Businesses feel Budget 2013 incentives fail to address labour constraints

Businesses feel Budget 2013 incentives fail to address labour constraints
By Yvonne Chan, Sharon See | Posted: 25 February 2013 2245 hrs
     
SINGAPORE: "Shape-up or ship-out" - this is the message some businesses are taking from the productivity drive announced in Budget 2013.

Under Budget 2013's Productivity and Innovation Credit (PIC) Bonus scheme, businesses that spend S$5,000 or more on PIC activities in a year will receive a dollar for dollar bonus of up to S$15,000, over three years.

Other productivity incentives include a Land grant, aimed at intensifying land use and an incentive for sector-wide collaboration to achieve industry productivity goals.

The Land Productivity grant for companies is aimed at businesses that intensify land use in Singapore. The new incentives also include enhancing the Collaborative Industry Projects and a broadening of the Partnerships for Capability Transformation (PACT) scheme.

Still, companies are concerned the incentives fail to address the severe labour constraints which is likely made worse for many by the higher foreign worker levies announced in Budget 2013 and lower dependency ratio.

Synnovate Solutions, an integrated dishwashing company, serves 17 Singapore restaurants, 365 days a year.

Its founder and chief executive officer Lawrence Low said he may have to shut down his business due to the shortage of manpower.

"At the end of the day where the service sector is concerned, it is actually a human business. Singaporeans are not used to taking up hard sweaty dirty hot humid jobs and that is hard to change. By stopping the flow of foreign workers in this area, we are basically stopping the economy at least in this area," said Mr Low.

He added: "With this further cut, I don't think rental is going to come down, labour cost is going to go up. I think I will close and leave. The bigger problem is availability of manpower. That is the game call now at the moment. A lot of business are shutting or changing the way they work and cutting corners."

The Association of Small and Medium Enterprises (ASME) said it boils down to "survival of the fittest".

ASME president Chan Chong Beng said: "Either the company adopt or embrace the changes, re-look the business model or they be prepared to face the worst scenario. The government is not going to give you more workers. That has been stated very clearly and also within industries itself, some of the disparities are very big. If those people who think they really can't embrace productivity, they have to look for alternatives."

To improve productivity, Synnovate said rather than spending money on new machines, it changed the process of doing business, resulting in economies of scale.

As such, the company is not too enthused about the extra benefits from the Productivity and Innovation Credit (PIC) Bonus for 2013.

Mr Low said: "I have not applied for the PIC in my first year because I was too busy covering losses. In the second year, I was not familiar with the process so I engaged KPMG to help us and we paid them a fee. The documents were submitted months back but I have not received my money yet. First we have to spend, then we have to wait. If it takes too long to come back, we will be closed by the time they come back with the money."

On the Budget's impact on companies, Members of Parliament said it will take time for SMEs to make adjustments and restructure but they also urged the companies to take advantage of the new schemes.

Jessica Tan, Member of Parliament for East Coast GRC, said: "I think companies will have to change but at the same time, take advantage of the schemes. The schemes are not one-off, the schemes are over a few years, so they have got to be sustained schemes to help the companies. In that sense, I would say to the companies, this is the time to look at it. The message is clear, companies will have to restructure. It will have some pain given some of the further tightening."

Member of Parliament for Ang Mo Kio GRC, Inderjit Singh, touched on how SMEs will be affected in the short-term.

"There are a number of schemes but I still worry about the short-term impact about the tightening labour force, especially the foreign workers. We probably should have slowed down a bit and then accelerated later on."

Analysts said 2013 will be an even tougher year for small businesses and the sectors hardest hit by the government's latest budget measures will be the healthcare, construction, processing and services industries.

As such, they are expecting more businesses to shut down, consolidate or even re-locate.

- CNA/fa

- wong chee tat :)