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Key to manufacturing success in ASEAN
SINCE the early 1970s, the manufacturing sector has formed the backbone of the Singapore economy. In recent years, it seemed to have lost its shine, but reports now show that it's making a comeback.
Singapore's robust manufacturing figures for the first half of 2018 should allay fears of potential global trade uncertainties having direct impact on the economy. On a year-on-year basis, Singapore's manufacturing output grew 3 per cent in August 2018.
With an average expansion of 1 per cent month-on-month, as seen over the past three months, Singapore is showing strong signs of resilience as the economy returns to normality after a period of recovery.
With ASEAN's economy on the rise, the demand for Singapore-branded products and services are also growing in tandem as a rising tide lifts all boats.
Small and medium-sized enterprises (SMEs) looking to grow their businesses in the region have the opportunity to grow their revenue very quickly but they will do well to tap all the government support that seems to be readily available.
For example, earlier this year, the Singapore Economic Development Board (EDB) launched a programme to help SMEs and multinational corporations (MNCs) across all industries accelerate their Industry 4.0 transformation.
Through the Singapore Smart Industry Readiness Index, a tool to catalyse the transformation of industrial sectors, companies based in Singapore can access a reliable benchmark to help identify areas of improvement to help them speed up their regional expansion.
Recently, EDB announced the launch of the Index Partners Network to help manufacturers accelerate the execution of their Industry 4.0 initiatives.
This network complements the Smart Industry Readiness Index by building an ecosystem of partners, in the areas of technology, talent development and training as well as financing, that manufacturers can tap to bridge the gap between the planning and execution phases of their transformation journey.
With a forward looking and trade-friendly team, I was encouraged to learn that the EDB will also partner international organisations to help regional governments and companies adopt the Index.
To this end, it is heartening to know that financial institutions also form part of the network, through the development of programmes and schemes targeted at supporting SMEs.
In the financial industry, for instance, DBS is the first to develop a programme to support SMEs along their transformation journeys.
It starts from the point of undertaking the Smart Industry Readiness Index assessment to implementation of specific technologies and solutions.
We understand how quickly the business world moves and how economical SMEs can be and so our clients can now tap this index at a preferential rate to help them identify gaps in their innovation and digital process in a systematic and comprehensive way.
To further help customers adopt the latest technology that is relevant to their business, DBS also has a programme called TechMatch to help SMEs define, design and develop the right technology solutions for the business by matching them with digital solution providers that are relevant to their industry.
Such initiatives are particularly useful for SMEs.
An example is our client Thong Siek, a manufacturer of fish balls in Singapore - an SME in a very traditional industry.
Thong Siek has used the index to identify initiatives such as paperless production of fishballs and fully-automated packing.
It is also tapping the Index Partners Network to tie-up with us to help finance and execute its digital and business transformation even faster.
The need for rapid expansion comes at a time when the demand for 'Made in Singapore' goods is on the rise as they are now synonymous with quality and consistency.
With the need for food safety and traceability on the rise, the potential for cross-border collaboration in the packaged food and snacks industry between more developed markets in ASEAN is high.
The opportunity comes as developing markets in ASEAN are still forming proper food safety and hygiene standards and my F&B SME customers tell me that collaboration between Singapore companies and ASEAN markets can ensure better standards are put in place.
DEMAND FOR SINGAPORE-BRANDED GOODS IS HIGH
Revenue in the food processing sector - which hit US$128 million in the first half of 2018 - is expected to show an annual growth rate of 14.1 per cent resulting in a market volume of US$216 million by 2022.
Some four in 10 of DBS' F&B SME customers have expanded overseas over the past two years, and this number is expected to steadily increase.
The strength in these sectors over the past 12 months has also seen more F&B mergers and acquisitions taking place within Singapore's SME sector.
SCALING BUSINESSES THROUGH DIGITALISATION
With growing trade uncertainties on the horizon, a recent survey of 220 DBS SME customers conducted in the first week of August found that seven in 10 SMEs said that e-commerce channels and solutions would help drive and maintain their business growth.
Of those who did not think that e-commerce channels and solutions would help their business' growth, the survey revealed that three in five did not have sufficient knowledge about digital sales channels and the resources to invest in digitalising their business.
In addition, the World Economic Forum reported that manufacturers do not fully benefit from the ASEAN B2B market due to limited visibility and lack of unified coursing platforms across the region's diverse and fragmented SME supplier base.
To support the growth of SMEs in the region, public sector partners and large corporates must collaborate to close the gap with SMEs to address technological shifts and harness the new technologies.
This will help them expand into regional markets, grow revenue and drive economic and social development.
To facilitate closing that gap, DBS will be launching a B2B platform where SMEs can gain access to an e-marketplace to sell their goods and services to other SME businesses, large corporations and MNCs.
SMEs can also gain access to supply chain connections, financing and payment solutions typically reserved to large corporates or MNCs.
The greater regional market demand for manufacturing products and services originating from Singapore also presents opportunities for SMEs based here to upgrade their systems and equipment, automate processes and upskill their employees.
TURNING CHALLENGES INTO OPPORTUNITIES
With so much going on, many of our SMEs grapple with a wide range of challenges, from managing technology disruptions and new regional competitors, to managing their day-to-day processes and cashflow.
However, the new age of manufacturing is full of opportunities if SMEs are willing to rise to the challenge of transforming their businesses to spread their wings across borders.
Industry 4.0 holds immense global opportunities for our SMEs in ASEAN if they are willing to embrace the spirit of collaboration to create interconnected networks of suppliers, partners and customers.
- The writer is group head of SME banking at DBS Bank.