SMEs expect business dip, but better to ‘worry about transformation plans first’, says Chan Chun Sing

SINGAPORE — As the economy slows, business sentiment has been affected, with more firms predicting a fall in revenue and profits. This was the finding from a new survey released by the Singapore Chinese Chamber of Commerce and Industry (SCCCI) on Wednesday (Aug 21). 

The poll gathered responses from 972 companies, most of which are small- and medium-sized enterprises (SMEs) from the services sector.

Despite the pessimistic outlook, Trade and Industry Minister Chan Chun Sing urged business leaders to “worry about your business transformation plans first”, and to diversify their markets “so as not to be held ransom by one particular market or set of supply chain”.

He was speaking at the 21st Annual SME Conference organised by SCCCI at Suntec Singapore, where the latest survey findings were presented.

Around 39 per cent of survey respondents predicted that they would see lower revenues this year, more than the 27 per cent in a similar survey last year.

More than half, or 54 per cent, expected their profit margins to fall, compared with around 45 per cent saying so a year before.

While about 14 per cent indicated last year that they would cut back on manpower, about 17 per cent said that they would do so this year.

Around 63 per cent of the businesses polled were most concerned about the trade war between the United States and China. Some brought up cyber attacks and the Singapore-Malaysia bilateral relationship as areas of interest too.

SCCCI president Roland Ng said that while efforts to transform, innovate and upgrade business capabilities must continue, “we are facing a challenging external environment and the Singapore economy is slowing down". "The chambers’ annual business survey this year reveals that businesses have indeed been affected by the current economic downturn," he added. 

During a panel discussion with SCCCI executive committee member Chia Kim Huat, Mr Chan noted, however, that there is still a sizeable proportion — about one-third — of the respondents who believe that revenue will increase this year.

It shows that “whether times are good or bad”, there are always businesses that expect declining revenues and also those which expect growth, he said.

He urged the 7,000 business leaders in the audience to make it a priority to transform their businesses and to work with the Government’s economic agencies through the various schemes available.

The Government, too, will consolidate its business schemes and provide firms with a “single touchpoint”, such that SMEs need not “run around” looking for what scheme to apply for. “That is a better way to do things than before,” he said.

One such example is the Enterprise Financing Scheme, which was announced during this year’s Budget and slated to launch in October. The programme brings together trade agency Enterprise Singapore’s eight financing schemes covering trade, working capital, fixed assets, venture debt, mergers and acquisitions, and project financing. 

‘NO SAFE HAVEN FOR BUSINESS’

Mr Chan reiterated that the trade war is likely to drag on into the long term, potentially creating “a very different world environment” involving different trading blocs.

“People today are talking about the bifurcation and fragmentation of the global trading order. If that is true, and if that worst case comes about, then the question is how we can prepare ourselves for that situation over and beyond just the US-China trade conflict, as this will impact other trade relationships with other countries as well.” 

Mr Chia from SCCCI observed that the global economy is rumbled not just by tensions between US-China, but also by the Japan-South Korea trade war and the likelihood of a hard Brexit. “It looks like there is really no safe haven in the world, even as we tell our Singapore companies to go international,” he said.

To that, Mr Chan said this is why it is so important for the two largest economies in the world — the US and China — to “set the right context”, otherwise there will be a “more chaotic world”. 

“Although the US and China are quarrelling with one another, neither the US nor China is quarrelling with Singapore. Our job is to make sure that no matter who quarrels with who, we do not quarrel with them and we interoperate with them. There is an opportunity there as well.

“So… Singapore is incidentally that safe harbour.”

Adding on, Mr Chan said that another challenge for businesses is how to position themselves in this bifurcated world.

One way is for them to diversify their markets. To facilitate this, the Government has sought to cover more than 90 per cent of all trade through free-trade agreements.

As trading involves the digital economy and financial flows as well, Singapore has also pioneered digital economy partnerships with other countries, such as with Chile and New Zealand, and are spearheading negotiations of the World Trade Organization rules on digital economy with Australia and Japan.

“This will be the next lap of opportunities for all of us here, but unless we have a global set of rules for the digital economy, not all of us will be able to benefit from this, trade freely, exchange data and ideas, (and) integrate our global production and supply chains together,” Mr Chan said.