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SMEs going abroad via 'private' path
VENTURING abroad may sound like the logical next step for small and medium enterprises (SMEs) to take their business to the next level, but it is easier said than done.
SMEs often pay expensive lessons in their first forays overseas due to lack of experience and knowledge of local markets. Such losses can be damaging for SMEs which have little bandwidth or resources to spare.
The government, together with the trade associations and chambers, has been urging SMEs to internationalise in the past few years. Such calls have become louder of late, as domestic growth continues to slow.
Most recently in Singapore's Budget 2017, a whole slew of measures were announced to further support SMEs in their efforts to internationalise. This includes the S$600 million International Partnership Fund, which is a co-investment scheme for promising local firms to scale up and go abroad, as well as more than S$100 million to boost capabilities of Singaporeans to work overseas.
These are on top of the grants and help already offered by government agencies IE Singapore and Spring Singapore.
However, government assistance is just one part. The private sector, too, can help meet this need. Sometimes, what SMEs want is to tap the experience and expertise from parties that already have business dealings in a particular market, as well as to gain access to relevant contacts.
Wong Hsun-Min, head of commercial banking, RHB Bank Singapore, observes that while more SMEs have been expanding abroad, the number has "not been too significant".
He says: "SMEs are also generally cautious and may need to make sure that they are ready and are supported with necessary information before venturing overseas."
As RHB has a presence in the Asean region, Mr Wong says that it was in the position to provide SMEs with the necessary support in their overseas expansion plans.
RHB recently concluded a three-day business mission to Phnom Penh, Cambodia, with 32 attending SMEs as part of its inaugural Investor Insights series. Some 90 per cent of the SMEs that attended were clients, but the bank also opened vacancies to others to attend as well.
The SMEs which visited had the chance to gain first-hand knowledge of businesses operating there through interaction with relevant parties in Cambodia at seminars or on site visits. They also got to network with the RHB Cambodia team, the Cambodia Investment Board, local businessmen, and Singaporean businesses with a presence there.
One company that attended was bicycle retailer Tonner Bike International Co, which is started by a Singaporean in Cambodia.
While general manager Bryan Yap feels that there are lots of business opportunities in Cambodia as it is a developing country, entering it can be a challenge. "We need time to study and understand the country before we can move in. I think it helps if you have local partners to work with."
Another company that joined the trip was private investment firm Pacific Equity Group. The Singapore-based firm operates in sectors such as real estate, natural resources, hospitality and food & beverage.
Director Calvin Lim says that on its own, the Cambodia market is difficult to penetrate, given that it is a frontier market, and not based on the English common-law legal system. Through the business mission, he got a better understanding of the business regulatory regime and gained good contacts for future reference.
RHB's Mr Wong says that the responses from the SMEs were so positive that a follow-up to the Cambodia trip would be held in September this year, where Cambodian companies will come to Singapore to meet local SMEs.
The bank will be organising more of such business missions to assist SMEs to internationalise. It is already looking at Myanmar or Vietnam for its next business mission in 2018.
Says Mr Wong: "By providing our clients with this value-add service, we hope to strengthen our relationship with them, foster customer loyalty and nurture a close partnership for many years to come."
While business missions are one way for larger enterprises to partner smaller SMEs to get overseas experience, another way is for them to tie up with SMEs with expertise in niche areas to work on projects.
Recently, eGovernment solutions provider CrimsonLogic won a contract in The Bahamas to provide a single windows solution to Bahamas Customs.
A key component of the solution included an analytics function to help monitor risks. The company partnered local SME Sense Infosys, which has expertise in maritime security data analytics, for that part of the solution.
Saw Ken Wye, CEO of CrimsonLogic, says: "We will never have all parts needed when putting together complex solutions for worldwide customers. By working with specialised partners, we avoid the need to build everything ourselves, and enable us to put together a best-in-class offering. It saves time and effort and enable us to differentiate and compete effectively worldwide."
This is a win-win situation for both parties.
He points out that SMEs are able to gain exposure and widen their business footprint with "cover" from a larger local company such as themselves. These SMEs do not need to worry about the uncertainties of the operating environment and can benefit from the guidance and support from them, adds Mr Saw.
"An added bonus is that both CrimsonLogic and these SME partners fly the Singapore flag, and it helps that the Singapore brand represents quality and trust, enabling better engagement with other customers, especially overseas government agencies."
With internationalisation as the natural progression for SMEs once they reach a certain size, larger enterprises are starting to recognise that partnerships with smaller SMEs can be mutually beneficial. Both parties can only stand to gain from greater business growth and expansion, which will not only strengthen product offerings but also enhance the ecosystem globally.
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