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Future Economy and Companies in Singapore

Faizal bin Yahya
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Faizal bin Yahya: Senior Research Fellow Institute of Policy Studies, Lee Kuan Yew School of Public Policy National University of Singapore

Abstract of Economic, Finance and Management Outlook, 2016, vol. 6, 2

Abstract: As a maturing economy, one of the key challenges for Singapore would be to examine the “future of companies” that will be affected by the rise of new and “disruptive” business models and increasing competition from abroad. Since the start of the latest phase of economic restructuring in 2010, the government has looked towards enhancing the productivity and innovation of small and medium enterprises (SMEs) which contributed more than 50% of Singapore’s economic output. DP Information Group undertakes regular survey among SMEs in Singapore. The DP Information survey showed that SMEs have embraced the need to restructure with just over half saying their main strategy going forward is to rethink their business model. An increasing number of businesses surveyed are also seeking to improve productivity through technology and innovation. Given the limited size of Singapore’s domestic market, more SMEs are planning to venture overseas as part of their expansion strategy. In late 2014, DP Information Group reported that among 2836 SMEs it surveyed, 51 percent are relooking their business model and 20 percent are planning to expand overseas. While the government-linked companies (GLCs) and larger Singaporean companies have ventured into the regional markets, SMEs have found it difficult to expand overseas. Critics have argued for more emphasis on helping companies improve their top-line growth so as to improve their productivity. Therefore, instead of taking the “carrot-and-stick approach of starving companies of foreign workers and subsidizing the costs of investment in technology, the focus in future should be on assisting local companies to improve their revenues. In this context, it is important to help companies to internationalize and expand into the Southeast Asian region. Arguably, the existing ASEAN Free Trade Agreement and the ASEAN Economic Community (AEC) could provide the platform for SMEs to expand regionally. The aim of this paper will be to examine policy options to incentivize SMEs to expand regionally. Through the use of secondary data and focus group discussions, challenges to internationalization will be discussed and possible policy solutions will be provided.

Date: 2016
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