by Eddie Neo
Small and Medium Enterprises (SMEs) have been created by individuals with aspirations to start handcrafted or semi-mechanized small businesses.
By definition, such companies employ no more than 200 people and generate revenue of less than S$100 million.
Most SMEs were founded in the 1960s and 1970s by the first generation of citizens who established the country.
Today, these two generations are reaching their twilight years, and they no longer have the energy to continue operating their businesses. Many people are unable to keep their businesses running and are contemplating retiring and closing down.
SMEs contribute to 48% of Singapore’s Gross Domestic Product (GDP), employing about 65% of its workforce and constituting 99% of all its enterprises.
Despite their importance, it would seem that they are not valued by the state and are left to survive on their own.
For many of SME business operators, they hold the view that if they can continue to operate, then it is great, but if they cannot, they would just simply close their doors.
On top of SMEs’ significant financial contributions to the country, their social function is also crucial.
They fill gaps in services that SMEs cannot provide, such as water, electricity, furniture, decoration, aluminum windows, ironwork, and hawker industries.
If these SMEs disappear, many service industries in society will vanish, and people will be unable to afford the services they need, as in European and American countries where people have to do everything themselves.
Most SMEs are artisans, and even if they are semi-mechanized, they still require human intervention.
Currently, SMEs are facing the predicament of having no one to take over the business as their children are not interested in inheriting the business, and hiring foreign labour is not easy. The lack of manpower is a natural obstacle that SMEs cannot overcome. Only when the manpower issue is resolved can SMEs continue to operate.
To make matters worse, most SMEs provide on-site services, and in their industries, there must always be a truck (large or small) to transport goods.
In the past, small business owners could afford to buy a new truck or use an old one with a few years left on its Certificate of Entitlement (COE), which cost only a few tens of thousands of dollars and could still be used with some effort. Now, a truck’s COE costs nearly $90,000, plus the Open Market Value (OMV), Additional Registration Fee (ARF) and the dealer’s profit, which is at least $130,000.
This is simply not affordable for SME owners, and they have no access to loans. Due to the PARF rebate cap, you can only get back a sum which is capped at $60,000.
Who will repay the outstanding car loan if you close your business one day and have to sell the truck at a loss?
I do not know who is behind the scenes pushing up COE prices, but one thing is certain: the government is happy to see it happen because one COE can cost up to $100,000, and ARF can cost tens of thousands of dollars. The national treasury earns a considerable amount of tax revenue. However, pushing up COE prices also carries potential risks.
If one day, the car dealers do not buy into it and COE prices plummet, Singapore’s beautiful scenery from the 1998 Asian financial crisis will be re-enacted.
At that time, rows and rows of cars, including lorries, were repossessed by Malaysia Borneo Finance (MBF), a listed company on the Malaysian stock market. As a result, MBF went bankrupt and disappeared from the historical stage.
History always repeats itself, and those in charge of managing the country often prioritize short-term and immediate interests.
