Bitter pill comes with balm to soothe pain

Tighter foreign worker curbs, but range of measures to help SMEs

Businesses dreading tighter foreign worker curbs and higher levies which, sure enough, arrived in yesterday's Budget found relief in an innovative Wage Credit Scheme offering help with rising labour costs.

It was all part of a $5.9 billion package showing that the Government is willing to spend serious money to ease the pain of businesses as they strive for productivity gains.

Still, not everyone was happy. Firms which had kicked up a fuss over rising rentals received little cheer on that front.

In the words of one chief executive running his own business, the Budget was a glass half-empty for some, and half-full for others.

But what is far clearer is that there is no let-up in the Government's long-term push on the productivity front and its moves to restructure the Singapore economy.

This restructuring began in earnest in 2010 when the ambitious goal of 2 per cent to 3 per cent productivity growth a year was unveiled.

Since then, companies have been encouraged to raise their productivity through a mix of measures. These include tighter foreign worker curbs, and incentives such as the Productivity and Innovation Credit scheme - encouraging firms to invest in improvements by dangling tax credits.

Companies have complained that the target is too ambitious. In fact, last year, productivity shrank 2.6 per cent.

Still there have been improvements. For example, Deputy Prime Minister Tharman Shanmugaratnam noted that Singapore's manufacturing and transport sectors are well ahead of other Asian economies, apart from Japan, in terms of productivity gains.

Our productivity level is about 70 per cent that of today's productivity leaders such as the United States and Japan, when it was only a third three decades ago.

And it is encouraging that, anecdotally, many companies have bitten the productivity bullet, from City Satay, where each worker produces more satay sticks, to egg producer Chew's, which is now able to grade more eggs.

Yesterday's announcement to curb foreign workforce growth was very targeted, recognising that some sectors have improved while others are lagging.

Mr Tharman noted that the sectors which are most dependent on foreign workers are also those most lagging in international standards of productivity.

He said: "If we pause now, and postpone the restructuring... we will face the same problems of low productivity, low wages and low profitability."

But even though the pleas for no more curbs on foreign workers fell on deaf ears, it was encouraging that the Budget tempered its hardline approach on foreign workers with a broad-based range of measures to help small and medium-sized enterprises.

For example, the Government said that it will work on the supply of labour, such as getting part-timers or older Singaporeans to join the workforce.

There are also moves to encourage industry collaboration where companies can come together to develop productivity solutions. There is a Productivity and Innovation Credit bonus as well.

The Budget also paid heed to complaints that firms' transport costs were soaring, allowing certificates of entitlement to be renewed for five years in certain cases.

But the boldest move on the cost front is the Wage Credit Scheme.

The Government will chip in to bear 40 per cent of the extra wages paid to Singaporean employees, up to a gross monthly pay of $4,000, over the next three years.

While the scheme helps firms needing to pay more to attract workers, it also sends an important message to workers that they matter.

Mr Tharman stressed to employers that they should "share productivity gains with their employees".

Still, many businesses would have come away from the Budget disappointed at the lack of goodies such as rental rebates.

And firms in a weak position, not wishing to adapt, change and transform themselves, would also have found little help.

The Budget delivered a clear message: The country is aiming for not only quality growth to be achieved through higher productivity, but also growth from which all Singaporeans will benefit.

The Government is also clearly committed to the changes, as it stumps up the money for the various schemes.

In fact, Mr Tharman stressed in his speech that all extra levies collected will be channelled back to help firms upgrade and share productivity gains with the workers.

While some firms may be disappointed, in the long run, a sustainable business is one where lower-paid workers enjoy more of the fruits of an enterprise's growth.


This article was first published in The Straits Times on Feb 26, 2013