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MEDIA CONFERENCE 6 October 2008 SME DEVELOPMENT SURVEY 2008 - Conducted by DP Information Group

MEDIA CONFERENCE 6 October 2008 SME DEVELOPMENT SURVEY 2008 - Conducted by DP Information Group Enhancing Business Competitiveness Among Singapore’s SMEs. SME Development Survey 2008 - Survey Objectives. Understand & highlight following issues relating to SMEs:

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MEDIA CONFERENCE 6 October 2008 SME DEVELOPMENT SURVEY 2008 - Conducted by DP Information Group

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  1. MEDIA CONFERENCE 6 October 2008 SME DEVELOPMENT SURVEY 2008 - Conducted by DP Information Group Enhancing Business Competitiveness Among Singapore’s SMEs

  2. SME Development Survey 2008 - Survey Objectives Understand & highlight following issues relating to SMEs: • Business strategies & challenges faced locally & overseas • Extent of internationalization & contribution to Singapore economy • New financing requirements in next 1 year • Rate & benefits of technology adoption & innovation • IT spending in next 1-2 years • Staff development & succession planning

  3. SME Development Survey 2008 - Characteristics of Respondents 5% increase in participation from SME Community • 1,656 companies responded to this year’s survey (last year: 1,206 respondents) • 23% repeat respondents from last year’s survey

  4. SME Development Survey 2008 - Characteristics of Respondents Respondents by Paid-Up Capital 7% increase in participation from SMEs with smaller capital • 7% increase in smaller SMEs with paid-up capital of no more than S$0.5m • Percentage of SMEs with >S$1m in paid-up capital reduced from 39% to 33%

  5. SME Development Survey 2008 - Characteristics of Respondents • More experienced SMEs responding to survey: - 76% in business for >10 yrs (4% increase) - Continued decline in Start-up participation from 6% to 2% • No. of companies experiencing accelerating turnover growth increasing but at slower pace • Mature & Decline companies on the rise • Stages of Development • Start-up: First 3 years of operation • Accelerating Growth: turnover growth of > 10% p.a. • Moderate Growth: turnover growth of up to 10% p.a. • Mature: Zero turnover growth • Decline: Negative turnover growth

  6. SME Development Survey 2008 - Characteristics of Respondents SMEs registered stronger profitability • Further drop in no. of loss-making companies from 21% to 13% • Almost a quarter (24%) generated profit >S$1m • Upward trend in respondents generating >S$0.1m in after-tax profit

  7. SME Development Survey 2008 - Business Strategies SMEs looking more to expansionary plans to grow sales in locally & overseas • Improve Cost Efficiency / Productivity remain top strategy but accorded less emphasis • Increasing emphasis on expansion: - New overseas market • - New products/ services • - Expand local distribution • channels • Growing importance : - Improve Customer Service (key strategy for those in Retail) - Branding

  8. SME Development Survey 2008 - Challenges to Growth Increasing operating costs foremost in minds of SMEs • Increasing operating costs (58%) overtook Increasing competition (49%) as top obstacle • Manpower remains one of top 3 concerns; more so for SMEs in Start-up (42%) & Accelerating Growth (50%) stages • Concerns regarding Cash flow & New Financing have fallen; Cash flow more of a concern for those in Start-up (37%) & Decline (28%) stages • Downward trend continue for Difficulty in accessing biz opportunities & Market size constraint

  9. SME Development Survey 2008 - Challenges to Growth • Increasing Labour cost key cost component affecting SMEs’ profitability in next 1-2 yrs Most affected are those in Information & Communications (73%), Construction (68%) & Services (63%) • Increasing Cost of sales ie. raw materials will continue to have major impact on SMEs’ profitability; SMEs in Construction (82%), Manufacturing (81%) & Wholesale (59%) greatly affected • Rental costs remain a challenge for most SMEs • More SMEs reducing their expenditures on optional cost factors Advertising & Promotion less regarded as key cost component

  10. SME Development Survey 2008 - Overseas Expansion Export growth to Asian region reached an unprecedented level – All Top 10 overseas countries from Asia • Upward trend in SMEs serving China & India markets • China overtook Indonesia & catching up with Malaysia as most favoured destination • Japan & Korea did not get into the top 10 last yr, but overtook Australia & USA to emerge among the top 10 this yr • At least three-fifths of SMEs that ventured to Middle East are serving Saudi Arabia & UAE • Cambodia, Myanmar & Taiwan increasing in popularity

  11. SME Development Survey 2008 - Financing/ Funding • Local Enterprise Finance Scheme (LEFS) remains the most popular scheme but SMEs accessing down 10% • More SMEs accessing : - Microloan (up 3%) - Loan Insurance Scheme (up 1%) - Internationalisation Finance Scheme (up 2%) • Start-up Enterprise Development Scheme (SEEDs) assisted 5% of respondents in Start-up stage • Low take-up rate (1%) for Internationalisation Finance Scheme (IFS) among those in Accelerating Growth stage

  12. SME Development Survey 2008 - Financing/ Funding Majority of SMEs are sufficiently funded • 70% do not see the need to seek new financing in the next 1 yr • Among those who seek new financing, majority (60%) looking at >S$0.5m in new financing

  13. SME Development Survey 2008 - Information Technology & Innovation Majority reported an improvement in actual turnover or profit through technology innovation. • 2 most prominent benefits reaped from technology innovation: - Increased Productivity - Improved Cost Efficiency • Good opportunity to share with SME community especially since Improving Cost Efficiency will be adopted by 26% as top business strategy in the next 1 year

  14. SME Development Survey 2008 - Information Technology & Innovation More than half of respondents plan to adopt technology innovation in the next 1-2 yrs • Among those who have already adopted technology innovation, a high majority (88%) plan to further embrace technology innovation in the next 1-2 yrs • Half of those who have not adopted technology innovation are considering making their first attempt in the next 1-2 yrs

  15. SME Development Survey 2008 - Information Technology & Innovation SMEs have very little budget for technology innovation • 51% who intend to adopt technology innovation in next 1-2 yrs do not wish to incur any costs on such adoption • Only 12% willing to spend beyond S$100,000 on technology innovation

  16. SME Development Survey 2008 - Training & Management Development SMEs are willing to invest in training • 79% find it useful to send their staff for training • Majority looking for training to upgrade Technical / Job Related Skills • With more SMEs identifying Improve Customer Service as their key business strategy in next 1-2 yrs, Customer Service is the 2nd most cited area where training is needed Note: Technical / Job Related Skills and Customer Service were not provided as options on last year’s survey

  17. SME Development Survey 2008 - Training & Management Development Though SMEs are supportive of staff training, close to half (46%) set aside <1% of staff budget for training • Available training options may be limited for those who budget <S$100 per employee for training • Only 55% set aside training budget of >S$300 per employee • Respondents from Manufacturing have set a lower budget for staff training compared to other business sectors • 34% not willing to spend >S$100 per staff

  18. SME Development Survey 2008 - DP Credit Ratings SMEs have demonstrated an improved credit risk profile • Increase in Investment Grade (DP1 – DP4) companies (Up 3%) • Increase in High Yield (DP5 – DP6) companies (Up 3%) • Drop in High Risk (DP7 – DP8) companies (Down 6%) Distribution of Respondents by DP Credit Rating

  19. Recommendations

  20. SME Development Survey 2008 - Recommendations • Strategizing for International Growth • Encouraging SMEs to collaborate and pool together their resources in bidding for overseas projects. • SMEs to Collaborate in Overseas Ventures • Assisting SMEs who are keen on internationalising to develop and implement a sustainable overseas growth strategy. • SMEs to Change Mindset on Technology as Investment & to Embrace Technology to Improve Cost Efficiency • Encouraging SMEs to have a mindset change on technology (cost vs investment) & to embrace technology through greater use of managed or hosted services to improve cost efficiency. • Banks to Review Evaluation of Innovative & Deserving SMEs • Reviewing existing lending criteria for innovative SMEs using DP Credit Rating. • Groom present & future leaders among SMEs • Facilitating SMEs’ bosses and key managers in training and capabilities development through greater funding support, customised curriculum and at flexible timing.

  21. Thank You

  22. SME DEVELOPMENT SURVEY CONFERENCE 2008 Wednesday, 15 October 2008 8.45am – 1pm NTUC Auditorium NTUC Centre, One Marina Boulevard Special presentations 1. Mr Sareth Menon, US State Representative from Pennsylvania – “An Insight into American SMEs” 2. Mr Terence Swee, Founder and CEO of muvee technologies - “moving muvee” – home-grown technology company Supported by SPRING Singapore, IE Singapore & EDC@SICCI Sponsored by HSBC

  23. Q&A

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