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Firms warn of layoffs to cope with costs
Companies here may have to lay off workers to cope with cost pressures as they respond to what they say is a Budget that is more focused on the long term than addressing their immediate concerns.
While business leaders whom BT spoke to commended the government for doing more to encourage productivity and innovation, they felt that the absence of direct measures to help firms with cost and cash flow issues meant that they might need to try to do more with less by cutting their headcount.
"I applaud the government's efforts to cater to the needs of SMEs in the Budget. But even though this is a good start, I believe the government can still do more, as SMEs are often faced with pressure margins and rising costs," said Yong Yean Chau, CEO of Parkway Trust Management.
"There are good things in the Budget to push through the economic transformation. In order to gain productivity, companies will need to look at technology and automation, but there is a limit to how much of that we can do," added Douglas Foo, chairman of Sakae Holdings.
Ong Jun Quan, executive director of Soon Li Heng Civil Engineering, said that he had hoped that the Budget would provide some cash grants to SMEs to help them with their cash flow problems.
Given the Budget's emphasis on restructuring, firms said that they will leverage on the productivity measures to reduce manpower costs. "The Productivity and Innovation Credits (PIC) scheme is a major point in the Budget, and it is beneficial to SMEs. But as costs continue to rise, we will have to do with lesser manpower and more efficiency. Through the PIC, the government is helping us to do that," said Arun Narula, chairman of Mercantile Pacific Asia. His company aims to be more efficient in two years' time by tapping the extended PIC scheme and introducing new technology and automation.
Sakae Holding's Mr Foo acknowledged that the enhancement of the Continuing Education and Training (CET) system through a $500 million increase of the Lifelong Learning Endowment Fund (LLEF) will help people to upgrade their skills and be more mobile. He explained that with gains in productivity, if companies needed fewer man-hours for projects, then "they do not need full-time employees to be there all the time". This frees up employees to work freelance or part-time for a few employers in the industry, he said. Under such a shared-labour resources model, companies can become more nimble with a leaner workforce.
Mr Foo noted that since there are limits to how much productivity certain sectors can gain through technology and automation alone, the Budget could have introduced measures to help companies relook their business models and address their cost problems. "The Budget contained measures to help start-ups, but I feel that there is already enough help for start-ups out there. Instead, there should have been a focus on helping SMEs with business model innovation through grants to engage consultants, for example, so that they can review their business models to remain more competitive," he said.
The Budget was also concerned with improving productivity in the construction sector through raising levies for lower-skilled foreign labour, a skills upgrading scheme for these workers, the use of more productive materials and extended employment stay in Singapore for higher-skilled labourers.
Soon Li Heng's Mr Ong said that these measures were designed to help construction firms reduce their reliance on manpower, particularly low-skilled foreign labour. For instance, the push for more productive materials such as prefabrication units would cut down on the amount of manpower needed.
While he welcomed the skills upgrading scheme, Mr Ong felt that this was bitter-sweet for him. "As for the skills upgrading course, some of my workers are really good in some skills but they are generally not good in English or languages in general. Therefore they will fall through the cracks because they may not be able to pass the course and upgrade even though they are really good in their work," he said.
As for the extension of period of employment for higher-skilled workers, he pointed out that this only applied to workers from non-traditional sources (NTS) and China, but the bulk of his workers came from traditional sources, particularly India. "So for me, this measure does not change my situation. Again, they are on the same shorter work permit stays as before, unless I now go and replace them with NTS workers."
Interestingly, the companies that BT spoke to seemed unfazed by the the increase in employer's contribution to CPF, saying that this was likely to have a minimum impact on them.
Some firms welcomed the measures to boost the internationalisation of local companies. "With the simplification of programmes such as the Market Readiness Assistance and Global Company Partnerships, SMEs are a step closer to having the support needed for their plans to succeed internationally," said Ingrid Sidiadinoto, managing director of UPS Singapore.
Mr Narula added that these measures are positive as they will help increase Singapore brands globally. "From our perspective, we welcome these timely measures as we are preparing to expand our brand globally in the next few years."
Companies here may have to lay off workers to cope with cost pressures as they respond to what they say is a Budget that is more focused on the long term than addressing their immediate concerns.
While business leaders whom BT spoke to commended the government for doing more to encourage productivity and innovation, they felt that the absence of direct measures to help firms with cost and cash flow issues meant that they might need to try to do more with less by cutting their headcount.
"I applaud the government's efforts to cater to the needs of SMEs in the Budget. But even though this is a good start, I believe the government can still do more, as SMEs are often faced with pressure margins and rising costs," said Yong Yean Chau, CEO of Parkway Trust Management.
"There are good things in the Budget to push through the economic transformation. In order to gain productivity, companies will need to look at technology and automation, but there is a limit to how much of that we can do," added Douglas Foo, chairman of Sakae Holdings.
Ong Jun Quan, executive director of Soon Li Heng Civil Engineering, said that he had hoped that the Budget would provide some cash grants to SMEs to help them with their cash flow problems.
Given the Budget's emphasis on restructuring, firms said that they will leverage on the productivity measures to reduce manpower costs. "The Productivity and Innovation Credits (PIC) scheme is a major point in the Budget, and it is beneficial to SMEs. But as costs continue to rise, we will have to do with lesser manpower and more efficiency. Through the PIC, the government is helping us to do that," said Arun Narula, chairman of Mercantile Pacific Asia. His company aims to be more efficient in two years' time by tapping the extended PIC scheme and introducing new technology and automation.
Sakae Holding's Mr Foo acknowledged that the enhancement of the Continuing Education and Training (CET) system through a $500 million increase of the Lifelong Learning Endowment Fund (LLEF) will help people to upgrade their skills and be more mobile. He explained that with gains in productivity, if companies needed fewer man-hours for projects, then "they do not need full-time employees to be there all the time". This frees up employees to work freelance or part-time for a few employers in the industry, he said. Under such a shared-labour resources model, companies can become more nimble with a leaner workforce.
Mr Foo noted that since there are limits to how much productivity certain sectors can gain through technology and automation alone, the Budget could have introduced measures to help companies relook their business models and address their cost problems. "The Budget contained measures to help start-ups, but I feel that there is already enough help for start-ups out there. Instead, there should have been a focus on helping SMEs with business model innovation through grants to engage consultants, for example, so that they can review their business models to remain more competitive," he said.
The Budget was also concerned with improving productivity in the construction sector through raising levies for lower-skilled foreign labour, a skills upgrading scheme for these workers, the use of more productive materials and extended employment stay in Singapore for higher-skilled labourers.
Soon Li Heng's Mr Ong said that these measures were designed to help construction firms reduce their reliance on manpower, particularly low-skilled foreign labour. For instance, the push for more productive materials such as prefabrication units would cut down on the amount of manpower needed.
While he welcomed the skills upgrading scheme, Mr Ong felt that this was bitter-sweet for him. "As for the skills upgrading course, some of my workers are really good in some skills but they are generally not good in English or languages in general. Therefore they will fall through the cracks because they may not be able to pass the course and upgrade even though they are really good in their work," he said.
As for the extension of period of employment for higher-skilled workers, he pointed out that this only applied to workers from non-traditional sources (NTS) and China, but the bulk of his workers came from traditional sources, particularly India. "So for me, this measure does not change my situation. Again, they are on the same shorter work permit stays as before, unless I now go and replace them with NTS workers."
Interestingly, the companies that BT spoke to seemed unfazed by the the increase in employer's contribution to CPF, saying that this was likely to have a minimum impact on them.
Some firms welcomed the measures to boost the internationalisation of local companies. "With the simplification of programmes such as the Market Readiness Assistance and Global Company Partnerships, SMEs are a step closer to having the support needed for their plans to succeed internationally," said Ingrid Sidiadinoto, managing director of UPS Singapore.
Mr Narula added that these measures are positive as they will help increase Singapore brands globally. "From our perspective, we welcome these timely measures as we are preparing to expand our brand globally in the next few years."
