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After all, this recovery is cyclical, and resource constraints are still there
Singapore’s economy is finally taking a turn for the better, which is welcome news for companies which have been struggling with slow growth and poor sentiment.
The improving outlook should bring more business and better sales, but this is no reason to hit the pause button on restructuring. Companies need to keep looking for ways to be better - even in good times, when there is no crisis to avert.
Singapore's economy is on track for stronger-than-expected growth this year, lifted by a brighter global outlook and strong trade momentum. The Ministry of Trade and Industry has upgraded its growth forecast for this year. It now expects growth to come in at between 3 per cent and 3.5 per cent, up from an earlier estimate of 2 per cent to 3 per cent.
This comes as the economy beat forecasts to expand 5.2 per cent in the third quarter - its strongest quarterly pace of growth in four years.
The cheerier outlook will come as a relief to companies. Many, especially small and medium-sized enterprises (SMEs), have been badly affected by a double-whammy of slowing growth and restructuring in recent years.
Singapore launched its economic restructuring plan in 2010, with the aim of raising productivity, lifting the salaries of workers and shifting away from an over-reliance on cheap foreign labour.
However, these transformation efforts coincided with a slowdown in growth in the wake of the global financial crisis, as economies all over the world struggled to get back on their feet.
As a result, companies had to cope with lacklustre demand, on top of rapid costs increases and a tight labour market due to manpower policies put in place to aid restructuring efforts.
Inevitably, not all companies survived those tough years.
Among those which managed to keep their heads above water, many pushed on with restructuring, investing heavily in automation, training and overhauling business processes.
Some firms might decide to allow these efforts to lapse, now that economic activity is picking up and companies shift from survival mode back to growth.
After all, the impetus to restructure or look for new sources of business is clearest when a company is already struggling with poor sales and thinning margins.
But it can be harder to push for change when things are going well. If it ain't broke, why fix it?
In fact, there are many reasons to be more proactive towards restructuring instead of treating change as a reactive solution to a downturn.
For one, this latest pick-up in economic growth is largely attributable to a cyclical upturn driven by a stronger external economy - which means it might not last.
Trade-related industries, including manufacturing, have benefited the most, with some tentative signs emerging that the rest of the economy is also feeling a boost.
Electronics producers, in particular, have received a shot in the arm from a slew of new product launches this year, including fresh mobile-device offerings from Apple and Samsung.
It remains to be seen whether these effects will continue into 2018. As UOB economist Francis Tan says: "Anything that goes up will eventually have to come down."
The cyclical nature of this recovery aside, the fact remains that Singapore's economy continues to face the same resource constraints as it did when the restructuring push started in 2010.
Manpower is scarce, business costs are continuing to climb and regional competition is heating up.
In addition, disruptive change has hit almost every industry and has had a transformative impact on the labour market, with jobs evolving faster than ever and new roles emerging even as existing jobs fall into irrelevance.
This means that companies should be pushing on with restructuring regardless of the economic outlook.
The aim of restructuring is not simply to keep afloat, but to create a more efficient, agile, and sustainable basis for future growth.
The most resilient companies are usually the ones most comfortable with change. Good times might not last, but strong companies do.
16 August 2024