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  • New Roads Ahead: Singapore Businesses Embrace Transformation as Overseas Expansion Gains Momentum

New Roads Ahead: Singapore Businesses Embrace Transformation as Overseas Expansion Gains Momentum

  • Even though more businesses (49%) expect a more challenging year ahead, over nine in 10 businesses (94%) recognise the importance of transformation to stay competitive and relevant, in the face of changing market dynamics.
  • Expansion efforts are paying off, as eight in 10 businesses report having an overseas presence, compared to 2018 (71%), and 41% report that more than half of their sales turnover originate from overseas.
Tuesday, 14 January 2020 [Singapore] Despite the challenges facing Singapore businesses in an uncertain economic climate, nine in 10 businesses now recognise the importance of business transformation to maintain competitiveness and competency. Nearly two in three companies (66%) also view technology adoption as fundamental in transforming their businesses.

Internationalisation has picked up pace among businesses, with SMEs (78% versus 68% in 2018) expanding overseas at a greater rate than seen previously. Eight in 10 businesses also reported having a presence overseas.

These were among the key findings in the Singapore Business Federation’s (SBF) latest National Business Survey 2019/2020. The annual survey, which was carried out from 26 August to 25 October 2019, drew responses from more than 1,000 companies across all major industries.

Business Transformation Now Seen as Critical

Nearly a decade after the Government began its push for companies to innovate, companies now view business transformation as critical. Nine in 10 (94%) Singapore companies acknowledged the importance of transformation to stay relevant and competitive (78%), and to improve business efficiency (66%), in the face of changing market dynamics. One in two (50%) also see business transformation as key to improving customer experience.

Technology continues to play a major role in transformation. While two in three (66%) believe that adopting new technology is fundamental to their own transformation and survival, the biggest roadblock is perceived cost (69%), followed by challenges such as training/adapting staff to use new technology (49%), and cyber security risk (40%). Notwithstanding, the pace of change in digital and e-commerce is providing some hope for the road ahead with 27% of businesses saying they are optimistic about getting positive returns from their investment in digitalisation and e-commerce transformation.

SBF CEO Mr Ho Meng Kit said, “The shift in mindset is a big step in the right direction and we hope to see this increased awareness translate into action. The perceived high cost of technology adoption is a common misconception. Companies can start small, such as setting up a website or getting on social media.

“Companies should also continue to invest in their existing workforce and develop digital talent internally. This starts with ensuring employee access to quality digital skills training, while also encouraging a company culture of continuous learning and providing employees opportunities to take on roles that are more valued-based and rewarding.

“In the coming year, SBF will continue to support our companies on their transformation journey through education and outreach on new technology showcases, the sharing of best practices among companies and self-assessment tools on digital readiness.”

Uncertainties Not Stopping SMEs Expanding Internationally

Despite current economic uncertainties, Singapore businesses continue to venture out and expand overseas.

Eight in 10 businesses said they now have an overseas presence. Internationalisation picked up pace particularly among SMEs (78% versus 68% in 2018). In comparison, 93% of large companies said they have expanded overseas (90% in 2018). Furthermore, 41% of businesses reported that more than half of their sales turnover originates from overseas.

Southeast Asia remains the most popular region for expansion, with 82% of Singapore businesses reporting a presence in the region. Malaysia (61%), Indonesia (48%) and Thailand (40%) are the three most popular countries, while China (46%), Japan (29%) and India (28%) are the top countries of interest outside of Southeast Asia.

Amongst companies with an overseas presence, 25% indicated that they grew in 2019. Companies point to increased demand for their products or services (98%), as well as the Free Trade Agreements (FTAs) that Singapore has secured with other countries (75%) as crucial to their overseas business growth.

SBF Chairman, Mr S.S. Teo noted that it is critical for Singapore companies to expand overseas to access new markets, diversify their supply chains and to support sustainable growth, given the limitations of Singapore’s small domestic market.

“It is encouraging that our SMEs are extending their global footprints more aggressively despite the economic uncertainty that shrouded 2019. The growing e-commerce and digital economy provide our businesses with new opportunities as they can expand into new markets with little to no physical presence. Additionally, Singapore’s extensive FTA network gives our companies access to preferential markets as well as free or reduced import tariffs and we urge our businesses to leverage these FTAs for their overseas expansion.

In this regard, SBF, through its FTA Education and Outreach team, provides FTA advisory services as well as training seminars to help companies understand and make better use of Singapore’s FTAs.

This year, SBF will intensify our efforts to help companies internationalise, particularly in key ASEAN markets, frontier and emerging markets as well as markets along the Belt and Road. From market advisory and market connection to research on internationalisation and in-market activities, we hope to provide our companies with first-hand market insights and establish a valuable eco-system of business partners, key decision makers and government officials that they can tap on.”

Uncertainty Weighs on Business Sentiment

While Singapore companies embraced transformation and internationalisation in 2019, business sentiment remained soft, as economic uncertainties took hold, partly in the shadow of the US-China trade dispute.
Over half of all businesses (51%) felt the Singapore business environment had worsened over the last 12 months. Businesses were also less satisfied with the regional and global business environments compared to 2018.

Looking ahead, while 44% of local businesses expect Singapore’s business climate to stay the same in 2020, almost half (49%) anticipate a more challenging year ahead. The survey also saw increased concern over the global economic climate (36%) compared to 2018 (25%).

Key concerns include increasing business costs (e.g. rental, raw materials, etc) (64%), rising wages (56%), the uncertainties created by the US-China trade tensions (46%) and China’s economic slowdown (42%).

Manpower Issues Continue to Frustrate Businesses

Although Singapore is now seeing the green shoots of business transformation across many sectors, talent remains a key challenge.

For businesses, the top three challenges are manpower costs (67%), business competition (62%) and finding new or better ways to grow revenue (56%).

Manpower issues appear to be multi-layered. While many businesses struggle with rising labour costs (78%), the dynamics arising from tighter government policies on hiring foreigners (48%), and the competition to secure the best local talent (44%) are putting real pressure on many companies. Four in 10 (41%) businesses also said they face challenges in attracting or retaining younger workers.

To mitigate these challenges, Singapore businesses are looking to invest in new systems or processes (25%) and investing in better training for existing employees (22%). To reduce their dependence on new hires or training, some businesses (19%), however, say they are turning to automation and technology.

Mr Ho added, “It is heartening to note that more companies are now investing in training for their existing workforce. SBF recently partnered V3 Fintech to launch Beyond Lab, a regional academy focused on supporting SMEs in adopting digital technology to increase operational efficiency and competitiveness. Through the academy, we hope to help our SMEs transform, and equip them to tap the opportunities of the digital economy in the region. Our training arm, the SBF Business Institute (SBI), also offers relevant courses year-round to help our businesses build digital and internationalisation skills for growth.”

Wishlist for Budget 2020: Tax Rate Reduction & Tax Rebate

The sluggish economic climate has seen companies return to basics in their Budget wishlist for 2020. Both large companies and SMEs rank tax reduction (55%) and rebate (55%) as the top two priorities for Budget 2020. However, they are also keen to see support in other areas, such as easier access to information and resources from government agencies (49%), incentives for industry-related training (47%) and corporate venturing (47%).

Please click here for the summary of the survey findings.

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