Forming the backbone of the nation’s economy, Small and Medium-sized Enterprises (SMEs) are essential for Singapore and account for almost half (44%) of Singapore’s Nominal Gross Domestic Product (GDP), indicating the critical role they play in the country’s economic development. With over 288,000 SMEs in Singapore, SMEs make up 99% of all enterprises in the country and employ up to approximately 71% of Singapore’s workforce.
Furthermore, SMEs in Singapore have shown a strong desire to expand their business beyond their borders. A survey by the Singapore Business Federation found that 19% of local companies that have not yet gone overseas intend to venture abroad in the next three years. Additionally, 55% of companies with foreign business operations intend to expand further in the same timeframe. This highlights the desire and potential of SMEs to expand their business overseas and contribute to Singapore’s economic growth on a global scale.
The Singapore government’s support for SME internationalisation and innovation
Given the prominence and importance of SMEs in Singapore, the government has taken steps to support their growth, at both a local and international scale. In the Budget 2023 announcement this year, several initiatives and funding schemes to support SMEs in their internationalisation journey and to drive growth were outlined, primarily with top-ups of S$1 billion and S$150 million to the Singapore Global Enterprises (SGE) initiative and the SME Co-Investment Fund respectively.
This effort will increase the availability of capital to SMEs and provide co-investment opportunities for SMEs and venture capital firms, highlighting the government’s dedication to support SMEs in their growth and expansion plans through access to funding and expertise, and helping them become globally competitive and innovative beyond Singapore’s borders.
Challenges faced by SMEs in their internationalisation efforts
While the Singapore government has laid out plans to support SMEs in their internationalisation journey, SMEs still face several challenges in expanding their business beyond the domestic market. Some of the notable challenges include:
- Limited funding: SMEs struggle to secure funding as they lack financial strength and track record required by traditional banks to access lending.
- Infrastructure challenges: SMEs may lack expertise, infrastructure, and logistics capabilities to establish a supply chain in new markets.
- Data protection compliance and sovereignty laws: SMEs need to comply with different data protection laws and regulations when expanding into new markets, which can be complex and require additional resources.
Furthermore, the challenge is compounded when considering the lack of homogenised legal frameworks across multiple countries. What works in one country may not necessarily work for others, making expansion beyond the domestic market even more daunting for SMEs.
Mitigating internationalisation challenges by leveraging cloud solutions
In the post-pandemic world, where businesses are taking a digital-first approach, SMEs can leverage cloud solutions for lower upfront costs, scalability and accessibility to ensure greater success in their internationalisation efforts, and the key lies in working with the right cloud provider.
An important area to consider when choosing a cloud provider is interoperability, enabling SMEs to seamlessly integrate cloud solutions with existing IT infrastructure and software applications without disrupting their current operations.
Another critical factor is reversibility to ensure no vendor lock-in, as this would allow SMEs to switch to another provider or bring their data and applications back in-house if necessary. Transparency with pricing structure, service level agreements, and any additional charges are also key considerations, so as not to incur unexpected costs.
In the case of international expansion across different regions, working with sovereign cloud providers with enhanced security features can also help SMEs maintain compliance with data protection and sovereignty laws across multiple jurisdictions, avoiding penalties.
Empowering internationalisation efforts with cloud solutions and government support
In today’s digital landscape, cloud solutions can offer significant potential for SMEs in their internationalisation efforts. When combined with the help of government support, SMEs are now more equipped than ever to expand their business overseas.
As the key driving force in propelling Singapore’s economy, SMEs need to continue innovating with digital transformation and cloud solutions to maintain competitiveness, scale operations quickly, and take advantage of emerging market opportunities.