This article was first published on The Business Times.
Small and medium sized enterprises (SMEs) are the primary focus and comprise the largest beneficiaries of the economic measures laid out during Budget 2017 and the Committee on the Future Economy (CFE) report. It may therefore not come as a surprise that the Ministry of Trade and Industry unveiled plans to merge IE Singapore and SPRING Singapore recently.
We believe that the merger will benefit SMEs. While Government support in growing the SME ecosystem is appreciated, this merger answers the call we have heard from local enterprises for a long time now.
That is, many across different industries have told us that they would feel more assured if there is one specific agency tasked with supporting their growth and related needs.
SMEs are often faced with increasingly complex challenges, such as manpower constraints, rising costs and relentless competition from bigger companies. At the same time, they are also under pressure to deliver improved business results, increase customer satisfaction, improve competitive standing and enhance employee productivity.
With this merger, the needs of the entire business community can be considered holistically, through more streamlined and comprehensive assistance schemes and programmes supporting SMEs with differing needs and challenges, across different industries.
Addressing these issues will require cross-agency collaboration in developing policies, coordinating programmes and making investments. Before the merger, our economic agencies were largely single-purpose and thus not structured to deal with complexity of issues.
IE Singapore facilitates the overseas growth of Singapore-based companies and promotes international trade. SPRING Singapore, on the other hand, helps to facilitate the growth of industries within Singapore and enhance enterprise capabilities of local enterprises for better access to markets and opportunities.
We hope that with the merger there will be more targeted support for developing our SME ecosystem.
Policy must be more nimble and adaptable to address SME needs
Firstly, there is a need to shift away from the ‘one-size-fits-all’ policy approach and adopt more targeted measures. This could begin with a possible rethink of the definition of a “SME” to better understand and target the needs of SMEs.
Instead of a broad brush, more granularity is required in differentiating small Singaporean firms in different industries so that policies can be fine-tuned and targeted to greater effect. A more holistic policy framework should address the various stages in a company’s life cycle, from inception to full-scale operations, to venturing abroad, and provide targeted support accordingly.
This is especially necessary since SMEs may have limited capacity to do long-term planning due to an intense near-term focus on survival, and thus may not prioritise ancillary activities (for example, branding, marketing, grant applications). As such, the economic agencies would do well to assist SMEs in this area.
Secondly, many companies we spoke to are aware of the well-intentioned government grants but often found the application process complicated and time-consuming, which deterred some.
SMEs were often asked for supporting proof, and often did not have the capacity to meet the high bar set. There is a need to eradicate this trust deficit and streamline the application process for SME grants in order to maximise benefits.
Government grants, in particular - usually disbursed based on spending – were seen as inaccessible. SMEs were often unable to cough up large amounts upfront to spend and qualify for these grants due to cash flow issues.
Even when grants are approved, after a sometimes lengthy application process, applicant companies often had to complete more paperwork, such as compulsory and highly detailed end—of –year surveys which inadvertently takes up more time.
Thirdly, productivity-enhancing schemes need to be targeted and offered over the entire lifespan of a company given that the productivity push should be continual, instead of having broad-based measures which rewards spending with specific expiry dates.
Targeted schemes are important and can be highly effective; however, they normally entail an approving authority deciding what qualifies for the benefits and what doesn’t. This also involves an application process.
The Business Grants Portal eases the administration process but a potential problem may arise if we have 10 different schemes administered by five different agencies; and companies could end up with 50 different sets of qualifying criteria for schemes.
With the merger, a possible solution is to set up a team specialising in grant applications for start-ups and SMEs and park the entire spectrum of available grants and incentives under this team. This would allow SMEs to fully tap on the existing benefits.
Building a strong core of Singaporean enterprises
Besides streamlining processes, it may also be worthwhile augmenting the ranks of case officers which are assisting SMEs.
Job displacements caused by economic downturns this past decade means that there is an increasing pool of mid-career business executives or PMETs available which can be hired into the ranks of this combined agency.
Such executives are likely to have more commercial experience augmented by a portfolio of skills, market knowledge and familiarity with taxation and in managing regulatory issues which can be helpful to SMEs.
Beyond policy, it is also necessary to create a conducive environment for Singaporean enterprises to take root and flourish. Such an environment can be nurtured through Government support in the forms of education, skilled labour, financing mechanisms and legal frameworks.
For example, more flexible and wide-ranging financing options to ensure that small businesses have ease of access to loans, especially for startups which may have little business history or collateral.
Also, the Government should provide substantial grants that are easy to apply and qualify for such that SMEs can tap these funds to develop long-term plans for growth.
As Singapore maintains an open economy, there should be a push to support local companies and promote locally produced goods and services in order to nurture indigenous capacity in the domestic economy.
Tax incentives can be made available to encourage the development of internally-generated, unique Singapore brands. Such incentives, like tax deductions based on the market value of these brands, would recognise the process of value creation that businesses go through in setting themselves apart.
SMEs can be drivers of creativity and innovation in Singapore. The role of the agencies should be to facilitate the growth of promising Singaporean enterprises and help them translate their entrepreneurial energies into tangible products and services and provide a boost to our local economy.