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The Business Times

More Budget measures to boost productivity seen

Lower-income workers may get more aid: Stanchart

THE government is likely to step up its productivity drive, help companies cope with higher costs, and provide more aid for lower-income workers in the upcoming Budget, said Standard Chartered yesterday.

Long-term goals - not short-term, anti-recessionary measures - will be the focus, said regional head of rates strategy for Asia, Edward Lee, who believes there is 'no need for a fiscal sledgehammer' given that the economy is doing better than it was in 2008 and 2009.

When the government rolled out a $20.5 billion stimulus package for FY2009, its projection then was for GDP to contract by 2-5 per cent. This year, though, it expects GDP to grow by 1-3 per cent.

For FY2012, the government may encourage companies to boost productivity further, Mr Lee said. 'The upcoming Budget is likely to include more measures on this front, particularly schemes geared towards SMEs.'

Measures may include tax incentives, subsidies for staff training, research and development, and capital investment.

In sustaining the productivity drive, the government is likely to keep a lid on the supply of foreign workers, Mr Lee said. Raised foreign worker levies and higher qualifying salary levels for foreign employment pass holders have contributed to increased business costs, he noted.

'Even though growth will be more challenging this year, the government is unlikely to respond by loosening restrictions on foreign workers,' Mr Lee said.

Apart from providing tax rebates and subsidies for companies to become more productive, what it may do is re-introduce corporate tax rebates and one-off SME cash grants.

'While these may be seen as short-term measures, they will help smaller companies to adjust to higher supply-side costs, particularly in a lower-growth environment,' he said.

This year's Budget may also see the government doing more to narrow the wealth gap, Mr Lee said. The Workfare Income Supplement scheme may be reviewed, and there may be more incentives for workers to upgrade their skills.

Standard Chartered's Budget outlook corresponds with calls from business leaders here for more help in coping with rising costs and in boosting productivity. These were key themes in chief executives' views about the Budget, published in BT yesterday.

Emilyn Yap