to help in children’s holistic education and not to see it as a transaction for priority primary 1 admission. Perhaps the priority system was put there to ensure that schools get a certain number of parent volunteers to get things going. Similarly so for community leaders. I still do not understand why community leaders’ children need to be given priority into primary schools. In their case, the benefits they directly bring to the schools may not even be as much as parent volunteers who would at least have to do something directly involving the school.

Whatever the reasons for giving absolute priority to parent volunteers and community leaders over others, this arrangement would benefit only popular schools. I rather see volunteerism as true volunteerism rather than a business transaction. That way, the effects of what volunteers can do will be more sincere and lasting.

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Investing in a Dynamic Population and Workforce

Speech delivered by Yee Jenn Jong at the Institute of Policy Studies Corporate Associates luncheon at Regent Singapore on 22 March 2013

 

It is my privilege to be in the presence of many distinguished guests who are captains of their industries and top researchers. I thank IPS for inviting me to speak.

I have titled my talk “Investing in a Dynamic Population and Workforce”. I will touch on the fundamental premise the Workers’ Party’s population policy is based on, that is, when we foster a dynamic Singaporean population and workforce, we can achieve a sustainable economy in the long term. For a more dynamic workforce, I will talk about three areas with room for improvements: productivity, work-life harmony, and female labour force participation. We also need to adjust our mindset as political and business leaders of the nation and to think outside the box to foster a creative economy held up by innovative workers.

Let me begin by arguing that we need to shift our comparative lenses. We tend to think of ourselves as a global city. Implicit in this mindset are the specter of our nearest competitor, Hong Kong, and to want to be like New York and London. But let us not forget that we are a country. As a country, the government’s primary responsibility is not to the economy but to the people. Economic growth must not be an end in itself, but the means to the people’s prosperity. I feel it is better to compare ourselves with small and dynamic countries that have achieved sustained economic success.

Let us take a look at this table, which was published in The Economist on 2nd February this year, just as we began the White Paper debate.

Economist-2Feb2013-Topoftheclass

The Economist 2 Feb 2013

Singapore is ranked 7th. It is interesting to note that the top 5 countries in the list are small and dynamic countries. They are Sweden, Denmark, Finland, Norway, and Switzerland. They are not unfamiliar. The Nordic countries are often brought up in our debates on education reforms, birth rate promotion, and social development. Switzerland was once our gold standard, as we pursued growth towards a Swiss standard of living in the 1990s.

Perhaps it should be again. The problem was that we defined the Swiss standard of living in terms of GDP per capita. We assumed perhaps correctly then, that growth would be shared and distributed more or less equitably. This assumption has not held. We now have one of the highest income inequality in the world. There are many reasons for this and I would not have time to discuss them today.

If you take a look at the table again, you will see an indication of why the wealth of our nation is not shared equitably. Singapore ranks in the top 5 in global competitiveness, ease of doing business, global innovation, and corruption perceptions. But when it comes to human development and prosperity, we are 26th and 19th respectively. Prosperity refers to the Legatum Prosperity Index, which goes beyond GDP. It also measures other factors such as entrepreneurship and opportunity, governance, education, health and social capital.[1]

This suggests that we have structured our economy to enable businesses to drive growth and be able to generate profits, but we have under-developed our people, such that Singaporean workers are not benefiting as much from growth as their peers in other developed countries. In 2011, our wage share as a percentage of GDP is 42.3%.[2] This is low compared with developed economies such as the United Kingdom (53.8% in 2011), Canada (52.3%), Switzerland (59.7%), Australia (47.5%) and the European Union (49.2%), which ranges from nearly 50% to almost 60% share of the GDP for wages.[3]

More than ever, there is a great urgency to invest in and to develop the Singaporean workforce to ensure our growth is driven by Singaporeans at the core.

Today, I highlight three areas with room for improvements: productivity, work-life harmony, and female labour force participation.

The Workers’ Party shares the government’s target of 2 to 3% productivity growth. The challenge is in achieving these goals. Last month, MTI reported that labour productivity fell by 2.6% last year. Labour productivity has fallen for five consecutive quarters. There is therefore urgency to improve labour productivity, particularly in industries where we lag far behind international benchmarks.

The second area we need to invest in is work-life harmony. A study by the Ministry of Social and Family Development found that only 23 per cent of workplaces offer flexible working hours. According to the study, work-life harmony has not improved over the last six years. Our score is 63 in 2012 out of a possible 100, no different from 64 in 2006.[4] The numbers clearly show that we need to increase our efforts. The MSF study found that those who scored higher on work-life harmony were more likely to be engaged and productive in the workplace, have better physical and mental health, and reported better family relationships and desire for more children. In other words, work-life harmony is important in improving our national TFR and promoting productivity growth.

One tool to promote work-life harmony is flexi-work arrangements. A recent study by the National Bureau of Economic Research in the US found that work from home employees performed 13 to 22% better than those in the office.[5] Flexi-work arrangements would also attract stay-at-home mothers to enter the workforce.

This is the third area Singapore needs to invest in: female labour force participation. In 2012, there were over 160,000 economically inactive residents who intended to look for a job within the next two years. Of these potential entrants, 64% were female.[6] There were around 270,000 economically inactive female residents aged 15 to 69 years old. This is a big potential pool of new workers.

The Labour Force Participation Rates (LFPR) for women in the prime working ages of 25 to 54 years is 77% in 2012.[7] Compared internationally, 77% is not the best that we can achieve for a developed economy with an educated workforce. There is room for the rate to rise to 85%. Some may also argue that the trade-off for higher female LFPR is lower TFR. This is where our comparative orientation to the small dynamic countries would help. Denmark, Finland, Norway and Sweden have prime-age female LFPR of between 83% to 88%, and TFR between 1.76 and 1.90.[8] Promoting female LFPR may actually have the reverse effect of improving TFR, as the sense of security on the part of women and overall gender equality are important factors in promoting birth rates.[9]

Ultimately, Singapore’s long-term goal should be to improve our TFR to foster a dynamic workforce. Meanwhile, we need to improve overall labour force participation rate to moderate the effects of an ageing workforce. Our current labour force participation rate is 72% for residents aged 15 to 69 years old. The Workers’ Party has called for this rate to be improved incrementally to 79% by 2025 through facilitating elderly reemployment and encouraging more women to re-enter the workforce, while we strive to improve our TFR. Again, let’s look at other small dynamic countries. Switzerland has a labour force participation rate of 80% for ages 15-64 years old and 72% for 15-74 years old. Switzerland has also climbed out of a low TFR of 1.38 in 2001 to achieve 1.52 in 2011.[10]

Finally, I wish to conclude with some personal thoughts about the challenges facing us. Besides being an NCMP, I am also in the business community. I ran an education group as an employed professional in the late 1990s and have started various education-related businesses since 2000.

There are indeed great challenges ahead as our population ages and our economy restructures to move away from the labour-fuelled growth that we are familiar with. Our foreign workforce is already at 1/3 of our total workforce. Singaporeans today form only 62% of our population. Working through the population data with various scenarios, we concluded that the window to restructure Singapore’s economy is a rather short one if we are to avoid massive new inflows of foreigners that will further greatly dilute the core Singapore identity. From now till 2020, the local labour force is still increasing as we will have more new job entrants than those retiring. During the remaining 8 years of this decade, we will all need to work together to raise productivity, find new markets and have more innovation driven growth.

I am reminded of a Chinese word for crisis, called “危机”。“危” stands for “危险” or danger while “机” means “机会” or opportunity. There are dangers and challenges right now for those in the business community. We are forced to adjust to a situation of tight manpower and changes in government policies and regulations. Technology changes are much faster than before. Global connectivity means greater competition for our businesses.

Yet, every time in history when there is great danger, there are opportunities too for those who can see the changes that are coming, adapt to it faster than others, and seize new opportunities that emerges. This is because the playing field may become leveled in a crisis or when there are changes in the operating landscape. Those that emerge first with good solutions will be winners.

I am reminded of my own experience when I ran an education technology business during the dotcom boom. The industry saw intense competition. Many players were wiped out within a couple of years. Then a great crisis came upon Singapore, in the form of SARS. Ironically, it was in this time of crisis that our clients became aware of the need for our type of solutions. Out of the crisis and the massive industry consolidation that took place, a few players managed to emerge with viable business models and growth.

Every situation is different and every industry has its own challenges. My encounter with “危机” or crisis, convinced me that we need to keep looking at the “机会” or opportunity every time there’s “危险” or danger.

In 6 years’ time, Singapore will celebrate the 200th anniversary of Sir Stamford Raffles’ founding of modern Singapore. Next to the parliament house stands a statue of Raffles, with the inscription “On this historic site, Sir Thomas Stamford Raffles first landed in Singapore on 28th January 1819 and with genius and perception changed the destiny of Singapore from an obscure fishing village to a great seaport and modern metropolis.”

Singaporeans have had genius and perception in the past to overcome and grow stronger with each great challenge. Today, Singapore is at another crossroad, already a great seaport and modern metropolis but in need of a new model to move forward. We will need to search deep inside ourselves, build up the Singapore core, both in the population and in the workforce and have confidence to take ourselves forward in this 21st century.

Thank you.


[2] Department of Statistics, Yearbook of Statistics Singapore, 2012, July 2012, p. 75.

[3] OECD Statistics, stats.oecd.org.

[6] Ministry of Manpower, Labour Force in Singapore, 2012, p. 47.

[7] Ministry of Manpower, Labour Force in Singapore, 2012, p. 3.

[8] Prime-age female LFPR data are from skills.oecd (http://skills.oecd.org/informationbycountry/); TFR data are from National Population and Talent Division, Marriage and Parenthood Trends in Singapore, June 2012.

[9] Peter McDonald, “Explanations of Low Fertility in East Asia: A Comparative Perspective”, Ultra-low fertility in Pacific Asia: trends, causes and policy issues, edited by Gavin Jones, Paulin Tay-Straughan and Angelique Chan, London: Routledge, 2008, pp. 23-39.

Blogging about blogging

I was just browsing through some of my old blog entries when I realised that today is the 2nd anniversary of my blog site.

It seemed almost like yesterday that I had decided to create this site. It was a tentative first step. Within the first week, I started by posting whatever I could find of my published letters to the Straits Times and TODAY newspapers. I also shared my reflections sparked by overseas travels made during that month. The next two months, the posts turned more political with the intense activities due to GE2011.

150 blog posts later, I have thoroughly enjoyed this blogging journey. This site has been the place where I share thoughts sparked by news; where I post speeches that I have made in parliament and in rallies; and where I write to seek the views of others on various issues. I have made new friends, including Singaporeans as far off in Finland, UK and USA. Some of the entries are spontaneous pieces, sparked by a moment of inspiration or a sudden thought; just like this post made after a 450-km drive around greater KL and back home at 11 pm. Some pieces are prompted by news or comments by others. Some articles are contributed pieces by readers, whom I have made friends with after they have read my pieces and had written to me to share their thoughts.

This site has grown with my own political journey. These two years have seen four elections (GE2011, PE2011, Hougang and Punggol East by-elections) and various hot issues such as Ministerial Pay, the National Conversation and the Population White Paper. There have been plenty to write about. My favourite topics are related to education, a matter close to my heart and work experiences.

I have enjoyed reading my readers’ comments. As a blogger, I have learnt to accept and value the different viewpoints and opinions. Blogging is like engaging in a conversation with people from all walks of life. Some comments have spurred me to think deeper about the issues and to make subsequent follow up articles.

Thank you for your feedback. They have made my blogging journey a meaningful one.

COS 2013 – Restructuring the childcare sector

Committee of Supply Cuts by YJJ on Ministry of Social and Family Development
Restructuring the childcare sector
Madam, I declare my interest as a supplier of services to education institutions.
I have previously stated my concerns over the way the childcare industry is organised. The government has stated that Anchor Operators (or AOPs) must be non-profit, non-religious and non-racial based. I do not think these criteria are necessary as long as operators accept students of any race and religion and follow strict rules which I will elaborate. MSF can dictate outcomes. It can define fees and expected quality of services instead of being concerned if operators are race or religion based or are private entities. With appropriate rules, MOE and MOT have found it acceptable to work with such entities for schools and public transport respectively . The AOP scheme has caused serious imbalance in the industry by loading a few selected operators with huge operating advantages over others.
I repeat the proposal I made last year for MSF to revamp the AOP scheme and to make childcare as a public good, with open contest by all operators.
Firstly, available sites can be clustered as a package for open bidding. Each tender can be for around 10 centres, with rental cost tied to what non-profit operators currently pay. Bidders should prove their ability to operate centres well, such as having good track record and being SPARK-accredited. Operators can propose the style of programmes and fees to be charged, but fees should be within an acceptable guideline around existing price charged by current AOPs.
Once an operator is awarded, it cannot change fees without approval by MSF. To achieve investment payback, operating period can be for a period of say 10 years, with interim review every 3-4 years. This is to ensure operators will continue to innovate and provide quality services. After the operating period, the sites are re-opened for bidding again by all.
The key advantage of this over the existing AOP scheme is that it allows newer operators who have proven themselves in the market to join in continuously when sites are available. This provides greater diversity of choices. Competition spurs innovation. The current scheme kills competition and freezes AOP players to the few based on the time of selection. It limits choices for consumers requiring affordable fees. Ten centres per tender will allow sufficient economies of scale, and a good operator can win several clusters of sites over time.
To speed up more new sites, I repeat my earlier suggestion that the government can negotiate as main tenant with large landlords of malls and industrial sites with spaces suitable for childcare. It can then open these sites for bidding under this new scheme. It can also turn disused schools and old community centres into mega childcare sites with different operators under one roof.
The government is spending $3 billion in this sector. I believe this same amount can be used to achieve better outcomes in accessibility, quality and affordability and with greater diversity of choices if we organize childcare as a public good and allow regular open and fair competition by all.

COS2013 – Class size in schools, Pri 1 Admission, Secondary School Admission, JC Education, Student Care

Committee of Supply Cuts by YJJ on Ministry of Educatiion
Class size in schools
Most schools in Singapore have a class size of around 40, while Primary 1 and 2 classes have 30 students. This is large compared to the OECD’s average of 21 per class.[1]
There are drawbacks of a large class. Teachers have to deal with more disciplinary and administrative issues, while weaker children risked being marginalised because the teacher’s time is divided amongst many students. MOE has previously said that “empirical evidence on the benefits of a smaller class size remains inconclusive.” [2]
The Brookings Institution notes that large class-size reductions can have significant long-term effects on students’ achievement. These effects seem to be largest when introduced earlier, and for students from less advantaged backgrounds.[3]
The Tennessee STAR and the follow-up Wisconsin SAGE projects demonstrated the positive effects of smaller classes on students’ cognitive and non-cognitive outcomes. These effects persisted throughout the school life of the students. Other studies also show smaller classes have benefited disadvantaged students.[4]
Class size reduction is not the magic bullet to better student development. It has to be implemented together with other holistic policies.
MOE saw it beneficial to have class size of 25 for gifted students. I hope such benefits can apply to all primary levels. I urge MOE to extend class size of 30 to primary 3 and 4 and eventually across all primary levels.

[4]P. Blatchford, P. Bassett and P. Brown (2008) Institute of Education,
University of London, Paper to symposium ‘Class size effects: new insights into
classroom, school and policy processes”, American Research Association
Annual Meeting, New York
————————————–
Primary 1 Admission
While MOE wants every school to be a good school, there is great disparity in results between schools. The highest and lowest median PSLE T-scores amongst schools last year are 247 and 160 respectively, a difference of 87. Mr Lee Kuan Yew had observed that admission to primary schools is based on the social class of parents. Six out of 10 pupils in six of the top primary schools live in private houses.
It is useful to review the primary 1 admission system. It is a stressful process for some, shifting house and doing volunteer work to get their children into top schools. I agree that priority should be given to those with siblings already in a school for the sake of convenience. Beyond that, we can consider a system with higher balloting chances for alumni, school volunteers and those living near the school, but it need not guarantee their position over others like in the phased system today.
I feel community leaders need not be given priority. Being a community leader for the purpose of getting into top primary schools does not gel with the spirit of community service.
With the change, we will have a better mix of students of different social backgrounds in our schools, allowing better integration amongst pupils.
I hope MOE can better spread resources across schools, reduce class size and review the need to centralise gifted students in top schools. Then, there may not be as much stress over which primary schools to enter.
—————
Junior College Education
I declare that I am an Advisory Board member of a junior college (or JC). Observations in this cut are not from that JC.
I am concerned with a trend I noted in JC year 1 promotion exams, or the promo. There is no universal standard. Some JCs fail more than 50% of students at the promo. There will be a re-test, of which I found that in some JCs, the number of students retained or left JC after year 1, is very high. The highest I found is around 200 students in a cohort of some 800 year 1s.
Ironically, it is not the JCs that take in the weakest students that have the highest failing rate. Some are mid-tier JCs taking around the 10-pointers. The high failure rate seems not to be about students’ abilities but the standard imposed by each JC. MOE has left schools to decide their promos. Are standards too high in some? Is high exam failure rate consistent with MOE’s vision of holistic development? Is there a need for MOE to moderate?
I also find that there are many who favour the JC route because it seems more prestigious. I commend MOE for making polytechnic into a viable and respectable path for the skills-inclined students to be able to enter universities. Perhaps this can be communicated more strongly to clear some biasness that polytechnic graduates will find it hard to enter university, and for secondary schools to engage in guidance and counseling to better explain the JC and polytechnic options to students.
——————–
Secondary school admission
Many see PSLE as a high pressure sorting exam that determines the future of their children. Some will settle for nothing less than the very top secondary schools while others fear their children being placed into undesirable academic streams.
The PSLE T-score is used for admission into Secondary Schools and academic streams, notwithstanding DSA exceptions. I call this the sorting method, using a single score to sort students into schools.
MOE is currently reviewing the PSLE. There are two ways to view this. The first is to explore how to modify exams and results reporting, and how secondary schools will use these for admission. Currently, PSLE is held over a few days. There is no consideration for how the child had performed throughout primary school. One can argue for continuous assessment and add school scores to the T-Score. But some will feel that schools will not be objective. 
Or results can be reported as grades only, so secondary schools will admit based on PSLE grades, school leaving testimonials, CCA achievements and other results. Instead of being a sorting test, PSLE then becomes a signaling tool. It signals the ability of the child in each subject and the secondary school has the discretion for other considerations.
The second way is to do away with the need for PSLE. Last year, I proposed for pilot schools with 10-year integrated programme from primary 1. This is to cater to parents like myself who do not think it is critical to send my children to top schools and that students of different abilities can mix together. I am happy to note that Mr Laurence Lien and Ms Denise Phua have made similar calls.
I appreciate that this is an emotive issue. Over the years, we have sorted students finely at various junctures of schooling and branded and banded schools to an extreme. I am for a system like Finland where students of all abilities progress through the same school and all schools are about the same. However, that may take a while for parents to accept. We can have start with 8 such schools; two for each zone. Meanwhile we can de-stress PSLE by changing it into a signaling tool, and spread students of different abilities across schools.
Lastly, I hope MOE can review the DSA system, especially DSA of GEP students into top independent schools.
——————————
Student Care Services
Student care services are now in 80 out of some 190 primary schools. It is commendable that MOE has stepped up efforts to have more student care facilities within schools. Student care had been given low priority in the past, and a poor cousin to child care which has more attention and funding support.
With more dual-income working parents, the demand for student care will follow the rise we saw in child care.
Student care has the potential to be a social leveler by providing homework coaching and lessons, as well as much needed nutrition for children from disadvantaged families.
Unlike childcare, there is no general fee subsidy for student care other than for the low income. Also, it is not mandatory for student care teachers to go for training. There is a Certificate in Student Care course but it is not widely promoted or mandatory for centres to have trained staff.
Some schools are constrained by space. Student care facilities should be viewed as essential school infrastructure and factored into the design of all schools.
Schools waiting for such facilities can work with nearby student care centres. MOE and MSF can work together to help secure new facilities if there are no nearby operators.
I hope MOE and MSF can work together, just as they are doing for preschool to provide better accessibility, affordability and quality in student care.

COS 2013 – Environment Impact Analysis

Committee of Supply Cuts by YJJ on Ministry of National Development

Environment Impact Analysis

Much has been said about infrastructure in the Land Use Plan.  Livability is not just about buildable infrastructure. Sustainability of our natural habitat is also important.

Apart from being a habitat for flora and fauna, natural environments alleviate drainage issues by retaining water and slowing surface runoff, and can moderate ambient temperatures.  The 2012 Expert Panel on Drainage Design and Flood Prevention Measures found that large-scale rapid urbanization is a key contributor to the recent increase of flooding.

A comprehensive environmental impact assessment (or EIA) should precede major developments.  Many countries already require EIA before commencement of projects. By alerting us to the potential hazards that may arise, precautionary measures can be taken.  An example is the urbanization of a grass knoll to house Ion Orchard.  Preventive measures could have been taken if nearby complexes and authorities were alerted to potential problems arising from the development.

Another effect of urbanization is the increase in ground temperatures due to the loss of trees.  EIAs can help us better understand this issue, and help planners plan the siting and even method of development to minimise this.

The Nature Society of Singapore has noted that Singapore has a higher carbon footprint than other developed countries. Naturally wooded areas help absorb this carbon. If more naturally wooded areas like Bukit Brown and Pasir Ris wetlands go away, our carbon footprint may become larger.

I hope EIA can be a pre-condition for any major development and findings made available to the public.

COS 2013 – SME Bank and Renewable Energy

Committee of Supply Cuts by YJJ on Ministry of Trade and Industry

SME Bank

The service economy is increasingly important to Singapore. Excluding Financial and Insurance, the service sector had 135,000 enterprises and employed 1.35 million workers in 2010.

The 2012 SME Development Survey highlighted that 50% more service sector SMEs found bank financing a challenge compared to the previous year. This is despite the availability of government-backed loans through financial institutions. The survey also found more SMEs facing cash flow problems and worsening liquidity.

Service sector SMEs generally require working capital financing such as supplier invoice financing, working capital term loans and factoring. They are generally asset light with little collaterals. Financial institutions are cautious and tend to make unsecured lending only to bigger mid-sized SMEs. With the Basel III minimum adequacy requirement, banks are likely to tighten loans to smaller and riskier SMEs.

Government lending to SMEs has been implemented in countries such as USA, South Korea and Malaysia to address market failure in working capital financing loans to SMEs.  A government-led SME bank will be useful for the following:

(1)  SMEs with track record of less than 3 years. SMEs have highlighted that banks generally offer financing to SMEs with more than 3 years of track record.

(2) SMEs with small scale operations. Financial institutions tend to focus on mid-sized enterprises.

(3) SMEs with intangible assets. Many knowledge or technology-based companies have intangible intellectual properties which banks are unable to assess. I understand there was previously a government backed unsecured loans to tech start-ups through the now defunct Keppel-Tat Lee Bank called TechFinancing. Is the government supporting more of such schemes?

 

To alleviate concern that the SME bank will crowd out private sector lenders, the SME bank can be a lender of last resort to the under-served small SMEs.  Alternatively, the government can form tighter partnerships with existing financial institutions to serve this market.

——————————————-

Renewable Energy

It has been some years since the government identified the clean energy as a key economic growth area. Since 2007, the government has invested $350 million to fund the development, testing and export of clean energy solutions. By 2015, the government expects the clean energy industry to contribute $1.7 billion to Singapore’s GDP and employ around 7,000 people [1]. It is now 2013. How far are we from this target? We have a dozen tidal, wind, and solar energy MNCs setting up largely R&D facilities here [2], but how many sizeable Singapore enterprises have sprung up to spearhead clean energy solutions export?

 

Solar power currently represents just 0.1% of electricity generating capacity in Singapore. [3] This is very low and could be the reason why local enterprises have not taken off. We are too focused on development and testing. Germany is the global leader in the solar energy production. The German solar energy industry was enabled not just by R&D but also lessons learned in system adoption and use because of the aggressive promotion of the alternative energy market.

 

Solar energy capability is not just about producing and exporting panels. Clean energy solutions is a post-industrial service industry where hardware and software have to be coupled with customization and after-sales service. Without a sizeable local deployment, it would be very difficult for Singapore to export our clean energy solutions expertise.

 

Currently, we only have two small scale schemes for private companies, one to encourage test bedding in government facilities and the other to offset the capital costs of installation. [4] We need to scale up system adoption and use in the private sector to develop the industry and make the market.

 

I propose the government look into three possibilities. One, Feed-In Tariffs for solar energy producers selling their electricity back to the grid on long-term guaranteed contract at a slightly marked-up price. Two, Rooftop Leasing to encourage building owners to lease out their rooftops to solar energy companies to produce electricity. Three, Solar Leasing to encourage building owners to rent panels from solar energy companies.

 

The government has said that it is not fair to subsidize electricity generation producers. [5] However, the government provides funding and subsidies in many creative forms to develop promising industries. In the case of these solar energy schemes, MTI should study its viability and release the findings to the public. I think it is time to experiment with solar leasing, rooftop leasing and FITs to study viability.

 

[1] http://www.edb.gov.sg/content/edb/en/industries/industries/alternative-energy.html

[2] http://www.edb.gov.sg/content/dam/edb/en/resources/pdfs/factsheets/Alternatve%20Energy%20-%20Clean%20Energy%20Factsheet.pdf

[3] According to the Energy Market Authority, there are 120 commercial and 36 household PV installations with 5.55 MWp (megawatts peak) capacity at end 2011 (http://www.ema.gov.sg/page/32/id:65/). Conventional electricity generating capacity stands at 9,892 MW at end March 2012 (http://www.ema.gov.sg/media/files/facts_and_figures/2012.03/MSA2a.pdf).

[4] The first is the S$17 million Clean Energy Research & Testbedding Programme (CERT). The programme provides opportunities for government agencies to partner private companies to develop and testbed clean energy applications and solutions using government facilities in Singapore. The second is the S$20 million Solar Capability Scheme, which was launched in 2008 to help companies offset part of the capital costs of installing solar technologies in new building projects.

[5] http://sprs.parl.gov.sg/search/topic.jsp?currentTopicID=00072686-ZZ&currentPubID=00075242-ZZ&topicKey=00075242-ZZ.00072686-ZZ_1%23%23

YJJ Budget 2013 Speech

Madam speaker, I wish to touch on three areas in this year’s budget – SMEs, new industries and preschools.

 

I wish to declare that I own and operate private companies classified as SMEs. I have previously managed and owned childcare centres though I no longer do so now. Part of my current business supplies products and services to education institutions.

 

SMEs

SMEs form 99% of business entities in Singapore, employ 70% of all Singaporean workers and contribute 50% to the GDP (1). SMEs are facing great challenges due to higher rents, higher cost of goods and services and a manpower crunch.

 

DPM Tharman spoke of the pain that companies, particularly SMEs will go through as the economy restructures to one that’s based on higher productivity. Some companies will not survive the restructuring. I’d like to share about the pains of restructuring and some lessons we can learn when an industry restructures. I happened to have been in an industry segment that underwent very severe restructuring and experienced one of the highest rates of company closures.

 

During Singapore’s dotcom peak, I started a company developing e-learning solutions for education institutions. It could not have been at a worst time. From 1999-2000, there were suddenly some 50 companies in this space, most of them new start-ups fuelled by dotcom investments. Funding very quickly dried up after the NASDAQ crash of April 2000.

 

But the companies were already formed and operational. The industry demand was much smaller than what these companies had thought it was. These 50 companies fought tooth and nail over the meager market, for customers who were then not yet ready for the services being offered. I witnessed many companies shutting down, merging or being acquired. Companies tried different ways to stay relevant to the market. We too experimented with different business models and products, and had to go through the painful process of chopping off unprofitable business segments and to let go of excess headcount at our darkest hour, just to stay afloat.

 

Within seven years, the 50 companies were withered to around 10, and I reckon less than 5 had respectable growth and profitability. There are some lessons that I have learnt observing this brutal industry restructuring first hand.

 

The first lesson is that those that survived had adapted their business processes to merge certain job functions to stay lean. Faced with poor prospects for better revenue, companies had to look internally to keep costs down. Being in a human resource driven knowledge industry, the biggest cost was manpower. Companies had to re-examine business processes to see which job functions could be merged or reinvented to cut costs. Company structures were flattened and employees empowered to do more.

 

A second and important lesson was that surviving companies had to find new business models to try to create new revenue sources. There is a limit to how much cost one can cut to be more productive. Revenue had to increase and companies had to find these revenue sources. Some companies merged or acquired other smaller players to achieve better economies of scale or used their combined strengths to create new business models.

 

The government is calling for companies to be more productive to overcome the immediate challenges. What is productivity?

 

Productivity is output divided by input. Financial output divided by labour input is also known as labour productivity, or value added per worker. Output is commonly measured as revenue less cost of purchased goods and services. (2)

 

In the context of my restructuring experience, survivors changed business processes to become lean. By reducing labour input while maintaining the same financial output, there will be productivity gains. But more critically, to make quantum leaps in productivity, financial output has to be significantly increased without corresponding increase in workforce. This can be done either by expanding the current market or modifying business models to gain new revenue sources or by merger and acquisition.

 

I believe these lessons can apply to other industries. For example, in the F&B industry, we have heard feedback about the lack of Singaporeans wanting to work in the industry. In his budget speech, DPM Tharman said that over the past 5 years, the F&B workforce has increased by 31% with Singaporeans actually making up half of the increase. So Singaporeans do enter this industry. Yet we hear of a shortage of manpower. The boss of Jumbo restaurant was pictured in the Straits Times clearing dishes.

 

DPM Tharman cited F&B as an example of a fragmented industry structure. Could there be too many F&B outlets in this industry chasing the limited customers’ dollar? Is there too much mall and shop spaces allocated for F&B? When an industry consolidates, manpower that is not fully utilized will be redeployed to companies that most urgently need them to cope with the bustling business. Or some companies may have to reinvent their business model or product offerings to generate new revenue streams.

 

Given Singapore’s limited market size, for meaningful productivity to be sustained through revenue growth, there should also be increased efforts to secure new overseas markets. The role of agencies such as IE Singapore becomes even more important. Singapore firms will need to create strong expertise and brands around products that have high demand in new markets. We have some success in areas such as oil rigs, food, and water technologies. The challenge is for the government to help identify more industry clusters and match that with emerging new markets.

 

The government has implemented various new schemes to help locals companies. The Productivity and Innovation Credit, or PIC was introduced two years ago. This year we have an interesting Wage Credit Scheme or WCS.

 

While WCS’s objective is to help companies share the fruits of productivity increases with workers, I believe it is intended to also provide companies with extra cash. Employers generally give increments to retain workers. WCS will run for the next 3 years. The 40% share by the government will be given back to employers only after the end of the year, which will impact the company’s cash flow. This means that employers will be careful not to give wage increases unless they have to and can afford to. Employers will likely be giving regular wage increases as they would generally have done so even without this scheme. Cash strapped companies will still resist wage increases.

 

Madam, I welcome any scheme that can help local companies cope with the current economic challenges. It will be interesting though to see which companies will benefit from WCS. MNCs, larger companies and more profitable companies have been and will be able to make wage increases. Smaller and struggling SMEs will still not do so. Perhaps the DPM can share what type of companies will likely benefit most from WCS looking at wage data from the past 2 years of CPF records. What is the government’s expectation of SME’s share of the $3.6 billion payout? If in reality, WCS ends up not helping SMEs much, the government will need to find more targeted ways to support them.

 

PIC is given a new push with the new one-for-one top-up grant of $5,000 per year. It’s a generous payout over and above the earlier PIC payouts. I think that should get many more smaller companies to use PIC as they will get more cash than what they have invested.

 

The PIC process is relatively easy to administer compared to most other government grant schemes. While PIC is useful to provide some relief to companies, it is limited in effectiveness for some types of companies which really need a major transformation. It is not always automation that will help companies restructure. Sometimes, it requires drastic changes to business processes, organization structures and to business models.

 

I would like the government to consider additional ways to help companies restructure. One is in the area of M&A.

 

In fragmented industries where there are too many companies chasing the market, it makes sense to consolidate. Merger and acquisition done strategically could boost revenues or result in greater manpower efficiency. In Budget2010, the government implemented the mergers and acquisitions, or M&A scheme (3). The scheme is hardly attractive as it allows M&A allowance of 5% of the value of acquisition as tax allowance. Budget2012 provided for 200% tax allowance on transaction costs. Transaction costs cover professional fees, legal fees and valuation fees.

 

These two provisions benefit mainly large transactions. To encourage M&A activities amongst SMEs, we need the scheme to be more targeted. The M&A scheme could be graduated to allow higher allowances for smaller SME consolidation and M&A transactions. For example allowance could be 30% for deal size of $500,000 or below, another
scale at $1 million, and a further lower rate at say $5 million. This would cover the typical deal size for acquisition of smaller SMEs.

 

The current scheme allows only for outright purchase of shares. Many acquirers prefer to buy over operations and businesses of SMEs, but not the entire company as they do not wish to be entangled with liabilities that may be associated with the target company. We can loosen the definition of M&A to include such type of acquisitions.

 

We can also incentivise the acquirers to automate the operations of their acquired businesses to achieve greater productivity and to change old business models. We already have the PIC scheme with its schedule of qualifying activities. We can look at allowing even higher than 400% tax allowances for investment in automation and higher than the existing cap of $400,000 in tax allowances for merged business entities to get them to speed up investments for productivity improvements.

 

New Industries

I am glad the government is constantly looking at new industries to develop as the economic landscape is rapidly changing due to globalization and technological advancement. This is important as Singapore companies continue to seek areas it can fill a niche in.

 

One area I hope the government can give more attention to is renewable energy.  Last Saturday, the Straits Times reported energy scenario projections by Shell. The report projected that total energy demand could double in the next 50 years as the world’s population rises to 9.5 billion. In a high energy demand scenario, Shell predicted a strong push for the development of solar power as an alternative source of energy. By 2070, solar photovoltaic panels could become the world’s largest primary source of energy.

 

Singapore is constrained by a small land size. We have been told that even if all our rooftops and building surfaces are covered with photovoltaic panels, we could only have up to 14% of our energy needs being met.

 

I think that should not stop us from aggressively promoting and pursuing renewable energy installation expertise and technologies at a faster pace so that our companies can export their renewable energy products and services to fast developing countries in regions hungry for more energy.

 

Our public projects can be more aggressive in using renewable energy. The government can actively support local companies to build up their abilities to install such set-ups. Just as we had supported local companies to build up capabilities in water technologies that allowed them to become global players in this field, we can do likewise now in renewable energy.

 

Preschools and Student Care

The government has planned to more than double its spending to $3 billion for the preschool sector over the next 5 years. It is good that the government is acknowledging the importance of early childhood education and is putting significant investment into it. It is forming the Early Childhood Development Agency to combine the preschool functions of MSF and MOE. This is something that many industry players, experts and observers had been calling for.

 

The government plans to bring more operators onto the Anchor Operator or AOP scheme. At last year’s national day rally, the Prime Minister had said there will be 2 or 3 more AOPs. There will be an additional 16,000 places by AOPs to add to the existing 17,000 places. (4)

 

I have previously spoken on this issue and I believe this will drastically alter Singapore’s childcare landscape. It is currently being served by a diverse number of private and non-profit operators, with a good deal of variety and innovation. The AOP scheme was initiated in 2009. It provides AOPs with easy availability of new centres at typically under 10% of prevailing monthly rental cost of private operators, a generous combination of start-up grants which I worked out to be around $600,000 per new centre and grants for teacher training and scholarships. (5)

 

In return, AOP are expected to charge fees below the industry median. That’s hardly any challenge at all, given that the generous grants and low rents will easily allow them to achieve this without having to be innovative or be cost conscious. The dearth of remaining new sites for non AOPs have seen rents being bided to highly unsustainable levels. This budget has increased salary grants to AOPs. This will accelerate the outflow of teachers from non-AOP centres to AOPs. There are 2 important things necessary for operators to succeed in this industry: Location and Teachers. Non AOPs will be choked off in these two key areas.

 

While it is good that the government is pumping a lot of money into this sector, the industry is wrongly structured and the huge grants will worsen the situation. There will be negative consequences arising from the current AOP scheme. It will wipe out many existing players, especially operators charging fees that cater to lower and middle income families. The 2 current and 2-3 new AOPs will not have to compete hard to be innovative. A healthy level of competition is needed for operators to be innovative, to continue to offer high quality services at competitively affordable prices. I believe we can instead structure childcare as a public good, with regular competition by all operators for packages of sites at fees regulated by MSF. With the same level of investment the government has planned, I believe it will achieve in better outcomes for affordability, accessibility and quality.

 

The higher number of working parents has seen fast rising demand for childcare. These same parents will also need good quality and affordable student care facilities.  It will be another important area as a social leveler.

 

I will touch on childcare and student care further in my COS cuts on MSF. Thank you.

 

References

1. Spotlight On SMPs and SMEs – The SMP, SME http://www.icpas.org.sg/mediacentre/admin/upload/20120522022044634732932440629198.pdf

2.  A Guide to Productivity Measurement http://www.spring.gov.sg/resources/documents/guidebook_productivity_measurement.pdf)

3. http://www.iras.gov.sg/irashome/ma-allowance.aspx

4. http://www.todayonline.com/singapore/govt-raises-funding-pre-school-sector-s3b

5. http://app.msf.gov.sg/PressRoom/Disbursementofgrantstononprofitchildcare.aspx and http://app.msf.gov.sg/PressRoom/Allocationofnewvoiddeckchildcarecentres.aspx