Businesses feel the pinch of higher costs, say MPs

MPs noted that some industries were hit badly by the water price hike and new diesel tax. For example, food manufacturers were concerned as water and diesel form a significant part of their production chain.
MPs noted that some industries were hit badly by the water price hike and new diesel tax. For example, food manufacturers were concerned as water and diesel form a significant part of their production chain.ST FILE PHOTO

They understand reason for moves, but hope more can be done to help firms cope

The water price hike and new diesel tax announced in this year's Budget are a strain on smaller businesses already grappling with higher operating costs, five MPs said yesterday.

While they acknowledged that the Government had valid reasons for the measures, they hoped more could be done to help companies cope with these new costs.

Such relief would be especially helpful in the current uncertain business environment and slower economic growth, they added.

Said Mr Lim Biow Chuan (Mountbatten): "I don't believe that businesses are hoping for a handout from the Government.

"What they are appealing for is a business climate which is less costly and friendlier to businesses."

About one-third of the 17 MPs who spoke on the first day of the Budget debate addressed the challenges of running a business in Singapore.

Opening the four-hour debate in Parliament, Mr Liang Eng Hwa (Holland-Bukit Timah GRC) said: "The general response from businesses to this year's Budget has not been positive."

Companies are feeling the effects of sluggish growth, added Mr Liang, who is chairman of the Government Parliamentary Committee for Finance and Trade and Industry.

There are fewer orders and "as a result, more competition and compressed (profit) margins". "At the same time, they see business costs continuously creeping up," he said.

"The increase in water prices and the diesel duty do not help the situation, even as the businesses can understand the reasons for the hikes," he added.

In his Budget statement on Monday last week, Finance Minister Heng Swee Keat announced a 30 per cent increase in water prices that will be implemented in two phases, on July 1 this year and July 1 next year. The diesel duty, however, took effect immediately on Budget Day, with 10 cents imposed on every litre for several diesel products to curb usage.

MPs noted that some industries were hit badly and this may, in turn, affect households via higher costs of living.

Mr Liang said food manufacturers were concerned as water and diesel form a significant part of their production chain.

There are also no direct rebates in the Budget to help them.

Similarly, Non-Constituency MP Dennis Tan said transport and delivery costs would go up since diesel oil is the primary fuel for delivery trucks and vans. "This will affect the operating cost of businesses that depend directly or indirectly on transport services," he said in Mandarin.

Non-Constituency MP Leon Perera criticised the hikes as coming too soon, as electricity tariffs, gas prices and parking fees had been raised in recent months. He said: "Why introduce all these price hikes now, at a time of relative economic fragility, when they could tip some SMEs at the margins over the edge?"

Workers' Party MP Pritam Singh (Aljunied GRC) said the Government should reveal more details of how water is priced, so Singaporeans can better understand why water prices are being raised by 30 per cent. For instance, he wanted to know how the cost of maintaining water infrastructure, including pipe networks to transmit water, has changed over the years.

He also asked for the cost of producing water in the different desalination and Newater plants, and whether falling water levels in Johor's Linggiu Reservoir - from which Singapore draws water - was a factor in the decision to adjust the water prices here.

Mr Singh also suggested that water prices be adjusted to reward households that use less water, such as offering a 10 per cent rebate for those who show a corresponding drop in water consumption.

Nominated MP and Singapore Chinese Chamber of Commerce and Industry president Thomas Chua acknowledged that the Government raised water prices to ensure a sustainable supply.

But companies do not see it this way, he said. "The major concerns of businesses are operational costs, while the Government's concern is the nation's mid- to long- term competitiveness."

He hoped the Government would help reduce costs, and urged firms to review their operations if they cannot keep up with these changes in the external environment.

Said Mr Chua: "Singaporean enterprises have to innovate boldly in order to adapt to this new business environment."

• Additional reporting by Chong Zi Liang

A version of this article appeared in the print edition of The Straits Times on March 01, 2017, with the headline 'Businesses feel the pinch of higher costs, say MPs'. Print Edition | Subscribe