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Singapore Budget 2016: Foreign worker levy to stay: Ser Luck, in response to SMEC

The government will look into developing a better ecosystem to support the needs of SMEs
Tuesday, January 26, 2016 - 05:50
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Mr Teo says that the priority now is to help companies make a change.

Singapore

THE government will retain the foreign worker levy in spite of calls - which have intensified in the lead-up to Budget 2016 - for a relook of its necessity.

"The foreign worker levy will stay put," said Teo Ser Luck, Minister of State for Manpower. "The priority now is to help companies make a change because it's not just about cost but it is about the number of manpower they use. And secondly, are they only relying on manpower? Is the Singaporean core being built up for companies?"

Mr Teo - who is co-adviser of the Singapore Business Federation-led SME Committee (SMEC) with Koh Poh Koon, Minister of State for Trade and Industry - was responding to the SMEC's Budget 2016 recommendations which raised foreign worker levies as one of the ways that the government could alleviate immediate-term challenges that SMEs face.

Said SMEC chairman Lawrence Leow: "In Budget 2015, the government deferred the planned increases to the foreign worker levy by one year. Here, we are suggesting to defer the increases further, and conduct a review to reduce the levy quantum taking into consideration the latest inflow of foreign workers."

Other cost management recommendations put forward by SMEC include getting government landlords to adopt the Fair Tenancy Framework in their tenancy agreements with tenants, and making rental data of other government-owned business premises available.

On the financing front, SMEC recommended that the government introduce a working capital or restructuring loan scheme to help SMEs in their working capital needs or transformation and restructuring process. The interest rates for such schemes should be pegged at more equitable rates compared with commercial banks, added SMEC, and should have enhanced risk-sharing among the stakeholders so as to lower the financing cost for SMEs.

Another way that the government can support companies on the financing front is to consider adopting the Korea Technology Finance Corporation (Kotec) model for intellectual property (IP) valuation and loan guarantees which reportedly backed about US$6 billion in loan guarantees in 2014.

Such a programme makes companies more self-sufficient as they can get their IP valued by a panel and leverage it to get a loan from the banks, noted Mr Teo who led an SME Workgroup delegation on the study mission to Hong Kong and South Korea last year. As the risk is co-shared between the government and the bank, banks are more willing to lend to these SMEs.

Said Dr Koh: "The Korean model is an interesting one, and it is one we can look at and see how best we can utilise the advantages from such a system and see if it can fit our current ecosystem.

"(One of the aims) should be to encourage our industry to look at innovation as an important pipeline for value creation. That should allow them to get genuine and also novel and unique products that can be a very good entrance for them into the global marketplace."

SMEC also raised the importance of making incubator and test-bedding facilities more readily accessible to SMEs. It also suggested having a contact point set up for SMEs seeking help to source for incubator and test-bedding facilities.

"What you are asking for is a better ecosystem - better matchmaking between the technology developers, owners and the industry people," said Dr Koh. "Maybe our SME Centres, which is a possible touchpoint for SMEs to get into contact, can be scaled up and rolled out to provide some of these better referral consultant services."

Leveraging the ecosystem that is in place is a theme that Dr Koh carried through to the proposal to establish a single SME authority - a proposal that SMEC raised last year as well.

Mr Leow stressed, however, that the SMEC was not quibbling over whether a multi-agency or single-agency approach is better, it is simply to find a winning formula.

He said: "(It is not that) the multi-agency approach is not good. In fact, it is working very well. The Economic Development Board (for instance) is a single authority that on the ground works with multiple agencies. And when MNCs have issues with various agencies, (they go to) EDB.

"The problem today is there are quite a number of agencies with their own KPI (key performance indicator). We are looking at the outcome - if the multi-agency approach is very good, where are our global companies? Our concern is not multi-agencies or single-agency. Our concern is: What is the winning formula for Singapore?"

Said Dr Koh: "As to whether there should be a single coordinating body, I think what they are asking for, really, is a better ecosystem to support the needs from beginning to end. And I think that is something we should look at."

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