PUBLISHED FEBRUARY 27, 2013
SMEs prepare for journey of pain
Despite help on offer, life will get harder, they say
BYFELDA CHAY
Some of the schemes that promise help may also have a limited impact. In particular, the business leaders pointed out that only a select group of firms will benefit from government help to enable SMEs to relocate some of their operations offshore - PHOTO: SPH
[SINGAPORE] It's going to get tougher for small and medium enterprises (SMEs) in the near term, and many may be forced to shut down, relocate or consolidate their business, said leaders of the SME community after the Budget was unveiled on Monday.
They say that the measures introduced focus strictly on raising productivity and pushing companies to restructure, but do not offer direct help with pressing issues such as escalating rentals.
Some of the schemes that promise help may also have a limited impact. In particular, the business leaders pointed out that only a select group of firms will benefit from government help to enable SMEs to relocate some of their operations offshore.
Meanwhile, the Wage Credit Scheme, a three-year government co-funding scheme for wage increases for Singaporean employees with a pay of up to $4,000, may put pressure on SMEs to raise workers' pay even though no productivity gains were made.
Said Lawrence Leow, head of the SME committee at the Singapore Business Federation: "Things will not get easier for SMEs going forward. This is a restructuring process and there will be a lot of pain. You are hearing things like how companies and restaurants are closing down, or cutting the number of outlets. It's a consolidation phase.
"I expect to see companies shutting down, or moving overseas because we just don't have the manpower. Without manpower you cannot do anything. Only companies that can attract employees will be able to continue running their business in Singapore."
Andrew Tjioe, president of the 300-member-strong Restaurant Association of Singapore, believes that more food and beverage (F&B) outlets will close down.
"They will have to pack up, especially the smaller ones," said Mr Tjioe, who is also executive chairman of TungLok Group.
"I don't feel good about the Budget at all. To put it bluntly I feel very bad, and I think my industry colleagues feel the same way. Many of us will be in trouble. The higher foreign worker levy for F&B is totally unnecessary, and hiring locals is not going to get any easier for us. And we have been paying more, and salaries have been increasing tremendously. But no matter how much we pay, we just cannot attract locals to be in this industry."
Apart from tougher foreign worker levies and cuts in dependency ratio ceiling, the budget has a scheme in which the government co-funds wage increases for some Singapore employees for three years.
Chan Chong Beng, president of the Association of Small and Medium Enterprises, did not welcome the scheme, noting SMEs may end up feeling pressured to raise the wages of Singaporean employees.
"I think this is dangerous, because wage increases without productivity increases will put a lot of pressure on costs. They (the government) are hoping that employers pass on the productivity savings but there is nothing to link productivity to this wage subsidy."
But Mr Tjioe said that the co-funding scheme will help F&B operators.
"I think this is good, I like it. We have to increase the pay of the workers anyway and we have been doing it, so the 40 per cent from the government will help."
Another initiative announced by Finance Minister Tharman Shanmugaratnam promised help to those who choose to relocate some operations offshore but retain their core functions in Singapore.
No further details were provided on this, though business leaders say they understand the scheme will involve SMEs having to swop some of the current space they are taking up here under JTC leases, in exchange for help to obtain space offshore.
Said Mr Chan: "You must give back the land and space to them, so there are probably very few companies that will benefit if they want to relocate. It is not meant for every SME. You have to be prepared to return earlier parts of the land and space you leased from JTC, in exchange for some grant for relocation. So not everyone who wants to relocate will be able to benefit from this."
He said that there are about 200 companies that take up leases with JTC, meaning only very few firms that will benefit.
Another initiative that may have little impact is the plan to have SMEs and large corporations - such as government-linked companies - collaborate with one another. Again, no details were provided on how this will work.
Said Mr Chan: "It is easier said than done. It is very difficult in Singapore because we don't have such a culture."