- Larry Sim, tax partner, KPMG
- Selena Ling, head of treasury research and strategy, OCBC
- Eugene Tan, associate professor of law, Singapore Management University
- Kurt Wee, president, Association of Small and Medium Enterprises
Moderator: Genevieve Cua, wealth editor, The Business Times
THIS year's Budget saw Singapore double down on its economic restructuring push, against the backdrop of a weakening economy, with growth hit by global trade worries. On the business front, Singapore unveiled new and extended schemes to help firms and workers, alongside tighter restrictions on foreign workers. Social support was also announced, from increasing spending on healthcare for an ageing population to tax rebates for some citizens. But will these measures go far enough? Is there a need to rejig initiatives instead of staying the course set in previous years?
Business Times (BT): How would you describe this Budget and what do you see as the main thrust for Singapore's enterprises and competitiveness?
Larry Sim: I think this Budget is about addressing the needs and challenges of businesses and workers in the face of uncertainty in global economies. For businesses, the message is clear - businesses would need to innovate, be able to transform, and be productive. For the individual, it's about taking into account training needs, to upskill to be able to stay relevant and move forward with the nation.
Kurt Wee: For businesses, it's very much a continuation of the previous push. I think a whip-and-carrot approach is being used to really sharpen industries at large. A lot of things are still a work in progress, be it transformation, innovation, manpower or training. But there's a lot of positive emphasis on tech, deep tech capability development and deepening the skills of the workforce. I think all these are going to benefit industries, including those on the Scale-Up SG programme.
Eugene Tan: In many ways, the Budget is consistent with previous budgets - for example, the emphasis on tech again. I think there's a need now for the government to flesh out the details. The funds are available but the key question is whether companies are able to use it, or is it just money that's going to be there, whereby a very select group will be able to tap on it.
Selena Ling: For the companies, SMEs in particular, a lot of the wishlists for better financing and more generous help in terms of going digital. I think a lot of the enhancements of the programmes will actually push the SMEs to embark on this innovation journey further. The only sting I see in this package, really, is the tightening of the foreign worker dependency ratio ceiling (DRC) for firms in the services sector. It basically re-emphasises the need to consider manpower needs very carefully going forward and focus on productivity improvements.
BT: New initiatives and extended schemes were announced to help local companies build "deep" capabilities, scale up, receive financing and adopt digital tech. But do they go far enough in supporting the enterprise?
Kurt: I don't know whether that's substantial enough, given that SMEs are facing potentially a shrinking macro environment, with higher costs in Singapore. Also, we talk about innovating and improving productivity but incremental yields from improved productivity will get less and less.
So, the need for us to extend industries into overseas economic centres is really important from a perspective of growing the topline and rebalancing your overall cost base. Although there were announcements towards Government-to-Government (G2G) projects and trade alliances, there was a clear lack of a resounding push for internationalisation.
Eugene: Also, when you look at this push towards deep tech, I wonder whether more could be done in terms of trying to build capacity. The schemes have been around but I don't think the utilisation is as effective as it could be. It's strange that in a country that aspires to be a smart nation, companies and SMEs need to be cajoled. So long as we don't understand what's holding them back from tapping into tech, many of the schemes are just going to remain there.
BT: So, what is it holding them back?
Kurt: I do see tech capabilities and development trickling down to the SMEs - some from A*Star, some from the universities. We also hear a lot of enterprises collaborating with the polytechnics. But I agree about the question of whether there's enough capacity to help more SMEs.
Also, sometimes the question is the relevance of the tech. The tertiary or research institutions are focused on research or tech development in line with its academic direction but the industry has different, active commercial needs.
Larry: I think the greater question is whether we can create an ecosystem ... such that it enables SMEs to explore and embrace technology. Because, most of the time when we talk to SMEs, the challenge is about understanding how they can support the costs involved, and looking at the kind of help they can get in terms of adopting technology. All this new technology can sometimes be very complex.
BT: How can this tie in with the need for internationalisation and issue of capacity mentioned earlier?
Selena: I think the capacity building and the internationalisation drive actually go hand in hand. The ecosystem is very important for capacity building. Between the medium and the small companies, they probably have very different bandwidth on how they want to adopt new tech and differ in the new markets they look at. So, a lot of it is actually information sharing and knowledge sharing, having platforms where they can bounce off ideas. This is probably one area where the local trade associations and chambers (TACs) can come in a neutral manner to share information.
BT: Speaking of productivity and tech, the government is tightening foreign manpower policy for the services sector. What do you think is the real impact of this?
Kurt: What we see on the ground, whether it's in F&B or in domestic oriented services, is that they are already quite starved for manpower and cost is not low for them. Some of them have adopted some digital solutions to get them going, but generally the sense is the service industry would like to have more labour.
They've gone through consolidation in 2016, 2017 - they've adjusted to it. To push them into another round of tightening, it's really going to be tough.
Eugene: It's very much cracking the whip. Again, it's one of these paradoxes in the country where we talk about digitalisation a lot, but I see the tightening of the DRCs as showing companies that they have no choice but to automate. They have to move to technology to deal with the reduced manpower.
Selena: To be fair, if you look at it from a multi-year perspective, all the previous schemes ... have actually gone a long way to plucking a lot of the low-lying fruits of productivity by introducing basic technology improvements to companies.
So, having undertaken all those productivity enhancing improvements and technology, maybe it's time to give another push in terms of trying to wean Singapore firms off this foreign manpower dependency.
BT: On the social front, this year's Budget holds generous support packages for individuals. What sort of benefits and downsides do you see in those packages?
Larry: On healthcare, I think this is something that is expected. The government has been looking at measures to manage or address the concern of rising healthcare costs. The one that comes as kind of a surprise is the Bicentennial Bonus. It distributes some of the surplus to the individual and I think that's a great move.
Eugene: The Bicentennial Bonus struck me as trying to find an excuse to give away money. It's something that the government says is important, and I don't disagree with that, but I would have liked instead for that bonus to go into, say, a SkillsFuture top-up. I would have felt that the push towards technology and lifelong learning may be due.
Selena: My take on the social spending is a little different. The fact that they continue to emphasise social spending is good because for an ageing population, there is concern about cost of living. But can we also tackle the healthcare costs from the supply side?
I was also a bit surprised by the Merdeka Generation Package, because it was quite generous. These are big, multi-billion-dollar packages, to what extent can we continue to finance this kind of big packages? The GST hike is still on the table. It also means that the onus will fall on corporations paying corporate income taxes and working Singaporeans paying personal income taxes.
- Additional reporting by Jay Parmar and Tara Anne Sreenivasan
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