SINGAPORE BUDGET 2019

Businesses fear tying grants to worker outcomes could be deterrent

They say the requirement adds to business cost without guarantees that profits will go up

Singapore

BUSINESSES are wary about a new condition announced in Parliament on Monday that requires firms to commit to the "fulfilment of worker outcomes" such as wage increases if they receive funding support from the Enterprise Development Grant (EDG) starting April 1, 2020.

Firms told The Business Times that tying grants to worker outcomes could backfire as it adds to business cost without guarantees that profits will go up, making Singapore less competitive in the long term.

On Monday, Senior Minister of State for Trade and Industry Koh Poh Koon said that worker outcomes will soon be "a mandatory consideration from the very first dollar of EDG funding" to encourage firms to "more intentionally translate enterprise transformation efforts into improvements in workers' livelihoods".

Aside from wage increases, these outcomes can appear in the form of job creation, job redesign or hiring older workers, he said.

This comes as the Inclusive Growth Programme (IGP), administered by the NTUC's Employment and Employability Institute, will be merged into the EDG.

The EDG, which is run by Enterprise Singapore (ESG), was first introduced in Budget 2018 to support businesses to undertake projects to upgrade, innovate or venture overseas. Under the IGP, companies receive help to kick-start productivity projects, and in turn, they are required to share the productivity gains with workers through higher wages.

The merged EDG represents a "significant change" in how the government approaches enterprise transformation, where worker outcomes would "no longer be an afterthought" but are fully integrated into enterprise grants from the start, said Dr Koh.

While workers have cause to cheer, businesses are concerned about how this would affect their competitiveness.

John Cheng, business development director of sugar manufacturer Cheng Yew Heng, said: "If the EDG helps the companies to generate more profits and expand, then of course the money should be shared with the employees - that is fair."

But he pointed out that many of these worker outcomes are long-term fixed costs while the returns of investment from grants are not so certain.

"At the end of the day, you don't want it to become a business cost . . . A lot of investments may not work out, and if you have to commit to an increase in salaries, you can't just lower them when the economy is bad."

He pointed out that it should be more dynamic and flexible for businesses to stay agile and competitive, and also said that more details on the timeframe are needed as some investments take years to bear fruit. "It might be tough for businesses to take up the grant if you want these worker outcomes immediately," he added.

Julia Bensily, associate director of Prime Structures Engineering, is concerned that the added conditions will make it even more challenging for businesses that are already struggling with the manpower crunch.

"It seems like it will be a lot more onerous . . . If they make it very difficult, it will deter us from expanding further or moving in a certain direction," she said.

The Ministry of Trade and Industry (MTI) also provided more details of several previously unveiled initiatives during the Committee of Supply debate. Trade and Industry Minister Chan Chun Sing said that the EDG will be extended for three more years till end of FY2022, to help firms defray costs of up to 70 per cent.

It aims to support small and medium-sized enterprises (SMEs) undertake "deeper and more ambitious" transformation projects, he added.

Along the same vein, Senior Minister of State for Trade and Industry Chee Hong Tat said that the Productivity Solutions Grant (PSG) - introduced in 2018 to help firms adopt pre-approved productivity solutions - will be enhanced to support employer-led training. Enterprises that qualify for PSG can apply for a training subsidy to cover 70 per cent of their out-of-pocket training expenses, capped at S$10,000 per enterprise. This is on top of existing SkillsFuture subsidies and funding for productivity solutions under PSG.

He also unveiled further details of schemes to help businesses venture abroad.

Under the new Enterprise Financing Scheme (EFS) that was announced during the 2019 Budget, the government will raise the maximum insurance cover for overseas project financing to S$50 million and increase the maximum tenure to 15 years.

The EFS, to be launched in October 2019, streamlines eight financing schemes under one single umbrella to make it simpler for firms to access funding.

The government will support a higher risk-share for loans to young enterprises for both domestic and international projects under the EFS, said Mr Chee.

"We will also provide a higher risk-share for enterprises venturing into challenging markets as they face higher hurdles in obtaining financing," he added.

Responding to a query from Member of Parliament Henry Kwek, he revealed that ESG has supported over 570 internationalisation-related projects in 2018, up 25 per cent compared to 2017.

More tailored support will also be provided to nurture high-growth enterprises, in the form of the Scale-up SG programme, first introduced in the 2019 Budget statement.

"Through this programme, we will help enterprises develop and implement long-term plans tailored to their specific growth priorities, in areas such as innovation and international expansion," he said.

According to MTI, the programme will identify 10 to 15 companies with similar growth profiles and priorities for each cohort, and each cycle will last two to three years.

ESG will support up to 70 per cent of the participation cost, but a co-funding principle will apply to ensure the commitment of participating companies.

"When these companies grow and succeed in future, I hope they will also provide opportunities to other local companies," said Mr Chee.

He added that this will help sustain Singapore's efforts to scale up more companies into globally competitive enterprises.

Despite the array of schemes to help businesses, he cautioned that the government can only play a supporting role as companies have to take the lead in enterprise transformation.

"We want to encourage entrepreneurs, not grant-repreneurs who seek to maximise their grant amount instead of focusing on how they want to transform and grow their business," said Mr Chee.

"Our efforts must be enterprise-centric and transformation-focused, not scheme-centric and grant-focused."

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