Wednesday, 28 November 2012

SMEs battle wage costs, curbs on labour

72 per cent say bottom lines hit; many also worried about oil prices
By Jonathan Kwok, The Straits Times, 27 Nov 2012

WAGES remain the main overall cost challenge for small and medium-sized enterprises (SMEs) here, even though many have achieved productivity gains.

A new study, done between May and August, found that 72 per cent of firms cited manpower costs as hurting bottom lines.

That was an increase from last year, when 54 per cent cited manpower costs as a key worry in DP Information's survey.

In particular, more than half of the SMEs said they are being hit by stricter foreign manpower policies and higher levies.

These were among the key findings of a survey of about 2,600 SMEs conducted by DP Information Group, a credit and business information bureau.

Construction, information communications, services and manufacturing companies were affected the most by wage costs.

Many are also worried about rising oil prices, with 73 per cent of those polled flagging oil prices as a key concern.

The survey also found that of the 74 per cent achieving productivity gains, nearly half produced goods or delivered services quicker, 38 per cent streamlined their workflows, while 32 per cent made the best use of their manpower resources.

DP Information's managing director Chen Yew Nah observed that SMEs are responding to the Government's message to focus on productivity.

"What SMEs can do is invest in productivity, technology and brand and product development while they wait for trading conditions to improve," she said.

The survey found that about 27 per cent of respondents have applied for the Productivity and Innovation Credit (PIC) scheme, which gives tax deductions and cash grants for companies that invest in raising productivity, compared with 6 per cent last year.

Ms Chen said more can be done to engage smaller SMEs and those which have been in business for a longer time. They are less likely to track and measure productivity.

The take-up rate for smaller SMEs with a turnover of less than $1 million is much lower, at 17 per cent.

For local printing firm Winson Press, manpower and rental are the most problematic cost issues.

Chief executive Tan Jit Khoon said the higher levies on foreign workers are also an issue.

It has tapped on the PIC scheme for some of its training and technology spending, and is looking to transform its business model to also help individuals publish their own books.

More SMEs venturing overseas
Myanmar is choice destination for many amid slowdown here: Survey
By Esther Teo, The Straits Times, 27 Nov 2012

MORE small and medium-sized enterprises (SMEs) are heading abroad as growth here slows, with Myanmar the destination of choice for many.

A survey found that 25 per cent of the 2,600 or so respondents had done business in the rapidly changing nation compared with 14 per cent a year ago.

Cambodia also enjoyed an increase, up from 13 per cent to 20 per cent, while 16 per cent of respondents were trading in Laos this year, compared with just 8 per cent a year ago.

Brunei, Cambodia and Myanmar have made the top 10 this year, displacing the Middle East, United States and Australia, according to the DP Information Group annual survey.

Ms Chen Yew Nah, managing director of the credit and business information services firm, noted that all the top markets for local SMEs are in Asia this year.

"As new markets open, Singapore SMEs are among the first to enter and stake a claim, showing that (they) are being bold when it comes to their market choice," she said.

Malaysia with 58 per cent, Indonesia with 51 per cent, and China and Hong Kong with 47 per cent remain the top three overseas markets this year, unchanged from last year's rankings.

The report also noted that more than half of all SMEs reported overseas revenue this year, a 10 percentage point increase from last year.

But it is not just more firms but also the extent of overseas contribution that is encouraging, noted Mrs Lee-Khoo Wee Lin, group director for planning at International Enterprise Singapore.

She said that 27 per cent of SMEs are generating more than half of their total turnover from overseas - the highest percentage since 2009.

Apart from construction, respondents in all sectors, including wholesale, transportation and storage and manufacturing, are also engaging more customers from overseas markets.

Construction SMEs buck the trend as they are focusing on the local market, with many public projects expected over the next few years.

The most popular way to generate overseas revenue is by exporting, the survey found, followed by the use of third-party distributors and agents. Fewer SMEs are setting up a physical presence.

Mrs Lee-Khoo noted a change in mindset on internationalisation among firms.

"SMEs used to thrive on conquering locally before thinking globally. Many never even want to think of the unknown outside our shores," she said.

"But, pleasantly, the survey showed that 58 per cent of SMEs reported overseas revenue within the first four years of incorporation, doubling the 30 per cent last year."

One possible reason is that firms see the increasing need to reduce reliance on Singapore's small, fiercely contested domestic market, she noted.

"Regardless, it is good that SMEs are thinking beyond the shores of Singapore, making the world their performing stage and Singapore as the core of control for the companies."

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