Government Intervention in Relation to Singapore SMEs Survivability - Essay Example

Most countries in the world have been affected by the serious Economic Recession that began in late 2007 and got worse towards the second quarter of 2008. Singapore has also been affected by this economic malaise; the impacts have mostly been felt in Singapore’s Small and Medium Enterprises (SMEs). According to the release from Singapore’s Prime Minister’s Office, most of the categories of Singapore’s SMEs have been seriously bashed by the recession, but which is mainly felt in its nascent furniture business (PMO 2009). The small furniture industries are overwhelmed with huge financial burdens and the yearning for greater exports for their products, for which international markets have been dwindling over the years.
Problems from recession
The major problems Singapore SMEs face as a result of the recession include loss of revenues that happen because their sales volumes have drastically been reduced as they could not export many of their products overseas; insufficient capital to fund some of their operations due to the restrain on lending from banks and other lending institutions like the financial crisis bit harder; a drop in production as industries attempt to cut cost by firing some of their workers. All these problems have rocked Singapore SMEs during the recession, which then forces Singapore Government to come up with some measures to intervene in the matter, in order to save the country's economic powerhouses from collapsing.
Government Intervention on Singapore’s SMEs
As the number of job losses increases and the country’s economy indicates that the recession is biting hard, the Government of Singapore has come forward with some measures to intervene in the economic activities of its SMEs industries (OECD & APEC 2008, pp.103-104). Some of these redemptive actions are as follows:
• Establishment of exporting markets: Singapore Government realizes that the domestic markets have already been saturated with the products/services the small and medium enterprises produce in the country. There is a need for export markets, and the Singapore Government has begun to engage in consortium with other countries in Asia with the hope of creating foreign and bigger markets for the country’s SMEs (OECD & APEC 2008, pp.103-104). Singapore has been in touch with China, Malaysia, and Indonesia to encourage their local buyers to import from Singapore. The Government is planning to extend business relationships into other regions like the Middle East, India, and Vietnam (OECD & APEC 2008, pp. 103-104).
• Provision of Job Credit: The Government also makes job credit available to SME employers by subsidizing their wage bills (PMO 2009). The importance of this is to encourage that SME employers keep their workers and not fire them randomly and create both social and economic problems for the entire country; because if many workers are laid off, Government will have to make unemployment payments those who have lost their livelihoods. More so, a high unemployment rate could lead some citizens into committing crimes.
• New Government-Backed Loans: The reduction in sales and production have led to a reduction in the overall sales and revenues that come to SME industries in recent years. As a result of this, the small and medium industries have been faced with an acute shortage of funds to run their production activities. Hence, with the creation of government-backed loans, the industries could receive soft loans or capital that they could inject into the financially dry businesses. These Government loans would help the employers to keep afloat while working hard on expanding their businesses both locally and internationally (PMO 2009).
• Creation of a globally recognized brand: By the action of the Singapore Government, small and medium industries are strongly encouraged to create “brands” of high quality that would be able to compete with other products in the world (PMO 2009). By doing this, it will be possible for Singapore companies to hold off their international rivals in stiff competition. Because if they happen to lose an edge against the other producers at the international level, it may be difficult to sustain the demand from the consortium which Singapore Government has been working hard on (OECD & APEC 2008, pp. 103-104).
• Tax Waivers: Singapore Government has also helped the firms reduce the overhead cost of operation by establishing some programs for tax waiver so that SME industries would be able to maximize the little funds in the coffers and produce enough goods/services that would keep the citizens at work while increasing their portions of exports to generate more funds from abroad (OECD & APEC 2008, pp. 103-104).
• Psychological Motivation: It has become one of the Singapore Government slogans that the SMEs, like every other business in the country, must be “strong and confident” in all their approaches. This psychological motivation is expected to give the industries confidence and the willingness to create brands that would be able to compete fairly with other products in the international markets; an issue which Singapore Government sees as a requirement to keep the SMEs in operation and save the country from unnecessary financial and social crises (PMO 2009). Read More