Finance Minister Heng Swee Keat's reassurance, that the forthcoming Budget will look into helping small and medium-sized enterprises (SMEs) during a difficult period, should be read in the right way. Helping them tide over the short term is necessary because external conditions have weakened. Singapore's economic prospects are not immune to the sharp fall in oil prices and global financial market volatility. Manufacturing, which accounts for a fifth of the economy, is expected to stay weak because demand for exports remains depressed. Expectations that the global economy will recover gradually this year are heartening, but SMEs need help to cope with both restructuring and the immediate challenges they are facing.
From a broad perspective, their numerical footprint is immense. Out of 190,000 enterprises in Singapore, 99 per cent are SMEs, and they employ about 70 per cent of the workforce. However, SMEs contributed only about half of the gross domestic product in 2014. Clearly, there is substantial scope for them to increase their contribution to the economy. The key to that effort lies in productivity, which has a direct bearing on Mr Heng's reassurance. Helping SMEs to press ahead in the short term should not translate into giving them crutches for the long term. These firms have to persevere with restructuring themselves through higher productivity, innovation and the search for new markets.
Government help has been forthcoming, for example, through the provision of restructuring grants. Enterprise development agency Spring Singapore gave out grants to more than 20,000 companies for 22,000 projects last year. This was more than twice the number of firms it had supported in 2014. This support should complement efforts by firms to trim costs and manage manpower more effectively. Indeed, labour and monetary incentives should be channelled to competitive firms, not those sticking to unsustainable old ways of doing business. Companies must sustain the momentum of change by themselves. State help should not merely buy more time for unviable firms as they move towards an inevitable future.
Fiscal prudence, an underlying principle of governance, demands that the Government continue to target support carefully at the most deserving groups. Also, expectations should be moderated because economic slowdown will affect government revenues and Mr Heng cannot rely automatically on budget surpluses accumulated during the past terms of the Government.
Singapore is at a transitional point where the tripartite system must cohere as hard choices are made to move to the next level. The State can help to ease that journey. Labour must keep in step with the changing times. And companies owe it to themselves and their tripartite partners to negotiate the transition nimbly and responsibly.