SME Committee’s Budget Recommendations for 2019 focuses on supporting SMEs for transformation and growth
- SMEs continue to transform and digitalise amid uncertainty going into 2019
- Internationalisation, technology adoption and manpower development are key levers for growth
21 January 2019 [Singapore] - The SBF SME Committee (SMEC) submitted its recommendations for the Singapore Budget 2019 to our Government on 2 January.
In 2018, the Singapore economy grew 3.3%1, in line with the Ministry of Trade and Industry’s (MTI’s) forecast of 3.0% to 3.5%2. Moving forward, MTI forecasts 2019 growth to be at 1.5% to 3.5%.
While SMEs are continuing to transform, they face challenges brought about by the growing trade tensions, rising interest rates and signs of slowing growth against a backdrop of changing economic climate. The SBF National Business Survey 2018/2019 found that SMEs would welcome assistance in addressing transformational challenges, digitalisation and human capital development. Overseas expansion remains a top priority.
Budget 2019 Recommendations
For the 2019 Budget, SMEC proposes 7 key recommendations to support SMEs in internationalisation, technology adoption, manpower development, competitiveness, cost and access to government support. These recommendations are made with inputs from 14 major Trade Associations and Chambers (TACs). The list of TACs are detailed in Annex A.
1.Increasing SMEs’ Competitiveness for Projects
This recommendation is premised on helping SMEs to develop and sharpen their capabilities by participating in government projects and synergistic collaborations.
1.1. Raise awareness - Our Government and its agencies can work with TACs to raise the awareness of the measures that the Government has taken to increase government procurement opportunities for SMEs, and the actual opportunities available, especially for projects where innovation solutions are required.
1.2. Access to government projects - Our Government and its agencies to begin implementing the new rules on government procurement to allow more SMEs to qualify for public projects. Projects should also be divided into more bite-sized components to enable more SMEs to participate in these projects and build track record/precedents for future projects.
1.3. Procurement platform for Government-linked companies (GLCs) - Set up a procurement platform for GLCs to enhance the information efficiency of their procurement opportunities to our SMEs. GLCs could also create problem-statement platforms, similar to the Open Innovation Platform by the Info-comm Media Development Authority (IMDA), that connect problem owners and problem solvers, to provide opportunities for SMEs to showcase their solutions for assessment.
1.4. Industry collaboration - Raise awareness and encourage multi-national companies (MNCs) and GLCs to participate in the Partnership for Capability Transformation (PACT) and Collaborative Industry Projects (CIP) schemes that allow SMEs to collaborate and band resources as means to build their capabilities and competitiveness.
1.5. Fair contract practices - The Pro-enterprise Panel (PEP) to look into cases where anti-competitive and unfair contract practices are surfaced by SMEs. GLCs to take the lead in practising fair contract agree
2. Short Supply of Skilled Manpower, Insufficient Young Talent and Access to Foreign Manpower
Difficulty in skilled manpower recruitment and the sustained effects of controlled quotas of foreign manpower continue to be business challenges for SMEs. This is especially poignant in technical disciplines such as precision engineering where graduating students often choose to pursue careers in other areas. The SBF SMEC recommends:
2.1. No further tightening of foreign manpower quotas and changes to the foreign worker levies in technical sectors such as precision engineering to avail sufficient time for SMEs to transform.
2.2. Design grants and tax incentives to complement existing programs to encourage more SMEs to have internship programmes that enable them to develop a pipeline of talent for future manpower needs and integrate students into jobs after graduation.
2.3. Further review and enhance existing ITE’s Traineeship Scheme in consultation with businesses and TACs to promote take-up of the scheme by employers and students. Some areas where the Traineeship Scheme can be further enhanced include its course content, its relevance to industry, and greater emphasis on how the lessons learnt in the training labs/workshops can be applied to companies’ actual business operations.
2.4. Enhance the Market Readiness Assistance (MRA) grant to include supporting SMEs in their establishment of overseas nodes. Specifically, the grant should be enhanced to include helping SMEs tap on the wider and lower costs of readily available talent in selected regional markets, with these workers based outside Singapore but supporting locally-based businesses remotely. Special considerations could also be accorded to service companies to help them build operational capabilities in regional countries.
3. Helping SMEs with Enterprise and Technology Road-Mapping
The SBF National Business Survey 2018/2019 found that SMEs’ top priorities in the next 12 months are growing revenue and maintaining market share. The SBF SMEC opines that enterprise and technology road-mapping will help SMEs in adopting new technology and developing strategies to achieve their business goals. The SBF SMEC recommends:
3.1. Government agencies, such as Enterprise Singapore (ESG) and the Agency for Science, Technology and Research (A*STAR), with ready support for SMEs in enterprise and technology road-mapping can work closely with TACs to support SMEs in these areas, with a focus in driving more effective outreach programs for awareness and promote greater adoption through lowering costs.
3.2. On awareness - Our Government to explore the possibility of providing specialised Industry Transformation Map (ITM)-related advisory to SMEs through the respective ITM lead agencies and TACs to avail direct, relevant assistance to SMEs who require them.
3.3. On adoption - Our Government to simplify the process/procedures for grant application and funding disbursement to SMEs to reduce the administrative effort required when seeking government funding for these services and programmes.
4. Creation of an SME Week to Consolidate Resources and Facilitate Learning
It was observed that there are many activities organised across our government agencies and TACs to promote learning and capability upscaling for SMEs. The proliferation of these multiple activities can be confusing for SMEs that have to decide which activity to attend and how best they can spend their limited time to build depth of knowledge. There is often duplication of scope. These activities often compete for the same time and resources for the planning agencies and TACs. The SBF SMEC recommends:
4.1. Appointing a lead government agency and/or TAC to organise a “SME Week” that will facilitate focused in-depth learning, showcase of solutions for enterprise adoption, and networking opportunities with both local and overseas businesses.
5. Formation of Overseas Nodes to Help Local SMEs Internationalise
The SBF SMEC recognises that Singapore businesses that are established in overseas markets could play a key role in connecting new-to-market SMEs, helping them to overcome barriers of insufficient knowledge, better understand in-country issues and create new business networks. The SBF SMEC recommends:
5.1. Providing TACs with the resources to organise overseas Singapore business communities and relevant business groups as overseas node points that our SMEs can leverage on to facilitate easier market entry. This could involve working through appointed lead TACs to serve as the go-to party for selected focused markets.
6. Refining Government SME Grant Processing Criteria and Application Process
The TACs notes that our Government has been making improvements to various touchpoints such as www.smeportal.sg and www.businessgrants.gov.sg on matters relating to available support schemes and simplifying its application processes. We applaud these efforts. However, the documentation for application and audit remains cumbersome. The SBF National Business Survey 2018/2019 revealed that one in three SMEs would welcome help with the complex schemes and grants for business transformation and expressed that this was an area that ITMs could help to address. The SBF SMEC recommends:
6.1. Creating sub-segments within the current definition of SMEs so that more differentiated and targeted help can be provided to the micro-segments for greater effectiveness in assistance provision especially in view of the limited resources of this category of companies. This could be in the form of easier grant application and government procurement requirements for the smaller SMEs.
6.2. Our Government can develop info-maps of government support schemes and grants to better help SMEs understand and leverage the available government assistance to transform and grow. These simplified maps or illustrations will also allow the TACs to more effectively cascade the information to their members and help overcome our SMEs’ perception that it is difficult to navigate and access the various grants, schemes and programmes available.
7. Rising Business Cost
Rising business cost is a perennial SME concern. Feedback from TACs indicate that company growth is lagging behind wage growth, leading to decreasing profit margins. There are also concerns on the cost of retaining and training matured workers in light of the ageing workforce. The SBF SMEC recommends:
7.1. Our Government to collaborate with TACs to explore the concept and proliferation of performance wage design for SMEs to close the gap between wage growth and company growth, and also to promote sustainable, profitable growth.
7.2. Following the good example set by JTC Corporation, other government agencies that are landlords should also recognise the principles detailed in the SBF’s Fair Tenancy Framework. This will signify our Government’s strong support for fair tenancy practices, and also encourage/place pressure on the private sector landlords to adopt such practices.
7.3. Introduce support measures to help SMEs mitigate the cost of retaining and training mature workers. For example, by subsiding or finding ways to lower the medical insurance cost of matured workers.
7.4. Introduce a part-time/freelance framework for mature workers.
7.5. Conduct a study on the medical needs and insurance cost for the ageing workforce.
7.6. Introduce more job re-design schemes for the mature workforce.
Mr Ho Meng Kit, CEO of SBF, said, “The Singapore economy has done well in 2018. For 2019, SMEs are cautiously optimistic as there is an overall sense that the business environment has become more challenging in part due to ongoing trade tensions and rising interest rates. But therein also lies opportunities. The SBF SMEC will continue to work closely with our Government and business community to support businesses in overcoming the challenges of a tight labour market and uncertain business climate through capability building in areas such as digitalisation, internationalisation and manpower development, and continue to provide an effective platform for G2B and B2B dialogues and collaborations.”
Mr Kurt Wee, Chairman of the SBF SMEC, said "SMEs must continue to set their sights beyond Singapore’s shores and diversify to overseas markets to tap available growth opportunities. The wide array of Free Trade Agreements negotiated by our Government, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which recently entered into force will give SMEs greater access and certainty in entering new markets, which our recommendation on formation of overseas nodes also aims to achieve. We also hope to see more support for SMEs to help them access and adopt new and critical technologies to enhance efficiency, build resilience and develop competitiveness.”