THE rising cost of doing business and how to tackle the problem were the hot topics at a pre-Budget forum yesterday.

Representatives from the business community argued that labour costs and rent are being artificially inflated, hurting firms which are struggling to maintain their cash flow.

Singapore Business Federation chief operating officer Victor Tay told the forum that several chief executives of big firms are struggling to meet the rising costs while maintaining a decent margin.

'If you think about it, the higher levies for foreign manpower are artificially inflating costs here,' he said, referring to the moves to raise the costs of hiring foreign workers.

He added that commercialising the assets of JTC Corp, which owns large tracts of industrial land, and divesting them to real estate investment trusts has led to higher rents.

Ms Elim Chew, the founder of fashion retailer 77th Street, also said that rents for retail space are extremely high and causing many entrepreneurs concern.

'If the cash flow and the margins are low, how can you expect them to send staff for training or think about creating new products,' she said at the forum, which was organised by the Institute of Certified Public Accountants of Singapore (Icpas).

A similar view came from a survey of about 400 Icpas members, in which 60 per cent of the respondents said rising labour costs are their biggest worry this year.

But Mr Chaly Mah, the chief executive officer of Deloitte Asia Pacific, said the Government should not be giving life support to businesses if they cannot survive.

He added that firms have to accept that costs are rising as Singapore has a small and finite source of manpower and land.

'In the long run, if we keep playing the cost game, we will lose out. Look at the firms in China - they are now moving their low-cost manufacturing to cheaper places like Indonesia,' he said.

He added that business is about the survival of the fittest - firms should either raise their game by being more productive or close down.