What’s on the horizon for SMEs in 2024

ASEAN Rising
In the current volatile geopolitical climate marked by conflict and tensions, ASEAN has emerged as an attractive destination for businesses and investors.  Here are some reasons why Singapore-based SMEs looking to expand should start by exploring opportunities in their own backyards.

1. Robust Growth: ASEAN’s projected GDP growth of 4.6% in 2024 and 4.8% in 2025 are expected to outpace global average growth estimates of 2.9% and 3.2%, respectively, according to forecasts by the IMF. Foreign direct investment (FDI) inflows into ASEAN-6, as proportion of world inflows, have exceeded China in the past two years.
2. Neutral stance: ASEAN is known for its neutral stance amid major power rivalries. This neutrality can offer stability for businesses at a time when geopolitical tensions are escalating.
3. Regional stability: The region has been relatively stable politically and economically, which provides a predictable and steady environment for business operations, compared to other regions that might be experiencing political unrest or economic volatility.
4. Trade diversification: As trade tensions continue globally, businesses are looking for alternative markets and trade routes to diversify their operations. ASEAN, with its strategic location and array of Free Trade Agreements, provides a platform for such diversification.

ESG compliance becomes a priority
There is no getting away from the need to incorporate ESG (environmental, social, and governance) factors into businesses today. Even though most SMEs in Singapore are not yet required to report sustainability metrics, those that start early will have an advantage in attracting investors and customers.

As sustainability regulations become more stringent, SMEs who do not meet the ESG criteria of MNCs and large local corporations may also not be able to supply to these big customers.

Meanwhile, more consumers continue to choose products that have a positive impact on the planet as the climate crisis deepens. By incorporating ESG factors into their business, SMEs can not only enhance their sustainability, but also gain a competitive edge in their respective markets.

Adoption of Gen AI by businesses
Powerful generative AI (Gen AI) technologies such as ChatGPT and Dall-E are set to transform the way businesses operate. Experts say that Gen AI is more than just a passing fad, but rather a catalyst that could redefine an industry's landscape.

Among other uses, Gen AI can quickly generate high-quality content tailored to the needs of the business, saving both time and money. This can include marketing blogs, package designs or even computer code. Reflecting its growing prominence, Gen AI was a key focus of this year’s Singapore Fintech Festival.

However, SMEs still lag their larger counterparts when it comes to adopting new technology. While the technology adoption intensity (which refers to average number of digital technologies adopted per firm) of SMEs improved to 2.1 in 2022, this is significantly lower than the 5.7 for their bigger enterprises, according to the Singapore Digital Economy Report 2023.

SMEs can take advantage of support schemes such as IMDA’s SMEs Go Digital initiative or the DBS Start Digital Programme to accelerate their digital transformation.

Singapore's transportation and logistics sector in 2024 will be impacted by two key trends: Continued growth of e-commerce and a heightened focus on sustainability.

1.    Growth of E-commerce: The expansion of e-commerce is a significant driver for the logistics sector. The value of the e-commerce market in Singapore is forecasted to rise to about US$10 billion by 2026, nearly doubling from its valuation of US$5.9 billion in 2021. By 2024, the Asia-Pacific region, with Singapore as a notable contributor, is expected to generate over US$4 trillion in e-commerce sales, making up 65.9% of the global market.

2.    Sustainability: The global focus on sustainability is driving the development of a greener logistics industry. In light of this trend, the Singapore Logistics Association has launched a five-year Vision 2027 plan to boost sustainable practices and the use of advanced technologies within the industry. The “Green Supply Chain” is a key initiative under this plan that will encourage at least 500 logistics firms to appoint a “sustainability officer” to drive green practices.

Singapore is also planning to introduce alternative-fuel standards by 2025 as part of over 25 sustainability-related standards and accreditation programmes aimed at benefiting more than 1,000 companies. In the aviation sector, Singapore recently signalled that it is ready to switch sustainable aviation fuel, following the completion of a 20-month pilot.

The Food and Beverage (F&B) sector in Singapore is witnessing a shift towards hyper-local sourcing, the accelerated adoption of technology, and the growth of plant-based offerings as we head into 2024:

1.    Healthier choices: The industry has been trending towards offering healthier food choices, in line with government efforts to reduce the sodium intake of Singaporeans. According surveys by the Ministry of Health and Health Promotion Board, some
9 in 10 people in Singapore are consuming more salt than what is recommended. 

2.    Hyper-local sourcing: The trend of hyper-local sourcing is growing as consumers become more aware of supporting local businesses and reducing carbon emissions. For instance, integrated resort Marina Bay Sands sources from local producers and farmers. For instance, locally-grown produce such as kale and micro cress are used in its culinary operations,  while responsibly-farmed local barramundi is also served at the integrated resort. 

3.    Technology adoption accelerates: Faced with persistent labour crunch and rising costs, F&B operators will accelerate their adoption of technology to maximise efficiency. These will include solutions such as smart waste management systems, service robots and even autonomous cooking systems.

The government has rolled out the Food Services Industry Transformation Map 2025 to provide support to F&B operators in areas such as technology adoption and internationalisation, with the goal of growing homegrown regional brands.

4.    Plant-based F&B growth: The market for plant-based food and beverages is anticipated to grow at a CAGR of 6.97% from 2022 to 2027, thanks to high consumer awareness about the health benefits associated with these meat-free offerings.