Budget: Govt will press on with restructuring

Tharman: More ways to help firms, lift productivity, keep seniors healthy

By Yasmine Yahya, The Straits Times, 20 Jan 2014

SINGAPORE has started to see some progress in its efforts to raise productivity, but the country is still in the early to middle stages of its economic restructuring and so has to press on with its efforts, Deputy Prime Minister Tharman Shanmugaratnam has said.

The upcoming Budget, which he will unveil on Feb 21, will therefore include more measures to help companies - especially support for small and medium-sized enterprises (SMEs) - to stay the course, he added.

This Budget comes as Singapore has been four years into moves to restructure the economy and raise productivity, so as to reduce the country's reliance on foreign labour, and raise average wages. However, many firms have asked for help with increased costs. Mr Tharman was speaking to the media on the sidelines of a family carnival in Jurong yesterday.

He said Singapore has to stay on course with the restructuring of the economy and the upgrading of its SMEs so the country can create better jobs, and wages of average and lower-income workers can rise over time.

"That is a multi-year task. It is not something that can be achieved in two or three years," he said.

"We are in the early to middle stages of that task. Wages are rising. The labour market is extremely tight; the pain is being felt by the businesses.

"But we are only beginning to see the pickup in productivity."

The Government has started seeing many interesting cases of firms using new technologies, changing their old way of operations and gaining market share and business advantage as a result, he said.

"Upgrading is not just about reducing costs. It is about gaining business advantage. So that process is now starting."

The fact that productivity has not picked up much despite the tight labour market is understandable, he said, but added that Singapore is now going to see better results.

The Government will do its part by providing more support, not just through broad-based schemes like the Productivity and Innovation Credit which any company can apply for, but more industry-specific measures too, he said.

The Government is working with industry associations and individual firms, he added, to help companies invest in technology and their supply chains and provide them with assistance so that large firms can help small firms.

Mr Tharman added that the Budget will also include health-related measures for seniors that focus not just on health-care costs but on keeping them active.

"It is really a commitment by the Government to honour the pioneer generation and to do it in a way which is sustainable," he said.

"In other words, this is not a one-year bonanza, but providing them with sustainable help so that they can live good long lives, happy and long lives."

'Merit' in extending productivity scheme
Josephine Teo hints that PIC may continue, following interest by firms
By Jermyn Chow, The Straits Times, 27 Jan 2014

IN yet another hint that a scheme giving tax incentives to firms that invest in improving productivity could be extended, Senior Minister of State for Finance Josephine Teo said there was "merit" in keeping it going.

She told The Straits Times yesterday that local firms have found the Productivity and Innovation Credit (PIC) scheme very useful and made a "strong request" to prolong it.

The feedback came amid the Government's ongoing review of the popular PIC ahead of next month's Budget announcement.

"Momentum is building up so there is merit in keeping the PIC available to businesses for a longer time," said Mrs Teo, without elaborating on how long a possible extension would be.

Introduced in 2010, the PIC gives tax deductions to companies that spend on productivity-related investments, such as staff training and patent or trademark registration.

The scheme is due to expire when the Government's 2014 financial year ends in March 2015.

Mrs Teo, who was attending an Edusave Awards presentation ceremony in her Bishan North ward, said more time is needed for the PIC scheme to make an impact on companies' productivity drive.

"It's just three years (now) and this is an effort that will probably take longer than that."

Her comments come less than two weeks after Minister of State for Trade and Industry Teo Ser Luck said the Government is considering prolonging the PIC.

The scheme allows firms to lower their taxable income or claim cash payouts based on up to $400,000 of spending in each of six categories of productivity- related investment, or up to a total of $2.4 million.

There have been suggestions from accounting firms, including Deloitte Singapore and PricewaterhouseCoopers, to make it available to companies for another two to three years.

Mrs Teo said the upcoming Budget will continue to pave the way for the Government to restructure the economy, such as by making it less reliant on foreign manpower. She added that most companies are already "feeling the pain" from the tightening of foreign manpower supply.

"As you feel the pain, you will also get a stronger signal to do things differently," she said. "Some have figured out. Some are still getting used to the idea."

Mrs Teo also said that the Government will be strengthening its support for families, in areas such as health care and education.