SMEs the seed of job opportunities and innovation

Alvin Ong

Running a small- and medium-sized enterprises (SMEs) involve a great deal of effort and commitment. Owners establish, operate and grow their business largely on their own with limited support.

In Singapore they have to contend with competition from multinational corporations (MNCs) which are given tremendous incentives and government linked companies (GLCs) which are perceived as having the “inside track” for government contracts.

Despite the current environment, many SMEs have succeeded against the odds. This brings the individuals a sense of satisfaction and achievement. Ideally, the role of government should be to engineer policies which support and encourage local small business success.

Instead we find that many Singaporean small businesses are troubled by the massive paperwork, regulations and compliance orders that strangle enterprise. Multiple taxes, both direct and indirect, such as corporate taxes, land taxes, rental, the GST etc divert resources from SMES which could otherwise be used to improve work conditions, upgrade staff and equipment and provide seed capital for future expansion etc.

The complexity of regulation is not only time consuming, but also drains the already limited resource of the SMEs who do not have the resources available to MNCs or the experience with regulatory bodies that GLCs possess. These regulations while well intentioned to protect consumers and the public, end up inhibiting innovation and creating a drag on productivity, development and growth of SMEs.

There are various ways of encouraging the growth of SMEs. These include:

  • Restructuring of industry assistance to reduce red tape, save taxpayers’ money, remove several layers of bureaucracy and focus on areas of practical concern to SMEs. Grants to SMEs should be simple, practical, perhaps in the form of access to resources and associated with simple transparent quantifiable outcome measures.
  • Allow small businesses to patent their ideas and innovations early, perhaps even before they are mature enough to manufacture it. This could be done through innovative intellectual property processes which protect small innovators from predatory corporations who might be tempted to limit competition.
  • Encourage home-based small businesses as it is not only cost saving, it also helps encourage work-life balance and flexibility in dealing with international clients in different time zones.
  • Simple direct financial support such as periodic cash handouts to small businesses should be discouraged, instead the support should be in the form of actual resources such as allowing them to use the media to advertise at a discount rates and rental discount for equipment and office space.
  • Assistance should be provided to SMEs to partner local mature businesses especially in terms of supply-chain management and distribution to provide a much more direct way for the small businesses to gain trust and build market share.
  • Government and the banks have to work together to assist SMEs in financing worthwhile ideas and enterprises. This is similar to the original noble aims of the Development Bank of Singapore which has now “morphed” into the DBS Bank which is not very different from other commercial banks.
  • Professional services such as  risk management and legal assistance could be provided for these small businesses to the improve their marketing strategies and financial management and governance.
  • Plans should be put in place to assist these small businesses to computerize their day-to-day administrative functions. This will not only increase cost efficiency, it will also allow them to focus more on developing ideas and improving productivity. This also helps to ensure an audit trail for transparent reporting, compliance with regulatory matters and protection of workers.
  • The whole formula for rental of shop houses and factories should be revamped. Small  businesses should not be tied down by the problem of inconsistent rental fees. Incentives such as rental discounts for promising young SMEs could be employed to encourage innovative SMEs.

SMEs remain both the backbone of our economy employing the majority of Singaporeans as well as the seed for future home-grown Singaporean companies which could change the world such as Google, Apple or even Air Asia. The current Singapore business environment which favours MNCs and GLCs has a powerful negative effect on local SMEs.

This has, in turn, led to a low productivity model for local SMEs, many of whom lack the confidence to compete on the international stage. A mindset change needs to take place for the government to have confidence in Singaporean entrepreneurs and to trust us to develop new businesses to take Singapore into the future.

Alvin Ong is a member of the Young Democrats and coordinates the Technical Communications of the SDP’s communications Unit.