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SMEs have potential to transform amid productivity push, analysts say

Economists say small- and medium-sized enterprises (SMEs) in labour-intensive sectors have the greatest potential for change amid Singapore's current economic restructuring effort.

SINGAPORE: Productivity is one key push in Singapore's current economic restructuring effort and some companies have managed to successfully reduce their reliance on foreign labour, while others are still struggling to reinvent themselves.

Economists say small- and medium-sized enterprises (SMEs) in labour-intensive sectors may find it especially challenging but they also have the greatest potential to transform.

Kitchen equipment supplier Q'son spotted a business opportunity amid the nationwide productivity drive. It started to import automated equipment that can reduce manpower needs by a third.

One example is a S$41,000 machine which can make up to 10 kilogrammes of fried rice at one go. All it needs is one person to programme it with a recipe and add in the ingredients in the right order and proportions.

"With the government's push towards productivity, there are lots of grants and rebates which benefit Singapore SMEs,” said Sally Chua, managing director of Q’son Kitchen Equipment.

“We have tied up with different manufacturers of automated and semi-automated kitchen equipment to support the F&B operators to tap on these grants. It has proven to be successful, increasing our equipment sales revenue by about 20 per cent (year-on-year)."

Q'son says orders for the equipment have come in from chain restaurants like Jumbo, TungLok, and caterers like Select. The food and beverage sector is among the hardest hit by tighter restrictions on foreign manpower. According to a recent study by DP Information, SMEs in the sector saw profits drop by 12.3 per cent last year to S$88 million.

Despite the challenges, some economists say the F&B sector also has the greatest potential for change.

"The earlier they reinvent themselves, the earlier they reinvest in technology and improve their productivity, will be the only way to go, going forward,” said Irvin Seah, senior economist at DBS Bank.

“I think the government has already rolled out many productivity enhancement measures. The take-up rate over the last few years has been gradually improving, but I think there is still significant room for improvement."

Besides automating processes, analysts say SMEs can improve productivity by tweaking work flows and employing data analytics to raise service standards.

The need to restructure for higher productivity is underscored by further challenges on the horizon. Analysts say that with increasing ASEAN economic integration, SMEs in Singapore will need to do more to outshine lower cost competitors in the region. 

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