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Feb 25, 2010
Raise the bar with regulation
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THIS year's Budget offered more tax breaks to companies that innovate. The Government also wants to pump in $5.5 billion in tax benefits, grants and subsidies to improve productivity.�
The strategy is not new. The annual Budgets in 2008 and 2009 also focused on offering such incentives to companies to encourage innovation and productivity, which did not necessarily yield the best results.
Most of Singapore's research continues to be minor adaptations of existing products to suit local markets, rather than cutting-edge innovations of the Nobel Prize variety.
Instead of offering grants, subsidies and tax breaks, the Government should use regulation and raise the bar on better standards.
Take the United States' battle to cut car emissions. It was the US government's rule requiring the installation of catalytic converters in American-made cars which led to more pollutant-free cars.
American business complained and lobbied against the rule, citing increased costs of making the cars and competitive disadvantages.
That did not happen. What did was that innovation took over and big car companies like Ford and General Motors were able to meet the new catalytic converter standards without losing their competitive edge.
Clear price signals and regulation create a more innovative environment. When we have the best research institutes, the best educated engineers and people, Singapore should want higher standards because companies can meet these standards through innovation while weaker ones cannot.�
Properly crafted rules will give a two-for-one kick: they can improve the competitiveness of both the firms and the nation.
Offering tax breaks and other incentives will indirectly weaken our standards which will only enable lower-efficiency, lower-cost Chinese products to compete with Singapore products and services.
Edmund Lin
Raise the bar with regulation
<!-- by line --><!-- end by line -->
<!-- end left side bar --><!-- story content : start -->
THIS year's Budget offered more tax breaks to companies that innovate. The Government also wants to pump in $5.5 billion in tax benefits, grants and subsidies to improve productivity.�
The strategy is not new. The annual Budgets in 2008 and 2009 also focused on offering such incentives to companies to encourage innovation and productivity, which did not necessarily yield the best results.
Most of Singapore's research continues to be minor adaptations of existing products to suit local markets, rather than cutting-edge innovations of the Nobel Prize variety.
Instead of offering grants, subsidies and tax breaks, the Government should use regulation and raise the bar on better standards.
Take the United States' battle to cut car emissions. It was the US government's rule requiring the installation of catalytic converters in American-made cars which led to more pollutant-free cars.
American business complained and lobbied against the rule, citing increased costs of making the cars and competitive disadvantages.
That did not happen. What did was that innovation took over and big car companies like Ford and General Motors were able to meet the new catalytic converter standards without losing their competitive edge.
Clear price signals and regulation create a more innovative environment. When we have the best research institutes, the best educated engineers and people, Singapore should want higher standards because companies can meet these standards through innovation while weaker ones cannot.�
Properly crafted rules will give a two-for-one kick: they can improve the competitiveness of both the firms and the nation.
Offering tax breaks and other incentives will indirectly weaken our standards which will only enable lower-efficiency, lower-cost Chinese products to compete with Singapore products and services.
Edmund Lin
