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Targeted approach flags key role for trade groups, chambers
Singapore's economic restructuring is entering a new phase, declared Finance Minister Heng Swee Keat on Thursday - with the winding down of "free-for-all" help, and the ramping up of targeted support only where and when it is needed.
This shift away from a broad-based incentive landscape is exactly in line with calls from the ground. Businesses have long pleaded for a more calibrated, sector-focused approach to restructuring, while critics have accused the government's flagship Productivity and Innovation Credit (PIC) scheme - available to all companies in all sectors - as lavish and prone to abuse.
But while undoubtedly a step in the right direction, the key challenge lies in implementation, economists told The Business Times. This is especially because a more targeted approach would require far deeper partnerships with companies as well as trade associations and chambers (TACs) - and it's unclear whether TACs are ready to step up to the plate.
Their involvement is crucial, said Mr Heng in his Budget 2016 speech. "TACs have intimate knowledge of the needs and potential of their specific sectors. They are well-placed to reach out to many firms, especially SMEs (small- and medium-sized enterprises)," he said.
Indeed, government agencies will need more specialised industry knowledge than they now have, and TACs can act as that bridge to share on-the-ground expertise. But in order for policymakers to formulate useful and transformative strategies, accurate feedback must first be relayed by TACs on behalf of their members.
Said CIMB Private Banking economist Song Seng Wun: "How effective they are really boils down to the structure and the leadership of these TACs. To what extent they really represent the voice of their respective businesses is very important ... Ultimately, the TACs need to get the feedback right."
OCBC economist Selena Ling agrees; she thinks the shift is likely to prove challenging for most TACs.
"They're probably not geared up to do such high-level types of things . . . So I think they will have to restructur e themselves. Because if they operate by the rules of the past, then I think they will be in a bit of a quandary," said Ms Ling.
UOB's Francis Tan and Stanchart's Jeff Ng also pointed out that there's also the danger of some sectors lagging behind, due to their respective TACs having fewer resources or perhaps less efficient processes.
Measurements, too, will have to be refined, and could become more complex and fractured with an increasingly sector-focused approach. Still, Mr Song points out that this isn't necessarily a bad thing, because broad-based measurements may not fairly reflect productivity or innovation gains in the first place.
"With more targeted KPIs (key performance indicators), the government can then say: 'In this sector, we achieved the result we wanted.' So they can at least answer to taxpayers," said Mr Song.
Added Ms Ling: "It makes sense, because we're talking about billions of dollars here. We're not talking about small change. You don't want to be so lavish and help everyone across the board - then you end up with a lot of consultants to help you claim your PIC."
(The government's new Industry Transformation Programme, unveiled in Budget 2016, is projected to cost S$4.5 billion over five years.)
Indeed, economists were heartened by Mr Heng's commitment to phase out broad-based support, and to deliver more targeted assistance instead. Apart from the benefits of minimising waste, some saw the move as indicative of - at long last - a maturing business and policy landscape.
Said DBS economist Irvin Seah: "Policymaking has traditionally been the role of only policymakers. But now, there's a space for businesses to say: 'I want to contribute to this process, to shape our growth strategy.'
"I think this is about Singapore maturing as a nation, and to me, that's a very positive thing."