Nearly two-thirds (63 per cent) of businesses say that the economic climate in Singapore has worsened in 2016 and nearly half (48 per cent) of businesses expect the situation to deteriorate in 2017, according to the latest National Business Survey 2016/2017 conducted by the Singapore Business Federation (SBF), that drew more than 1,100 responses from companies across all major industries. The negative sentiment persists across both large companies and SMEs.
Key Challenges for Businesses
In the midst of the tepid economic climate, operating costs (68 per cent ) and manpower issues (66 per cent) remain the biggest challenges for businesses. Key manpower issues faced are rising labour costs, manpower rules and regulations, as well as attracting and retaining younger workers.
Government regulations (31 per cent ) appear to be another key challenge for businesses, ahead of issues such as access to finance, and technological change and disruption. The challenges faced by companies in the area of government regulations include cost of compliance, struggles with bureaucracy, as well as mandatory fees and levies.
Views on Government Policies and Wish List for Budget 2017
In the short to medium term, businesses appear to be looking for more help from the Government to cope with the worsening economic conditions. Only 28 per cent of businesses have expressed satisfaction with the current policies. This is lower amongst SMEs, where 27 per cent have expressed satisfaction, compared to 39 per cent among large companies. Most companies have chosen to remain neutral. This indicates that the steps taken in Budget 2016 are not far-reaching enough and do not have significant near-term impact.
From the survey findings, the focus in Budget 2017 should look at measures to assist businesses with manpower issues as well as lower government compliance costs, fees and taxes.
Most businesses are not embracing the Government’s message on the need for economic transformation. Overall, 62 per cent of businesses agree that there is a need for companies to transform. Only 15 per cent among SMEs and 36 per cent among large companies strongly agree with the necessity to transform in order to adapt to the slowing economic growth, as well as technological change and disruption.
More can be done to mobilise companies to be ready for further economic transformation. Only 13 per cent of businesses described the Government’s recent steps in Budget 2016 to assist companies with the slowing economic growth as sufficient. Similarly, only 18 per cent indicated that the assistance with adaptation to technological change and disruption is sufficient. In addition, about six in 10 SMEs have yet to make significant adjustments to adapt to the slowing economic growth (58 per cent ), as well as technological change and disruption (64 per cent ).
On the international expansion front, businesses are keen to expand overseas, but efforts are limited by the lack of good understanding of the opportunities available and requirements needed.
ASEAN is the preferred region for overseas expansion with eight in 10 companies indicating that they are keen to venture within the region. However, only 22 per cent of businesses have identified opportunities in the new business landscape after the launch of the ASEAN Economic Community (AEC) 2015, and 74 per cent do not think the AEC has benefitted their company. Furthermore, only one in five (21 per cent ) businesses claim to have benefitted from the Free Trade Agreements (FTAs) that Singapore has signed, while over half (52 per cent ) feel less informed about the benefits of the FTAs.
Mr Ho Meng Kit, CEO of SBF, said “Singapore is impacted by the current subdued external demand and global trade due to its open and outward-oriented economy. Domestically, high operating costs and the constraints imposed by our foreign worker policies continue to affect businesses. Businesses find operating under this persistently tepid global and domestic economy challenging.
As mentioned in the “SBF Position Paper for a Vibrant Singapore”, addressing near term issues is important to help viable businesses transit to the new restructured economy. We urge the Government to consider measures to assist businesses to overcome the near-term economic headwinds in the upcoming Budget 2017, even as it considers the longer-term strategies for the Singapore economy. We expect the local business environment to remain lacklustre at least in the short term.
Having said so, Singapore companies can, and must transform to find new ways of doing things and offer innovative new products and services. At the same time, we encourage our companies to expand to overseas markets. The current technological disruption that we are witnessing has lowered the barriers for companies to do all these. SBF stands ready to help our members on these aspects. We also encourage businesses to utilise our FTAs to gain competitive advantage.”