In recent years the world has undergone significant fundamental geopolitical shifts and technological disruptions, with far-reaching implications for globalization and trade. Much of Asia has benefited from the open economy and international trade. However, increasing anti-globalization rhetoric and the rise of protectionist economies may threaten the region’s growth trajectory in the near term.

Asia will feel the impact of inward-looking policies from more advanced economies. The effects of the U.S. administration’s “America First” policy and a rise in nationalism in many parts of Europe are already impacting consumer sentiment. Coupled with a slowdown in Chinese foreign investment, these trends are likely to result in a slower pace of growth in Asia than seen in the last decade.

Impact on ASEAN

Outside of China and Japan, the Association of Southeast Asian Nations continually strives to encourage more economic and trade integration within its members. While ASEAN has historically been successful in improving regional trade integration, it will be challenging for the ASEAN Economic Council to continue driving the mandate of further integration with its member nations at different levels of economic maturity and competitiveness. As Pushpanathan Sundram, former deputy secretary-general of ASEAN for ASEAN Economic Community, told BRINK Asia: “Trade is going to be the main catalyst for other forms of integration and it will also have a direct knock-on effect on the amount of foreign direct investments the region receives.” And yet the increasing digital divide remains one of ASEAN’s biggest challenges.

Despite these challenges, ASEAN and the rest of Asia continue to drive much of the growth in the global economy. Companies headquartered in advanced but sluggish Western economies will continue to look toward Asia and seek to ride on its growth. This can be seen in the increasing number of companies choosing to set up their regional or even global headquarters in Asia. Opportunities for homegrown Asian companies to partner with larger foreign multinational companies have been on the rise, either by way of mergers and acquisitions, or foreign direct investment in joint ventures and alliances.

The Case of Singapore

In view of the current and future economic climate, to better position the nation toward growth, Singapore has set up the Committee on the Future Economy with the sole objective of building a value-creating economy. One of the key priorities for Singapore is to see the successful establishment of Smart Nation. In this year’s National Day Rally, Prime Minister Lee Hsien Loong highlighted the importance of building strong digital capabilities through Smart Nation, one of the strategies identified by the Committee on the Future Economy.

Through Smart Nation, the Singapore government envisages that the digital economy will provide greater economic opportunities, increase workforce productivity and enhance interconnectivity. Specifically, there is a focus on data analytics and cybersecurity, which is applicable across all sectors and companies regardless of size. This is particularly poignant for small- and medium-sized enterprises because they can expect more targeted assistance programs from government agencies to bolster them with digital capabilities.

While Singaporean homegrown companies are competing effectively in global markets, the country’s continued prosperity is dependent on its SMEs’ ability to replicate the success of their predecessors. To this end, International Enterprise Singapore, which was focused on promoting international trade and globalizing Singaporean companies, and Spring Singapore, which focused on enabling SMEs with financing, technology and capability development, are being merged to create one entity—Enterprise Singapore.

The risk appetite of Asian governments to invest in startups has grown with the success of home-grown firms.

The mission of Enterprise Singapore is to support Singaporean companies in their international growth aspirations and equip them with the right capabilities to survive and thrive in their international expansion plans. In today’s business climate, companies cannot afford to focus solely on either capability development or international expansion. Both need to be undertaken simultaneously.

This is particularly true for startups and mid-sized Singaporean companies looking to make the leap to the next stage of their growth. They will benefit from an ecosystem that provides relevant support to catalyze both organic and inorganic growth. The new agency will also streamline government assistance programs to help Singaporean SMEs scale up their capabilities and bolster their international reach. Under its umbrella, Singaporean companies will be offered a simpler and more holistic approach toward their internationalization efforts.

Mercer anticipates that once Enterprise Singapore is operational, it will offer targeted “bundled” assistance programs to SMEs. Historically, IE Singapore’s assistance programs focused on international growth, and Spring Singapore focused on capability development. We envision new bundled assistance programs that will bring SMEs the expertise and institutional support with regard to financing, capability development, access to technology and internationalization, all through a single channel.

Lessons for the Rest of the Region

The traditional definition of an SME will be revisited and redefined, not just in Singapore, but across the Asian region. Going forward, startups with potential for exponential growth will be targeted and actively sought out not just by venture capitalists but also by government agencies such as Enterprise Singapore. The risk appetite of Asian governments to invest in startups has grown on the back of the success of homegrown startups, such as Grab, the ride-hailing service in Singapore, and governments are recognizing the potential of a supportive startup ecosystem as a way to spur innovation and growth more broadly. Government support for startups and small businesses can help them grow through either organic or inorganic strategies, such as through the acquisition of competitors or businesses that sit along the value chain.

The creation of Enterprise Singapore is not an unexpected move. It is a result of the government delivering on the Committee on the Future Economy’s goal of building a value-creating economy. While it will take time for Enterprise Singapore to operationalize and cement its vision, Singaporean companies hoping to leverage on government support can start engaging with their existing account managers and take advantage of any programs that may be relevant for them.

Enterprise Singapore sets a strong precedent for other countries in the region to emulate. With the right support infrastructure in place, SMEs with differentiated business models can access global markets and scale much faster. Stronger institutional support also implies that SMEs can professionalize early on in their growth trajectory. And with a government agency invested in their success, Asian SMEs can truly thrive as significant players in regional and global trade.