SMEs must press on with global plans: ESG

Singapore

DESPITE a global growth slowdown and disruption from trade tensions, Kathy Lai, the deputy chief executive of government agency Enterprise Singapore (ESG), is still urging companies to expand overseas.

Asean and the two Asian economic giants of China and India are still compelling markets, she told The Business Times. "We have not seen any market where we say, 'Chope, please gostan a bit!'," said Ms Lai, using the popular vernacular for "hold on" and "reverse".

Indeed, even with external headwinds, ESG has not held back on new initiatives to get Singapore businesses into new markets. Its Scale-up SG scheme - to incubate Singapore companies that could become regional or global industry leaders - launched in July with 25 participants.

Up to 90 more such businesses may join Scale-up SG in the next two years, according to a parliamentary reply from Minister for Trade and Industry Chan Chun Sing on Monday.

Ms Lai told BT that businesses now face three major obstacles: a slowdown in demand, more intense competition, and the need to watch costs.

Given the host of challenges to growth, "we've got to roll with the blows, I suppose" - an attitude that extends to the domestic front, where she noted that workers must be ready for the automation of manual tasks.

"Some jobs are just suffering temporarily in a cyclical downturn - those, we need to sustain, so if there's anything we can do to keep those jobs to tide them over, we will do." But for jobs that are becoming redundant, ESG will encourage people to retrain themselves.

She also warned that, while "there are a lot of trade barriers, a lot of trade wars", Singapore businesses have no choice on whether to venture abroad, amid the competition from local peers and foreign rivals alike.

As barriers to market entry lower, on better technology and connectivity, "internationalisation is no longer something that you can sleep on", said Ms Lai. "Companies should get in the game faster, because they should always assume you have to fail several times before you succeed."

She reiterated ESG's strategy on expansion into China, India and South-east Asia, where "it's only logical that, if you're a company sitting in Singapore, that we shouldn't look so much farther afield than... the immediate region and the two fastest-growing economies in Asia".

The International Monetary Fund (IMF) projected in July that China's year-on-year growth would cool from 6.6 per cent last year to 6 per cent in 2020, and also trimmed its forecasts for growth in India and the Asean-5 economies of Indonesia, Malaysia, the Philippines, Thailand and Vietnam. But Ms Lai characterised a slowdown as "a general tide going down, rather than certain markets going south".

"You cannot say uniformly that they are all slowing down - there are still pockets of good opportunities," she said, calling instead for a targeted approach by region and industry.

Dubbing the Chinese coastal cities "very, very saturated", she said that - given China's size - ESG encourages companies to diversify their footprint in that country: "There are still pockets of unmet demand... a lot of pent-up demand still in western China. Those are second-tier cities, maybe, but also rising up very fast."

For instance, small and medium-sized enterprises (SMEs) in lifestyle are gunning for Sichuan province, while Minister in the Prime Minister's Office Indranee Rajah named Jiangsu province a market for professional services firms last month.

Meanwhile, healthcare, urban solutions and rural solutions are pegged as growth sectors for startups and small businesses headed for India.

At the same time, ESG has built a footprint in other emerging markets: regional giants such as Mexico and Brazil in Latin America; and South Africa, Nigeria and Kenya in Africa; as well as peers such as Chile, Colombia and Ghana and the Ivory Coast; and Central Asian nations such as Kazakhstan.

Market diversity can be a boon during ongoing geopolitical and trade uncertainties, Ms Lai observed: "It's safe to say that not just Singapore companies, but all companies, are looking at how they can mitigate the risk of being caught in all these trade wars - by ensuring that they have Plan B, that they have alternative routes."

She added that ESG has been asking companies if they have any contingency plans - such as alternative supply routes - and helping them develop such measures if they don't.

With some emerging markets previously reliant on the United States and China - which have fallen out on trade - Ms Lai stressed that Singapore can step into the role of a bridge between these markets and Asean.

"Also, partnership is usually best when it's two-way... They can be our partners, if we want to bring our service offerings and our products to their markets. So I think there is a lot of space for us to explore that."

Free trade agreements (FTAs) also offer shelter as trade barriers and new tariffs dim the allure of some markets, Ms Lai noted. With two dozen bilateral and regional FTAs under Singapore's belt and another five under negotiation, ESG is holding a symposium on trade deals on Oct 23.

"FTAs will be very relevant because... (of) how multinational supply chains need to be rejigged, in light of certain barriers that countries have enacted," she said, citing how trade networks could help companies to find the next-best place to do business. "FTAs are going to be something that we'll take out of our toolkit."

Some SMEs have managed to scoop up new customers, such as US buyers turning to markets beyond China, BT reported in August. Others are shifting supply chains out of China and beefing up sales in Asean.

But even though companies may have found a silver lining or have put mitigation measures in place, US-China tensions still threaten business, Ms Lai stressed: "It's something that is a risk, more than an opportunity, that supply chains are disrupted."

She added, good-humouredly: "In the big picture, it's bad news. Nobody should think that they can have an enduring benefit out of a trade war."