Manufacturers seek tax incentives to grow

A worker in a medical clean room at a manufacturing plant in Woodlands.
A worker in a medical clean room at a manufacturing plant in Woodlands.PHOTO: ST FILE

Multinationals and large firms here should be given tax incentives to outsource to local small and medium-sized enterprises (SMEs), the Singapore Manufacturing Federation (SMF) said yesterday.

As part of its recommendations for the upcoming Budget, the SMF also called for more help for firms looking to move away from the "middleman" role that Singapore companies have traditionally played, towards more innovative business models.

Its recommendations come after manufacturers suffered a dismal 2015. The industry was the main drag on growth last year and economists say factories are mired in the worst "manufacturing recession" since the global financial crisis.

Manufacturing, which makes up one-fifth of the Singapore economy, shrank about 5 per cent last year, due mainly to weak external demand.

"The manufacturing industry has been declining in the past year and we believe that the weak sentiments in the industry will continue into this year," said SMF secretary-general Lam Joon Khoi.

"There are still many manufacturing SMEs that are not future-ready and our recommendations to the Government aim to help these companies embark on the value-creating journey."

The SMF's recommendations, which have been submitted to the Finance Ministry, focus on four key areas: collaboration, innovation, productivity and talent.

The federation, which represents about 3,000 members, said collaboration and information platforms should be made available for multinational firms, large local enterprises and SMEs to find one another and explore opportunities.

The Government can do more to encourage local enterprises to expand beyond Singapore - for instance, by providing "better financial support" for businesses to go on missions to target markets, with subsidised airfares and accommodation.

The SMF also asked the Government to help businesses understand and take advantage of Singapore's free trade agreements.

More resources should also go towards helping "progressive companies" revamp their business models and create new strategies, especially since the "middleman" role many companies play is becoming marginalised.

"A business model innovation centre could be established to capture the relevant knowledge and expertise," said the SMF, which also asked that help schemes such as the Productivity and Innovation Credit be extended for two more years.

The SMF urged the Government to work with the manufacturing industry to promote jobs as the sector is suffering a talent shortage.

This could be done "through deepening and strengthening of internship opportunities, to ensure students will gain longer and better exposure to the real world working environment. Internship salaries in SMEs could also be increased to attract participation outside of the school-mandated internship curriculum".

A version of this article appeared in the print edition of The Straits Times on January 16, 2016, with the headline 'Manufacturers seek tax incentives to grow'. Print Edition | Subscribe