From The Straits Times
By Harsha Jethnani
Published 20 Aug 2010
OWNERS of Singapore's vital small- and medium-sized enterprises (SMEs) are feeling more upbeat about their business prospects - and plan to hire more workers.
A quarterly index measuring SME sentiment has jumped five points.
The only slightly downbeat sector is manufacturing, where business owners are less optimistic in the latest survey, conducted in the second quarter.
The SBF-DP SME Index - jointly run by the Singapore Business Federation (SBF) and DP Information Group (DP) - rose to 56 from 51 in the first quarter of the year, the two organisations said yesterday. A reading above 50 indicates an improvement.
More than 3,000 SMEs were interviewed for the study in June, which measures the outlook over the next six months. Employers in every sector expect to hire more workers in the next six months.
'The good news for job seekers is that the improved outlook of SMEs has translated into the confidence required to employ more people as they plan to expand their businesses,' said DP's managing director, Ms Chen Yew Nah.
The index rise shows SMEs are 'still optimistic about the business sustainability capabilities'. Last quarter, it reflected 'cautious optimism'.
Manufacturers, however, were less bullish, as the factory index dropped to 51 from 55 previously.
Ironically, the biggest jump was in transport and storage which shot up from 50 to 68, buoyed by an earlier strong rebound in the manufacturing outlook. Other strong performers were commerce, up seven points to 61, and services, up from 49 to 56, as these businesses expect more tourist arrivals, for example.
The weaker trend in manufacturing was not unexpected, even given the incredibly strong shift in sentiment between the fourth quarter of last year and the first quarter of this year, said Ms Chen.
Every sector apart from manufacturing indicated greater optimism regarding turnover and profit over the next six months.
But the moderated outlook for manufacturers meant expectations for turn-over fell to 5.49 from 5.63, while profit expectations in the sector slumped to 5.5 from 5.65.
Manufacturers also worried about getting funding. Expectations for securing funds fell to 4.88 from 5.14.
Across the board, business expansion expectations and hiring expectations grew, although at a relatively flat rate for manufacturers.
Businesses were more averse to capital investment, with expectations lower in the commerce and services sectors and only moderately higher for manu-facturing with transport taking the lead.
SMEs tend to avoid committing to such spending unless 'unavoidable or when they are absolutely sure of sustainable demand', said the study.
Singapore's manufacturing sector is 'highly dependent' on the US market, which faces major difficulties, said Association of Small and Medium Enterprises president Lawrence Leow.
Companies are most cautious about the last quarter of this year, he said, as orders for the Christmas period, which typically come around the third quarter, are still uncertain.
Mr Leow added that manufacturers constantly face the challenge of keeping higher costs in check to stay competitive.
Wet towel maker Freshening faces pressure from production costs, said the firm's director Jonathan Phoon.
Exporting to markets like Europe, Britain and the US is more difficult as the Singapore dollar is stronger, he told The Straits Times.
Although exports account for 35per cent of his business, Mr Phoon thinks the slowdown will not affect his overall business significantly.
We will 'not rest on our laurels at this time', he said adding that hiring and research and development would continue.
Network Courier managing director V.S. Kumar said customer orders have risen for the company.
He told The Straits Times that business in the Asian region to markets like Vietnam, Cambodia and neighbouring countries was steady and picking up. Travel and tourism, another business driver, has done very well, he added.
He said: 'Singapore is also becoming an education hub - more and more students are making use of our courier services for things like books.'
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