Despite Singapore experiencing relatively encouraging domestic recovery, buffered by government efforts to flatten the curve, SMEs are anticipating a longer path to recovery compared to their global peers. Although HSBC’s latest Navigator survey revealed that two-thirds of SMEs are adapting to the new environment, Singapore's open and trade-dependent economy means they're more pessimistic about 2021 than businesses globally. That said, they are proving more agile in adapting to change.
To continue operations in this new normal, businesses have had to adapt by going digital and pushing to fortify supply chains. However, Singapore SMEs are still cautious of what is to come, citing a resurgence of COVID-19 as the biggest threat to their growth or recovery, followed by a decrease in demand, conservative spending and supply-chain disruption.
To overcome these challenges, businesses are looking to cut costs and improve cashflow management, build digital into their supply chains for future resilience, and are becoming more entrepreneurial through improved financial management, innovation and customer acquisition.
Navigator revealed that Singapore’s firms are continuing to invest in Asian expansion despite over two-thirds expecting cross-border trade to become more difficult than it was prior to the pandemic. Businesses are also doubling down on intra-regional trade; year-on-year trade with mainland China, the leading trade partner, has increased and there has also been strong growth in trade with ASEAN members. The push to ratify trade agreements, such as the recently signed Regional Comprehensive Economic Partnership, the world’s largest free trade agreement, will work to streamline the various overlapping preferential trading arrangements and create a more coherent trading zone that hands Singapore firms a step-up to greater market access, making it easier to drive new business.
But for SMEs to effectively enter into new markets, they will need to ensure they are armed with a robust online commerce framework, and are able to identify any hidden dependencies and plan for interruptions in their supply chain sooner, rather than later.
It’s encouraging to see that despite the global lockdown, border closures and increasing protectionist environment, growth is prioritised, nearly all businesses in Singapore express greater concerns about their supply chain, mainly with regards to time spent on management, instability, and possible tariffs, compared to their global counterparts.
Firms cite that proven customer demand, access to new suppliers and partners, and building business ahead of competitors are the main attractions of new markets, with the vast majority of businesses intent on reshaping, rather than restricting their supply chains in 2021 – investing at a greater pace than their global counterparts. There is continued focus on digital adoption and selection of suppliers based on operational resilience and ability to deliver quickly.
Technology has been the true driver of business survival this year; it has enabled continuity, defined winners from losers, and will shape the future of resilient businesses.
Over 90% of HSBC’s corporate clients in Singapore are now using digital channels to conduct payments online, manage accounts, liquidity and forecasting, utilise trade finance and services, obtain corporate cards, make FX transactions, and track transactions and documents in real-time.
Despite the overall pessimism, over half of Singaporean businesses plan to increase their investment in their business in the next year and more than eight in ten companies plan to maintain or increase their investment, focusing on innovation, efficiency and targeting new customers. With an increased focus on ‘going digital’, businesses stand to reap the following benefits:
SMEs that can identify businesses pain points such as in their supply chains and the integration of technology will be able to meaningfully lean into and adapt their operations to strengthen resilience and be poised for growth.
A contribution piece by Li Lian Ng, Head of Business Banking HSBC Singapore, which was first published in SG.SME on 22 December 2020.