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Straits Times
22-05-2025
- Business
- Straits Times
Singapore Business Federation launches guide to help firms navigate trade barriers
Singapore Business Federation CEO Kok Ping Soon with a mock-up of the tariff playbook for businesses, pictured on May 20. ST PHOTO: MARK CHEONG SINGAPORE – An e-book guide to help businesses find out how they would be affected by tariffs has been compiled by the Singapore Business Federation (SBF), which is also drafting measures to help firms find financing and diversify their supply chain. Speaking to The Straits Times ahead of the launch of the playbook on May 22, SBF chief executive Kok Ping Soon outlined the apex business association's plans, including its intention to provide longer-term advice to firms on tariff matters. He said: 'Companies are saying that they are concerned about reduced credit limits, increased collaterals, stricter governance. And it is now that they need longer and larger financing.' The funds are not only to deal with the front-loading of purchases by buyers that are stockpiling goods before any end to tariff reprieves, but also to tide businesses over smaller orders and higher administrative costs for trade compliance. SBF – the business community's representative on the Singapore Economic Resilience Taskforce to counter rising trade barriers – has asked to be updated on failed applications for the government-backed Enterprise Financing Scheme. Firms, especially small and medium-sized enterprises, apply for these loans through financial institutions and are subject to conditions such as shareholding, credit worthiness and solvency status. Mr Kok said: 'We may want to make representation on behalf of the businesses to the Government to consider. Perhaps the risk-sharing can change, perhaps the quantum can change, or perhaps the tenure can change.' The association is also asking the Government to consider funding trade advisory experts for businesses to legitimately get around the new and tighter Customs administrative procedures and documentation. Consultants have said that these could be done by reflecting the value of goods before mark-ups by intermediaries or by firms splitting their purchases. 'We have a team of advisers that can help companies navigate, but there's a limit to how much they can provide. These are free advisories,' Mr Kok said. On the findings of a business sentiment poll conducted in April covering 294 firms, Mr Kok said one in two businesses expects costs to rise, and 75 per cent of them foresee revenues will fall. Seven in 10 plan to pass on all or part of the added costs to customers. Bosses also worry about currency fluctuations, supply chain reconfigurations and retaliatory measures. A surprise, Mr Kok said, is that firms are already planning to diversify sales markets and supply sources. 'Our companies are not just not doing anything,' he said. In fact, one in three firms is exploring alternative sourcing and buying. 'South-east Asia is obviously the top choice, but it looks like our companies think quite far, because number two was Europe and number three was the Middle East,' he added. Mr Kok noted that Singapore firms are already planning to diversify sales markets and supply sources. ST PHOTO: MARK CHEONG He expects the services sector, which includes logistics and professional services, to bear the trickled-down effects of the tariffs eventually as investors turn cautious. The Government lowered 2025's economic growth forecast to a range of zero per cent to 2 per cent, down from the previous estimate of 1 per cent to 3 per cent after the US slapped the wide-ranging tariffs in April on its trading partners. Mr Kok said: 'We want to work with the Government to implement very practical solutions to support what is important – addressing firms' financing, helping them in advisory and compliance, and helping them to diversify sooner than later. 'Any help that businesses need to fulfil these three things, we want to work with the Government to make it happen.' Regionally, the organisation plans to amplify Singapore's call for open trade and cooperation. 'There is a saying, in Asean, you either hang out together or you get hung separately,' he said. But whether the regional grouping will band together or veer towards bilateral trade pacts remains a question, he added. Fresh from a trade mission to the US, Mr Kok said new opportunities still exist. 'If China has to be disengaged from the US, can Singapore companies fill the gap?' And while the US accounts for about 12 per cent of global trade, Singapore firms can tap the Republic's 28 free trade pacts with 65 countries and play in the remaining 88 per cent. The 20-page playbook, which the federation put together with consultants such as PwC Singapore and Rajah & Tann Asia, advises businesses to understand their trade exposure, financial vulnerabilities and supply chain risks, then act to stabilise operations, reconfigure sourcing strategies, and take advantage of Singapore's free trade partnerships. Those two steps could be done in 12 months, it noted, after which firms could focus on building long-term resilience with digitalisation, innovation and raising productivity. The e-book ends with a checklist. Mr Kok said: 'It may look very daunting, but if you look through each of it, some of these are quite basic. You need to ask your finance people, your trade people, your suppliers. 'If there's one area where businesses need a bit more help, it is the first part.' Companies may need support getting hold of Customs and trade data, and interpreting and applying the data to their trade activities, he explained. SBF is asking its consultancy partners if they would offer some trade advisory services at no cost on a regular basis. Mr Kok said: 'We hope that the industry partners will be happy to support this initiative.' Both the playbook and poll results can be found on the SBF website. Join ST's Telegram channel and get the latest breaking news delivered to you.
Business Times
18-05-2025
- Business
- Business Times
GXS' acquisition of Validus' Singapore business a sign of market validation
[SINGAPORE] The recent acquisition of small and medium enterprise (SME) lender Validus' Singapore business is a sign of market consolidation and validation in South-east Asia. To recap, GXS Bank acquired Validus' Singapore business on Apr 14 for an undisclosed amount. This expands the digital bank's SME offerings to include Validus' trade financing and working capital loan expertise and customer base in Singapore. Competitor Funding Societies sees Validus' acquisition as a positive, with market consolidation having reduced the pie to a few notable players. This is also a sign of market validation as well, said Kelvin Teo, co-founder and CEO of Funding Societies. 'I think it's actually a very positive development in the market, and it also shows openness of banks, as well as validation towards fintechs and fintech players' existence,' he told The Business Times. The sale of the Singapore business is partly a reflection of the constraints that SME fintech lenders face in the island republic. Despite Validus and Funding Societies having access to the government's Enterprise Financing Scheme, in which Enterprise Singapore shares 50 per cent of the risk, both could not get local traditional banks to fund the loans on their platforms. Instead, Funding Societies and Validus had to rely on international banks to fund the SME loans of Singapore companies. There was more success in raising debt from international banks and funds than local banks, noted Teo. A NEWSLETTER FOR YOU Friday, 8.30 am SGSME Get updates on Singapore's SME community, along with profiles, news and tips. Sign Up Sign Up 'We got the big chunk of the supply from Citi Hong Kong, keeping that in mind we realised we would never be able to grow the business in Singapore to be as large and attractive as we wanted it to be,' said Nikhilesh Goel, co-founder and CEO of Validus. Even though Validus started out from Singapore, the other markets – Indonesia, Thailand and Vietnam – grew much faster. Singapore would only account for a minority of the overall loan book, with about 10 per cent of the monthly loan disbursals for the SME lender. Selling the Singapore business to a bank, where the cost of capital is lower due to the availability of deposits from customers made sense. But rather than sell it to a traditional bank, Validus had to wait for digital challenger banks to emerge. 'This business we felt would do more justice in the hands of a bank who had access to cheaper forms of capital, and could build on our partnerships, teams and models we had created…the big three had shown no inclination to partner or do anything,' said Goel. In any case, the acquisition has helped to bring SME lending platforms such as Funding Societies into the mainstream, said Teo. With digital banks entering the fray, market awareness for SME working capital or trade financing loans can only grow. Tariffs everywhere The impact from tariffs imposed by the US will vary across SMEs in the region, but both Validus and Funding Societies say that customers are still taking up loans from them. For Funding Societies, it has few customers with a direct business relationship with the US, with most having a domestic or regional focus. Other segments of customers would have already pre-planned shorter capital loans to operate and would not be as impacted. The customers looking to take loans for growth are the ones hesitating now amid the uncertain macroeconomic environment, leading to more of a delay than a stop in borrowing. 'The decision-making time becomes longer, they want to wait and see how things play out …the growth opportunity may change and therefore the financing needs change,' said Teo. For Validus, there is no direct impact, as the lender focuses on domestic businesses and their supply chains. These could be local conglomerates or regional companies and their suppliers and distributors, and has nothing to do with the export economy. There will be an indirect impact if tariffs stay, inducing a dampening effect on broader spending in the economy. Validus is exposed to what the middle class is consuming, for instance in Indonesia, the focus sectors are food and beverage, fast moving consumer goods and pharmaceuticals. 'We believe that if we stick to sectors that are consumer staples and non-discretionaries, these kinds of headwinds will always come and pass, if you think about it, this is not the first challenge, there was Covid, the market crash in 2022, then interest rate hikes,' said Goel. Both Funding Societies and Validus will be putting their heads down and working hard on their businesses for the coming year. Funding Societies is planning to steadily grow their loan book across all their markets, as well as the new payments arm into new markets such as Malaysia and Indonesia. The SME lending platform is also looking to diversify funding to be more resilient. 'Really diversifying our funding sources by working with digital banks and other fund partners…the one positive effect of the tariffs is that central banks are looking to cut interest rates, how can we take advantage of that to diversify and lower our cost of funding,' said Teo. Validus on the other hand is working to turn profitable in these turbulent times, after turning operationally profitable in 2024. 'We want to deliver our first year of profits, because if we can do that we would be among the very few tech companies in the region that are actually delivering cash flow…and it would deliver a statement,' said Goel.
