Budget 2022: Businesses support Budget measures but worry about rising costs

With the tight manpower situation, there might be a need for SMEs to tap on foreign manpower to ensure business sustainability and growth. ST PHOTO: KUA CHEE SIONG

SINGAPORE - While business leaders and associations welcomed initiatives announced by Finance Minister Lawrence Wong to drive their operations forward, they said other measures will present roadblocks and urged the Government to help them stay on track.

They gave the thumbs up to the Jobs Growth Incentive scheme, Temporary Bridging Loan Programme and the Enterprise Financing Scheme, but are worried about higher costs brought about by the progressive wage model (PWM), goods and services tax hike, property tax increase and the rise in minimum qualifying salaries for new Employment Pass (EP) and S Pass applicants.

Mr Douglas Foo, president of the Singapore Manufacturing Federation (SMF), said the group is grateful to the Government for considering the opinions of its members in extending various business support initiatives.

"While the SMF and its members support and understand the push for a workforce with a strong Singaporean core, the announcement of higher qualifying salaries for Employment Pass and S Pass would also mean hiring challenges in an already tight labour market in the manufacturing sector.

"SMF will work with its members and government agencies to see how the SMF can assist to alleviate these concerns."

Ms Rose Tong, executive director of the Singapore Retailers Association, said the lack of locals to join the retail workforce, combined with the new salary thresholds, may force retail businesses to further cut down on foreign manpower to reduce operating costs.

Retailers may limit opening new stores or expand overseas, or worse, close outlets to contain costs leading to job loss and unemployment, she added.

She noted that existing staff will have to take on additional responsibilities and the increased workload could affect individual performance and mental health.

Mr Yeo Hiang Meng, president of The Federation of Merchants' Associations, said Budget 2022 is pragmatic and forward-looking, providing enhanced support for capability building, investment in human capital and building a Singapore talent core.

However, he added that there will be significant impact on heartland businesses that are smaller.

Mr Yeo said the implementation of the PWM, higher GST and adjustments to S Pass salaries will be areas of concerns.

"Moving ahead, these businesses will have to seek ways to manage cost, leverage more on technology and create greater value goods and services."

The Singapore Chinese Chamber of Commerce and Industry welcomes the many measures to help businesses, but said the increase in the minimum qualifying salaries for new EP and S Pass applicants may impact companies in selected sectors, including construction and manufacturing, where locals continue to shun some jobs.

It added that these salary adjustments will lead to a further rise in the manpower bill as well as business and infrastructure project costs in an operating environment that is already facing inflationary pressures.

The Singapore National Employers Federation (SNEF) similarly supports the wide range of incentives provided to employers to help them retain and strengthen their capabilities to prepare for a post-pandemic economy.

It said that last year, as part of the NTUC-SNEF PME task force, it called on the Government to strengthen employment and employability for professionals, managers and executives (PMEs) while ensuring that employers continue to have access to skilled manpower and remain competitive globally.

With the tight manpower situation, there might be a need for SMEs, which hire approximately 70 per cent of Singapore's workforce, to tap foreign manpower to ensure business sustainability and growth. As these employers may not be able to afford the enhanced salary criteria for EPs, SNEF urged the Government to provide support to these companies to meet their manpower needs.

SNEF also said that it had suggested transitional support to cushion the impact on business costs brought about by the PWM. It is grateful the Government has taken into account employers' feedback by introducing the Progressive Wage Credit Scheme from 2022 to 2026 to allow time for employers to sustain higher wage increases for lower-wage workers.

Under this scheme, the Government will co-fund the wage rise.

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Mr Phua Boon Huat, president of the Singapore Furniture Industries Council (SFIC), said the various packages announced will give enterprises the added confidence to achieve economic recovery and transformation.

"Anchored on sustainability to enable the furniture industry to leverage green growth opportunities as a competitive advantage, the newly launched Furniture Sustainability Roadmap will be in line with the Government's target to advance the green transition," he added.

SFIC welcomes the phased GST implementation and the Jobs and Business Support package that will accelerate digitalisation, innovation and internationalisation.

However, the PWM and the higher minimum qualifying salary for EPs and S Passes will increase costs.

He said: "We do implore the authorities to monitor the implementation dates, as most industry players are still reeling from the adverse effects of the prolonged pandemic."

Like many, Dr T. Chandroo, chairman of the Singapore Indian Chamber of Commerce and Industry (SICCI), is relieved that the GST hike will be implemented in a phased manner in 2023 and 2024.

He said: "Now, with the announcement of the GST increase pushed to 2023, something SICCI has been asking for and proposed in our wish list to the Finance Minister, SMEs can concentrate on their road to recovery and play their part in the nation's economic development."

Mr Wong Wai Meng, chairman of SGTech, said the trade association for Singapore's tech industry supports the Government's move to increase the carbon tax and the commitment to reinvest the revenues of this tax into climate tech and enterprise upgrading.

This is critical if Singapore intends to take a leadership space in the sustainability and carbon arenas, he added.

"While we are happy that the Government has considered the immediate impact of the carbon tax on businesses and households, for a complex problem such as this, we hope that the Government will engage the industry in regular dialogue and reviews so that we can collectively tackle any unintended consequences that might surface, such as an indirect impact on the rate of digitalisation." 

Read next - Budget 2022 highlights: GST hike, higher income tax for top earners and CDC vouchers for all

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