IN A world of increasing uncertainty and protectionism, changes in the digital space and the rise of the millennials will be key challenges for small and medium-sized enterprises (SMEs) here, said economists from United Overseas Bank at their 2017 outlook briefing.
These two areas are bigger concerns for Singapore to tackle even as the spotlight lately tends to be on the global economic slowdown and policy changes in the West, according to UOB chief economist Jimmy Koh.
This comes on the back of changes in the digital space altering the physical world, and as Millennials become the consumer and labour force of the country.
While UOB economists expect the slowdown in Asia to be protracted, it will be less severe than initially feared. Mr Koh described it as a "Goldilocks" situation - neither extremely hot nor cold - for the next few years.
But they say that there are still silver linings to be found in Asia, or more specifically ASEAN.
Mr Koh said Asia is less dependent on what happens in the US and Europe. In fact, more activity is emerging out of South-east Asia, such as the ASEAN Economic Community, which he believes is the start of regional integration.
He also pointed out that ASEAN countries still have fiscal leverage when compared to developed countries, due to lower government debt.
Mr Koh said: "It's very easy to become overly negative, especially in a long 'Goldilocks' environment like this. But I think in the global arena, we can see banking models changing from the West to the East, the rise in the middle income, the rise in intra-regional trade - all these bode well for Asia."
On the Committee on the Future Economy (CFE) report expected later this month, Mr Koh expects two main fronts to be addressed, namely the structural slowdown and innovation.
He said that the key issue SMEs face in Singapore is cost. But this, in turn, forces traditional businesses to see how they can do things differently.
Mr Koh gave the example of a pest control company he encountered which decided to bring in drones to overcome safety and cost issues.
"It's relooking the same product, the same business, but re-engineered and re-delivered to customers in a different way...
"We need more SMEs to think through these issues and to bring new value. It's how we bring the business closer to the customer instead of the customer coming to you."
Mr Alvin Liew, senior economist at UOB, added that cost is a concern not just for Singapore businesses, but for all developed economies.
"There is no cheap first world country. It's how we try to manage it: transform, change the way we do things, and move up the value chain."
This article was first published on Jan 11, 2017.
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