The Straits Times says

SMEs must think transformation

Reactions to this year's Budget among many small and medium-sized enterprise leaders reveal the disconnect in the approaches of the private and public sectors. First, there is a difference in timeframes, with SMEs worried about short-term disruptions, while the State is also concerned about long-term ones. Next is the way support is conceived. Businesses are seeking immediate relief to remain profitable, while the authorities are urging them to use the support being offered to become profitable in new ways in a changing world.

SMEs' focus on higher operating costs is valid in that these will make businesses less competitive over time. However, the larger story is one of transformation that must be urgently undertaken if the city-state is to continue playing a useful economic role. In this endeavour, SMEs have a crucial role to play as their economic remit is vast. The 189,000 SMEs here form 99 per cent of enterprises and employ 70 per cent of the workforce. Yet the sector contributes to only about half of the gross domestic product every year. If SMEs can generate more value, that would uplift millions of workers as well and secure the nation's growth. "The biggest change can come from the smallest block," as noted by Spring Singapore, the agency for helping Singapore enterprises grow.

Hence, the State's focus on being an enabler, via schemes like a $600 million fund to help firms expand abroad. SMEs can also get government help to digitise their products and services - a vital step if they are to ride on the prospects of Asia, particularly China, India and Asean. There is a wealth of other schemes available offering practical assistance to SMEs that have the burning drive to innovate and cater to customers' needs in new ways.

The State's role is not to extend the lease of life of unsteady companies, with no fresh ideas, that still clamour for cheap labour or state subsidies for running costs. These might not survive even if they relocate. Nor can the State pick winners to back. Instead, it's the market that must determine who will thrive. What the Budget offers to SMEs, intent on transforming themselves in viable ways, is a framework of training, tailored grants, loans and schemes like laboratory facilities, technology consultancy and testing services at Centres of Innovation set up by Spring Singapore together with certain tertiary institutes.

Singapore is in a transitional phase that compels it to look ahead, while bearing the pain of disruptions. The cost pressures serve as price signals in the economy, enabling resources to be put to more productive uses, as Finance Minister Heng Swee Keat noted in rounding up the Budget debate. One might take painkillers for temporary relief during a stage of this journey. But the larger objective must be to breathe vitality into SMEs so they can outrun others in the global pack.

A version of this article appeared in the print edition of The Straits Times on March 04, 2017, with the headline 'SMEs must think transformation'. Print Edition | Subscribe