Innovation can give SMEs a leg up

The Singapore Central Business District.
The Singapore Central Business District. ST PHOTO: ALPHONSUS CHERN

As Singapore's economy matures, slower growth will be a reality. I agree that a fundamental survival skill for small and medium-sized enterprises (SMEs) is their ability to adapt quickly during a downturn ("SMEs need to adapt quickly during downturns" by Mr Francis Cheng; last Saturday).

The current shorter cycles between economic growth and downturn are limiting new opportunities for expansion and causing companies to focus more on cost management.

However, it is not all doom and gloom, as an economic slowdown often leads to innovation and, consequently, a superior quality of growth in the longer term.

Our leaders are seeing the wisdom of creating value through the generation of our own products and services. In this way, local enterprises can grow through collaboration with, and being an integral part of, the business strategies of multinational corporations (MNCs).

For Singapore to prosper in the long term, the push for export-led industrialisation through foreign investment will be tempered by the development of local private sector businesses that can contribute to supply chains globally.

While we cannot depart totally from wooing MNCs to our shores, we must face the reality that our high costs make Singapore a less inviting option for many foreign firms.

There needs to be a viable alternative - with local companies at the core - to give us a competitive advantage in the global market.

Without the financial muscle and economies of scale that MNCs possess, SMEs face far more stringent credit guidelines from banks to fuel their expansion ("Set up SME bank to help nurture budding businesses" by Mr Raymond Koh Bock Swi; last Saturday).

Instead of driving growth in chosen sectors like before, our Government is now playing the role of facilitator, by introducing a variety of schemes to help local businesses tap opportunities for expansion.

Given that SMEs have a significant role to play in the economy, many government schemes, tax incentives and grants are available to help businesses overcome challenges in four crucial areas: building business capabilities, expanding overseas, financing, and developing their workforce.

Realising the complex growth environment facing local enterprises as our economy enters a new phase, the Government collaborates with trade associations and chambers of commerce. Such initiatives will include assigning mentors to help small firms navigate through the muddy waters of restructuring.

The official shift in approach to focus on innovation in every industry, while preserving a level playing field of support for all small businesses, will help to get SMEs up to speed.

Edmund Khoo Kim Hock

A version of this article appeared in the print edition of The Straits Times on November 20, 2015, with the headline 'Innovation can give SMEs a leg up'. Subscribe