Sunday, May 20, 2018

Understand and address the problems faced by SMEs

The minister for trade and industry Chan Chun Sing announced recently that government wants to help small and medium enterprises (SME).

As he is new to the ministry and to the government, he may not be aware that the government has been making a similar announcement for the past three decades or longer.

In spite of the past announcements and big policy initiatives, the SMEs continued to be struggling. The government had made little progress in helping the SMEs to be more productive and competitive.

There were a few successes, such as the franchised food outlets and food manufacturing and the e-commerce businesses. But the failures overwhelm the successes.

What are the problems faced by SMEs? Let me list them:

a) High rental
b) High cost of labor
c) Tight margin due to competition
d) Problem with cash flow, financing and finance charges
e) Heavy cost of complying with government regulations.

What can be done to help the SMEs?

We need a change in the way of doing business.

Government departments, agencies and their linked companies should work out long term contracts with local SMEs based market adjusted prices, to replace the open tender system, where possible.

This allows the local SMEs to build a business with greater certainty.

The principal should also make prompt payment to their supplier and subcontractor to help them with the cash flow and reduce their finance costs.

If the public sector helps the SMEs, it is likely that the private sector will follow.

Some of the government regulations should be changed. SMEs have a problem in employing local and foreign workers. They find it difficult to comply with the employment quotas that are more suitable for the larger companies. Separate quotas should be given to small companies.

The government needs to understand the challenges faced by SMEs. They can then craft out suitable policies that can address these problems and help the SMEs to be viable and grow.

Share your views.

Tan Kin Lian

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