Transforming for growth against global headwinds

ROUNDTABLE PANELLISTS

• Low Yen Ling, Minister of State for Trade and Industry as well as Culture, Community and Youth

• Koren Wines, managing director, Xero Asia

• Vicky Hwang, chief executive officer, Chyau Fwu Wine & Spirits

• Moderator: Anita Gabriel, senior correspondent, The Business Times

These are edited excerpts of the transcript.

Anita Gabriel: What are some of the biggest stressors impacting small and medium-sized enterprises (SMEs)?

Koren Wines: There are macroeconomic pressures and stressors – rising costs, inflation, workforce shortages. But if I look at what I hear from SMEs, it’s about cash flow, cash flow, cash flow.

We’ve done some research: 83 per cent of SMEs told us they experienced cash flow issues in the last 12 months. It means that they can’t grow, they can’t employ people, they can’t scale.

Tactics such as putting prices up might seem like a good idea, but it can push you into another price bracket, which limits your market.

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Vicky Hwang: The three biggest things are the rising cost of doing business; consumers being more conservative with discretionary spending; and labour. In the hospitality industry, coming out of Covid, it’s just been more and more acute. We simply don’t have the labour to fulfil the needs of our business.

Since we started Atlas (Bar), we’ve always been a six-day operation. In the last year and a half, we’ve had to close a day because we just didn’t have enough team members.

Gabriel: What is the government doing to tackle SMEs’ woes? Low Yen Ling: We are keenly aware that the volatile global situation may lead to complications and supply chain challenges and uncertainties in terms of demand, leading to cash flow situations for some SMEs. That’s why (Budget 2024 had) the S$1.3 billion Enterprise Support Package. One part is the corporate income tax rebate. For micro enterprises that don’t pay any tax, so long as they have at least one local employee, companies will be able to receive at least a S$2,000 cash grant.

This is one tool that we want to make sure is broad-based. As many of our 260,000 SMEs as possible must at least benefit from this.

In order to transform, training is important. We want to make sure that the SMEs don’t have to come up with the upfront capital outlay. And that is why the SkillsFuture Enterprise Credit was extended.

We have the Enterprise Financing Scheme. In this Budget, for the SME working capital loan, we increased the maximum loan quantum permanently.

How do we encourage digitalisation to redesign jobs such that we can do more with less manpower?

Restaurant Dian Xiao Er applied for the Enterprise Development Grant to transform their central kitchen. It reduces the reliance on foreign manpower, reduces preparation time and saves S$60,000 in operating expenses every month.

Not to say that we can deploy robots to fetch the wine at Atlas! But at the back of the house or middle office, digital tools can transform processes to make certain jobs more productive.

Hwang: The Progressive Wage Credit Scheme enhancement is a huge thing for us because it puts money back into our accounts, which helps with our cash flow.

Low: We want to make sure that even as the Progressive Wage Model has been implemented, it does not cause our SMEs to be uncompetitive. That is why since 2022, the government has been co-funding and co-sharing the wage increase.

Hwang: Coming out of Covid, we increased our salaries by 15 per cent just to remain competitive. The government support was huge for us, because the cost obviously was very significant. Gabriel: Are there areas that businesses should figure out on their own?

Low: Yes and no. We believe in walking the journey with our SMEs. We need to support them to start locally, but look global.

But why I say “yes” is that in the last few years, we have seen SMEs rising up to challenges, especially during Covid.

In the past, when you persuade SMEs to go digital, there was a bit of hesitance. But today, 95 per cent of our SMEs have adopted digital tools or technology.

(But) in today’s artificial intelligence (AI)-enabled world and future, only 4 per cent of SMEs have leveraged AI or machine learning.

We have to support our SMEs to learn more about how to leverage AI, and address their fears and concerns, lower the barriers to entry, (and) certainly lower their cost.

Some of them will ask: “Are you sure this can be applied to my sector?” And the answer is “yes”.

You can, for example, leverage generative AI to help you with marketing and sales solutions as well as customer engagement solutions. Think of AI as your additional army of staff to do certain basic work.

Gabriel: Digitalisation involves costs, but in the long term, the fruits are sweet. How can SMEs balance both?

Wines: Digitalisation and automation are becoming table stakes. Businesses are starting to realise that if they want to be successful and survive in such a competitive market, they need to harness digitalisation, automation and AI.

People are going to continue to get more and more expensive. So they need to be throwing tasks that computers can do at computers, and then putting their people on revenue-generating activities.

When you start on that journey, it doesn’t have to be costly. You can make small incremental changes and explore. Those costs don’t have to be massive, but they do have a significant return on investment.

Usually these kinds of things are driven out of the private sector, and then the government’s running behind to catch up. Not in Singapore.

In Singapore, the government is listening and looking for ways to carve things out in terms of digitalisation, and bring the market and SMEs on that journey.

Hwang: A lot of SMEs hesitate to adopt (AI) because they just don’t know where to begin. As it becomes more mainstream and more SMEs can see examples of what’s happened, I think you’ll get more adoption.

I do think that SMEs are in a really good position to adopt this kind of technology because you’re more nimble. You can gain a first-mover advantage over your larger competitors just by adopting first.

Low: Another programme is the Productivity Solutions Grant. There’s a list of pre-scoped solutions that are validated by the market. There are proof points: how the solutions have helped companies raise productivity to adopt AI.

We have 20 Industry Digital Plans. We have worked with relevant industry associations to map out end-to-end where solutions can be applied. So it’s almost like a buffet spread.

Gabriel: Are enough businesses tapping – or aware of – what’s out there? Low: We can always do better. Last year, our 11 SME Centres served more than 30,000 SMEs. That is more than one in 10 (SMEs).

What happens with the other nine? Maybe they are getting access to programmes via private-sector players; maybe they are being account-managed by my colleagues in Enterprise Singapore.

But that’s why we are here with BT, doing the Budget roundtable – to raise awareness of the various programmes.

If you don’t have time to go to the SME Centres, just go to our GoBusiness portal. In one stroke, you can apply for any of the grants and various licences.

Gabriel: What trends will impact SMEs in the coming years?

Low: There are three important trends for which we need to future-proof our SMEs. We’ve talked about digitalisation and AI.

The third one is very important – sustainability. No matter what sector you are in, no matter what your size, that is going to be a very, very important topic for the foreseeable future. 

We will roll out a grant to support all our SMEs to develop their first sustainability report. We hope that in the shortest possible time, we get as many of our 260,000 SMEs as possible to at least publish their first sustainability report.

And then from there, hopefully a portion of them will say, “I want to go further, I want to incorporate sustainability in my processes”.

Wines: I think there’s a reluctance, partly because SMEs run so lean. Cash flow is a challenge. Anything else is a nice-to-have and that unfortunately includes sustainability.

Key to all of that is the trends that we’re seeing – digitalisation, automation, AI – are not going away and they can be harnessed.

If you can harness them, you can throw your people at other things such as sustainability.

Gabriel: That is precisely why the government is helping businesses embrace this technology. I guess you’re there with them for the long haul? Low: As we share this “buffet spread” of Budget announcements, we’re also not expecting each of the 260,000 SMEs to apply for everything.

But there must be something for everyone – at least one or two things.

Depending on your stage of development and where you want to turbocharge your growth, you can apply for the Productivity Solutions Grant, et cetera.

If 95 per cent of our SMEs have adopted digital tools, that means 95 per cent have already started transforming. We just need to keep up the momentum.

Gabriel: What should SMEs look out for in the next year?

Wines: We all wish that costs will go down. But they won’t and they’re not going to.

It’s very easy to rest on your laurels and go, “There’s cash in the bank, we must be doing well. I don’t need to digitalise, I don’t need to continue to evolve.” You have to evolve or you die. Digitalise, so that when the environment changes, you’re not caught off guard.

Costs are never going to go backwards. Humans are going to continue to get more and more expensive. So continue to make deliberate decisions and protect yourself. Be strategic. 

Hwang: Our costs go up, but we can’t pass them on completely to our customers.

So it’s important to hold true to your brand, and really shore up your existing customer base and create loyalty.

Look at taking initiatives that are not for short-term gains, but to ensure the longevity of your business and your customers.

Low: On Mar 1, I announced the Alliance for Action on business competitiveness, a partnership between the private sector and the public sector.

It will co-curate solutions looking at three pillars: manpower, land and regulatory agility.

We want to continue to be attractive for multinational corporations, as that will create opportunities for SMEs.

Aerospace company Pratt & Whitney has been working with more than 20 SMEs, supporting them, upgrading them, co-innovating – levelling them up to meet international standards. 

Don’t be frightened by the word “transformation”. Continue to take steps – it can be baby steps – in the direction of digitalisation, innovation, sustainability, AI.

(This is) to address your pain points, your bottlenecks, to help redesign the job so that you are better placed to attract locals, so that you can do more with less, and you can grow your top and bottom line.

The Singapore government will (go on this) journey with you.