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The Straits Times (Singapore)

Budget wish list for SMEs unveiled

SME Committee submits 17 proposals to Govt with the aim of lowering business costs

A NEWLY formed advocacy group for small and medium-sized enterprises (SMEs) has come up with a Budget wish list aimed at lowering business costs and easing labour constraints.

The SME Committee, formed two weeks ago and led by the Singapore Business Federation (SBF), has sent its 17 proposals to the Government for possible inclusion in the Budget, to be unveiled on Feb 17.

To help SMEs deal with the rising cost of doing business, it has proposed a cash payout scheme of up to $10,000 a year, mainly for smaller SMEs.

This would replace the SME one-off cash grant of 5 per cent of a company's revenue, capped at $5,000 introduced for the 2011 tax year.

'We are also saying, let's skew it a little bit, so smaller SMEs get to enjoy a bigger slice of the payout... and then they can use this cash to support their operations over five years,' said SBF chief executive Ho Meng Kit at a media briefing yesterday.

The committee has also proposed that the corporate income tax rebate be extended for another year to assist bigger SMEs. A rebate of 20 per cent capped at $10,000 was introduced last year.

To help firms deal with rising rental rates, the committee suggests that industrial landlord JTC Corporation resume its former developmental role of providing ready and affordable industrial facilities for SMEs.

Some measures proposed by the committee are aimed at encouraging firms to boost productivity so that they are less reliant on manpower.

For example, the committee has suggested that a company's foreign worker quota should be linked to its efforts to invest in building the long-term capability of its staff. 'This means that if companies are actually investing more time in the training of their own workforce, then can they be given slightly more preferential allocation in terms of foreign workers?' Mr Ho said.

The Government has recently tightened foreign worker quotas and raised foreign worker levies to encourage firms to be less reliant on foreign labour.

However, many SMEs say some of their operations cannot be automated, and it is getting harder for them to find locals willing to take on jobs involving manual labour, shift work or that are in non-central locations, Mr Ho said.

The committee also proposed changes to the Productivity and Innovation Credit (PIC) scheme.

Introduced in 2010 and enhanced last year, it offers companies a tax deduction or cash allowance when they invest in six categories of activities including research and development, automation through technology and staff training.

The committee has suggested that the Government raise the maximum cash payout under the scheme from the current $30,000 to $60,000.

It would also like the PIC scheme to be expanded to include more qualifying activities, such as projects that would help to improve a company's operations.

The committee has also made several proposals to help companies expand overseas. For example, it suggested the Government provide cash incentives to help SMEs establish an overseas presence in new markets.

The proposals come amid a heightened sense of pessimism among SMEs about the outlook.

The SBF said in its latest National Business Survey that only half of 973 business leaders polled in November expected their businesses to be profitable this year. In November 2010, it was almost 70 per cent. About 14 per cent said they expected to make a loss this year, more than double the 6 per cent who felt this way in the previous year.

As a result of the gloomier economic outlook, many have decided to scale back on overseas expansion plans, with only 32 per cent saying this is one of their main business strategies for this year.

This is sharply lower than a year ago, when 75 per cent had said they planned to expand overseas.

Companies are also a lot more cautious about hiring, with only 16 per cent planning to recruit, half the 32 per cent who planned to do so last year.

Close to 80 per cent of the respondents said they would try to increase cost efficiency and productivity, up from 61 per cent the year before.

And 58 per cent plan to offer new products and services, up from 40 per cent in the previous year.

When asked what measures they hoped to see in the Budget this year, the top choice was a lowering of foreign worker levies, picked by a fifth of the respondents. Next came lower rental costs, chosen by 18 per cent of the respondents.

Yasmine Yahya