Looking On The Bright Side

Author: Lim Chu Chong, Regional Head, DBS SME Banking

By most accounts, 2016 is expected to be as uncertain as the one that just past for businesses. The persistent challenges of a tight labour market and high operating costs are expected to continue, even as the broader economy continues on a path of low growth.

The Ministry of Trade and Industry (MTI) expects gross domestic product (GDP) to expand by just 1 to 3 per cent in 2016, as a sluggish external environment continues to weigh on Singapore’s economy.

With domestic and global pressures at the top of their minds, local small and medium enterprises (SMEs) are expecting tough times this year. A recent survey of some 3,600 SMEs by the Singapore Business Federation and DP Information Group found that their sentiment over the first half of the year was at its lowest point in almost four years.

To thrive in this volatile landscape, Singapore businesses have to streamline their operations, raise productivity and leverage innovation to generate growth and create value. While this may sound like a daunting task, there are many reasons for SMEs to be hopeful that they can achieve this.

Firstly, the Government has recently enhanced its already generous support for SMEs with the aim of fostering a vibrant entrepreneurial sector. Among other measures, these initiatives provide funding support for various purposes, training and development programmes as well as other forms of technical or operational assistance. Many SMEs are not aware of the Capability Development Grant (CDG) by SPRING Singapore. The grant can defray up to 70% of qualifying upgrading projects in areas like increasing productivity, product development and new market access.

Meanwhile, new technology-based tools continue to emerge that removes much of the pain of running a business. Through DBS BusinessClass, we have organised events that pair SMEs from different industries with tech start-ups handpicked from all over the world, which can offer them solutions to their problems.

Our most recent event focused on the retail sector, where solutions from stock taking robots to augmented reality shop fronts were on display. Such technology can free up entrepreneurs from many of the non-core aspects of their jobs, allowing them to focus on what they do best.

Yet, many local businesses are ignorant of these innovations. As such, we hope to not only help raise awareness of the tools available to our SME customers but also help them find bespoke solutions to their specific challenges. You can read more about it here: http://go.dbs.com/1S19rf0

Fuelled by technology, business banking is also evolving to better serve the needs of SMEs here.  Our DBS' SME customers can open a Business Multi-Currency account, without ever having to step into a branch. They can also apply for a business loan online with no signatures or paper forms required. This service enables business owners to apply for up to 11 types of loan products - including business loans, overdrafts, SME working capital loans, commercial property loans and equipment loans - in this manner. SMEs can also to track their loan applications in real time and get instant notifications. SMEs can also to track their loan applications in real time and get instant notifications.

We have also introduced new products that are tailored to meet the needs of today's start-ups. We were one of the first banks in Singapore to offer venture debt as an alternative capital-raising option for growth stage tech start-ups with a proven business model. SMEs backed by DBS partner venture capitalists can apply for DBS Venture Debt Financing for working capital, fixed assets acquisition and even project financing.

On the macro front, things are also not as bleak as they seem. While markets are fixated on China's slowing economy and interest rate hikes by the U.S. Federal Reserve, there are new opportunities emerging closer to home.

Most immediately, the formation of the ASEAN Economic Community (AEC) at the end of 2015 will give Singapore-based companies greater access to the dynamic markets of Southeast Asia. The common market it creates is worth more than US$2.5 trillion, making it the third largest economy in Asia after China and Japan, and the seventh largest in the world.  

Singaporeans are optimistic about the AEC. A recent poll conducted by the Straits Times found that locals hope its formation will reduce business costs and allow for seamless travel within the 10-country grouping. Nearly 75 per cent of Singaporeans polled also believe the formation of the community will make ASEAN more competitive.

In the longer term, the recent signing of the Trans Pacific Partnership also bodes well for Singapore enterprises looking to internationalise. An agreement was reached on this comprehensive trade agreement between 12 Pacific Rim countries, including Singapore, on October 5 after five years of negotiations. The TPP is expected to boost trade and investment links between Singapore and key markets in the region and elsewhere in the world. Special provisions in the TPP also aim to help SMEs expand overseas.

As we enter 2016, let's be cognizant of the many challenges that lie ahead, but perhaps also take advantage of the temporary lull period and assess all the resources available, to build new capabilities for your business and to prepare for the exciting opportunities emerging on the horizon.

Here’s wishing all business owners a Happy New Year and we look forward to supporting your business through many more years.