Headline: Did Budget 2017 do enough to help SMEs prepare for the future?

Publication: ST^ST

Date: Monday, 03 April 2017

Page: A20

Picture Caption: Budget 2017 gave the construction sector a boost by bringing forward the start
dates for about $700 million worth of public-sector infrastructure projects to this year and 2018.
Many companies and business associations have said that they are underwhelmed by the
measures for businesses unveiled in this years Budget. SMEs, in particular, had been hoping
for more help amid the tough economic outlook.

(C) Singapore Press Holdings Limited

Primer

This is the second of 12 primers on current affairs issues that are part of the outreach
programme for The Straits Times-Ministry of Education National Current Affairs Quiz.

Companies across all industries have had to grapple with the onslaught of disruptive
technologies, but small and medium-sized enterprises (SMEs) have probably been hit the
hardest.

Sandwiched between established multimillion-dollar companies and nimbler, more innovative

start-ups, SMEs often lack the resources or know-how to take advantage of new technologies or
the digital economy.

In addition, many Singapore SMEs are already struggling to stay afloat amid a slowing
economy, which has been weighing on sales and profit margins even as high costs continue to
bite.

Amid these challenges, did Budget 2017 do enough to help SMEs?

WHY DO SMALLER FIRMS NEED HELP? SMEs defined by the Ministry of Trade and
Industry as companies with annual sales turnover under $100 million, or employing fewer than
200 workers are the beating heart of Singapores economy.

There are nearly 190,000 local SMEs, making up 99 per cent of enterprises here and
contributing nearly half of the gross domestic product.

SMEs also employ about 70 per cent of Singapores workforce, making them crucial to the
functioning of Singapores economy and a key driving force behind growth.

This is why the bulk of government efforts to raise productivity and encourage companies to
adopt new technologies are targeted at SMEs.
In recent years, SMEs have been hard-hit by the lacklustre pace of economic growth amid a
broader global slowdown. The Singapore economy spent much of 2016 in an extended funk,
gradually picking up speed only in the last three months of the year.

The economy expanded a modest 2 per cent last year, which also saw the highest number of
retrenchments since the global financial crisis in 2009.

The gloomy outlook weighed heavily on SMEs a quarterly index released in December by the
Singapore Business Federation and DP Information Group showed that SMEs were pessimistic
about the first six months of 2017 and expected a reduction in both turnover and profitability.

This comes on top of rising business costs such as rent, and a tight labour market which makes
it tough for companies to hire and retain talent.

These short-term woes often leave cash- and resource-strapped SMEs with little time to
consider long-term strategies. But it is becoming increasingly imperative for companies in all
industries to restructure and transform to keep up with the rapid pace of technological change.

Innovation cycles are now shorter and new technologies can supersede entire industries even
as they create new opportunities.

WHAT DID THE BUDGET DO TO HELP SMALLER FIRMS? Budget 2017 sought to ease
immediate pain points for sectors struggling against economic headwinds, without losing sight of
the longer-term need to help businesses transform.

Foreign worker levy increases for the marine and process sectors hit by an extended global oil
price slump were deferred by one more year, in view of the continued weakness in these
industries.

The construction sector was also given a boost the start dates for about $700 million worth of
public-sector infrastructure projects were brought forward to this year and 2018.

Given the uneven performance across different sectors, we need to go beyond general
stimulus, and target the specific issues faced by different sectors, said Finance Minister Heng
Swee Keat in his Budget speech.

The Budget also contained other measures to support businesses, including a move to enhance
and extend the corporate income tax rebate. Existing schemes such as the Wage Credit
Scheme and Special Employment Credit will also continue to help companies manage wage
costs and cash flow.

The SME Working Capital Loan, where the Government co-shares 50 per cent of the default
risk for loans of up to $300,000 for each SME, will also remain available for the next two years.
Besides noting these short-term measures, Mr Heng also devoted a significant portion of his
speech to the importance of preparing SMEs for the future economy.

The Government will spend more than $80 million on programmes to help SMEs go digital and
to boost Singapores capabilities in data and cyber security, he said.
There are plans for a new SME Technology Hub for companies to get advice on both off-the-
shelf and customised tech solutions.

They will also get step-by-step advice on the technologies they can use through industry digital
plans for specific sectors such as retail, food services, cleaning and security.

DID THE BUDGET DO ENOUGH TO HELP SMALLER FIRMS? Many companies and
business associations said they were underwhelmed by the measures for businesses unveiled
in this years Budget. SMEs, in particular, had been hoping for more help amid the tough
economic outlook.

In a statement released after the Budget, the Singapore Business Federation said it was
disappointed with the lack of short-term measures for companies this year, given that rising
business costs have been a persistent concern.

For example, the deferment of foreign worker levy (increases) by one year for only the marine
and process sectors should have been extended across other sectors that are still experiencing
cost challenges, it said.

There is also an absence of measures on rental rebates for businesses in general.

During the Budget debate in Parliament, several MPs lamented the lack of financial relief for
struggling SMEs.

In response, Minister for Trade and Industry (Industry) S. Iswaran said the Budget contained
short-term relief measures for the hardest-hit industries, such as the marine and process
sectors.

Singapores maturing economy is adjusting to a slower pace of growth, but there are still
significant opportunities available for companies keen on innovating and expanding abroad, he
added.

This means companies need to gear up for the long term and be prepared to take advantage of
emerging opportunities in key sectors.

Singapores long-term prosperity hinges on it being able to nurture and grow innovative
companies, especially SMEs, the minister said.

He listed a plethora of schemes to help companies expand overseas, innovate and deepen their
capabilities. These include:

$400 million in grants to companies going international

The $36 million Technology Adoption Programme and the $45 million Get-Up scheme to build
up innovation capabilities by seconding public-sector researchers to SMEs

A suite of loan programmes that will collectively catalyse $5 billion in loans up to 2020.
Mr Iswaran said: The Government is resolute in our commitment to help our SMEs (transform)
successfully. Large companies do not necessarily need this breadth of support. It is the small
companies that need them.

In addition, road maps for the development of each sector, called Industry Transformation Maps,
are being rolled out. They will chart strategies for 23 industries, covering over four-fifths of the
nations gross domestic product.

Six sector maps have been launched, for the logistics, hotels, precision engineering, food
manufacturing, food services and retail industries.

SHOULD COMPANIES DO MORE TO HELP THEMSELVES? However, there is only so much

the Government can do to help companies.

Ultimately, SMEs which want to remain viable have to chart their own course for long-term
growth.

There are myriad schemes available for companies but they have to be the ones to take that
first step.

Trade associations and chambers (TACs) also have a role to play and can act as multipliers to
drive change in their sectors.

For instance, they can encourage companies in their industry to collaborate with each other
large players venturing abroad can bring along smaller ones as part of a consortium.
Companies can also work together to come up with new technologies.

In addition, TACs can develop industry-specific resources or training tools that can be shared by
companies in the sector.

This would be especially useful for SMEs, which tend to have limited access to market
resources and expertise, compared with large companies.

chiaym@sph.com.sg

SMALL COMPANIES NEED HELP The Government is resolute in our commitment to help our
SMEs (transform) successfully. Large companies do not necessarily need this breadth of
support. It is the small companies that need them. MINISTER FOR TRADE AND INDUSTRY
(INDUSTRY) S. ISWARAN, on schemes to help businesses.

Chia Yan Min Economics Correspondent

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About The Big Quiz

Each Monday, the papers journalists will address burning questions in the Opinion section,
offering unique Singaporean perspectives on complex issues.

These primers form part of the outreach of The Straits Times- Ministry of Education National
Current Affairs Quiz, nicknamed The Big Quiz, which aims to promote an understanding of local
and global issues among pre-university students.

Underpinning this years Big Quiz is a focus on disruption, a timely issue as various sectors and
industries adapt to this global change.

The theme will be featured in six campus talks helmed by editors and correspondents.

Six quiz rounds will also be held for students to demonstrate their current affairs knowledge.

The nationwide event is jointly organised by The Straits Times and the Ministry of Education,
with the Singapore Press Holdings Foundation as its presenting sponsor.

Pre-university schools and institutions can note these dates for participation in the coming quiz
rounds and talks:

Today at National Junior College

April 12 at Dunman High School

April 19 at Nanyang Junior College

April 26 at Temasek Junior College

May 12 at Eunoia Junior College