The Government should be more flexible when helping smaller firms restructure and innovate while also giving trade associations greater support to drive industry development. It could also do more to educate small and medium-sized enterprises (SMEs) on the benefits of free-trade agreements.

These suggestions are among the pre-budget recommendations the Singapore Chinese Chamber of Commerce and Industry (SCCCI) tabled yesterday, following its annual survey of the local business community. The poll of 708 respondents undertaken between May and July pointed to a persistently challenging business environment.

The SCCCI noted: "Government agencies need to be coordinated and make its rules and regulations less rigid so that SMEs can be more flexible when restructuring their operations."

In the survey, 84.1 per cent of respondents said the way SMEs can be more innovative is for the Government to make it easier for them to qualify and apply for innovation schemes.

While 87.5 per cent of respondents said they have adopted productivity measures - similar to last year's 87.9 per cent - the proportion of micro SMEs doing so dropped from 91.6 per cent to 87.5 per cent.

Aside from the bumpy progress that SMEs have made to become more productive and innovative, other challenges have persisted. Rising business costs, stiff competition in the domestic market and manpower shortages were the top three concerns named by the survey respondents.

The gloomy mood was underlined yesterday when advance estimates showed that third-quarter growth was only 0.6 per cent from the same period last year, far below the 1.7 per cent forecasted by economists.

The SCCCI said trade associations can help address business challenges in such an environment with a sectorial approach, stating that the "Government can empower and financially support trade associations to undertake certain critical functions for the industry, for example, industry training".

It added: "This will ensure initiatives are relevant to industry needs and are able to secure industry buy-in."

Businesses looking beyond Singapore for growth should also be educated on how to tap the opportunities of free-trade agreements, particularly opportunities in the Asean Economic Community (AEC).

Venturing overseas has been challenging, mostly due to unfamiliarity with overseas market rules and difficulty in getting the right business partner, respondents noted. The SCCCI said: "Asean countries continue to be the markets of most interest to SMEs as they venture overseas. Our businesses and SMEs must know how to leverage on the AEC to the maximum to derive practical benefits out of it."