You are here
Taking the middle path on restructuring
IT may be getting more expensive to do business here as companies clamour for greater resources, but Finance Minister Tharman Shanmugaratnam doesn't think this spells bad news for the economy.
That businesses in this supply-constrained nation continue to demand more land and manpower is a positive situation, because it shows that the economy isn't in crisis, he said in parliament on Thursday as he rounded up the three-day debate on the budget.
Addressing concerns by MPs about soaring business costs at a time when revenues aren't growing as rapidly, he cited figures to show that firms are still choosing to set up shop here.
Over the last five years, the net number of new companies formed across all sectors was 20,000 a year, twice that in the preceding five years; in the food and accommodation sectors, the average net gain was 1,000 new companies every year, 50 per cent higher than in the previous five years.
"Revenues overall are not growing more rapidly, not growing by 50 per cent more - we all know that," he said. "It's a question of revenue growth not being unusually buoyant, but the demand for resources is growing. In that situation of demand and supply, business costs go up."
To deal with the issue, the government could have taken one of two approaches. One way is to subsidise business costs across the board, but providing subsidies for rental and labour costs, for example, would create a fundamental constraint on resources.
The other way is to withdraw the state's support altogether. Mr Tharman said the approach of letting market forces weed out the weaker, unviable players was "not a crazy idea" to accelerate restructuring, but this "shock treatment" could weed out the good businesses as well.
It would also impose large costs on workers, given that it takes time to train people and raise the productivity of those re-entering the workforce, such as women and older workers.
The government has opted for the "middle path" - a phased, gradual approach to economic restructuring. It will need time for the results to show, as it could entail re-engineering businesses, switching to new business models and sending people for training.
Even as the government has slowed the inflow of foreign manpower in recent years and raised foreign worker levies, businesses have embraced the call to upgrade themselves and boost productivity, he said.
Stressing the need for Singapore's SME (small and medium-sized enterprises) sector to remain vibrant five to 10 years down the road, Mr Tharman said there must be a critical mass of SMEs in every sector of the economy that is Singaporean.
The country needs local companies that are not only innovative and active in expanding overseas, but able to develop new ways of doing business and bringing new ideas to the market.
"It can be done. We are seeing leaders among our SMEs in every field that are breaking the mould," he said.
On its part, the government will spare no amount of resources to help firms move up the value chain. Describing the existing schemes and initiatives in Singapore as "more generous than any other economy I know of", he called on entrepreneurs to take full advantage of these programmes for an edge in competitiveness and productivity.
It is also crucial that SMEs take advantage of SkillsFuture, Mr Tharman said, describing this national movement as a "major new phase" in developing people.
He chairs the 25-member SkillsFuture Council, tasked with helping Singaporeans develop the necessary skills to do well in the future and to be able to master them over time.
"(SkillsFuture) is an opportunity for our trade associations and chambers to strengthen themselves and work with their members," he said, promising that the courses and programmes under SkillsFuture will be of a high standard, because it was pointless to provide funds for education and training - every Singaporean aged 25 and above will get an initial S$500 in SkillsFuture Credit from 2016 - if there was no assurance of quality or relevance to their jobs.
SkillsFuture is a "learning journey" and will involve some experimentation along the way, Mr Tharman said, as he called on Singaporeans to take it in the right spirit.
"We just need the mindset of embracing the future. We all have to embrace the future, and this will, in time to come, prove to be a transformative force in society," he said.
- Tharman gives assurance of fiscal sustainability
- CPF system is fair and sustainable
- Military spending will still rise steadily
- The role of soft power in S'pore's foreign policy
- Time for S'pore firms 'to venture out'
- A Budget seminar for SMEs