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Singapore SMES See Opportunities Amidst Challenges, UPS SME Survey Reveals
Press Release

 
SINGAPORE, June 3, 2009 - Small-to-medium enterprise (SME) leaders in Singapore can maximise opportunities in the current downturn with the help of the government and choice business partners, according to the latest UPS Asia Business Monitor (ABM) 2009 findings. The ABM report focuses on the challenges and issues facing SMEs in Asia Pacific. Now in its fifth year, it continues to be an indispensable and effective resource for SMEs, businesses and stakeholders throughout Asia.

According to the findings, Singapore SMEs anticipate bleak economic growth in 2009, and are now directing their focus to three key areas for long-term growth: Exploring new markets (24 per cent), moving to higher value-added products and services (21 per cent), and strengthening the workforce with good talent (21 per cent) (Appendix I).

While the majority of SME leaders (66 per cent) are kept awake at night pondering the challenges arising from the market downturn, 54 per cent of respondents believe that the global economy will rebound by 2010 (Appendix II). This can largely be attributed to adequate support from the Singapore government which was the perception of the majority of respondents (63 per cent). This was the strongest finding amongst all 12 Asia Pacific markets surveyed, highlighting the Singapore government's efforts in helping SMEs ride out the recession.

"This year's ABM results show that despite the challenging economic environment, SMEs in Singapore are in good stead to see their businesses through this difficult period should they be nimble in reviewing their internal processes and quick to seize the opportunities around them," said Gillian Sim, Managing Director, UPS Singapore. "The Singapore government and global trade service partners such as supply chain providers have been proactive in their initiatives to help SMEs, actively educating and providing tools to navigate out of the recession."

It also helps that Singapore businesses currently report a high level of supply chain efficiency in the market, which contributes to a strong infrastructure in place for SMEs to leverage.

Based on insights from the ABM 2009 findings, UPS offers four recommendations to help SME leaders in Singapore to stay relevant and compete with other SMEs in the international arena:

Embrace globalisation and leverage Free Trade Agreements (FTAs)

68 per cent of SME leaders in Singapore acknowledge the importance and positive impact of globalisation. In addition, 24 per cent surveyed point to the exploration of new markets as the single biggest growth opportunity in the current economic downturn (Appendix III).

Singapore SMEs can leverage Singapore's network of 15 FTAs with over 20 countries, including major economies and markets around the world such as the U.S., Japan, India and China. At a time when businesses are looking to better manage costs, FTAs provide tariff concessions which boost the competitiveness of Singapore-made products in overseas markets. This offers Singapore-based companies the opportunity to effectively grow and diversify revenue streams on a global scale.

With the support of the Singapore government, agencies such as International Enterprise (IE) Singapore, and global service partners such as supply chain providers, and legal and accounting firms, SMEs can receive counsel, support and assistance on how best to increase their export markets, and handle business operations anywhere in the world. This includes finding the most efficient and cost-effective ways to transport goods across borders, manage inventory and ensure smooth trans-border customs clearance.

Capitalise on China's increasing dominance in the global marketplace

A whopping 75 per cent of Singapore SME leaders view China's increasing dominance as a boost to their business, the highest percentage tracked in a country compared to the regional average of 46 per cent (Appendix IV).

Singapore SMEs believe that the growth of China will be a boost to businesses in Singapore. They view China's success as a key regional growth driver (29 per cent), anticipate an increase in exports to China (13 per cent), and also look forward to leveraging China's low-cost products (9 per cent) (Appendix V). This would provide a potential solution for containing costs, cited by 61 per cent of Singapore SMEs surveyed as the second biggest challenge facing them today.

With the signing of the China-Singapore Free Trade Agreement (CSFTA) in October last year, Singapore SMEs are in a prime position to take advantage of opportunities in China, and stand to benefit from China's increasing dominance in the global marketplace.

Implement effective cost management strategies and move to higher value-add products and services

For 61 per cent of Singapore SMEs, increasing costs represent their second biggest concern today. SMEs are already taking action, with 68 per cent of SMEs in Singapore reducing their other operating costs such as rental and utilities to counter the recession. However, pushing suppliers to reduce costs only offers a short term solution which will not be beneficial to SMEs in the long run. SMEs need to look to long term solutions that will help them sustain their business in the future.

In Singapore, a majority of SMEs remain apathetic about the potential to improve internal efficiencies by better managing their supply chain. Thirty-seven per cent reported that they are not changing their supply chain practices, while almost half (40 per cent) said they were focused solely on reducing transportation and distribution costs. In order to ride out the recession and compete in the global market, short-term cost cutting measures are not adequate. A more effective way of managing costs is by actively reviewing overall resource allocation, including the complete supply chain to better manage their business. With the help of a global leader in supply chain and freight services like UPS, SMEs can mitigate risks through forward planning, scrutinising their supply chains for vulnerabilities and developing contingency plans.

Retain, retrain and develop talent

Eighty-nine per cent of SME leaders in Singapore believe the availability of a talented workforce will help Singapore's economy to rebound, with talent development seen as the second most important factor in Singapore's recovery.

Increased government funding for training is the strongest motivator for SMEs to engage employees in training and development courses, according to 66 per cent surveyed, which acknowledges the importance of government support for SMEs today (Appendix VI).

Singapore SMEs can also take advantage of additional schemes introduced by the government, including the Jobs Credit Scheme which was introduced in the Singapore Budget 2009, to encourage business to preserve jobs in the downturn. Businesses will receive cash grants to retain existing workers and, and where warranted, to hire new ones.

Other key findings in the UPS ABM 2008 include:

Workforce Issues

  • Seventy per cent of Singapore SMEs surveyed said that there will be no change in
    their workforce projection, compared to a regional average of 65 per cent
  • Only 15 per cent of SMEs across the 12 markets are planning to reduce their workforce, with more than 90 per cent stating the availability of a qualified workforce as the most important determinant of their competitiveness (Appendix VII)

Costs

  • Forty-one per cent of SMEs in Asia-Pacific cite insufficient collateral as a major obstacle to raising funds, possibly reflecting a decline in companies' balance sheets
  • Sixty-three per cent of the 1,200 surveyed indicate diversifying and/or exploring
    new revenue streams as part of their contingency plans to ride out the recession

Economic performance

  • Eighty-three per cent of SME leaders in Singapore recognise that the country's high level of supply chain efficiency contributes to SME competitiveness locally
  • The top three economic pillars for Singapore over the next three to five years, according to Singapore SMEs, are financial services (43 per cent), leisure and tourism (33 per cent) and, healthcare and pharmaceuticals (31 per cent)
  • Sixty-five per cent of Asian SMEs expect the economy to decline in 2009, compared to just two per cent in 2008

Growth and expansion

  • Sixty-one per cent of SMEs in Singapore cite Southeast Asia as the preferred region for expanding their businesses abroad (Appendix VIII)

About UPS
UPS (NYSE: UPS) is the world's largest package delivery company and a global leader
in supply chain and freight services. With more than a century of experience in
transportation and logistics, UPS is a leading global trade expert equipped with a broad
portfolio of solutions. Headquartered in Atlanta, Ga., UPS serves more than 200 countries
and territories worldwide. The company can be found on the Web at UPS.com.
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