Singapore’s small firms hit by US-China trade war want help, but relief may take some time yet

Singapore manufacturing company Aluputer Industrial is hurting from the ongoing trade war United States president Donald Trump is waging with China. “We are feeling the impact on materials we purchase from US suppliers,” said Monica Lim, its business development manager. “Their prices have increased by more than 30 to 50 per cent as their local raw material costs have been affected by Trump’s policies.” The company, which produces machine parts and other items, has been forced to review its business processes and seek alternative sources of raw materials. Lim says her team is acting as fast as it can because delaying may prove disastrous, given signs of a looming recession for Singapore. ‘Hype, smoke, and hot air’ clouding Singapore real estate On Tuesday, the trade-reliant city state cut its expected growth for the year to 0 to 1 per cent, down from the earlier forecast of 1.5 to 2.5 per cent. The second quarter growth of just 0.1 per cent was the slowest expansion in a decade. It was the second consecutive quarter that saw the trade ministry slash growth estimates, signalling the possibility that Singapore might enter a technical recession in the current July-to-September quarter. The economy is expected to figure prominently in Sunday’s National Day Rally speech, when Prime Minister Lee Hsien Loong delivers his most important annual address to the nation, spelling out challenges, new government policies and plans. He referred to Singapore’s slowed growth during his National Day message on August 8, saying measures to stimulate the economy would be implemented if there was a need. Hong Kong has also revised its growth forecast for this year downwards, from 2-3 per cent previously to between 0 and 1 per cent. On Thursday, the government unveiled economic relief measures worth HK$19.1 billion (US$2.4 billion), including sweeteners for businesses and individuals. Why Singaporeans don’t get the Hong Kong protests Ho Meng Kit, chief executive officer of the Singapore Business Federation, said that while Lee’s government was monitoring the situation closely, he did not expect it to “reach for the medicine chest so soon”. In the past, Singapore introduced relief measures only in major recessions, such as during the global financial crisis of 2008-2009. Singapore’s small and medium enterprises say they are feeling the pain from the US-China trade war, and hope the government will step in with relief measures to help them stay afloat. Kurt Wee, president of the Association of Small and Medium Enterprises (ASME), said the revised growth forecast is “recognition that the economic outlook isn’t going to be ideal”. Even before the dismal second quarter results were announced, he said, companies were reporting that business was on the decline and that they were feeling the effects of the trade war. “It looks like the situation is going to become more protracted,” he said. Selena Ling, head of treasury research and strategy at OCBC Bank, said Singapore’s SMEs have been hit by a “double whammy”. “To a certain extent, SMEs are being squeezed on both sides,” she said. “They are largely tied to the domestic market so they don’t have the diversification of regional markets that are more resilient.” She worries about the prospects for mom-and-pop stores in the downturn. Singapore has 160,000 micro enterprises, according to figures from ASME. She said the services sector is vulnerable, while the wholesale and retail sectors are struggling with structural challenges on top of the current downturn. Government help measures would likely include assistance for businesses’ loan and liquidity facilities, but she did not think they would be introduced anytime soon. Ling says: “I think the general sense is that we took one year to get here in terms of the trade war. It’s not something that hit us out of the blue.” She noted that jobs have already been shed this year in underperforming sectors such as manufacturing. Singapore becomes an option for Hongkongers amid political crisis Richard Siah, founder of the chain of Holi Department Stores found in public housing estates across the island, hopes the government will help ease their burden. Like many retailers, he complained about high rents and the shortage of workers, saying high rentals have forced him to look for new locations for some of his shops. He is hoping for some form of tax relief, and that the government will relax rules for hiring foreign workers. Retailer Azan Tengku said he did not need this week’s revised growth forecast to know the economy was in trouble. “The retail business has been in a recession for a while now,” said the director of Kalms, a chain of shops selling greeting cards and gifts, which has switched to selling from vending machines placed at shopping malls and Changi Airport. “Traditional brick-and-mortar retail stores have been challenged with high rent and manpower shortages, which is why we closed down our retail stores,” he said. Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said in a report that they expect the government to roll out stimulus measures to support SMEs, especially those in manufacturing and trade-related services. They also said they felt that the government should defer implementing stricter rules for hiring foreigners in the services sector, scheduled for 2020 to 2021. ASME chief Wee hoped the government would provide long-term help to nudge businesses into venturing overseas. Singapore chip makers become trade war casualty as firms slash jobs “Some Southeast Asian countries are still evolving, developing and growing, and there are a lot of opportunities for Singapore companies to add value and support the growth of those economies,” he said. Law professor and political observer Eugene Tan of the Singapore Management University expects Lee to use his Sunday night rally to assure Singaporeans that the government was prepared for the downturn and ready to put fiscal measures in place if necessary. “The economy is on the minds of many people even though it has not reached the stage of national anxiety yet,” said Tan. “But I think it will be the subtext in many of the issues he will be discussing.” Connect with us on Twitter and Facebook