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  • SME Committee Budget 2016 Recommendations Focuses on Helping SMEs with Immediate Growth Challenges and Creating an Innovation-centric Environment for SMEs

SME Committee Budget 2016 Recommendations focus on helping SMEs with immediate growth challenges and creating an innovation-centric environment for SMEs

  • SMEs still grappling with new operating norms of a tight labour market and high business costs
  • Proposes measures on foreign worker levies, manpower, transportation and logistics to help manage costs
  • Recommends support for financing, internationalisation and creating an innovation-centric environment for SMEs
  • Reiterates call to establish a single agency empowered to drive SME development

25 January 2016 [Singapore] The SBF-led SME Committee (SMEC) submitted its recommendations for Singapore Budget 2016 to the Government on 15 January 2016. 

Three Key Considerations

The SMEC maps out the following three underlying considerations for Budget 2016: 

  1. Global Economic Outlook 2016: Substantial Downside Risks 
    The global economy grew slower than expected in 2015 and is entering 2016 in a turbulent time. According to the World Bank in their report released in January 2016, global growth slowed to 2.4% in 2015, down from 2.6% in 2014. There are substantial downside risks, triggered largely by falling oil and commodity prices and a slowdown in major emerging market economies, notably China. Reflecting the impact of these on Singapore companies, the SBF National Business Survey (NBS) 2015/2016 showed that 53% of SMEs surveyed indicated that they have been negatively impacted by the current global economic climate in 2015, up from 37% in 2014

  2. Prolonged Period of Slow Growth 
    In the Economic Survey of Singapore 2015 released on 25 November 2015, the Ministry of Trade and Industry forecasted that Singapore’s economy would expand by 1-3% in 2016. This marks the fourth year of low growth in Singapore. Coupled with five straight quarters of declining SME sentiments in the SBF-DP SME Sentiments Survey, this prolonged period of slow growth is a new unknown. The SMEC asks that the impact on SMEs be closely monitored.

  3. Budget Wish List 
    The NBS 2015/2016 found that 58% of businesses were concerned with the uncertain economic environment. Seven in 10 businesses see high labour costs as a key challenge this year. To combat these headwinds, businesses urge the Government to introduce measures to help reduce business costs, and invest in the training and development of their PMET employees.  

 

Budget 2016 Recommendations
In its Budget 2016 recommendations, the SMEC focuses on two key areas:
  1. Overcoming Growth Challenges
    Alleviate immediate term challenges of SMEs, while at the same time consider the development of an efficient transportation and logistics systems, as well as increase on-the-ground support for SMEs doing business in international markets
    • Hold back any further planned increases in foreign worker levies
    • Conduct a review to reduce foreign worker levy
    • Remove the foreign worker levy for S Pass holders
    • Review the conditions for minimum salary and foreign worker levy under the Training Employment Pass and Training Work Permit
    • The Job Flexibility Scheme eligibility to be expanded to other sectors beyond the services sector
    • Update source countries for work permit holders for the hospitality and tourism sectors
    • Government landlords to consider the adoption of the Fair Tenancy Framework
    • Make available the rental data of other government owned business premises on top of those already published by JTC and URA
    • Review existing development control guidelines to promote efficiency and effectiveness of overall building design
    • Examine measures for more efficient transportation and logistics structures
    • Introduce a Working Capital or Restructuring Loan Scheme
    • Adopt interest rates pegged at more equitable rates and enhance risk-sharing by government for government-supported financing schemes
    • Strengthen on-the-ground support for companies venturing into overseas markets
    • Encourage partnerships between large local enterprises and SMEs for overseas projects

  2. New Paradigm for Enterprise Development
    Resources will need to be channelled to those sectors where SMEs have a better chance of doing well and succeeding. This calls for a new paradigm for enterprise development in which the government places priority on developing the SME sector.

    More effective help and resources will have to be channelled to nurture innovative and entrepreneurial local companies to their full potential.
    • Review enterprise development policies where SME development is at the centre of economic strategies
    • Establish a single SME authority that is headed by a Minister and empowered to drive SME development
    • Study and consider the adoption of the Korean Technology Finance Corporation (KOTEC) model for intellectual property valuation and loan guarantee to support SMEs
    • Review R&D programmes for SMEs to close gap in understanding SMEs’ innovation needs
    • Enhance capacity and knowledge within Technology Transfer Offices
    • Promote and avail incubator and test-bedding facilities to SMEs
    • Consider setting up contact point for SMEs to source for incubator and test-bedding facilities

Noting that more than one in three SMEs face challenges with unclear rules and regulations in overseas markets, Mr Lau Tai San, Chairman of the SMEC Sub-committee on Internationalisation, said “IE Singapore has done well to support Singapore companies overseas such as developing networks and opening new opportunities. What we see now are SMEs asking for more help to overcome rules and regulations, compliance and bureaucracy. IE Singapore can expand on-the-ground support in overseas markets to cover these areas. Another way is to fund the setting up SingCham business groups in selected markets that comprise practitioners on the ground who have been there, done that, and to provide this support.” 

Mr Melvin Tan, Chairman of the SMEC Sub-committee on Innovation, said “Through the Innovation Sub-Committee, we heard from many SMEs with anecdotal accounts of challenges they face gaining access to various resources for their innovation projects. Perhaps this has to do with different expectations, or a different level of understanding of demand and supply. Sometimes, the SMEs may not even be aware of who to approach. If we want to move from value adding to value creation, facilities and support for innovation will need to be more SME-friendly and better organised.” 

Mr Lawrence Leow, Chairman of SMEC, said, “In the past 50 years, Singapore has been successful with attracting multinational companies (MNCs) here. They created jobs for Singaporeans and raised our technological and skill levels. We also developed Temasek Portfolio Companies (TPCs) into global players.” 

“However, there is a general feeling that there is something missing. This is best described by the Chinese saying “mei zhong bu zu” (美中不足), meaning the "lacking of something in an otherwise perfect situation". What is missing or lacking is local companies that can be considered global brands or companies. While we are not producing global companies, there has been an emergence of foreign global companies in our region over the years, with some possessing new disruptive technologies.  There is a pressing need for our companies to bridge the gap in terms of technological innovation, company size and market presence, or risk being ousted from the intensifying competition.” 

“Increasingly, we need to place more emphasis on helping companies move up the technological ladder and transform from a value add to a value creation economy, as our government had advocated.  More focus and resources need to go into supporting the growth of our SMEs to help more local companies become global players, particularly so given the constraints and limitations of our small domestic economy." 

“While the present model of having different agencies with varying expertise focus on specific aspects to drive SME growth has provided SMEs with an adequate suite of support, a more concerted effort is required to drive SME development and growth amidst the current economic restructuring and global slowdown.  We would like to call for the establishment of a single authority dedicated to this cause, preferably led by a Minister, as we believe this would be an effective means towards ensuring that the blueprint and strategy for the SME sector is not only designed with a more holistic approach but also implemented more effectively under one umbrella." 

Mr Leow added “We look forward to continue working with the government to give our SME sector a helping hand in pursuing growth and to emerge stronger from the ongoing economic restructuring.”

Welcome Address by SBF CEO Mr Ho Meng Kit

Opening Address by SMEC Chairman Mr Lawrence Leow

Budget 2016 Recommendations At A Glance 

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