SBF-led SME Committee proposes targeted approach for Government’s consideration in Budget 2014
- Outlines six key considerations in its development of Budget 2014 recommendations
- Proposes targeted approach to help SMEs across three situations: SMEs seeking growth, SMEs in survival mode and SMEs in sectors with special needs
- Urges Government to allow more time for the restructuring process and not introduce any more measures that would exacerbate the already harsh conditions that SMEs are currently facing
14 January 2014 [Singapore] – The Singapore Business Federation today shared the key findings of its National Business Survey 2013/14 and Recommendations for Budget 2014 from its SME Committee.
Whilst the survey findings affirm the assistance provided by 2013 Budget measures and the increased optimism for prospects in 2014, the Federation cautions that close monitoring, particularly of the SME sector, is warranted during this difficult transition period of economic restructuring.
Key Findings of SBF National Business Survey 2013/14
The SBF National Business Survey conducted in Q4 2013 polled 1,014 members from representative sectors of the Singapore economy. 78% of respondents were SMEs, with MNCs and large local companies making up the rest.
Effectiveness of Budget 2013 – Businesses viewed Budget 2013 more positively than 2012. With greater outreach of government schemes, more companies were aware and used these schemes. However, small businesses, which were particularly impacted by cost pressures, found Budget 2013 measures on cost alleviation less useful compared to larger companies.
Escalating Business Costs – Inflationary pressure continued to persist in 2013 with rental and labour-related costs cited as top concerns. Government Compliance Costs has emerged as one of the top cost components, 4th on the list, with the greatest impact on profitability. For Budget 2014, the SME Committee (SMEC) urges Government to pay closer attention to policies that could impact rising business costs, including Government Compliance Costs.
Responses to Labour Challenges – While labour woes continued across 2013, businesses have responded to the tightened foreign labour policy by reducing the number of foreign workers hired, hiring more local staff and improving productivity by embarking on automation. Overall, some 15% of the respondents have also decided to downsize and 11% are considering relocation as a strategy.
Wish List for Budget 2014 – Rental, foreign workers regulations (including foreign workers levy) and taxation emerged as the top three issues that SBF members would like Budget 2014 to address. 72% of SBF members hope Budget 2014 will contain measures to help businesses deal with escalating costs, while 48% are anticipating policies that can soften the impact of tighter manpower constraints.
Six Key Considerations as the Backdrop of SMEC Recommendations
The SME Committee puts forward the following six considerations as backdrop to its 2014 Budget recommendations:
- Economic Competitiveness
Singapore’s competitiveness (as shown in IMD World Competitiveness Yearbook 2013, HSBC Global Survey and ECA international) has eroded by global conditions while domestically, it is dragged down by reduced business efficiency as a result of high business costs and the restructuring process.
- High Business Costs
Continuous cost headwinds distract SMEs off restructuring and business expansion as reflected by diminishing average turnover and profits across most sectors. Also, one in three SMEs polled by the SME Development Survey highlighted cost cutting as a top priority.
III. Realistic Productivity Target
Singapore’s labour productivity has been negative for six quarters since 2011 though there were some recent improvements. Companies need more time to achieve Government’s productivity growth target as SMEs face short term challenges in costs and manpower constraints.
- Financing for Growth
Increasing challenges of SMEs seeking financing for business continuity, growth and market expansion. This is seen in the alarming rise in the number of SMEs (43%) with “High Risk” DP Credit Rating.
- Seizing Growth Opportunities
Give more focus to help SMEs seize growth opportunities particularly in ASEAN and rest of Asia.
- Greater differentiated fiscal policies
Larger corporations appear to have benefited more from Budget 2013 than SMEs. This can be seen with 44% of large companies finding Budget 2013 useful against 41% of SMEs. Greater differentiated fiscal policies is needed for SMEs as compared with larger corporations