Consult business sector on policy, SCCCI urges govt

[SINGAPORE] Government agencies should continue to provide affordable business space and consult businesses closely in the policy-making process, as small and medium enterprises (SMEs) find themselves in an ever-tightening squeeze between rising costs and falling profits.

According to survey findings released by the Singapore Chinese Chamber of Commerce and Industry (SCCCI) on Monday, 82.7 per cent of businesses surveyed said they faced rising business costs (up nine percentage points from 2013). Meanwhile, 45.8 per cent reported a drop in profit margins (up from 38.7 per cent previously).

Of the respondents, 97 per cent are SMEs, and 88 per cent are business owners and decision-makers. A total of 645 businesses took part in the survey.

The increase in business costs was largely due to higher staff salaries (up 9.4 points at 80.3 per cent) and rental, property tax, and land tax (up 1.9 points at 64.2 per cent).

Companies in the service industry are most affected by rising rental (69.6 per cent). About 54.2 per cent of companies in the manufacturing industry highlighted rental as contributing to rising business costs.

Said SCCCI: "JTC and HDB should continue to make available sufficient industrial and commercial space for SMEs so that rentals can be kept affordable."

This stems from about 44.4 per cent of respondents highlighting affordable business premises as the key form of help needed apart from government assistance schemes.

Separately, 40.5 per cent of respondents said the government should refrain from introducing new policies too frequently.

"Frequent introduction of new policy measures creates administrative burden and increases compliance costs for SMEs," noted SCCCI. "Government should engage businesses and trade associations and chambers closely to take into account business impact."

On the productivity front, more SMEs are leveraging government incentives to improve productivity (90.3 per cent compared with 83.9 per cent a year ago). This can be credited to better outreach efforts by the government and SME Centres which have resulted in a higher take-up rate of government schemes, said SCCCI.

That being said, micro-enterprises (defined as those with annual revenue below S$1 million) are still lagging behind in adopting productivity measures, although there is a 5.3-point increase from 2013. About 85.9 per cent of micro-enterprises have adopted productivity measures, compared with 80.6 per cent a year ago.

The most common productivity measures adopted include upgrading of worker skillsets through training (52.5 per cent), and adoption of industrial automation and leveraging IT (42.4 per cent).

Even as more SMEs are taking concrete measures to improve productivity, more effort should be directed at helping build their track record, added SCCCI.

This can be achieved via a two-pronged approach - by developing initiatives to help SMEs effectively use the equipment and hardware purchased to bring about the intended results; and by developing more common-use business solutions that can benefit SMEs and improve their productivity, it said.