15 January 2014
Bigger productivity push needed from SMEs

Bigger productivity push needed from SMEs

Ser Luck: 2020 target of 2-3% p.a. productivity growth drawing near

[SINGAPORE] The government hopes that more local companies will ramp up their efforts to boost their productivity, making this call especially to those that have yet to do so.

Minister of State for Trade and Industry Teo Ser Luck made this point as he warned that time was of the essence, given that the target to achieve productivity growth of 2 to 3 per cent per annum by 2020 is drawing near.

"It's important for SMEs (small- and medium-sized enterprises) to quickly take that first step, because it will take some time for productivity schemes to take effect," he told reporters yesterday.

A new survey done by the Singapore Business Federation (SBF) found, however, that SMEs here want more time to adjust to the restructuring process.

The SBF had polled 1,014 of its members from several sectors in the fourth quarter of last year. SMEs made up about 80 per cent of the respondents, and multinational firms and large local companies, the rest.

Lawrence Leow, who chairs the SBF's SME committee, said: "This is a difficult transition period for SMEs as many grapple for survival with persistent rising business costs, tight manpower and resource constraints."

In its recommendations to the government ahead of next month's Budget, the committee noted that companies did not want to see the introduction of new measures that would "exacerbate the already harsh conditions" SMEs are facing.

Mr Teo, who is also the committee's adviser, said that the government was ready to help companies make the necessary changes to their operations through schemes such as the Productivity and Innovation Credit (PIC).

Singapore failed to meet the 2 to 3 per cent productivity-improvement target in 2011 and 2012. Labour productivity edged up by only 1.3 per cent in 2011, and even shrank by 2.6 per cent the year after.

Productivity was negative for six quarters from the fourth quarter of 2011, and improved slightly in the second and third quarters of last year.

In a separate survey conducted by the Association of Small and Medium Enterprises (ASME), 61 per cent of companies polled indicated that they would like to see more initiatives to increase productivity.

Local SMEs also want the government to extend the PIC scheme beyond the 2014 financial year so more companies can benefit from it.

But even as companies here try to meet the demands of a transforming Singapore economy, Mr Leow urged them to look into expanding overseas, or risk being overtaken by competitors elsewhere.

He said: "The global economy is recovering and regional growth is expanding. Our SMEs have to seize these growth opportunities. There is an urgency to prepare them so that they do not miss out on these opportunities while regional competitors are also fast catching up."

Mr Leow called on the government to take a "more targeted approach" in this year's Budget by focusing on helping SMEs revitalise their appetite for growth and expansion through innovation, internationalisation and access to financing.

Echoing these sentiments, ASME president Kurt Wee lamented the lack of assistance in equity financing for SMEs from the banks.

"Typically, banks only offer financial assistance to SMEs purchasing goods, equipment and properties, but do not provide or provide only limited funding for SMEs interested in expansion of equity," he said.

"For SMEs to remain competitive in this increasingly challenging local and regional landscape, ASME urges the government to work with financial institutes to make equity financing available to SMEs for this purpose, as a debt-financing option."