SMEs' optimism about growth in H2 slightly up

[SINGAPORE] Singapore's small and medium enterprises (SMEs) are slightly more positive about their growth in the next six months, an index by the Singapore Business Federation (SBF) and DP Information Group showed. But on the whole, business sentiment is still not strong due to manpower curbs, business leaders said.

The SBF-DP SME Index for the third to fourth quarter rose 0.5 point to 54.9 points out of 100, from 54.4 a quarter ago and almost back to the 55-point level two quarters ago. A reading above 50 indicates improvement.

Overall revenue and profit expectations, capital investment, capital utilisation, access to funding and hiring expectations are all up, while business expansion expectations are flat.

"It is not negative but it is not in great positive territory either," said Ho Meng Kit, CEO of SBF.

He called the sentiment "dampened" and not reflective of the recovery in developed markets and good expectations of Asian growth.

This is because SMEs are still affected by domestic constraints, he said.

Kurt Wee, president of the Association of Small and Medium Enterprises, told The Business Times that there is a "renewed sense of a manpower crunch".

"The mood is bad in the past two months," he said.

Chen Yew Nah, managing director of DP Info, said that labour curbs continue to bite and prevent SMEs from expanding.

The Singapore government is in the midst of a push to raise productivity and reduce reliance on foreign labour. It has also been offering tax incentives and grants for companies to invest in technology and automation.

Mr Ho said that there are encouraging signs that SMEs are tapping incentives and investing in capital. He cited the manufacturing, construction and engineering sectors.

Capital investment expectations are up across most sectors.

"SMEs need to move away from reactive correction to a more transformational approach to achieve robust and sustained growth," Mr Ho said.

Improved expectations were not even across the board, however. The strongest improvement in sentiment came in the transport and storage sector.

However, the commerce and trading sector, together with the business services sector, saw slight drops in sentiment.

Profitability expectations are also down across most sectors, with the exception of commerce and trading.

Mr Ho said the government can do more to help smaller SMEs take on larger projects.

"It is a positive sign that Budget 2014 saw commitment to nurturing tech startups in the IT sector through government procurement. Perhaps similar initiatives could be done to benefit more sectors," he said.