Firms to rethink business models because govt can't support them forever: DPM Heng

ALTHOUGH the government is spending billions to preserve jobs for Singaporeans amid the Covid-19 crisis, Deputy Prime Minister Heng Swee Keat said business leaders here acknowledge that the government cannot be expected to shore up companies forever.

He described their viewpoint as a realistic one, following his most recent meeting with the Future Economy Council and the Singapore Business Federation.

While the government is supporting businesses through the crisis, notably through the Jobs Support Scheme, these support measures are set to taper off after about 10 months.

"At the end of it, there're some business models that will be broken, which is why in the Fortitude Budget, I urged businesses to really rethink their business models because it is not just the impact of Covid-19, but Covid-19 has also accelerated a lot of the structural changes which are already happening," he said in an interview with The Straits Times and The Business Times at The Treasury on Monday.

Some of these structural changes include a reshaping of globalisation, the digitalisation of businesses and a robotic revolution within the labour market.

Mr Heng said businesses that do not pivot quickly to these new growth areas could be in trouble.

In the meantime, a large part of the government's economic support during this crisis is focused on people and workers. This means supporting them in terms of expenses, to keep their jobs for as long as possible and to build a strong element of traineeship and skills upgrading.

"We have to prepare for the change because the structural changes will come faster than we imagined," he said, adding that he countries and people that are most prepared for these structural changes will be in a far better position.

This is why he is glad that Singapore began its industry transformations in 2016, he said. At that time, there were business that were in denial about needing to change, but more have been getting on board.

He said he is also encouraged by the enthusiasm and creativity of venture capitalists and startups, which have been looking to new growth areas and trying out new business models.

Mr Heng also said his key focus is on strengthening the economy, and this applies even as the government is looking to rebuild Singapore's fiscal position and reserves.

In supporting Singaporeans and businesses through the Covid-19 pandemic, the government has had to draw S$52 billion from past reserves to fund the four economic relief packages that will cost nearly S$100 billion.

"If our economy bounces back, faster and stronger, then revenue will grow, whether it's corporate income tax, GST, personal income tax or stamp duty," Mr Heng said, noting that there has been a decline in Goods and Services Tax and stamp duty as people are spending less and buying fewer properties during the pandemic.

Another source for Singapore's reserves comes from land sales, Mr Heng said, and these will help to rebuild the past reserves when they resume.

"Probably the most important part of it is our investments by GIC, Temasek and MAS. Each investing entity has a clear mandate and I am very encouraged that every one of them has been reviewing its investment strategy over the years - we have accelerated work over the last few years. In this period of change, I think being able to get our decisions right will make a huge difference," he said.

Mr Heng said while Singapore is exploring the possibility of borrowing for longer-term infrastructure developments, these will have to be economically justifiable, and whether they bring an economic or social return will have to be factored in.