You are here
A much-needed leg-up Budget for the current turmoil and the future
- Linus Goh, head of global commercial banking, OCBC Bank
- Selena Ling, head of treasury research and strategy, OCBC Bank
- Desmond Teo, growth markets financial services tax leader, EY
- Ho Meng Kit, chief executive officer, Singapore Business Federation
- Edy Tan, chief executive officer, Chye Thiam Maintenance
Moderator: Dylan Tan, SME editor, The Business Times
THIS year's Budget will provide a much-needed leg-up to businesses amid the current turmoil and for the future, according to industry players. The government on Tuesday unveiled a bumper package under the latest Budget to help firms and households alike tide over the ongoing Covid-19 outbreak, but also flagged plans to tackle longer term issues like economic transformation and climate change.
Those issues should matter to local businesses even as they contend with pressures from the outbreak, the industry players suggest.
They tell The Business Times what they took away from the Budget, and the initiatives will affect companies in Singapore.
The Business Times (BT): How would you describe this year's Budget and what were the key takeaways?
Linus Goh: I would say it was impactful; it was sizeable for sure. There has been a lot of concern on people's minds for the situation we're currently in. We also spoke to our SME (small and medium enterprises) clients and it's clear there's uncertainty in the air.
Particularly in the first-line industries, the travel and retail-oriented, the drop in footfall is quite aggressive. It's clear that the businesses today are not only feeling the strain of continuous cost pressures, but also of business coming off quite significantly.
Clearly, there was a very targeted approach to deal with some of those issues. But at the same time, the familiar themes for the longer term, like growth and transformation, are still very strong and, in fact, improved on. It suggests there's an opportunity to take advantage of this time to even step up the agenda.
Selena Ling: I think it was a very generous Budget - it's 2.1 per cent of GDP (gross domestic product) and will lead to a S$10.9 billion budget deficit. He (Deputy Prime Minister and Finance Minister Heng Swee Keat) certainly delivered on what he promised in his preview, which was that it was going to be a transformative Budget.
It was also going to be supportive for industries and workers, and sustainable. So he was not gun-shy about the need for the future GST (goods and services tax) hike, or even for the tightening of the S Pass for industries.
Ho Meng Kit: I think it was well thought out and it's comprehensive.
It's fortunate that we have the resources and financial muscle to bring in a very substantive package to deal with this virus situation. I think the Budget also signals help for those companies that were first affected by the crisis. We did a survey of businesses - all of them think their businesses won't do well.
So if you put some cash back to the companies I think it will help. I think the Budget certainly has many aspects of it, from the job support scheme to the wage credit scheme and corporate tax rebate.
Desmond Teo: I was actually very excited by the Budget because it's one that's about a shared future. It's not just for large companies or multinationals but also for SMEs, which form a large part of all the companies here and employ close to 60 to 70 per cent of the workforce.
If I'm to focus on the tax changes that have been announced, two things stand out: one is the corporate tax rebate. That's important because it helps to alleviate some of the cash flow concerns for companies but, at the same time, has them share part of the burden.
The other would be the fact that we've held the GST hike back one more year. The tax is a cost to individuals and small businesses that are not GST registered. So, delaying the increase could help individuals and businesses tide over this period, at least from a cost perspective.
Edy Tan: What stands out is relief for both the short term as well as the long term. For the short term, I note that there's immediate relief when it comes to aspects like employment and wages. In the longer term, there's talk about sustainability, re-training our staff and redesigning jobs. All these are very helpful.
BT: A hefty portion of the Budget has definitely been set aside to help firms and households alike amid the novel coronavirus outbreak. But will the measures planned for firms be enough?
Meng Kit: The drop in demand for businesses is high, up to 50 per cent. I don't expect the government to be able to buffer that and match that gap.
So, businesses also have to help themselves in order to reduce their overheads, reduce their capital expenditure and operating expenses.
Selena: I do agree with Meng Kit. I think it's a relief package. . . it's meant to mitigate some of the downside pressures but it's not going to fully offset the big drop that we've seen both in visitor arrivals and in terms of the hit to domestic spending.
What will be interesting to see, however, is whether there'll be additional schemes or initiatives when the turnaround comes, to help the tourism industries back on their feet again.
Edy: Someone was commenting to me this morning that my business must be doing well now, as an SME in environmental management services. I replied that it's true, because we've been told to step up cleaning and disinfection works.
But I also said that we'll suffer in the long run if we're not careful. Why? When the economy is affected, our contracts will be re-looked as part of others' cost-cutting measures.
So it's helpful that we're getting some relief from the government right now, and we'll be using that relief, and this time, to enhance our operations and perhaps look into some form of training for our staff.
BT: Looking to the long term, one aspect pegged for transformation is the workforce. How might companies make the best use of the latest efforts to do so, like SkillsFuture Credit top-ups and a new enterprise credit for firms?
Linus: The previous years have focused more on the individuals seeking specific training. But this new scheme - although the details are yet to be seen - may be looking to facilitate enterprise development as a whole.
While you have specific persons being equipped as change agents, there's still a need for the enterprises as a whole to undergo training as well. I think that will always be very useful for companies.
Selena: Actually, the timing is quite opportune because now we're kind of in a sluggish growth period.
By giving this enterprise credit, the enterprises could be incentivised to send their workers for training instead of retrenching them during the downtime.
The new scheme also kind of makes the enterprises the stakeholder in the whole process rather than simply leaving it to the individual to decide how they want to invest in their training.
BT: What about the Senior Worker Support Package; is it sufficient to change the mindsets of companies when it comes to employing older workers? Can older Singaporean workers now expect a longer career runway?
Desmond: If they're able to re-skill or up-skill, and stay relevant in a digital economy, it's a win-win situation because companies will be able to retain or hire older workers who have the experience and the right skillsets.
While you can't make a horse drink water, you can bring the horse to the water. And I think the support we talk about here will remove some of the hesitation in employing some of these older workers.
Edy: I believe older workers can stay longer and they themselves would want to stay longer as well. Something we're doing is to revise the scope of work, or redesign the job, for our staff, especially the older ones. With the increased use of technology and robotics in our industry, we're training them to be able to operate robots, for example, which can help them in their daily work.
Selena: I think it's quite inevitable. You have an ageing population and you want to encourage active ageing as life expectancy is increasing. Also, the government is not going to ease up on the foreign manpower curbs. They still want to push companies to be lean on manpower.
So, it all points in one direction, which is that you have to make the best use of your human resources, and that would mean more elderly workers in time to come.
BT: Looking further ahead, climate change has also been flagged as an enduring challenge, with funds and incentives pledged under this year's Budget. Will this theme feature more prominently in future budgets? Are we moving in the right direction?
Linus: I think it's an important signal and it has come at the right time. In our engagement with businesses, it's quite clear to me that they are seeing this as a growing priority. And it's not just in industries that may be more directly impacted, like energy, but across all industries, where there's a growing consciousness of sustainability and climate change.
Whether it's in construction, engineering, or food, we see companies trying to make changes - finding different ways to manage waste better, for example. So I think it's useful for the government to back these separate initiatives, to latch on to the momentum and build on it.
Desmond: There's been quite a lot of focus on climate change, starting in 2019 and going into this year. It's interesting to see that Singapore is prepared to inject S$5 billion today to start dealing with the issue. The sum is no small change and it demonstrates the importance of the issue, and the government's commitment to tackling it.
Selena: From the economist's point of view, it's always about how we'll pay for that S$100 billion bill (to fight climate change in the future), so it's an opportune time because they have accumulated substantial fiscal surpluses.
The right thing to do is to put away a chunk of that for the S$100 billion bill. So in the budgets to come, I think they will continue to put aside that kind of sum as and when they have the opportunity.
BT: On the whole, were there aspects of this year's Budget you found interesting or surprising?
Linus: Actually, I think the leadership programme is quite interesting. Its link to transformation is critical. One of the things we've noticed in serving our SME clients is that the agents for change in established companies, very often, are the next generation of leaders.
So, if you have ways in which you can reach out to the next-gen leaders, offer them training and help them to build up their leadership, then they'll become more effective agents for change in their industry and in their businesses.
Meng Kit: I think the government, in implementing a transformation package, is beginning and will continue to work much closer with the trade associations and chambers.
I think they are good partners that can help the government reach out to members with the transformation and growth packages. Within the ecosystems of the various trade associations as well, they can pull together the necessary stakeholders for collaboration and partnership, whether it is on mentorship for leadership, or other packages.
BT: Before the virus broke out, this Budget had been widely viewed as an 'Election Budget'. Is there any particular policy that still hints at that?
Selena: Well, there's still a lot of goodies being given out - a lot of stuff that will go to individuals, especially those in lower income households; a lot of help that's meant to assuage the concerns people have over job security.
There's also a lot of help that's forthcoming, like on education for children and keeping the elderly employable. So in that sense, I don't think they are stinging on any of the goodies or bonuses for Singaporeans.
Linus: I agree very much. There's something for everybody, and something for now and for later. So you kind of address not just the immediate issues of the day, but also pave the way for individuals, communities and businesses to see the future.
Desmond: Beyond the goodies introduced, the other aspect that caught our attention was how there was a lot more consultation on the ground this time, especially with the younger population.
We see it as a move to win the hearts of the populace.
If you're dealing with millennials especially, they look more towards being involved.
I think it's a step towards being more consultative that we're seeing, and one that was demonstrated towards the end of the minister's speech.
Edy: I think this is also the last Budget before the General Election, so there's something good for everyone.