Budget 2015: SMEs look for more targeted help

SMALL and medium-sized enterprises (SMEs) are looking beyond technology adoption and hardware purchases to address manpower shortages and reduce their reliance on foreign labour.

One idea is to market SMEs more aggressively to existing and potential local job applicants.

To that end, one of the Budget 2015 recommendations put up by the Association of Small and Medium Enterprises (Asme) is to develop a structured framework or curriculum to allow SMEs to provide certification to students employed by their organisations.

Asme members ranked "more initiatives to help SMEs look for local staff and talent" as topmost on their Budget 2015 wishlist, according to a pre-budget survey conducted by Asme in December.

In the same vein, members of the Singapore Chinese Chamber of Commerce and Industry (SCCCI) put "active participation in 'place-and-train' programme recommended by the Aspire Committee to attract ITE/polytechnic students" high on their wishlist.

The need to find more solutions to the manpower crunch comes amid mounting challenges faced by SMEs here. Businesses have overwhelmingly cited rising business costs as one of the key challenges faced in 2014. Among Asme members, 44.7 per cent of the survey respondents said that their operational costs have increased by 11 to 20 per cent in 2014 over the previous year, compared to 34.7 per cent in 2013.

The factors for higher business costs were manpower and rental costs, and foreign worker levies, said these respondents.

According to latest rankings released by DP Information, Singapore's top 1,000 SMEs are facing drops in their revenue, with a growing number even falling into the red. These companies generated S$28.3 billion in combined sales, 8.7 per cent less than in the 2014 rankings. Their combined profit was down 0.8 per cent to S$3.4 billion. Meanwhile, the number of loss-making SMEs grew from 114 in 2014 to 130 in the latest rankings.

Domestic challenges mean there is now increasing impetus for SMEs to adopt overseas expansion as a key growth strategy. The Singapore Business Federation-led (SBF) SME Committee (SMEC) has recommended a slew of assistance programmes ranging from enhancing IE Singapore's Global Company Partnership to lowering the threshold for Iras' Mergers and Acquisitions Allowance to 30 per cent.

Currently, under the Global Company Partnership, only companies with in-market turnover not exceeding S$100,000 are eligible for the grant for in-market sales support. But this cap is too low for large markets such as China and India, noted SMEC. It has recommended that the government raise the in-market turnover ceiling to S$200,000.

Also worth noting is that small SMEs find cash subsidies more useful compared to double tax deductions, as many SMEs have lean profit margins. Such cash grants will enable these SMEs to benefit from the ASEAN market, and the impending ASEAN Economic Community in 2015.

Beyond funding, SMEs have cited a lack of information - including but not limited to lack of awareness of rules and regulations such as taxation and labour laws in their intended overseas markets.

Fresh calls were also made for a high-level SME-centric strategy group to be set up. Such a body, which can champion the rights of SMEs, will offer greater synergies and coherence, said Kurt Wee, president of Asme.

This same body could also drive a more comprehensive collection of data about SMEs in Singapore. Currently, data on SMEs are collected by different ministries and agencies. Better coordination and analysis of such data would allow for better assessment of the overall health of SMEs, and help ensure that policies and programmes catering to specific needs are developed.

This article was first published on Feb 2, 2015.
Get The Business Times for more stories.