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Singapore Budget 2016: Budget expected to prime firms, workers for future
BUILDING blocks to help businesses tap into Singapore's economic transition will be put in place for the upcoming Budget, observers said.
In particular, they foresee more efforts to help workers upgrade their skills, while tweaks will be made to initiatives aimed at boosting productivity.
But first, don't expect too many goodies to be doled out to businesses and workers this year.
"This will be a budget for this one year, but it will also be at the same time a multi-year budget," Singapore Management University finance professor Annie Koh told The Business Times.
"You want to put less at the beginning, but also in the right places, and then invest more and more as the years go by."
That this will be a tight Budget was already underscored by Finance Minister Heng Swee Keat last Friday when he spoke to the media.
As such, this Budget will instead see funds being channelled, and initiatives tweaked, so as to help businesses grow.
This aim is evidenced by the fact that Mr Heng is concurrently the chairman for the Committee on the Future Economy (CFE).
Also, the Budget will only be unveiled on March 24, later than most by about a month, economists noted.
"Mr Heng can have this additional month or so to think about the CFE. This Budget will probably see an emphasis on funding the CFE; it can even be seen as implementing a first wave of measures to achieve the CFE's goals," said Barclays economist Leong Wai Ho.
One way that the Budget can help prime the economy for its future transition is through channelling funds to, and tweaking of the SkillsFuture framework.
This is because levelling up the skills of workers is the best way to value-add to goods and services produced amid a tight labour market, observers said. This coincides with the CFE's focus on value creation.
"We might be able to see some measures taken to encourage take-up rates for SkillsFuture courses, particlarly in skills or industries that are good for our economic transition," said Song Seng Wun, economist at CIMB Private Banking.
Prof Koh took it one step farther, by highlighting a sector that will see a greater emphasis in this Budget.
"For the future economy, we have a chance with food manufacturing for the simple reason that Singapore is a trusted brand name. This is also where automation can go a long way. So we might see more focus on this in SkillsFuture," she said.
While observers agree that this coming Budget will focus on medium-term goals, they also expected some form of pain relief for companies amid the moribund growth outlook.
Their concerns were chiefly focused on two aspects: the Productivity and Innovation Credit (PIC) Scheme, and the foreign worker levy.
All of them agreed that the PIC, introduced in 2010, needs to be refined so that the funds can be more accurately used.
Labour productivity growth remained flat at around -0.1 per cent annually in the past five years, according to the Ministry of Trade and Industry.
"Basically, you need to ensure that the PIC is properly applied," said Barclays's Mr Leong, while noting that productivity has not been improving.
Chua Hak Bin, Asean economist at Bank of America Merrill Lynch (BAML), went on to say that it may be wound down as it has been "unproductive" in meeting its aim.
While experts agreed that the PIC needed retooling, they were divided over whether the foreign worker levy hikes should be reinstated after they were deferred in last year's Budget.
"The more you delay the hikes, the more you're kicking the can down the road. Our economy of the future has to primarily rely on our own local workforce," said Prof Koh.
But HSBC economist Joseph Incalcaterra believes there may be tweaks to the policy "in particular, for the manufacturing sector which has seen four consecutive quarter-on-quarter declines in gross domestic product".
BAML's Dr Chua felt that they should be scrapped altogether. Not only is manufacturing in the doldrums, growth in services has also been anaemic.
"Scrapping the foreign worker levy increases will give firms more breathing space. Going ahead with the hikes will only add fuel to the fire," he said.
- READ MORE: Tax tweaks that help SMEs expand abroad
- For more Budget stories, go to bt.sg/budget_16. For BT's five-minute guide to the Budget, go to bt.sg/budget16vid