Businesses see challenges in the year ahead
SBF members share their concerns, business strategies and the areas for which government’s assistance is sought
Businesses highlight high labour costs, competition and uncertainty in the economic environment as the key challenges ahead.
They are taking measures to address these challenges through increasing productivity/cost efficiency, offering new products and services, staff retention/filling new positions and exploring overseas markets.
Businesses need help from the government to reduce business cost, introduce more targeted foreign worker policies and to assist in capability building and overseas business expansion.
16 January 2015 [Singapore] - The SBF annual National Business Survey conducted in Q4 2014 drew more than 950 responses from members across a range of industries from Manufacturing, Services, Construction and Trading. 21% of the respondents were large enterprises (i.e. MNCs and large locally-owned companies) and 79% were SMEs.
Businesses highlight high labour costs (83%), increase in competition (59%) and uncertain economic environment (56%) as their top three challenges in the next six to 12 Months
Businesses have identified high labour costs as the top challenge that they currently face, with higher levies and curbs on growth of foreign workers contributing to a tight labour market, resulting in upward pressure on cost.
Businesses are responding by increasing productivity/cost efficiency (71%), offering new products/services (47%) and retaining staff/filling existing positions (42%) to address the challenges
Majority of businesses will continue to drive better cost efficiency and productivity in 2015, making it their key strategy for the year.
In addition, businesses also intend to invest in the areas of employee upgrading, IT infrastructure, machinery and equipment, amongst others.
More businesses are looking for opportunities in Asia, particularly ASEAN and China
72% of the respondents (i.e. an increase of 10% from 2014) have indicated that they have an overseas presence. The top markets are mainly in Asia, namely Myanmar, Indonesia and Cambodia.
Only 60% of businesses are aware of the ASEAN Economic Community (AEC), out of which about 70% believe that it would present opportunities.
Businesses identify Cost (62%), Foreign Manpower (34%) and Greater Incentives for Capability Building (18%) as the Top 3 Areas that they would like the Government to Address in Budget 2015
Specifically in reducing business cost, businesses have highlighted rentals (30%) and foreign worker levies (20%) as key areas to look at. On foreign worker policies, businesses have suggested that the government consider increasing the foreign worker quota (22%) and having industry-specific dependency ratios (16%).
Industry sectors that have indicated a heightened need for the government to reduce business cost include Manufacturing, Logistics and Transport, Services and Trading. Industry sectors that have indicated a heightened need to look into more granular foreign worker policies include Construction, Manufacturing, IT and Services.
Summing up the views of businesses expressed in the annual National Business Survey, Mr Ho Meng Kit, Chief Executive Officer of SBF said “In PM Lee’s New Year Message, he had described Singapore’s productivity performance as “disappointing”. Our survey shows that the need for productivity improvement resonates with a vast majority of our members. Many of them, particularly our small companies will continue to benefit from government support to improve their productivity. We hope that the Government will consider the 2015 Budget Recommendations submitted by our SME Committee favourably.
Whilst businesses are still optimistic about their prospects for 2015, the global economic environment has turned more uncertain with lower forecast for global growth. We are seeing a demand constraint. There is a clear need to manage cost to provide businesses with a conducive environment for growth. Lower oil prices will help for many companies, but we need to also focus on wage cost so that it does not run ahead of productivity improvement.”
Mr Ho added “Another important focus for our members is internationalisation. I am glad more of our members are exploring business opportunities overseas. The AEC will take formal shape by the end of 2015. The survey findings indicate that we are still some way in raising the awareness of the AEC amongst businesses. As the AEC comes into place, the flow of goods, services, capital and people will expand. I would like to invite more companies to work with SBF, various trade associations and government agencies like IE Singapore, to leverage the opportunities offered by the AEC.”