Singapore firms cheer Budget 2026’s AI and globalisation push
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Labour-intensive firms said a rise in costs of hiring foreign workers may put the squeeze on firms and consumers.
ST PHOTO: SHINTARO TAY
SINGAPORE – Business leaders hailed Budget 2026 for its thrust into artificial intelligence (AI) and globalisation,
Dining establishments, often the employers struggling to hire local workers, sounded a caution over more costly meals when higher minimum salaries for foreign workers kick in.
From 2027, hiring foreign employees will become more costly, with Employment Pass minimum qualifying salaries raised from $5,600 to $6,000,
The new salary thresholds were announced by Prime Minister and Finance Minister Lawrence Wong in his Budget 2026 speech on Feb 12 as part of measures to keep Singapore open to skills and expertise from foreigners while ensuring Singaporeans remain at the core of the local workforce.
Mr Benjamin Boh, president of Restaurant Association of Singapore (RAS), said: “Many players will have to increase prices to absorb some of these costs in order to stay in business.
“While digitalisation is also another way to find efficiencies, many in the industry have already embarked on that journey, so there might not be much more efficiencies to squeeze from that.”
The Singapore Retailers Association (SRA) also flagged that business expenses – which have piled up in recent years from trade tariffs, domestic wage inflation and competitive factors – are being given a further squeeze.
SRA president Ernie Koh commended steps that support workers’ training and AI, which will help keep jobs and raise productivity, as well as the extension of wage offsets for senior workers.
But he added: “It is very difficult for the association to go to our members and the retailers to say let’s embrace AI and let’s train our workers, because these things take time to bear fruit.”
Many retailers are fighting costs just to stay afloat, he said, and with local workers tending to shun jobs in the sector, retailers could end up passing the burden to consumers.
Singapore could become a less competitive shopping destination, he warned.
Even the 40 per cent corporate tax rebate, capped at $30,000 to help cushion rising business costs, provides little comfort to some as loss-making businesses may claim only the minimum benefit of $1,500, said tax leader at consultancy PwC Singapore Lennon Lee.
Echoing calls for a more targeted approach to address the hiring of more Singaporeans, director of creative agency Visual Studio Singapore Larson Ong suggested drilling down to sub-sectors, rather than using broad classifications like services or manufacturing.
Mr Ong, who has 12 foreign employees among the company’s 39 team members, said: “We have been hiring for a project executive role for four months without success. Roles in the events industry are often seen as demanding, with long hours and poor work-life balance. Many Singaporeans prefer larger organisations due to perceived stability, prestige and career progression.”
The work pass policy changes, as they have been announced, put small and medium-sized enterprises (SMEs) in a “difficult position”, he said.
He suggested that the new agency to be formed from the merged Workforce Singapore and SkillsFuture Singapore could, at the same time, step up in matching Singaporeans with jobs in SMEs.
Budget 2026 signals that long-term, strategic firms would be rewarded, said Mr David Toh, entrepreneurial and private business leader at PwC Singapore.
Enhancements to the Productivity Solutions Grant show a departure from the one-size-fits-all approach to help SMEs digitalise, he said, while start-ups are being rewarded to design products, business models and technology with regional or global scalability in mind from day one.
Businesses have also been given larger grants to expand overseas, bigger tax rebates and stronger financing support.
He said: “For many SMEs, this positions international growth as a viable next step rather than an aspiration.”
In the immediate term, more or the current rate of business closures can be expected, said the Association of Small and Medium Enterprises (ASME).
Its president Ang Yuit said the additional costs will force many businesses to take a hard look at continuity.
“I think that is the intention of the policy, except that I hope that it will be calibrated.”
Micro and small businesses, which hire between one and 30 employees, sometimes including many senior workers, may not be able to digitalise or expand overseas as per the Government’s plan.
Still, these firms make up 94 per cent of companies here and hire 45 per cent of the workforce, according to ASME’s Budget proposal this year. There are about four million workers in Singapore.
Overall, however, Mr Ang noted that the Government has laid out its priorities very clearly this year: “There was clarity about where the Government is putting their eggs. Their signal is important because it galvanises the industry.”
Businesses would be drawn to seek out marked sectors for opportunities, he said.
Budget 2026 priorities include a National AI Council chaired by PM Wong, national AI missions, a Champions of AI programme to help with business transformation, as well as expanded AI tax deductions under the Enterprise Innovation Scheme, enhanced internationalisation grants of up to 70 per cent for SMEs, and an AI park at one-north.
ASME plans to align its calls for support based on the priorities set out in the Budget, Mr Ang said.
While they wait for details to come during the debate on the ministries’ budgets in the coming weeks, business leaders said they will be gathering feedback from members.
Mostly, however, it is business as usual. Plans such as upcoming overseas trade missions and programmes to help firms digitalise will continue as planned, they said.
SRA’s Mr Koh said: “My philosophy of government funding is that it is always a plus, not a must. Life goes on with or without it.”
