Reactions to Budget 2019
Businesses and experts welcomed measures to support enterprise in Budget 2019, but were disappointed in the move to tighten foreign worker quotas for the services sector
Budget 2019 was announced amid a challenging economic and geopolitical environment. Against this backdrop, the local business community welcomed measures announced in the Budget to help companies boost innovation, promote internationalisation and improve worker skills.
In a statement, the Singapore Business Federation (SBF) noted that the Government has introduced a set of forward-looking measures to meet Singapore’s long-term challenges and address the immediate and medium-term concerns our companies are facing. “SBF commends the Government for putting forward a well-balanced and progressive Budget that encourages companies to continue to transform and prepare for the future,” said Mr Teo Siong Seng, SBF Chairman.
He added: “We note the Government’s point that close collaboration between the Government and trade associations and chambers (TACs) is crucial to achieving our objectives, and we are thus very encouraged to hear that the Government will strengthen its support for TACs through the Local Enterprise and Association Development programme.”
Business Transformation push welcome
Observers welcomed the Government’s continued commitment to economic transformation in Budget 2019. To this end, policy measures announced have focused on deepening enterprise capabilities.
“Besides the Scale-up SG, SME Co-Investment Fund III and the Innovation Agent programmes, which are new initiatives to help start-ups and younger companies, policymakers have opted to “double-down” on existing schemes and worked on enhancing the effectiveness of these schemes, which is in line with our expectations,” said Mr Irvin Seah, Senior Economist at DBS Bank.
For example, past policy measures such as the Enterprise Development grant, the Productivity Solutions Grant, the Working Capital Loan, and the Automation Support Package have been extended.
In addition, the Government will also increase its share of the risk to 70%, up from 50% for schemes under the Enterprise Financial Scheme. “Increasing the government’s share of the risk will encourage Participating Financial Institutions to loan to smaller companies with relatively weaker financial standings instead of favouring bigger corporates,” said Mr Seah.
Ms Donna Lee, founder and CEO of KG World, said that Budget 2019 reflects the Government’s efforts to establish new ways of helping businesses move forward. “As an accelerator company for businesses, we will continue to assist business owners in the area of franchising, licensing and internationalisation. We look forward to work together with government agencies, and our local and overseas partners, to help Singapore businesses deal with challenges ahead,” she said.
Foreign worker quotas for services sector
One unexpected move by the Government was the tightening of foreign worker quotas for the services sector. Some business owners were concerned that the measure would add further pressure to an F&B sector already suffering from labour crunch.
The Government is tightening the Dependency Ratio Ceiling (DRC), or the proportion of foreign workers a firm can employ, from 40 per cent to 38 per cent on Jan 1 next year, and to 35 per cent on Jan 1, 2021.
“The decrease in the Dependency Ratio Ceiling for the services sector will have an impact on SME businesses. However, the progressive implementation will help businesses gradually make changes,” said Ms Lee.
SBF said that while the lowering of the service sector’s DRC was unanticipated, it is a strong signal from the Government of the importance of maintaining its current policy on foreign workers, so that Singaporeans can continue to enjoy meaningful and well-paying jobs in the future. “That said, the services sector is very diverse and adjusting the DRC can be a blunt tool. We hope to see some flexibility in its implementation as some service sectors do have higher productivity and are facing local skill shortages,” SBF added.