A new front for a new normal

Back then, ESG — an agency under the Ministry of Trade and Industry (MTI) whose agenda is to help local companies grow — was gearing up with ways to help companies here cope with the fallout of the trade war between the US and China. Among other things, the agency was helping local companies develop and move into new markets, find new customers and to explore new supply chains as the existing ones were coming under strain.

The virus was then just a niggling concern. By Feb 18, the day Deputy Prime Minister Heng Swee Keat delivered Singapore’s first Budget for 2020 in Parliament, the seriousness of Covid-19 was already apparent.

The travel and hospitality sectors were the first to be hit, and the knock-on impact on the rest of the economy quickly followed. As the case count climbed rapidly, worries and uncertainties increased, culminating in the “circuit breaker” lockdown that took effect on April 7. The government swung into full battle mode, drawing up plans and firming up measures needed to deal with the crisis. “The measures needed to help businesses overcome [an economic slowdown] is completely different from the measures needed when the economy comes to a complete stop. There is a much greater threat to the livelihoods of individuals,” says Png.

Drawing reference to the downturns seen during 2003 SARS outbreak and the 2008 Global Financial Crisis (GFC), Png observes that banks which are known to be risk averse had tightened cash flows and credit, causing companies, already reeling from the sudden shock, to suffer even more with cash flow constraints.

To prevent such a situation this year, the government launched various loan schemes aimed at supporting businesses through the crisis. One such scheme is the Temporary Bridging Loan Programme which allows eligible enterprises to borrow up to $5 million from banks at rates capped at 5% per annum. Another initiative — the enhanced Enterprise Financing Scheme–SME Working Capital Loan — on the other hand, allows SMEs to borrow up to $1 million to help with their operational cash flows. For these schemes, the government is shouldering 90% of the risk, so as to encourage banks to lend.

To make it even easier for banks to lend, ESG is also partnering with the Monetary Authority of Singapore (MAS) to reduce the cost of lending. As such, banks that are part of the scheme can borrow Singapore dollars at an interest rate of 0.1% for a two-year tenor, says Png. In addition to supporting lending, the government has worked with financial institutions to give more breathing room in repayment by providing debt moratorium to enable viable businesses to repay only the interest and not the principle until Dec 31. SMEs requiring further relief after the end of 2020 can tap on other measures such as the Extended Support Scheme–Standardised, which offers them options to lower their short-term repayment obligations on their loans.

There were plenty of takers for the support offered by the government. Between March and September, around $14.5 billion in loans had been disbursed to over 18,000 enterprises under ESG’s various loan schemes. Png estimates this is around 14 times the credit that was extended in 2019.

Going digital

Png says the various financial schemes rolled out have collectively helped to prevent healthy companies from “getting into an accident or taking ill”, especially during the lockdown when business activity was down to a trickle, not because “consumers did not want to spend or businesseswere insolvent”.

However, he is quick to add that these measures have been complemented by other efforts such as supporting businesses’ digitalisation efforts. Aside from this, the team rolled out more targeted packages to support businesses, particularly those that had taken a greater hit from the pandemic. For instance, ESG worked with retailers by helping them digitalise operations and get on e-commerce platforms such as Shopee and Lazada. For food and beverage operators, ESG aided their move onto food delivery platforms such as Foodpanda, such that they could continue selling their food during the circuit breaker. ESG also covered 5% out of the 25% incurred from delivery charges, to help defray any additional cost to the companies.

Transformation

While these measures have helped mitigate the extent of the economic downturn on businesses, Png believes that businesses have a bigger opportunity to seize now: Upgrading and transforming themselves.

While businesses can take on this process at any time, he says it is timely to do so now especially when the economy and revenue streams are not doing so well. This is as it will help companies reposition themselves, such that they are “in a better shape to ride the crisis and [remain relevant] when the economy recovers”.

With the pandemic likely to permanently alter old norms and conventions, Png is urging businesses to reassess their business model. Take for example, a fine dining restaurant. Prior to the pandemic, it could seat up to ten persons at each table, but that number was reduced to five under Phase Two’s limitations. What this means is, the restaurant needs to turn the table twice to generate the same revenue as before. For this to happen, the menu would need to be tweaked from, say, a five-course meal to a three-course, so that diners can eat and be served in half the time, says Png.

Creating such a seamless process would involve re-modelling the dishes to be served — as well as introducing innovative elements so that the customer experience is not compromised, despite them having less time to linger over their meal.

Across the different sectors, Png is seeing businesses re-inventing themselves as they adapt to restrictions while catering to customers’ tastes and preferences. For instance, a retailer selling winter and outdoor wear has now moved to selling sportswear and bicycles, following the plunge in global travel and heightened interest in exercise.

Against this backdrop, between January and September, enterprises have embarked on over 28,000 projects under ESG’s programmes aimed at helping them improve productivity, build new capabilities and expand overseas. This number is a three-fold y-o-y jump, says Png.

Start-up hub

While Singapore’s economy may have slowed this year, the opposite can be said of the number of businesses and start-ups that have sprouted up. Png notes that along with the higher numbers, the tempo of activities among start-ups have remained high during the lockdown and safe distancing measures, since these companies typically come from digital fields and do not require a physical space to operate out of.

According to data compiled by the Accounting and Corporate Regulatory Authority, in the first nine months of the year, a total of 58,075 companies were formed — up 25.6% from the same period last year.

If the job market does not look positive in the long run, Png expects the number of start-ups and new companies formed to go up even more, as the opportunity cost of giving up a stable job will become comparatively lower.

While the presence of more businesses would mean stiffer competition, Png believes the economy as a whole stands to gain since this will spur improvement in the quality of goods and services offered. This also means there would be more people looking to create solutions that either address the threats or sieve out opportunities, he notes.

Although around a quarter of the businesses being set up are sole proprietorships or partnerships, there will, too, be plenty more employment opportunities as well, especially over the medium to longer term as some of these companies stabilise and grow.

While the pace might have picked up during the pandemic, Singapore’s start-up scene, as a whole, had already been gaining traction in recent years. Companies with innovative products and offerings are creating new demand and markets to call their own.

For instance, Singapore-headquartered MooVita — which provides software for driverless vehicles — is collaborating with Sioux Technologies from the Netherlands to improve communication between autonomous vehicles (AV) and pedestrians to assess how the vehicle can assess a pedestrian’s intention and show that it is coming by. The collaboration took place in the Eureka GlobalStars Call which serves to support R&D across 41 states such as the European Union, Canada and South Africa.

At a global level, Singapore is shaping up to be a regional hub for start-ups and venture capitalists to meet. This year, a record 7,500 companies from more than 150 countries took part in the Slingshot start-up competition organised by ESG. The competition was part of the joint Singapore FinTech Festival and Singapore Week of Innovation and Technology held between Dec 7 and 11.

Outside the festival days, Singapore has become home to start-up accelerator programmes from Germany, the Nordic countries, Switzerland, China, the US and South Korea. Moving forward, Png believes that Southeast Asia presents such opportunities given its characteristics as a young and emerging economy.

While Singapore may be small in size relative to its neighbours, he is also confident there will always be start-ups with the drive and ability to identify their niche and capture those market segments to call their own.

“When domestic demand is down, everybody wants to go elsewhere but when the global demand shrinks, everybody is hungrier and looks for new business opportunities,” adds Png.

As Singapore enters Phase Three of its reopening, there may be more opportunities for businesses to expand both domestically and abroad. Png says Singapore can stay relevant by equipping itself to capture new opportunities and face disruption, upgrading its existing base of businesses through acceleration and by providing a solid operating base for good MNCs to locate and thereby create valuable jobs for Singaporeans.

While a Covid-19 vaccine will soon be available, there is no guarantee on how the economy will shape up in 2021 and beyond. However, these strategies are a good starting point to help both Singapore and its businesses to pivot in what is now known as the new normal.