Singapore Business Sentiments

Transcription

1 Singapore Business Sentiments START-UP ENTERPRISE CONFERENCE Devan Nair Institute of Employment & Employability (E2I) Lam Kong Hong Director, SME Committee Singapore Business Federation

2 Singapore Business Federation Mission Nationally, SBF acts as the bridge between the government and businesses in Singapore to create and enhance a pro-business environment. Internationally, SBF represents the business community in bilateral, regional, and multilateral fora for the purpose of promoting trade expansion and business networking. Active advocacy between businesses & government Business intelligence & insights Advocacy Global Business Capacity Building Growing globally competitive companies and leaders Capability upgrading Active business facilitation & international market access Singapore s business voice overseas

3 Singapore Economic Backdrop

4 Singapore Economic Transformation The Singapore economy has evolved to stay competitive

5 Singapore Economic Transformation Mapping out Singapore economic transformation in next decade High Skilled People boost skills in every job Innovative Economy deepen corporate capabilities to seize opportunities in Asia Distinctive Global City make Singapore a distinctive global city and endearing home

6 Budget Measures: Elevated Manpower and Costs Issues Towards Quality-led Growth; Reduce Reliance on Foreign Manpower Boosting Skills and Productivity, Supporting Enterprise Growth Enhanced PIC Increase Employer CPF Contribution Rate Increase in Foreign Worker Levies An Inclusive Society, A Stronger Singapore Enhanced PIC Reduce Dependency Ratio Ceilings (DRCs) Reduce Man-Year Entitlement Quota for Construction Increase in Foreign Worker Levies A Better Singapore: Quality Growth, An Inclusive Society Enhanced PIC Wage Credit Scheme Increase Foreign Worker Levies for Work Permit and S Pass holders in 2014 and 2015 Increase in S Pass Qualifying Salary Opportunities for the Future, Assurance for our Seniors Enhanced PIC Increase in Foreign Worker Levies for Construction sector Increase in Employer CPF Medisave Contribution Rates (effect from January 2015) Increase in CPF Contribution Rates for Older Workers (effect from January 2015)

7 Current Business Challenges

8 Key Business Challenges High labour cost is the top concern over the years Top 3 Challenges Top 1 High Labour Costs (73%) High labour costs (79%) High labour costs (79%) High labour costs (75%) Top 2 Increasing Competition (64%) Uncertain economic environment (73%) Uncertain economic environment (69%) Increasing competition in area of sales (72%) Top 3 Uncertain Economic Environment (56%) Slow growth in sales (67%) Increasing competition in area of sales (61%) Increasing competition in other areas (60%) High Labour Costs continues to affect most companies (73%) As more certainty emerged, the number of companies citing Uncertain Economic Environment has dropped ( 17%) With a pickup in business activities, Increasing Competition comes back as a key challenge, cited by 64% of the respondents

9 Key Business Strategies Key Business Strategies Overcome rising business costs Innovation Internationalisation Overcome tight labour market

10 More Cessation of Businesses Official data seem to suggest companies ceased operations doubling the rate before Lehman Brother crisis years Is the policy instrument too blunt a blade which maim all sectors? Business cessation doubled in wholesale & retail, transport & storage, F&B, Infocomm, Finances and other professional services

11 SMEs with double digit growth lowest in 10 years history Has economic restructuring come too fast too furious, given the percentage of SMEs with double digit growth is lowest in 10 years? Fewer expecting significant growth in turnover performance 44% facing stagnancy SMEs with double digit growth lowest in 10 years history at (7%) Companies reporting negative growth dropped to 9% this year Varying conditions amongst sectors Manufacturing & Information & Communications reported largest increase (24%) in SMEs with zero growth Retail see significant change with 16% experiencing negative growth Source: SME Development Survey 2013

12 Darwinian Policies: Higher number of High Risk SMEs The DP Credit Rating sees higher number of High Risk SMEs over the years DP Credit Rating Investment Grade (DP1 - DP4) 22% 21% 18% 23% 22% 17% High Yield (DP5 - DP6) 35% 40% 44% 47% 49% 58% High Risk (DP7 - DP8) 43% 39% 38% 30% 29% 25% Total 100% 100% 100% 100% 100% 100% Greater divide between the stronger & weaker SMEs Over 6 years, there is a 5% of that are in the investment grade Continued sluggish economy & worsening of financial performance see higher number of High Risk SMEs for 2013 Source: SME Development Survey 2013

13 Challenges in Manpower & Productivity Most companies, especially SMEs are affected by manpower policies Response to changes to foreign worker quota and levies No impact Employ more local staff No solution at the moment Focus on productivity Outsource/ look for shared services Downsizing Step up automation Construction 18% 27% 33% 29% 9% 9% 6% Information & Communications 49% 18% 18% 15% 8% 3% 5% Manufacturing 33% 24% 22% 24% 7% 9% 7% Retail 42% 28% 19% 15% 4% 4% 5% Services 48% 22% 23% 16% 2% 2% 2% Transport/Storage 39% 27% 23% 23% 5% 4% 7% Wholesale 56% 19% 19% 11% 2% 2% 1% Overall 45% 22% 22% 17% 4% 4% 3% 55% affected by changes in government policies on foreign workers SMEs in Construction most affected More in Construction (29%), Manufacturing (24%) & Transport/ Storage (23%) looking to productivity Some in construction (9%) & Manufacturing (9%) may plan to downsize

14 Challenges in Manpower & Productivity The Productivity Myth or Mystery - despite a slew of new productivity measures since Budget 2010 Labour Productivity Growth

15 Challenges in Manpower & Productivity Main obstacles faced in promoting productivity % Lack of manpower with the right attitude and mind-set 29% Lack of manpower with the right skills 22% Lack of relevant knowledge and skill 15% 88% of SMEs had encounter challenges promoting productivity Main obstacle: Manpower issues; SPRING or MOM could further assist in this Lack of money 12% Lack of time to manage productivity 11% Others 11% 12% cited the lack of money; 15% lack relevant knowledge Areas of consultancy assistance needed to improve productivity Improve the productivity of my staff Review operations and processes for areas of improvement Develop a roadmap of actions to take Implemen t ICT solutions Automate Implement the identified productivity measure Construction 65% 32% 21% 9% 14% 13% Information & Communications 54% 35% 15% 19% 15% 6% Manufacturing 52% 36% 19% 20% 24% 12% Retail 47% 53% 18% 11% 13% 3% Services 59% 33% 18% 14% 11% 7% Transport/Storage 49% 42% 23% 31% 23% 17% Wholesale 45% 45% 12% 12% 6% 6% Overall 53% 39% 17% 15% 13% 9% 86% of SMEs have indicated that they require some form of consultancy assistance to aid in their company s productivity drive 40% find training programmes most useful

16 Challenges in Internationalisation Decline in Turnover from Overseas Singapore based SMEs generating lower % of Turnover from Overseas 8% in SMEs with Overseas Revenue Most generating a smaller proportion ( 11% in >50%) Reasons for companies to take a serious look at opportunities overseas Growing markets in Asia, particularly ASEAN & China Pull factors Push Factors Severe resource constraints and rising business costs in Singapore

17 Challenges in Innovation Weaknesses in innovation output despite high ranking in Global Innovation Index (GII) Areas of Weakness Innovation Input Index GII Overall Score 1 st 3 rd Innovation Output Index Innovation Efficiency Index 11 th 83 rd Low commercialisation rate of intellectual properties (IPs) and successful Made-in- Singapore products Lack of ideation and design companies Technology innovation requires financing stamina Local community s inability to assess IPs as collaterals pose difficulty in securing traditional bank loans. Funding by foreign venture capitalists can lead to Singapore s loss in retaining valuable IPs Weak defense against patents infringement

18 Challenges in Financing More SMEs facing financial challenges in 2013 Cashflow issues and bank financing More (+4%) are facing financing challenges Attributed to slower turnover performance in FY2012 Main challenge: Cash flow problems ( 4%) More stringent assessment criteria for such SMEs with lower turnover figures Financing Issues Financial Challenges Experiencing cash flow problems 62% 71% 75% % Difficulties in obtaining bank financing 34% 25% 26% % % % Lack of funds to build internal competencies 21% 16% 16% Do not meet criteria for Government Schemes 17% 9% 9%

19 Deep Diving into Land & Rental

20 Challenges of Land & Rental According to SBF National Business Survey, 90% of members experienced an Operating Costs increase of up to 30%. o About half are affected by high rental costs. o o o Changes to foreign worker policies coupled with tight labour market contributed to high labour costs Stronger Sing Dollar helped lower costs of imported materials Lower oil prices aided members affected by High Transport Prices 18% are planning to relocate (locally or overseas) o Reasons due to higher relocation cost, unable to find / purchase own premises & long term leasing contract

21 Challenges of Land & Rental Rental being a significant component of Retail and F&B (15.9% 32%)

22 Challenges of Land & Rental: Lease Terms CHALLENGES: RENTALS & LEASE TERMS High rentals is exacerbated by unfair lease terms for tenants: Tenant is not to engage in similar business within a radius of 1 km Landlord has the right to terminate, move, alter the boundaries of the tenants premises Rental = Base Rent + Percentage of Gross Turnover Landlord has the right to pre-terminate the lease Landlord is not liable for any impact due to works done to the building Landlord insists on their own POS system, but tenant bears expenses Compulsory renovations for every lease renewal Banker s Guarantees not accepted as Security Deposits Onerous tenancy clauses

23 Holistic approach to tackle rental costs and tenancy terms 1 Promote transparency in rental costs and practices; to improve decision making 2 Improving small businesses understanding of tenancy terms 3 Encourage adoption of standardised model tenancy terms

24 Promote Transparency in Rental Costs and Practices 1 Promote transparency in rental costs and practices; to improve decision making Publication of rental data by government agencies to reduce information asymmetry Disclosure statement by landlord for major decisions such as early termination ; non-renewal or others such as refurbishment Obligation by landlord to provide copy of lease; information brochure and calculation of effective rents

25 Improving small businesses understanding of tenancy terms Case study: 2 UK Develop easy-to-access guide that familiarises small business with tenancy contracts Term of lease and options to renew Rent and basis of rental review Outgoing or shared operating expenses Obligations to repair Permitted use of premises Sub-letting or assignment Code for Leasing Business Premises in England and Wales (2007) Easier access to information explaining the commitments both parties are making in clear and easy to understand language. Checklist and model lease templates, to better help serve small businesses in lease negotiation and renewal

26 Encourage adoption of standardised model tenancy terms 3 Adoption of Standardised lease terms Government agencies as early adopters of model standardised lease terms Subsequently, followed by efforts to encourage adoption by private sector landlords Case study:

27 Deep Diving into Government Compliance Costs

28 Government compliance Government compliance costs impose compliance effort and high fees on SMEs Non-streamlined backend licences processing Resources directly proportionate to processing costs SMEs face staff and time costs involved in interface with the various agencies during application, documentation and inspection processes Fees are further increased and passed on to businesses Source: SBF National Business Survey 2013/14

29 Budget 2013 Recommendations The SBF-led SMEC recommends a review of licensing requirements to reduce the complexity and compliance costs. Licensing requirements for starting up an F&B outlet

30 Recent press coverage Personal Data Protection Act Workplace Safety and Health Act Consumer Protection (Fair Trading) Act

31 Ideal outcomes General outcomes Keep fees stable Reduce duplicity and effort in compliance, through better streamlining Communicate and consult fee increases in a timely manner, bearing in mind overall impact on business costs Assess impact of new fees to businesses in totality Specific outcomes Lower compliance costs passed down to businesses Reduced complexity for licensing through simplified application and approval processes where multi-agencies are involved Streamlined licencing requirements within government agencies that will result in increased cost efficiency Reduced processing time for application/approval of permits, licenses and approvals

32 Deep Diving into Improving SME Access to Government Procurement

33 Advantages of increasing SME Participation Sustain and increase growth Government contracts given to bigger spread of SMEs Greater proportion of SMEs build track record and capacity to Internationalise

34 Advantages of increasing SME Participation For Government Competitive bids Greater range of goods & services Greater rate of SME participation Developmental tool for SMEs

35 Challenges in SME Participation Inflexible qualifying criteria Smaller and newer SMEs do not possess requisite track record Some SMEs do not meet required Expenditure and Procurement Policies Unit (EPPU) rating Insufficient access to information on available opportunities Access to information on Government projects fragmented and not comprehensive SMEs may need lead time or collaborative efforts to build capacity for projects Institutionalised procurement framework Majority of contracts are of values beyond SMEs tendering capacities? [MTI figures required] Smaller SMEs without track record unable to compete with established ones

36 Conclusion

37 Views on Singapore Economic Transformation Important to leverage on growth in next decade, one that is unusual both for its opportunities and its challenges More business opportunities from regional and global integration Greater domestic constraints on growth: land, manpower, etc Growth through innovation, internationalisation, collaboration

38 To register:

39 Thank You Singapore Business Federation SME Committee Secretariat