SINGAPORE (Jan 29): The Singapore government is expected to double down on its efforts to provide greater support for companies in developing their capabilities and in their internationalisation efforts.
These include helping companies venture abroad, particularly to Asean, tweaking its policy to target smaller companies and encouraging automation in companies and helping them leverage on digital technologies and R&D while entrenching local value creations.
In part 2/3 of its Singapore Budget 2019 report released on Tuesday, Irvin Seah, Senior Economist at DBS Group Research, says local companies must re-orientate their business strategies in order to capitalise on the opportunities arising from an emerging Asean, given trade and investment flows will be diverted away from North-east Asia in the coming years.
For decades, China has been dominating global trade and investment flows amid its economic liberalisation and accession to the World Trade Organization (WTO) but amid the ongoing trade disputes between the itself and the United States, one of the likely outcomes is a rebalancing of global trade and investment dynamics.
Besides enhancing the level of support for some of the existing schemes, the government’s focus could shift towards execution and streamlining to enhance policy effectiveness, adds Seah. For instance, the government could implement a fast track scheme for grant approval in selected high growth industries to intensify investment in those clusters.
And to enhance the effectiveness of Singapore’s internationalisation effort, trade associations (TACs) should also be given more support to enable them to set up more overseas offices to better facilitate the local companies that are venturing abroad.
“With a better understanding of the various types of businesses and markets, the TACs would be able to leverage on their local contacts and resources to help their members explore overseas markets,” says Seah.
Focus on SMEs
Meanwhile, SMEs reporting below a certain level of sales should be provided added attention in their grant applications given technological advancement and innovation at present matters more than just the sheer size of the organisation.
Further enhancement in the policy direction in favour of the smaller companies could also be applied to many of the existing support schemes
SMEs registering sales below a certain level should also be given added attention in their grant applications which can be achieved by simplifying the documentation requirements in the grant application process.
Other policy measures -- like the SME Working Capital Loan -- continue to be skewed in favour of bigger companies as they are administered via the Participating Financial Institutions (PFIs) which prefers bigger companies with better financial standings.
“Despite some risk coverage by the government, the outcome is that smaller companies who need more financing help may not get the necessary support regardless of their product innovation or business ideas,” says Seah, “Therefore, the government could consider taking a bigger share of the risk for smaller companies that apply for financial support.”
This would enhance the accessibility of these schemes for smaller companies.
Nevertheless, while the economic cycle is set to drift southward, the risk of a recession this year is still remote, says Seah. “We reckon that the government would prefer to keep its powder dry and continue to stay focused on longer term structural issues, specifically on preparing the economy for the future.”
