Image credit: Campaign Asia
SINGAPORE – Smaller firms here are facing a “red ocean” as foreign competitors with deep pockets and their own suppliers set up shop in Singapore, warns Mr Ang Yuit, president of the Association of Small and Medium Enterprises (Asme).
Mr Ang likens the saturated market to a sea bloodied by cut-throat competition, making it imperative for small local players to venture overseas.
Rising business costs and labour shortages, two top challenges identified by small and medium-sized enterprises (SMEs), are not expected to ease.
“Landlords are not going to reduce rent because there’s always someone else taking over,” Mr Ang told The Straits Times.
“Your staff are not going to be okay with reduced salaries because someone else is going to pay them more.”
A new wave of Chinese investors tends to arrive with savvy technology tools like robotics and an intact supply chain.
In the past, foreign investors might engage local businesses for part of their orders, but that has changed, says Mr Ang: “The Chinese are very integrated. Their ordering system is from China, they may even have their system providers sitting in China, remotely servicing them.”
These investors may spend on construction and renovation as they set up, giving a quick boost to the economy, but in the longer term, he believes their presence will weaken local SMEs.
Chinese investors have been raising stakes here in recent years, led by geopolitics and enhancements to the China-Singapore Free Trade Agreement completed in 2023.
China’s Ministry of Commerce noted that in 2018, cumulative investment from China in Singapore was US$50 billion (S$68.42 billion). By 2022, it had risen almost 1½ times to US$73.5 billion.
Mr Ang, who is serving his second year as ASME president after 12 years as vice-president, says it is time for SMEs to cross the seas.
In 2025, ASME aims to have at least five projects bringing together smaller players which could not make the cut for market readiness assistance from the Government, nor get a lift from Government-linked companies, for a stab at the global pie.
Fresh from an exchange trip to Harbin, Mr Ang cited an offer from the Chinese city’s provincial government to offload its maize in bulk. A typical SME may not have the appetite for it, he said, “but if we aggregate enough of them, they collectively may have the capital and the channels”.
Mr Ang, a mechanical engineer by background and chief executive of web consultancy The Adventus Consultants, said possibilities extend from bidding for projects in the Middle East, to sharing the upkeep of a business development executive in a foreign market.
He added: “Currently, the most we do is trade shows, but I think that the association’s got to go beyond networking sessions, get people to come together, win deals and bring in revenues.”
Besides ambition, SMEs must put aside any competitive streak and warm to the idea of a collective bid, he said.
ASME, founded in 1986 and partly government-funded, has more than 6,000 members but also serves non-members.
Not all SMEs want to grow, Mr Ang said; some exist just to hoover up government grants.
“I’m highly critical of business owners like that. They set up that company to help on the surface, but all they are doing is enriching themselves.
“Then there are others who feel that I survived today, or this year, that’s enough, really.”
On why Singapore has failed to produce a private company with global success like TSMC, Mr Ang pointed to Fraser & Neave and Asia Pacific Breweries, two local firms bought out by foreign groups after building global brands such as 100PLUS and Tiger Beer.
“I think there’s a mentality to monetise, and do something with that cash,” Mr Ang said.
Other than being squeezed by competition from businesses run by government-linked entities such as Temasek and union-backed NTUC Enterprises, Singapore entrepreneurs also tend not to see beyond the borders.
“But I think that can be changed. If we keep sensitising our people beyond the shores of Singapore, and see Singapore as a capital of Asean, rather than just being a country.”
Like its peer trade groups, ASME has sent its wish list for the 2025 Budget, which will be announced on Feb 18. It listed five categories: human capital; digitalisation; sustainability; internationalisation; grants, incentives and schemes.
Going beyond cost subsidies is high on the list. It is hoping for increased funding that supports innovation such as AI use.
Halving the costs of using Microsoft Copilot, for example, does not make a Singapore SME more competitive than another foreign SME with the same tool, Mr Ang said.
“It is that additional workflows that you build on top of basic work that makes your SME more productive.”
The other wish, for Enterprise Singapore to streamline grant application processes, is a repeat call that failed to materialise in the 2024 Budget.
It has also asked for upfront wage payments instead of reimbursements for temporary staff standing in for employees on parental or maternity leave to improve SME cashflow, and a $1,000 annual subscription credit for three years to firms with at least three employees to give them flexibility in choosing software providers.
The association hopes SMEs will be allowed to cancel projects without grant clawbacks, but with reduced future grants, to encourage honest vendor feedback.
There are more than 300,000 SMEs in Singapore, accounting for over 99 per cent of enterprises, over 70 per cent of employment, and almost 50 per cent of economic output.
With more than 300 trade associations and chambers in Singapore, Mr Ang noted that advocacy for SMEs is mixed and sometimes sweeping.
Groups that jump on the SME term bandwagon conflate the issues, he said.
“Instead of saying that the floor is wet at that point, you just say the floor is wet. And people think that everywhere is wet, but actually that is not the case,” he added, urging his peers to go more granular on issues.
Mr Ang believes that ASME, which had a review of its strategic purpose three years ago, remains the voice for the macro and across-the-broad issues for SMEs.
The association will focus on supporting the small and micro enterprises, typically those with annual revenue under $10 million.
“Our perspective is that SMEs have got to come together. We will fight for business ourselves, separate from the multinational corporations and at some point when we’ve demonstrated competency and success, we will go back to the multinational and say, ‘Hey, can we partner?’”
Source: https://www.straitstimes.com/business/its-a-red-ocean-cant-be-business-as-usual-says-sme-association-chief