Businesses in Singapore are recognising the need for a greater focus on value creation and innovation to develop Singapore brands. This is according to the results of KPMG’s pre-Budget 2016 poll released last month.
Over half of poll respondents viewed investing in innovation and productivity improvements as one of the top three strategies to grow their businesses. However, businesses state that it is time for the Government to revisit existing schemes to heighten productivity.
The poll also reveals that global economic uncertainty, rising cost pressures and measures to curb foreign labour inflows have also led to businesses in Singapore starting 2016 with a pessimistic outlook.
These were the main concerns of businesses echoed in the poll of 106 companies, ranging from small and medium enterprises (SMEs) to foreign multinational companies (MNCs). Similar worries were shared by business leaders in focus group sessions held separately.
Businesses also suggest that Government policies should be calibrated to better address the unique needs of businesses at different stages of growth. While 60 percent of SME respondents stated that the Government’s focus on improving productivity has benefitted their businesses, almost half of all respondents were in favour of more flexibility and greater incentives to spur value creating activities like internationalisation, brand building and innovation.
Mr Tay Hong Beng, Head of Tax at KPMG in Singapore, says: “As Singapore progresses up the economic ladder, we need to shift from simply adding value to creating value in order to develop a strong core of Singaporean businesses to compete globally at the higher end of the value chain. There needs to be a Singapore-centric talent pool, not only just having technical skills but also having the ability to innovate, lead and manage in the face of a weaker economy.”
Other key findings of the poll report are:
- 50 percent were not optimistic about their business prospects in 2016, compared with 20 percent that had an optimistic view.
- 87 percent ranked innovation and value creation within the top three areas of importance over the next 5 years.
- 51 percent said that the current Productivity and Innovation Credit (PIC) scheme is not sufficiently effective and should be more calibrated to different developmental stages in a business’ lifecycle.
- 81 percent stated that there was insufficient recognition and support for value creation activities. 85 percent of local SME respondents agreed with this.
The findings suggest that although businesses recognise a need for greater focus on value creation and innovation to develop Singapore brands, the current incentive structure still favours firms adding value rather than creating value.
Developing a strong core of local enterprises
Singapore has had a successful history in attracting large MNCs to its shores, which has been an important pillar of growth. However, this growth model needs to evolve – Singapore can no longer remain competitive due to rising labour costs and the current volatile economic climate.
Businesses polled said the Government should make it a priority to provide more support for Singaporean-owned businesses. Having more schemes to promote Singaporean-owned businesses to strengthen the economy received the highest vote with 34 percent, ahead of innovation and value creation at 30 percent.
Mr Tay added, “The economy now needs a strong core of Singaporean businesses which are anchored in the country while expanding into overseas markets to capture growth. More efforts should be made to promote the perception of ‘Made in Singapore’ products and services as being high-tech, high-quality and high-value. This should be done both locally and overseas.”
From adding to creating value
Focus group participants emphasised the need for Singapore to find new growth areas in order to sustain vibrancy in the economy. Areas where Singapore has the potential to be world leaders include the Finance Technology (FinTech), renewal energy as well as healthcare and silver industries (solutions for ageing). Spurring these new industries would be an underlying push for value creating activities.
Echoing similar views, 87 percent of respondents polled recognise a need for greater focus on value creation and innovation to develop recognisable Singaporean brands, products and services.
However, the adoption of innovation remains slow. 81 percent of poll respondents stated that there was insufficient recognition on value creation and innovation. 51 percent of firms polled said that the current PIC scheme is not sufficiently effective and should be calibrated to different developmental stages in a business’ lifecycle.
Taking stock 6 years after the launch of the PIC, Mr Tay noted that the time is ripe to recalibrate the scheme: “There should be a combination of broad-based and targeted incentives to encourage innovation and value creation. By definition, innovation can arise in any industry or business, and with much shorter innovation cycles, it will be difficult for the Government to ‘pick winners’.”
“Further efforts could be calibrated to focus on extending assistance for the SMEs, customising the support for different stages of growth. The focus could be on keeping costs low through spurring productivity in the initial stage, while shifting to igniting innovation and internationalisation in the growth stage”, added Mr Tay.
