SINGAPORE (Feb 14): Singapore’s economy is bracing for a miserable 2020. Businesses across the region are grappling with an escalating novel coronavirus outbreak that shows no signs of peaking more than two months after it was first reported in China.
For Enterprise Singapore, the government agency tasked with helping local businesses grow and adapt to changes to the business environment, the message is simple: Chin up, forge ahead and keep up with the process of transformation.
At the statutory board’s year-in-review meeting on Feb 7, chairman Peter Ong and CEO Png Cheong Boon note that business sentiment among domestic companies remains weak as companies cite challenges such as rising business and manpower costs.
“While businesses are worried about the current situation, as they ought to be, the current focus should be about business continuity. Companies should be thinking about what’s next, and are starting to put in place plans to do so,” says Png. “If companies start to plan when the economy recovers, they will be about six months behind other companies.” As the death toll and the number of infected cases climb daily in China, Singapore cannot help but be worried. Both the coronavirus and the 2003 Sars outbreaks in Singapore can be traced to China. Yet, in between the 17 years, ties between the two countries have only grown tighter.
According to the data from the Singapore Tourism Board, Singapore booked 3.42 million tourist arrivals from China in 2019 – the biggest inbound market for the state. The disruptions in supply chains, as workers stay away from temporarily shuttered plants, will have a further impact. “We would expect that there are multiple channels of linkage that could be affected, should something happen to China,” says Ong. “Trying to shift things into, or out of China, is tough now.”
The two head honchos at Enterprise Singapore are encouraging local companies to press on with the familiar theme of upgrading skills, embracing technologies, and venturing overseas.
The bureaucrats also recognise that private sector entrepreneurs need time to generate results, and taking on plenty of risks and incurring significant costs along the way. Now, when the eventual recovery returns, there will be handsome returns for those who are well positioned.
“When the recovery comes, while there will be pent-up demand, there will also be pent-up supply competing for new businesses to make up for lost revenue,” says Png. “Hence, it is important that our enterprises can compete effectively when the competition intensifies.”
Venturing abroad
The government’s open-door policy in the past few decades has helped grow the domestic market to a certain mass but there’s a reasonable limit. As such, staying open and trading with anyone who wants – as Singapore has done for centuries – remains the way forward, and along with it, exposure to the global economy’s volatility and uncertainties.
To Ong, staying open and venturing overseas is necessary. “Given the size of the market, Singapore enterprises cannot afford to not seek out opportunities globally. In fact, situations such as the coronavirus and geopolitical risks make it even more critical to diversify our businesses and markets,” he says.
Tan Peck Ying, a co-founder of PSLove – a company that produces heat packs for menstrual, back and shoulder pain relief – shares that her company had to be aggressive in terms of venturing overseas.
After four years in Singapore, PSLove made its foray into Malaysia. Business there quickly overtook the company’s operations in Singapore. The company then moved on to secure a distributorship agreement with Apollo Pharmacy in Chennai, India, to distribute its products across 400 outlets in the country.
“There were multiple trade-offs the company had to make when we chose to venture overseas because of our small size,” says Tay.
“But [PSLove] is still a young start-up, so we have to be aggressive in pushing through our internationalisation plans.”
The move into different countries appears to have worked well, and PSLove shows no signs of slowing down. The company is now in talks with partners in Thailand, Indonesia and Australia. “We’re aggressive in having a presence across Southeast Asia, so opening up [to] more markets is at the top of our minds,” says Tan. To date, PSLove’s products are sold in more than 2,400 major pharmacy chains and convenience stores.
In 2019, around 2,600 companies embarked on internationalisation projects to seek new growth opportunities and to diversify beyond existing markets, Enterprise Singapore reported.
Some 60% of these companies were from the wholesale trade, professional services, information and communication technology (ICT) and retail sectors.
China and Southeast Asia remained the top markets of interest for the companies, while developed markets such as the US, Japan and Korea, as well as emerging markets such as India and Africa also saw significant interest.
“We encourage companies to go overseas as much as possible and as early as possible,” says Png. “It is only through expanding into new markets, that enterprises can grow their business and strengthen their business resilience.” According to Enterprise Singapore, in 2019, 11,450 Singapore companies undertook 13,560 projects to improve their business efficiency and step up on overseas growth bids. Along the way, these projects generated some $17.3 billion in economic value and created 21,700 white collar jobs, estimates the agency.
Innovation, digitalisation
Besides the willingness to take risks and go overseas, Singapore companies are being encouraged to make better use of new technologies to gain a competitive advantage, and offer products and services in newly-emerging markets.
For example, Oneberry Technologies is a homegrown firm that uses specialised technology to provide security services. It has created digital tools to solve two problems facing the traditional security industry: a shrinking workforce and rising manpower costs.
“Every challenge could be an opportunity,” Oneberry Technologies CEO Ken Pereira tells The Edge Singapore in an interview. “In fact our first big breakthrough in surveillance and remote monitoring came when Singapore experienced one of its first ‘major’ floods in Orchard Road.”
As Pereira tells it, the group’s focus on technology – from surveillance software to robots – has set it apart from other companies in the industry which rely on labour-intensive methods of operations. While the initial cost of investing in technology was high, Pereira remains optimistic about the efficiencies that can be reaped.
“Business in the last year was challenging and will look to be more challenging as the need to reduce costs becomes more important in this unpredictable time,” says Pereira. “Innovation is always a key focus for us and we will continue to focus on it. We will need to manage our resources to balance our operations in Singapore and our plans to expand overseas.”
With offices in Singapore, Indonesia and the Philippines currently, Pereira has set his sights on Thailand next. According to him, this is an “ambitious” move considering the current uncertainty looming in the global economy. “So far [our strategy] has paid off for us. We had some difficult times at the start but this has helped us to get a headstart and be ahead of the market,” says Pereira.
Interestingly, despite Enterprise Singapore encouraging companies to innovate – be it in terms of their products or the way they function – Png, the CEO, warns that companies need to keep pace with how quickly the addressable market can grow or be created that can make it worth the while.
“The reality in Singapore is there is a lot of innovation in sectors such as retail and food services,” observes Enterprise Singapore’s Png.
“This is good as it makes the industry a lot more vibrant. But the demand is not growing as much as the new concepts that are emerging, and that is always a concern.”
Tough, but surmountable
Even as Enterprise Singapore looks at its 2019 report card, the immediate concern of businesses is how to deal with the virus outbreak. No one is belittling the impact and fallout from this episode but Ong believes Singapore is wellplaced to surmount this phase the way it did with previous turbulent periods.
“We have come out of every crisis stronger, and we have worked as a collective with everyone playing their part and looking out for one another,” says Ong.
“We are heartened by what happened in 2019 where we faced a lot of business uncertainties in the global trading environment, but we pulled through,” he adds, referring to the US-China trade war in which the Phase One deal has marked a turning point; at the very least, the trade dispute has not worsened.
Ong also seeks optimism in the fact that companies today appear to be better prepared than they were back in 2003. “Some businesses will have problems of being under-manned, and these are all challenges that can create a lot of anxious moments for the companies,” he says. “But these businesses are dealing with these in a calm and confident manner.” Headlines these past weeks have focused on the number of patients and fatalities that seem to change every few hours. Png hopes companies can “think beyond” the headlines now, and ponder and plan for what’s next after this crisis. “What we want to do is to encourage companies to look at the medium to long term, and to take this opportunity to upgrade and build new capabilities to transform and grow, and to emerge stronger than competitors in the market,” he says.
“Through this, we can also build greater resilience in the market, so that we are better prepared for the next situation that might come about,” adds Png.
