While delivering a speech to address the Supplementary Budget in Parliament on Tuesday (27 July), The Workers’ Party (WP) Member of Parliament (MP) for Aljunied GRC Leon Perera offered several suggestions on how the Government can help small-and medium-sized enterprises (SMEs) thrive in a post-COVID world.
Mr Perera said many SMEs, particularly micro-businesses and small and medium-sized enterprises, have been badly affected economically following the last few rounds of restrictions, adding that SMEs employ about “two thirds” of Singapore’s workforce.
He also pointed out that COVID-19 has worsened inequality among companies where those who are able to adapt to the digital economy and e-commerce have fared better compared to those who didn’t.
Despite the challenges faced in this pandemic year, there has been a “burst of new start-up formation” in many countries around the globe, including Singapore, he said.
Although 2020 is deemed as the worst recession experienced in Singapore’s history, there were 63,480 new enterprises set up in that year compared to 61,573 in 2019. In fact, the figure in 2020 is the highest since 2016.
“We should ensure that we create the right eco-system to enable these new start-ups, and SMEs in general, to flourish and both safeguard jobs in a competitive environment as well as contribute to job and GDP growth, alongside MNCs and state-linked companies,” the MP said.
However, Mr Perera expressed in his speech that wholesalers, distributors and importers who support restaurants and F&B outlets are not included in the Government’s Jobs Support Scheme (JSS), noting that the Government should take a “balanced approach in administering schemes”.
He also asserted that there should be review on the rental support given to SME tenants who rent a mixed-used property, such as a shophouse for both retail and residential use.
“Due to Covid-19, there are SME tenants who have to resort to renting a mixed-use property to keep their businesses afloat. However, doing so would prevent them from obtaining the cash disbursements automatically.
“Some SME owners who are renting mixed-use properties find the process complicated to manage, sometimes due to language differences or unfamiliarity with government applications. They have also raised their concerns about how costly it would be for them to get hired-help just to assist them to submit their claim with supporting documents,” he explained, adding that the Government should look into having an automatic service for SME tenants renting mixed-use properties to reduce their financial burden.
Call for one-stop portal for all citizens and companies
In his speech, Mr Perera has noted that the Government should improve the user experience for its grant applications for SMEs.
As such, he urged for the creation of a one-stop portal for all citizens and companies to transact with the Government on assistance schemes.
Although there is one such portal that exists now – businessgrants.gov.sg – but it appears that not all the SME schemes across the whole of Government can be accessed via this portal, said the MP of Aljunied GRC.
He also said that many SMEs feel that the process of applying for grants and support is “too administratively time-consuming and difficult”.
In fact, UOB SME Outlook 2021 survey revealed that small SMEs want more help in applying for existing grants and schemes, and this was one of their top three wishes for Budget 2021, he said.
Ways to support SMEs in post-COVID world
Mr Perera proposed that the first way to help SMEs is to offer more SME scholarships to the people of Singapore, as well as develop and market it well so it becomes attractive to them.
He explained that SMEs are not sufficiently attracting, retaining, developing and investing in their talent and this is a “vicious cycle” as they will not be able to offer quality goods and services, as well as survive for a long run.
“SMEs without talent do not do well and not doing well means they are discouraged from investing in their talent.”
Although there are Government scholarships in place, such as some IMDA scholarships, that will allow scholars to take on roles in SMEs rather than in GLCs and other major companies, but he questioned if the Government is putting enough effort into developing the scholarships.
“It could well be that SMEs scholarships are not as attractive to many young Singaporeans as other types of scholarships, such as PSC scholarships or GLC scholarships. To widen the potential talent pool for such SME scholarships, can we give the option to PSC scholars to transfer the second part of their bond to an SME? This may attract some PSC scholars who realise that they would rather develop their career in the private sector,” he said.
The next suggestion by Mr Perera is for the Government to nurture players that will provide shared services like finance, HR, accounting and administration at low costs to SMEs. This is because most SMEs find it hard to employ individuals in such sectors due to lack of qualified workers as well as high competition from MNCs, GLCs and professional firms.
“And having such firms providing such services at low prices on an on-going basis would be more helpful to SMEs than many of our existing schemes which prioritise the partial funding of one-off consulting work.
“Our economic agencies should treat the development of the low-cost shared service industry as an industry development priority. Technology can be leveraged to provide low-cost services,” he said.
The third suggestion by Mr Perera is for the Government to help SMEs have better succession planning as many of them find it a struggle to ensure the continuity of their business and to monetise the value they’ve created.
“Would the government look into providing low-cost services to SMEs that cannot engage M&A advisory firms, to help match them to potential acquirers? A basic form of match-making could be set up via an online portal which allows potential buyers and sellers of small firms to express their interest, for example,” he proposed, noting that other first-world countries offer SME owners strategic advice on business succession planning.
The MP for Aljunied also urged the Government to look at SMEs that are starting overseas, and asked if Enterprise SG is able to provide hotdesking facilities and business centres in its key overseas centres to help SMEs that are going abroad for the first time.
“While such facilities are available commercially in most global cities, having Singapore SMEs use the same facility and having that co-located with the office of Enterprise Singapore and other Singapore government agencies in-country would facilitate networking with government and collaborations among Singapore firms in that overseas market.
“Subsidised rental rates could also be provided to ease market entry. Access to such facilities should, of course, be limited to SMEs and not extended to large firms,” he said.
Financing growth for SMEs
In his speech, Mr Perera also pointed out that having an Export and Import (EXIM) bank for SMEs is something the Government should consider having.
He said that in 2010, the Economic Strategies Committee (ESC) mooted the option of having an EXIM bank but the Government said that the gaps in trade financing could be addressed by expanding the suite of trade and internationalisation finance schemes under what was then International Enterprise (IE) Singapore, without the setting up of an EXIM bank.
Ever since then, Enterprise Singapore has launched many internationalisation finance schemes in which the Government co-shares risks with participating financial institutions to support SMEs.
“However, I am not sure if all our SMEs feel that it is easy to secure financing, especially for overseas expansion. It should be noted that even with the government sharing a high proportion of the risk, banks may prefer other options to deploy their capital then lending to SMEs, as they still bear some risk,” he said.
He continued, “While existing financing schemes have certainly helped some of our SMEs, it would be worth considering if the creation of an EXIM bank for SMEs could help us to reach greater outcomes in SME growth.”
“Having an institution that has the sole mandate to lend to and boost our SMEs, rather than relying on schemes driven by commercial banks who will, understandably, pursue primarily commercial priorities, can help us better address SME’s financing needs. Hence, I believe the establishment of an EXIM bank for SMEs is an idea worth revisiting.”
Lastly, Mr Perera noted that it is critical to protect the intellectual property of SMEs in order to foster innovation in the SME sector.
This is because there are still a perception in the sector that for IP-dependent kinds of work like creative or consulting work, government agencies may take their ideas contained in their proposals and pass it to cheaper vendors or adopt those ideas internally.
As such, the MP asked: “I would like to ask if all government agencies are given strict guidelines to not treat ideas contained in proposals in this manner?”
Having said that, Mr Perera told the House that the pandemic provides the best opportunity for Singapore to leverage on the increase of start-ups in the country by creating an eco-system that allows these companies to thrice and scale-up by driving job creation and creating a third engine of value creation that may be more rooted in Singapore than perhaps all MNCs are.
