Singapore’s economic openness has made businesses in the Republic vulnerable to commercial shocks, but also sees its supply chain connections as the path to future recovery, a HSBC report has found. The Report reveals that firms are planning to invest in supply chain digitisation and are looking to lean into intra-regional partners to build future resilience, but focus must center on visibility and flexibility.
The findings come from HSBC Navigator: Building Back Better which surveyed more than 2,600 companies from 14 markets around the globe in May 2020, including 200 firms in Singapore.
Singapore amongst hardest hit
Singapore firms have felt the full force of the economic shock more acutely than others; according to the report, 87% of Singaporean respondents said they are feeling the impact ‘strongly’, (72% all markets). The report reflects Singapore’s official data which revealed the open and heavily-trade dependent economy shrinking 41.2% QoQ.1
Contingency planning is key
The survey also revealed that Singapore’s firms felt considerably less prepared to handle the challenges arising from COVID-19. Just 34% of Singapore firms thought they were as prepared as they could be, the lowest amongst Asia Pacific countries alongside Hong Kong. This comes despite heavy investment in technology in the two years preceding the pandemic; technology and innovation were the main focus for businesses in building resilience prior to COVID-19 (75% vs. 65% all markets).
Alan Turner, Head of Commercial Banking, HSBC Singapore: “It is no surprise that Singapore firms have been more acutely affected; their success is founded on international trade systems. What stands out is the need to build more resilient contingency plans; whilst digital investment may have benefitted B2C operations, digging deeper, the survey suggests future planning in supply chains is key.”
Visibility and flexibility key to supply chain resilience: technology the enabler
The survey revealed that Singapore firms are now prioritising their supply chains as a way to ensure sustainable operations for the future. Singapore businesses are intent on securing their supply chains, more so than their global counterparts (75% vs. 67% all markets), with firms stating the top priority in the next 1-2 years was to review their supply chain partners (18%) to ensure they are able to weather future challenges and uncertainties.
Significantly, they are also placing a heavier emphasis on integrating technology into their supply chain management, with 36% of firms saying they will focus on digitising their supply chains in the next 1 – 2 years (vs. 28% all markets).
Commenting on the future of supply chains, Mr. Turner said: “COVID-19 has shown the absolute necessity of preparedness for all businesses. Firms must get ahead to develop greater visibility and flexibility of their supply chains to withstand future shocks.
Digital has been crucial to business continuity. Yet beyond transactions, technology unearths insights that can also be used to build future preparedness in trade functions. Data optimisation and analytics enable mapping, revealing the key players in a value chain; this can be used to build stronger Business Continuity Plans. Amidst crises, data can identify bottlenecks and provide more efficiency in responding to demand and supply side disruptions, for instance alternating stock levels or suppliers.”
Leaning into the region
In addition, the survey revealed that Singapore’s firms are looking to their regional partners to bolster trade flows. More than a quarter (28% vs. 20% all markets) of businesses intend to increase intra-regional trade in the next 1 - 2 years.
This sentiment coincides with the development of two major regional trade agreements, of which Singapore is involved in both; the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). RCEP is expected to be inked in November and the CPTPP, already underway, may be extended over time to incorporate further markets.2
Mr. Turner continued: “Having greater flexibility will result in supply chains being more diverse. With Singapore already establishing business green lanes with key trade partners and with regional trade agreements like CPTPP and RCEP developing, Singapore businesses are well placed for the recovery.”
Worldwide from offices in 65 countries and territories in its geographical regions: Europe, Asia, North America, Latin America, and Middle East and North Africa. With assets of US$2,728bn at 30 September 2019, HSBC is one of the world’s largest banking and financial services organisations.
1 HSBC Global Research: Singapore 2Q20 GDP (advance): Recession is here, but it's a short one, 14 July 2020
2 HSBC Global Research: Asia Chart of the Week, Decouplin' alright, 17 July 2020