Debate on Annual Budget Statement 2019

Mr Speaker, Sir, in his development and delivery of Budget 2019, our Finance Minister Heng Swee Keat, has lived up to his reputation of being both gentle and firm. This is a Budget that tries to uplift every Singaporean – the children, the youths, the seniors and in particular the Merdeka Generation. This is also a Budget that relentlessly pushes local enterprises and workers to step out of their comfort zone, and build deeper capabilities to fend the unforgiving disruptions caused by globalisation and technology. 

I would like to speak on one, the key pillar of our economy, the Small-and-Medium Enterprises (SMEs) which form 99% of all local firms; and two, the key pillar of our social service terrain, the Voluntary Welfare Organisations or VWOs which, together with the public agencies, jointly deliver many of the social and even healthcare services in our country.

First, on SMEs, a key pillar of the Singapore economy, contributing about 50% of our GDP. In addition to creating wealth and jobs, a vibrant entrepreneurial spirit is a national asset that feeds a flourishing society. Hence, the responses by SMEs are important points of consideration in fine-tuning our policies or communications efforts.

There are two Budget features that I would like to touch on concerning businesses.

One is on the Dependency Ratio Ceiling (DRC) or the restrictions on foreign manpower. It has been more than six years since foreign manpower dependence was tightened to drive higher productivity and redirect foreign manpower to higher tech-content businesses and also to protect the employment of our own local workers. However, whilst automation and digitalisation have helped industries such as the construction and manufacturing sectors, the same cannot be said of the service sector. As Budget 2019 continues with the latest DRC reduction to 35% in 2021, sectors likely to be hit will be in hospitality, F&B services, the arts, entertainment and other lifestyle sectors.

I spoke to Mr Benedict Choa, the owner of Cube Boutique Hotel which specialises in the capsule hotel model with its highly space-efficient yet comfortable bunk-bed accommodation in both China Town and Kampong Glam vicinity. Ben, who has fully used up his foreign worker quota, primarily in the housekeeping department, has tried all means to transform his business model. He has found a new market niche in highly space-efficient capsule hotel market. He has also automated his guest check-in system; and he took a leap with Government agency, IMDA, to install a communal dining ordering system in the Kampong Glam tourist belt. And Ben is all ready to employ any local staff willing to work if he only can find them.

This manpower challenge on the ground is also faced by larger service enterprises too. Mr Andreas Sugaimin, Senior VP of Human Capital and Development of Pan Pacific Hotel group, in his efforts to employ local staff, has embarked on a programme to employ persons with disabilities. Despite this, the group is still short of manpower as shift jobs in his industry continue to be unpopular amongst Singaporeans. Andreas and his team shared that the pool of willing workers from Malaysia and China is shrinking. And these are the hard truths on the ground.

How does Government encourage enterprises like Cube Boutique Hotel and Pan Pacific Hotel which are aligned with our national directions and yet still face manpower challenges?

Next, on the tiered support for different tiers, different types of SMEs according to size. 

Instead of broad strokes, a different tiered approach is explicitly adopted in Budget 2019 to provide different strokes of help to SMEs of different sizes. Hence, high-growth large firms get more dedicated support and account management to scale and internationalise such as using the Scale-Up SG programme. Those in the mid-sized tier will get slightly less. And the biggest base comprising many of the small and micro firms are assisted through more plug and play solutions at mostly self-help platforms or the heartland SME Centres. So, very differentiated approach for different tiers.

Dr Sue Ann Toh and her team, one of my grassroots, recently started Novi Health, a medical clinic and health tech company which combine clinical care with technology-enhanced holistic solutions to prevent and manage diabetes and other chronic conditions. Sue Ann spoke to me, a small firm, about her team's wish to access a roadmap and a competent Tech Coach which will likely not be available in view of her start-up size and in view of our strategy of differentiated support for different tiers of SMEs.

So, whilst differentiated support support favouring larger SMEs make sense as larger firms arguably give more returns to the economy and provide more jobs, all large firms themselves however started small often with humble beginnings. How would Government identify and nurture small start-ups who deserve a leg-up but who might be overlooked because of their being defined as a micro or small business? 

So, I have further suggestions to help the SMEs and for the Minister to consider.

One, aggressively identify, train and develop a special workforce comprising senior citizens and persons with disabilities; two, incentivise SMEs through higher Special Employment Credit to employ these special workforce members; three, provide a buffer foreign headcount for a duration if an employer guarantees the training and employment of, say, more than 10 local staff with disadvantaged backgrounds; four, update the pool of source countries to include countries such as Myanmar to allow employers to fulfill the DRC; and five, adopt and execute well a four-pronged process to nurture the largest base of small and micro SMEs – the largest base of the most SMEs. And the four prongs being the 4As – Awareness, Affiliation, Action and Advocacy.

Many SMEs are still not fully aware of the purpose and slew of measures Government has in store for them. That is for Awareness.

Those who are aware may not be convinced of the need to change and upgrade and will need to affiliate or buy in through a more impactful and regular targeted sharing of successful transformations in their specific industries.

And three, SMEs who are aware and willing to take action often find themselves burdened by daily operational demands and fires. My search on the SME Portal was interesting but it was insufficient to develop a roadmap or action plan if I were running my own business. So, some way must be found to competently facilitate clusters of similar SMEs on a regular basis to adopt or to plug some low-lying fruits together, such as shared services in HR, accounting and common industry-specific applications. That is for Action.

Finally, Advocacy in this four-step process. Just as Dr Robert Yap from YCL Group has risen to become an advocate for transformation in the logistics industry, more aggressive efforts ought to be made for more of such evangelists to be profiled for the rest and its industry and to harness these advocates' ideas for further industry transformation. We need more of the Robert Yaps in the other industries as well.

Sir, moving even the smallest SMEs from Awareness to Affiliation to Action and to Advocacy in Singapore's enterprise transformation vision, is a framework that Government can consider. 

And finally, on building a caring society and the role of voluntary welfare organisations (VWOs).

Sir, it is a known fact that the demand for healthcare and other social service to assist our disadvantaged is mounting in our society. Our Finance Minister had himself shared that these needs cannot be met by Government alone and will require the rest of the society – the village – to join in the solutioning. Besides donors, one significant partner to Government is the VWOs. Unless they are more financially independent, much of their time will be taken up to seek funds instead of strengthening their services. 

So, therefore, I have three suggestions to enhance the financial independence of the VWOs so they can provide more sustainable quality services with Government. I propose that Government:

(a) further incentivise donors to IPCs by offering a 300% tax deduction provision for the Bicentennial Community Fund, similar to that implemented for SG50;

(b) help VWOs further earn their own stream of incomes by allowing VWOs to invest Singapore Savings Bonds, for instance. This is currently not permitted; and

(c) invest. For Government to invest in and nurture VWOs with good track records and help them build social enterprises and other revenue-earning arms to reduce their dependence on Government grants and donations. Create platforms similar to the enterprise model that we see in the economy side, such as VWOs Go Digital!, Scale Up VWOs!, VWO Co-Investment Fund or even VWOs Go Regional! There is no reason why this sector cannot be more entrepreneurial and why they cannot spawn a MacDonalds' chain of sorts to create many more jobs for the differently-abled. There is no reason why they cannot set up e-commerce sites with plug and play solutions to market and distribute its own services and products. There is no reason why VWOs cannot start regional businesses offering much-needed training in social services, consulting services and disability management, for instance.

And since there is no way that Government will be able to fund all the needs, it must find ways, like it does for the SMEs, to strengthen its VWO partners so that they too can be more financially independent and continue to be a strong service partner to Government.  

In conclusion, Sir, Budget 2019 is a comprehensive and sensible budget. Will Budget 2019 make any major difference to the transformation of our country's business and social service sectors? I believe the devil is in the details and the key is in the execution. And I hope the Minister will consider some of my inputs. Sir, I strongly support the Budget.