Preparing Singapore SMEs for the digital transformation journey

SINGAPORE is one of the most technologically-advanced nations in the world. We took pole position in the World Economic Forum's 2016 Networked Readiness Index, which measures how well an economy is using information and communications technologies to boost competitiveness and well-being. And we placed sixth in the 2017 Digital Evolution Index that looks at the progress countries have made in developing their digital economies and integrating connectivity into everyday lives.

The driving force behind this success has been the Singapore government. In the 2017 IMD World Digital Competitiveness ranking, which Singapore topped as well, the win was largely attributed to the strong government commitment to the digital agenda; we came in first for the most tech-savvy government indicator as well.

This shouldn't come as a surprise to those who have kept abreast of the government's digital initiatives. Under the S$4.5 billion Industry Transformation Programme for example, roadmaps called the Industry Transformation Maps (ITMs) are being developed for 23 industries covering manufacturing, built environment, trade & connectivity, essential domestic services, modern services, and lifestyle, and some inroads have been made to bring a broad swathe of industry players up to speed. In addition, the SMEs Go Digital Programme which was in Budget 2017 was targeted at boosting SMEs' digital readiness by advising them on technologies to use at each stage of their digitalisation journey.

As Budget 2018 approaches, SMEs are looking at the government to continue rolling out these initiatives. But it is important for all to remember that digitalisation of SMEs must not be an end in itself. It is important to always keep the objectives of digitalisation in mind - to help SMEs explore new markets, innovate and grow their revenues, withstand global competition and thus continue creating good jobs for Singaporeans. While SMEs can cut their teeth by tendering for Government Procurement projects to secure a track record and grow, they must set their sights further afield to expand in scale and seize new opportunities along the way. Hopefully, some will ultimately grow to become Singapore's "Alibaba" or "Tencent".

So what can be done to achieve this goal?

With the expiry of the Productivity and Innovation Credit (PIC) incentive scheme in YA2018, there are some industry concerns about sustaining the pace of digital transformation in the Singapore economy, especially when it comes to SMEs. For instance, some feel that there needs to be an enhancement of tax incentive measures. For instance, KPMG is calling for an Enhanced Tax Deduction of Capital Allowance scheme on digital initiative structures, such as consultancy and professional fees, digital adoption and digital skills training. The Singapore Institute of Accredited Tax Professionals (SIATP) also proposes that qualifying expenditures on approved R&D projects see additional deductions, subject to a cap, in addition to the introduction of a double deduction for training expenditures. This could incentivise SMEs to innovate, and to attract startups to Singapore.

Just retooling businesses to compete in the fourth industrial revolution is insufficient. Digitally-enabled companies require digital-savvy and skilled workers too. Even the recent World Economic Forum at Davos announced the launch of an IT Industry Skills initiative to meet the global skills gap challenge and is committed to up-skilling one million workers by January 2021 through its free platform of online tools, starting from the United States. As for reskilling the Singaporean workforce, much has been said about the SkillsFuture initiative and the crucial place of Science, Technology, Engineering and Mathematics (STEM), as well as digital skills such as computer science and coding, in our education system.

Given our ageing demographic trends and the decreasing shelf life of current skillsets, the "silver workforce" may encounter greater difficulties in overcoming learning hurdles. Hence, the government's role in promoting, incentivising and integrating lifelong learning, in partnership with industry clusters and educational institutions, remains critical. The current education system mainly focuses on preparing students for the workforce, but further enlarging the pool of institutions catering to a more inclusive adult learning and reskilling pathway will be key to avoiding structural unemployment challenges down the road.

Furthermore, motivating older workers to go for training while they are employed, especially the PMETs, may require an enhancement of current subsidies and funding resources, given the currently tight foreign manpower policy. For instance, a top-up to the SkillsFuture accounts for Singaporean workers may be timely for this Budget 2018. Greater effort to curb ageism in the workplace could also be fronted by the government.

SMEs employ the bulk of Singapore workers and potentially need the most help and face the greatest impact from digital disruptions when it comes to upgrading and reskilling. Against this backdrop, given the need to actively engage and motivate them, the Singapore Business Federation's call for more R&D funding support to local businesses in ITM identified growth sectors, and enhanced accessibility to Centeres of Innovation (COIs) to help SMEs with technology application makes a lot of sense.

Budget 2018 is expected to continue efforts to help firms transform. Come 19 February, we should expect to see a renewed but targeted push to promote innovation, digitalisation, and R&D investments, amongst others. If the efforts of the Committee for Future Economy (CFE) come to fruition, SMEs will continue to play an important role in driving growth and supporting the Singapore economy. Just like what one little Hobbit named Bilbo Baggins said in J.R.R. Tolkien's The Lord of the Rings: "Go back?" he thought. "No good at all! Go sideways? Impossible! Go forward? Only thing to do! On we go!"