3rd SCCCI-NCB Internet Commerce Conference

Mr Michael Yap, Chief Executive National Computer Board Opening Address - 3rd SCCCI-NCB Internet Commerce Conference

Mr Michael Yap, Chief Executive
National Computer Board
Opening Address - 3rd SCCCI-NCB Internet Commerce Conference
Singapore, 4 June 1999

Mr Tay Beng Chuan, President, Singapore Chinese Chamber of Commerce & Industry, and Nominated Member of Parliament, Distinguished guests, ladies and gentlemen, Good Morning.

1. The annual Internet Commerce Conference, jointly organised by the Singapore Chinese Chamber of Commerce & Industry and the National Computer Board, has become an important occasion for local companies to come together and learn about the latest developments in e-commerce. I am encouraged to see a record number of participants at this year's event. This is a clear indication of the increasing interest in e-commerce from local companies.

2. SMEs form a significant part of Singapore's economic landscape. There are 92,000 SMEs in Singapore. Collectively, they make up 92% of all establishments, and employ 53% of the workforce. Yet, SMEs contribute only 34% to Singapore's GDP. This contribution may look small, and SMEs have traditionally not been well-recognised. However, we must not ignore the fact that many MNCs today were SMEs of yesteryear. SMEs are therefore the incubators of our future economic giants.

SMEs' Challenges

3. The truth is, the physical world is rather harsh to SMEs. They face a number of challenges in doing business. For example, it is difficult for them to reach out to new customers and new markets due to the high cost of advertising and business promotion. Because of the small size of their operations, many SMEs are unable to benefit from economies of scale. Very often, SMEs also lack the necessary reputation to secure trust and confidence from potential customers.

New E-world Emerging

4. However, good news beckon. There is a new world emerging. This is the e-world, brought on by the rapid explosion of the Internet. The Net is driving dramatic changes in the way businesses operate and compete. It goes beyond extending market reach and lowering operating cost - it is causing a fundamental shift in the way businesses are conducted.

5. The rules of competition are being redefined. The global playing field is becoming more even, and the barriers to entry are coming down. Small players can now plug into the global market place, along with the big names. Many of the top e-companies, such as Amazon, eBay, Yahoo!, e*Trade, did not even exist five years ago. Yet today, many of them have market capitalisations that are even larger than that of all our local banks combined.

6. The Net has made for greater parity in relationship. Small companies which are able to tap niche opportunities, can now have major impact on MNCs. It is a fact that many MNCs are looking to partner with the nimbler small companies, for that extra competitive edge.

Opportunities for SMEs

7. The e-world has opened up endless new possibilities for SMEs. Physical size is no longer an overpowering constraint - you are only limited by the size of your website. Because e-commerce transcends physical boundaries, geography will no longer bind a company's aspirations or the scope of its market. SMEs can therefore effectively reach both local and international customers. High value services can be delivered at relatively low cost. The success of Amazon.com, which rose from zero physical presence and no traditional book trade experience to become one of the world's largest booksellers within a few years, shows how innovative businesses can overcome traditional market barriers and emerge as leading winners.

8. Using e-commerce, SMEs can scan the international community in search of new partners and suppliers without having to incur time and travel expenses. With mass customisation, the smaller companies can now use the Net to provide more flexible and personalised services to their customers that were not possible previously.

9. Companies can also test out new ideas and products by setting up virtual storefronts at a small fraction of the cost of setting up new physical stores.

10. In Singapore, we have invested in the necessary infrastructure to make e-commerce possible. We built Singapore ONE - a high bandwidth and high speed Internet network which can support any end user application today. We enacted the Electronic Transactions Act in August last year, and have also put in place systems for secure Internet transactions. A number of e-commerce services companies have set up business. They offer bureau, leasing and hosting services to companies who want to conduct e-commerce. All these initiatives are aimed at helping companies to get their e-commerce business up and running quickly and easily.

State of Business-to-Business E-Commerce in Singapore

11. However, we still face a major challenge in building up a critical mass of e-commerce users. In a recent survey commissioned by the NCB to gauge the state of e-commerce in eight industry sectors, only 9% of companies said that they were already buying and selling on the Internet. Sixty-three per cent (63%) said that they were either not interested in e-commerce, or were unsure of their future plans. Some of the reasons cited included initial start-up costs and on-going operational costs. The survey also showed that the bigger companies were the ones embracing the new technologies more readily.

12. From the survey, there appears to be a difference in expectations between businesses already using e-commerce, and those planning to do so. Almost 80% of the current users were already transacting with overseas partners through the web. They were also generally optimistic about the growth prospects of their e-commerce trading activity. 95% of companies that were already procuring, and all of the companies that were selling via the Internet, expected an increase in their e-commerce transaction value in the next twelve months. In contrast, businesses that were planning to embark on e-commerce appeared to be more hesitant about going into e-commerce in a big way, and tended to be more conservative in their expectations.

13. This difference between the two groups reflects that the potential offered by e-commerce might be greater than expected. While companies were generally highly Internet- ready - close to three-quarters of those surveyed had corporate Internet access, and over a third owned corporate websites - only 9% were conducting e-commerce. There is much room for companies to be bolder and more aggressive in exploiting e-commerce.

14. Another interesting finding is the fact that among the companies that were not interested in e-commerce, the majority - more than 60% -saw no need for e-commerce. This group comprised mainly the small- and medium-sized companies. I urge these companies to re-examine the value proposition of e-commerce to their business.

Government's Commitment to SMEs

15. To companies that have found it difficult to implement e-commerce, I would like to reiterate our commitment to help you overcome the barriers.

16. Various assistance schemes are available to help companies defray part of their e-commerce start-up and operational costs. For example, the NCB extended the Local Enterprise Computerisation Programme (LECP) in November last year, to include funding for e-commerce activities. The scheme funds up to fifty per cent (50%) of the cost of acquiring e-commerce applications and services for the first 500 SMEs that adopt e-commerce. To date, about 170 companies are benefiting from the scheme.

17. The NCB, together with industry partners and relevant trade associations, also conduct regular e-commerce awareness seminars for SMEs. In addition, several sector-wide e-commerce projects have been implemented to accelerate the adoption of e-commerce across specific industry sectors. Examples include BookNet for book retailers and ShopNet for grocery stores.

Ease of Embarking on E-commerce

18. It is easy to embark on e-commerce. With the global trend of outsourcing, implementing e-commerce applications has become more viable than you can imagine. Today, you can outsource your online business process to third-party service providers which offer complete end-to-end solutions. For example, an online retail merchant can outsource its hosting, payment processing services and even delivery and fulfillment to e-commerce service bureaus. You can do your procurement and trading activities through the Internet by participating in the many business-to-business trading platforms and communities that are already available today.

Conclusion

19. The necessary pieces - our IT infrastructure, the legal and regulatory environment, and various assistance programmes - are in place to power SMEs into the electronic world. Our aim is to help SMEs make better use of new IT capabilities to generate new businesses, and new ways of doing business.

20. E-commerce, in particular, is a formidable force. The government is committed to help SMEs further exploit the opportunities offered by the Internet. We aim to have 20% of Singapore companies adopt e-commerce in the next two years, and 50% by the year 2003.

21. In the old world, we talked about the "big eating the small". In the new Net- centric world, it is increasingly a case of the "fast eating the slow". SMEs, being small and nimble, have the inherent ability to adapt quickly to change. And change will continue to take place - not just incremental differences, but in quantum leaps. In fact, it is not unforeseeable that companies in many industries will need to use e-commerce to increase their productivity five-fold, in other words, a 500 per cent increase, just so they can continue to survive in the next five years. Not having an e-commerce server in the business may eventually have the same impact as not having a telephone line today.

22. In closing, I would like to leave with you my personal observation: that small is in. I will not be surprised to see that it will be SMEs that make up the bulk of companies to be listed on Nasdeq in the near future. SMEs have good chances of making it in the e-world along with the big boys.

23. Thank you.