An employee working in SME
State of Singapore’s SMEs
There are many huge countries with vast lands and abundance of natural resources that maintains a powerful economy, such as China and United States. Singapore, on the other hand, is known for being a small country with limited arable land but surprisingly has one of the world’s strongest economy.
Singapore’s economy has an unemployment rate of 2.1% and per capita GDP of nearly S$53,000. This rising and powerful economy is powered by small and medium sized enterprises (SMEs), which make up 99% of all enterprises and an employment rate of 65% of all workers in Singapore.
Small and medium sized enterprises (SMEs), therefore is a crucial segment as they are a huge contribution and play an imperative role in Singapore’s powerful economy.
Profile of Singapore’s SMEs
Statistics are effective and can be analyzed to assess the health of businesses in Singapore. Looking at the Singapore Department of Statistics, reviews are done to see how SMEs affect and contribute to Singapore’s Economy.
Chart 1
From the chart above, it can be seen that SMEs caused a rise in nominal gross value added to Singapore’s economy. An estimate of 219,000 SMEs contribute S$196.8 billion in gross value added to the economy.
It also shows that SMEs have generated half of the nation’s growth in gross value added from 2013 to 2017. On average, each small and medium sized enterprise in Singapore employs 10 workers and contribute S$900,000 in gross value added to the economy.
Threats to SMEs
As SMEs paved through success serving as major players in Singapore’s economy, SMEs have to also break through challenges and difficulties in recent years.
Statistics from Singapore Department of Statistics have shown that the average value added per SME has decreased 1% since 2013 and the average size of SMEs has decreased by 12%. This indicates a struggle from SMEs in previous years.
Power of Large Corporations
Aside from SMEs, large corporations also play an important role in Singapore’s economy. These huge and dominant companies only make up 1% of all enterprises and an employment rate of 35% of all workers in Singapore.
The other half of the economy’s gross value added comes from large corporations and this competition makes it difficult for smaller companies to survive. Large corporations are able to grow at an exponential rate due to the access to vast resources. This also leads to more and larger contributions to the economy.
Large corporations’ value added per company has grown by 8% since 2013. SMEs, on the other hand, grows at a much slower rate and contribute less and smaller amounts to the economy.
Rising Costs
Chart 2
In any stable and growing economy, prices and costs are expected to rise. Every business owner dreads about rising costs. In 2017, 42% of Singapore’s SMEs reflected that increased costs had significantly harmed their business.
An increase in the cost of labor is a common example of rising costs. Wages are known to grow faster than inflation, causing businesses to face increased costs. As the average value added per SME has already decreased, an increase in costs will just make it more challenging to maintain or increase profit margin.
Limited Access to Finance
Chart 3
According to a recent study, about 4 of 5 Singapore SMEs do not qualify for business financing. This shows that it is highly difficult for SMEs to obtain financing from investors.
The chart proves that 18% of SMEs find it “easy” to obtain financing in 2017, down from 30.9% in 2014. Also, 12.4% of SMEs expect it to be “easy” to obtain financing in 2017, down from 24.4% in 2014.
Financing is important for a business’s growth. Lack of financing can even prohibit and shut down a business.
The Future for SMEs
Despite the challenges faced, SMEs still continue to effectively contribute to Singapore’s economy and make up 99% of all enterprises. This huge involvement and contribution of SMEs to Singapore’s economy makes SMEs crucial.
Thus, the government will always try to aid SMEs as they are imperative in Singapore’s economical growth. Recently, the newly implemented 2018 budget scheme aims to increase support in financial aiding for SMEs through corporate tax rebate, deductions and schemes.
This gives a reason for SMEs to be confident and have a positive outlook. The Singapore Business Federation expects SMEs to continue growing and expanding, contributing more to the economy.