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Causeway toll hikes could hit profit margins of some Singapore SMEs

Tuesday, October 7, 2014 - 16:41
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THE Causeway toll hikes could affect the profit margins of some Singapore-based SMEs, even though they are generally expected to have a limited impact on businesses here. - PHOTO: SPH

THE Causeway toll hikes could affect the profit margins of some Singapore-based SMEs, even though they are generally expected to have a limited impact on businesses here, Minister of State for Trade and Industry Teo Ser Luck said in parliament on Tuesday.

Saying that the impact of the Causeway toll hikes on economic activity in Singapore was likely to be small, he explained that this was because land transport cost constituted a small proportion of total business costs of firms in Singapore - at only around 3 per cent for companies in the manufacturing sector and at 1 per cent for those in services.

Even so, he noted that some firms could be more affected than others by the higher toll charges.

"In particular, SMEs in the sectors such as the food and wholesale sectors that frequently transport materials and goods across the Causeway would likely see a larger increase in land transport costs. Logistics firms offering trucking services via the Causeway may also pass on the increase in toll charges to SMEs."

As a result, Mr Teo acknowledged that this increase in cost could in turn affect the profit margins of SMEs.

Consumers too could be affected by some "pass-through impact" on inflation.

"In particular, as some of our food imports and lifestyle and furniture products are transported via the Causeway, the higher land transport cost may be passed on to consumers."

However, he suggested that any such impact on consumers is expected to be small, as the majority of our food imports and lifestyle and furniture products are still transported by sea or air.

He was responding to a question from Member of Parliament Ong Teng Koon, who had asked for an economic assessment of the impact arising from Johor's decision to impose Causeway tolls, especially on SMEs which depend on goods and services rendered from Malaysia.

Mr Teo said that some SMEs were already preparing themselves for this impact and looking at ways to overcome it. "...While some SMEs may be adversely affected by the hike in toll charges, we have also received ground feedback that others have found ways to cope with the higher charges. This includes improving trip scheduling so that fewer trips across the Causeway are needed."

He confirmed that the government will continue to monitor the impact of the toll hikes.k

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