More liquidity, support for digital solutions needed for SMEs: SBF

SMALL- and medium-sized enterprises (SMEs) need help with near-term issues like financing, as well as support for long-term measures like technology adoption, in order to stay sustainable and grow, the Singapore Business Federation (SBF) SME Committee said on Tuesday.

SBF cited its National Business Survey 2019/2020 released last week, which found that SMEs know they need to adopt digital solutions to tackle their top challenges of manpower costs and finding new or better ways to generate revenue, but costs remain the biggest roadblock. This is further compounded by financing difficulties, with one-third of the businesses reporting a credit crunch.

Noting that business sentiment remains weak for 2020 despite forecasts for Singapore’s economic growth to pick up modestly as compared to 2019, the committee called for increased liquidity through new schemes and greater access to digital solutions to help businesses better position themselves for the global economy’s next upswing.

“Our businesses are increasingly aware of the importance of innovation and transformation, as reflected in the latest SBF National Business Survey,” said Ho Meng Kit, CEO of SBF. “We hope the government can build on that momentum with robust measures that encourage, support and strengthen the digitalisation and R&D (research and development) efforts of our companies. This will position them well for the future economy.

“At the same time, we should not ignore bread and butter issues like facilitating adequate cash flow for our SMEs, especially during this prolonged period of economic uncertainty.”

The committee’s wishlist for the Singapore Budget 2020 was submitted to the government on Dec 28, and included seven key recommendations.

One recommendation was to set up a one-stop digital trade platform where companies can trade among themselves, which would help B2B (business to business) companies grow. The greater sales opportunities afforded by the platform would encourage companies to adopt digital solutions like e-invoicing, SBF said.

Alternatively, the government could leverage GeBiz and government spending on products and services from local SMEs to encourage the use of available procurement platforms.

With SMEs struggling to obtain credit due to their lack of collateral and risky borrower profile, SBF requested more support from the Loan Insurance Scheme (LIS), which currently provides government support for up to 50 per cent of the insurance cost for short-term financing like invoice financing.

SBF recommended that the government’s share of the insurance cost be raised to 70 per cent, saying: “Enhancement of the LIS can provide greater financing support and also encourage SMEs’ shift to e-invoicing.”

To tackle the issue of late payments causing significant cash flow scenarios, SBF called for the government to support a Payment Code of Conduct that it is developing, similar to Australia’s Supplier Payment Code. Government procurement entities should endorse and adopt the code, and the government could also use it as a way to encourage e-invoicing, by paying suppliers more quickly if they e-invoice and providing incentive schemes for larger enterprises to get their SME suppliers to use e-invoicing platforms.

In order to move up the value chain, SMEs need more access to R&D resources and funds so as to develop new capabilities, intellectual property and intangible assets, SBF said.

This could be accomplished by increasing collaboration between research institutions (RIs) or institutes of higher learning (IHLs) and the SMEs, and offering grants like Enterprise Singapore’s Enterprise Development Grant and Productivity Solutions Grant to pay for up to 70 per cent of costs for “applied R&D to develop industry-relevant technologies and innovation”.

“The RIs and IHLs can also help to identify common challenges faced by similar companies and aggregate the demand for R&D for the same outcome,” SBF added.

To help SMEs protect their new R&D capabilities, the government should provide more funding help to create, regulate and administer intellectual property filing in global markets. And to encourage SMEs to pursue R&D even if they are not yet profitable, a cash or cash-back research expenditure rebate system should be introduced for SMEs that are currently non-taxable.

SBF cited a similar practice in Australia, where companies with turnover of less than A$20 million (S$18.5 million) can get a refundable tax offset for eligible R&D expenditure, and companies in a tax-loss position can receive it as a cash refund instead.

With SMEs listing cybersecurity risks as a top barrier to technology adoption alongside costs, there is a clear need for help in navigating complex cybersecurity requirements and obtaining the right solutions. SBF suggested an Enterprise Cybersecurity Advisers programme that would deploy advisers to SMEs, to provide training customised to the individual SMEs’ needs and help them adopt comprehensive cybersecurity solutions.

Finally, SMEs will need continued support to employ older workers as the retirement and re-employment age and CPF contribution rates are progressively raised over 10 years. SBF cited the Special Employment Credit (SEC) and Temporary Employment Credit (TEC) as key support schemes which have helped to subsidise older employees’ monthly wages and cushion the cost of increased employer CPF contributions, respectively.

It requested for the SEC to be extended beyond December 2020 in tandem with the raising of the retirement and re-employment age until 2030, and for the TEC to be reintroduced whenever the CPF contribution rates for older workers are raised during the same period.

The committee added that it would work with other trade associations and chambers (TACs) and the Singapore National Employers Federation to raise awareness among companies about the Portable Medical Benefits Scheme. The scheme helps to defray employers’ costs for medical benefits, especially for older workers, but is underutilised as only 5 per cent of companies currently offer it.

Said Kurt Wee, chairman of the SBF SME Committee: “The global slowdown in growth is likely to persist for the foreseeable future. Companies should seize this window of opportunity to upgrade their human capital, strengthen their digital capabilities and expand overseas for diversification of markets.

“Whilst more tangible support for SMEs is necessary this year, we would also like to encourage SMEs themselves to be more proactive in seeking out and leveraging available resources, be it provided by the government, SBF or other TACs.”



Capital Media

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