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In tough times, SMEs prioritise revenue ahead of innovation, talent retention
BUFFETED by a slowing economy and prolonged US-China trade war, Singapore's small and medium-sized enterprises are prioritising revenue growth ahead of product innovation, talent retention and digitalisation.
In the Singapore Chinese Chamber of Commerce and Industry's (SCCCI) annual business survey, nearly two in five or almost 40 per cent of respondents predicted a drop in revenue, higher than the 26.8 per cent a year ago. Just over 82 per cent of the businesses polled said expanding the topline was their key concern.
Respondents also said that in addition to the dent in profits, they were also bracing themselves for a hit to profit margins.
Over half of the businesses said they are expecting a decline in margins this year, up from 45.4 per cent last year, revealed SCCCI on Wednesday. It surveyed 972 respondents, of which 95 per cent were SMEs.
In the latest quarterly earnings season, Singapore-listed firms saw more hits than misses, while Singapore cut its official growth forecast for the second quarter running to almost zero, on a flat economic performance in the first of the year.
A tally by The Business Times had showed that of the 418 companies whose latest quarter ended within the April-to-June period, one in three chalked up losses.
About 60 per cent did worse than the corresponding quarter last year, prompting brokerages to cut their earnings forecasts and to expect further reductions in FY2020 should the US-China trade war drag on.
Despite the headwinds, most of the survey participants (60 per cent) expect to retain their present workforce. Only 17 per cent said they would cut back on manpower.
Some chamber and association leaders say they are doing more to help companies grow their topline, but hope the government will lend its weight if the downturn persists.
Speaking at SCCCI's conference on Wednesday, the group's president Roland Ng said the chamber is encouraging firms to go overseas and has set up offices in Shanghai, Chengdu and Chongqing to help businesses break into the China market.
It also hosts events such as the SME conference for firms to network and learn from fellow businesses and experts.
In addition, the chamber is working with the government to find more ways to help local SMEs and tap government help schemes and upgrade themselves, said Mr Ng.
The Association of Small and Medium Enterprises (ASME) has a similar focus on internationalisation and learning to support its members, many of whom worry about the impact of an economic slump and trade tensions on their business.
"Generally from our own survey, SMEs this year are not looking at a great year and a lot are concerned about how the trade war will continue to take its toll on business," said Ang Yuit, the association's vice-president of membership and training.
Hence, ASME is organising more overseas studies and missions, and setting up "node points" abroad to help companies. It is also holding events for SMEs to share on challenges, and learn how to overcome them.
Still, both ASME and SCCCI hope the government will lend a hand if growth conditions worsen.
"Should economic prospects remain uncertain or if there is a protracted downturn in the global economy, I also hope the government is prepared to offer businesses timely and effective help," said Mr Ng.
Asked what kind of help it might hope to see, Mr Ng said the chamber would appreciate any effort by the government in helping companies to alleviate rising business costs.
"We can start looking at the situation now. We haven't hit the point yet but we're pretty close. I think it's time to start preparing," said Mr Ang.
He suggested potential broad-based measures like government spending, and encouraging more to buy from local SMEs instead of foreign companies.
According to Trade and Industry Minister Chan Chun Sing, who also spoke at Wednesday's conference, one way may be the authorities tweaking the way they help companies, particularly SMEs.
For instance, firms may no longer need to approach different government agencies for grants, and can instead look to a single point of contact for support, said Mr Chan.
And rather than telling agencies the schemes they want to adopt, companies could come with a business plan, which agencies can then use to figure out which schemes to provide.
"We are going to make our help schemes company-centric, not scheme-centric," he added.
But aside from government efforts, the minister also urged firms to be cognisant of long-term shifts in the economy and position themselves by diversifying their markets and embracing digitalisation.