Smaller firms should link with government agencies to expand overseas as they may not be big enough to meet the challenge themselves, the Minister of State for Trade and Industry Teo Ser Luck said yesterday.

He said yesterday that small and medium-sized enterprises (SME) in Singapore "usually don't have the kind of volume to compete effectively".

He said: "I think it is important to partner the government agencies when they go overseas, and government agencies must give them the support as well, in terms of providing information and other (aspects)."

Mr Teo added that the government has invested a lot of effort in building up relationships with countries in the region.

"This is a platform where I hope the SMEs can tap on and go overseas," he said.

Companies can also tap on offices of International Enterprise Singapore in markets they want to explore.

Mr Teo said SMEs will have to consider expanding overseas as "this is something that is inevitable".

He said: "They face capacity issues with current policies, some of the tightening of labour and space constraints within Singapore."

This means it is "very difficult to expand" if companies just stay in Singapore, said Mr Teo, who added that the Government will review its internationalisation programmes.

"There is always room for improvement... seeing how we can make them more effective in helping SMEs... set up base, expand their capacity overseas," he said.

Mr Teo was speaking during a visit to the Senoko Road premises of SC Auto Industries, a home-grown bus and coach manufacturer. The company designs and makes specialised vehicles to customer-specific requirements.

SC Auto also has a presence in Hong Kong, and recently expanded into Myanmar.

SC Auto founder and chairman Tan Siow Chua said: "Even in day-to-day work, everyone is encouraged to think of better and more productive ways of doing things. It is especially critical for SMEs like ourselves to continuously strive to improve to drive business growth."

The company's productivity initiatives include the introduction of a barcode inventory system with handheld scanners. This has cut the time spent on stock taking and reduced discrepancies of stock.

The workers are able to spend the time saved on activities such as welding and bus assembly.