About 60% of SMEs unsure or have no plans to internationalise: survey

SIXTY per cent of small and medium-sized enterprises (SME) here are unsure or have no plans to expand overseas in the next 2 years as they continue to feel the pinch from the Covid-19 pandemic, a survey found.

In a survey by QBE Insurance of more than 400 SMEs, which was conducted in Q4 2021, a majority revealed that internationalisation is still on the backburner for them in the next 12 to 24 months.

The top 3 concerns cited by SMEs on internationalisation were travel restrictions for employees due to the pandemic, a general lack of knowledge of other markets and insufficient financing or funds for expansion.

Separately, close to 29 per cent of those who indicated they have no plans to venture overseas on their horizons have only a business presence in Singapore.

The survey noted that local SMEs are adopting a more conservative business mindset, with half of those who already have an overseas business presence intending to downsize in the next 1 to 2 years.

When it comes to small SMEs, 53 per cent of them who have already ventured abroad intend to downsize. The main challenges they cited include cost control, mitigation and streamlining their business, as well as concerns around the cost of running the business.

Ronak Shah, chief executive of QBE Insurance Singapore, said SMEs in the last 12 months have been "carefully adjusting" their business strategies and prioritising prudence as they continue to operate in a Covid-19 environment.

"As many continue to err on the side of caution in 2022, we encourage them to take this time to reassess their business models and operations to give mind to environment-based investments or initiatives that will help provide sustainable business growth post-pandemic," he said.

Meanwhile, 59 per cent of SMEs polled believe business outlook will improve in the next 12 months, while 67 per cent of SMEs also expect the economic outlook to improve, the survey found. Around 33 per cent expect the size of their business to grow in the next 12 months, up from just under 19 per cent in 2021.

Yet this optimism towards business outlook is guarded, according to the survey. It found that 61 per cent of SME businesses feel pandemic-related policies, restrictions and lockdowns will worsen in the next 12 months, in addition to increased operating costs.

About 44 per cent of SMEs cited the cost of running their business as their top concern over the past 12 months, on account of current regulations having "adversely" impacted their business operations, the survey said. This was the same sentiment for smaller SMEs, with 48 per cent raising this as their top concern.

The second and third-most prominent concerns for SMEs were cost mitigation for business continuity due to the pandemic (31 per cent) and operating with reduced cashflows (26 per cent).

The survey also found that environmental, social and governance (ESG)-led and sustainability-oriented investments have also been on SMEs' radar, though such initiatives among them are still lacking.

Around 40 per cent of SMEs have invested in green products, technologies and infrastructure; 26 per cent in climate change-related policies; and 29 per cent in renewable energy usage.

However, the survey noted that SMEs still view ESG-led initiatives as "less of a priority", with only slightly over 35 per cent having engaged in these in the past 12 months. Main barriers cited were too much time and too many costs involved.

Shah said it was important for businesses, both big and small, to not place sustainability and ESG-oriented business initiatives on the backburner, as these are integral to long-term growth and the ability to thrive.

"Being sensitive to these issues and redesigning strategies towards these investments is how they can forge stronger foundations for sustained growth in a post-pandemic world and beyond," he said.

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