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Helping SMEs with collaboration

Copyright 2018 Singapore Press Holdings Limited
 All Rights Reserved

SINGAPORE is expected to face slower economic growth this year as the world economy trudges on at a more sluggish pace. In August 2016, the Ministry of Trade & Industry announced a narrower GDP growth forecast for 2016 to 1.0 per cent to 2.0 per cent from 1.0 per cent to 3.0 per cent. As Singapore continues its push to improve productivity amid China's economic reform, overall global uncertainty and lower consumer and business confidence, a more poignant question remains: How are our Singaporean SMEs preparing themselves for a sustainable future?

In recent years, our policymakers have placed an emphasis on transforming our economy and focusing more on innovation and building capabilities. In fact, a critical part of Singapore's sustainability is dependent on transforming our SMEs to embrace the future. According to the Singapore Department of Statistics, 99 per cent of our 190,100 enterprises in 2015 are SMEs. Spring Singapore has also released statistics that 70 per cent of Singapore's workforce is employed by SMEs. Such statistics are testimony that Singapore's next decade of economic growth is largely dependent on local SMEs.

Our SMEs will need to gather their mettle in this period of economic slowdown to transform and restructure by focusing on collaboration and value creation. Earlier this year during Budget 2016, our leaders rallied Singapore to embrace mergers and consolidations, and encouraged Singaporeans to deepen their skill sets to stay relevant in this competitive environment. We have also seen other measures focused on supporting SMEs to grow further: the SME working capital loan, enhancements to the mergers & acquisitions scheme to defray transaction costs for local SMEs to grow through acquisitions, higher corporate income tax rebate from 30 per cent to 50 per cent which is targeted at SMEs.

That being said, for our SMEs to take on the next step boldly in this period of economic restructuring, there must be continued encouragement for them to collaborate extensively with other SMEs relevant to their line of business to stay ahead of the competition. The benefits of such alliances are two-fold: Harnessing synergies and cost savings. To give SMEs this much needed push, we advocate more accessible government support for SMEs.

The Singapore government has introduced a number of schemes to achieve this purpose of partnership between SMEs. One of Spring Singapore's schemes is the Collaborative Industry Projects scheme, which allows a consortium of at least three SMEs to receive government support for qualifying development or adoption costs if one or more of the following outcomes are attained: Revenue gain or productivity gain. To allow more SMEs to benefit, we hope that this scheme can be extended to any two SMEs or more, rather than a consortium of at least three SMEs. Practically, it is not always easy for three SMEs to come together jointly. The reduction in number will definitely facilitate a larger take-up rate on the scheme. If there are concerns over how proliferated the scheme may become, a minimum size can be set for the combined group as a condition. This allows the smaller scale SMEs to benefit from this scheme, and does not detract from the overall policy intention of achieving economic growth or productivity gains. Widening the scheme to any two SMEs also does not imply providing government funding indiscriminately by lowering each SME's commitment levels for assistance. Instead, we are proposing to extend the reach of this scheme to a wider net of SMEs.

In addition, one of Spring Singapore's other schemes is the Partnerships for Capability Transformation (PACT). Under the PACT initiative, large organisations (LOs) collaborate with local SMEs on knowledge transfer, capability upgrading or development and test-bedding of innovative solutions. This scheme is practical because it allows the SMEs to leverage off the expertise and networks of the LOs to grow and benefit. This scheme, however, remains out of reach of the smaller scale SMEs. More often than not, LOs will choose to work with the bigger SMEs, and not the smaller ones. We suggest for PACT to be extended to allow bigger scale SMEs to work together with smaller scale SMEs, and not just LOs vis-a-vis SMEs. Even within SMEs, it is possible to stratify them further to provide support to the mid-tier SMEs or smaller ones.

Other possible ideas to help SMEs include providing enhanced tax allowance for costs incurred to buy qualifying productive equipment shared between SMEs. Take for example a small logistics company that wishes to enhance delivery timings through the use of drones. Granting such enhanced tax allowance could spur technological innovation and collaboration between a drone manufacturing company and a logistics company. The proportion of tax claims could be allowed according to the proportion of cost contributions by each SME. The rate at which tax allowances can be claimed could either be standardised for all SMEs or elected separately for each entity.

In 2006, Spring Singapore developed SME Portal as an information services tool for Singapore SME owners and entrepreneurs. This SME Portal is a good touchpoint for SMEs and business entrepreneurs to access government support and network with like-minded individuals. To support more SME collaboration, we could incorporate a platform within the portal for SMEs to post notices to other SMEs for collaboration opportunities.

Take for example the model application SWATmobile, which is an on-demand ride-sharing service that provides taxi-like services at bus-like prices. Commuters who require this service would need to communicate with a chatbot which utilises dynamic routing technology to map out the most efficient travelling routes for all the commuters based on real-time passenger requests and live traffic data. If there is an avenue on the SME platform for SMEs to work together, we could see future link-ups between all kinds of SMEs, such as a transport SME with a technology-related SME.

In conclusion, it remains a challenge for the Singapore government to balance the support of SME cooperation with letting market forces determine the course of events. The intent remains for our SMEs to foster a culture of synergistic partnerships beyond government support. To this end, there is a need to foster a culture of collaboration to transform and restructure in the next decade.


Last Updated on : 18 Jan 2018