Minister Lim Hng Kiang's Written Reply to Parliament Question on Impact of Recent Restrictions on Foreign Worker Numbers

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Question

Mr Inderjit Singh: To ask the Minister for Trade and Industry (a) what has been the impact on SMEs of the recent rise in business costs and restrictions on the number of foreign workers that companies can hire; and (b) what are the plans to help SMEs remain viable in Singapore.

Written Reply by Minister for Trade and Industry, Mr Lim Hng Kiang

1. The cost pressures for businesses in general have increased, stemming largely from higher labour cost and to some extent, property rentals. Reflecting this, the unit business cost index for the overall manufacturing sector has increased by 4.6 per cent for the first half of 2012 compared to a year ago. 

2. The Government has taken action to help businesses address their cost concerns. One main area is manpower cost. Acting Minister for Manpower has explained the government’s measures to help SMEs adjust to changes in our foreign workers policy, by restructuring their businesses, and hiring and training more locals.

3. To mitigate other costs, the Government has also introduced initiatives such as the one-off, non-taxable SME Cash Grant of up to $5,000, announced as part of Budget 2012. To contain rising rental cost pressures in the industrial property markets, the government has released more industrial land on shorter leases through the Government Land Sales programme. Over the next two years, an estimated 500,000 square meters of multiple-user factory space will be made available to industrialists each year. This is about three times the average annual supply of land released in the past five years.

4. But ultimately Singapore is not a cheap business location. We are at a more advanced state of development compared with our neighbours, and our costs would be higher. For SMEs to remain viable in Singapore, they have to continually upgrade their operations to maintain their competitiveness. The Government has therefore introduced many measures to support firms to raise their capabilities and improve their productivity.

5. The National Productivity and Continuing Education Council (NPCEC) is charged with raising productivity across all sectors of our economy. It has identified 16 key priority business sectors, and is applying productivity roadmaps to restructure these sectors towards higher value-added activities with good jobs. For example, the Media Development Authority of Singapore (MDA) recently announced plans to raise the productivity of the media industry through a $20 million funding boost into the industry.

6. We are focusing help to our SMEs. For example, the Government earlier announced a $200m boost to the Capability Development Scheme (CDS). This will help SMEs build up their capabilities in the areas of automation, technology adoption, innovation service quality and branding, and restructure their businesses for sustained growth and competitiveness. This boost increased the grant subsidy rate from 50 per cent to 70 per cent for the next three years under schemes managed by SPRING and IE Singapore.

7. In addition, SPRING has also rolled out the Innovation & Capability Vouchers (ICV) programme, which provides a $5,000 voucher to eligible companies to offset costs for upgrading capabilities. The programme aims to encourage smaller companies to upgrade, strengthen their core business operations and enhance efficiency in four capability areas: Innovation, Productivity, Human Resource Development, and Financial Management. SPRING has committed $32m over 5 years for the ICV.