23 January 2015
High business costs a top concern for SMEs: Survey
Goh Chiew Tong

SMEs cite manpower as top factor contributing to high business costs, as many look to Budget 2015 for reduced rental costs and initiatives to look for local talent, according to ASME survey.

SINGAPORE: High business costs amid the manpower crunch is the top concern for small and medium enterprises (SMEs), according to findings from the Business Sentiments Survey 2014 conducted by the Association of Small and Medium Enterprises (ASME).

In a media release on Friday (Jan 23), ASME revealed that 86.6 per cent of respondents said manpower was the top contributing factor for higher business costs, while 57.1 per cent cited rental costs and 48.2 per cent cited the foreign worker levy.

In addition, 84.6 per cent of respondents also predicted that their operational costs will increase in the next six months.

Both "initiatives to reduce rental costs" and "initiatives to look for local staff and talent" are important in terms of expectations for Budget 2015 for 58.3 per cent of the respondents, according to the survey findings. And 57.4 per cent of respondents would also like to see more “initiatives to increase productivity”.

In its Budget recommendations to the Government, ASME said there should be a structured framework or curriculum that allows SMEs to work with higher education learning institutes in providing certification for students who have been employed by these companies for a
certain duration.

"ASME would like schools and institutions to recognise these certificates, distributing credits to students should they choose to further their studies," it said. Students from universities, polytechnics and ITEs should also be encouraged to join the workforce for work experience and to advance their career path, ASME added. 

The survey also showed that 79.6 per cent of respondents utilised the Enhanced Productivity & Innovative Credit (PIC) scheme - making it the most utilised Government scheme. The second most popular Government scheme was the “ICT for Productivity & Growth” (IPG), utilised by 13.9 per cent of respondents.

Meanwhile, 55.3 per cent said the requirement to pay upfront and be reimbursed later was the top deterrent of tapping on Government schemes. "As PIC requires SMEs to pay first and then be reimbursed later, this will significantly affect their cashflow and deter them from investing in productivity enhancements," said ASME.

Recommendations included a three-year extension with a S$6,000 cash bonus to maintain support for productivity upgrades, and fine-tuning the PIC scheme to move beyond "hardware purchase" to "soft skills, soft processes and software development". 

Meanwhile, 68.2 per cent of respondents are also looking to expand overseas in the next two years. ASME recommended efforts to connect SMEs to overseas business opportunities, including financial assistance for market assessment and penetration.