Written by Ng E-Jay
03 March 2010

During the budget debate in Parliament on Monday, PAP MPs echoed concerns previously raised by the National Solidarity Party (NSP) on the possible impact of the latest productivity drive on small and medium enterprises (SMEs).

A couple of PAP MPs were of the view that some SMEs might face cashflow problems in the immediate future as they sought to enhance their work processes to improve productivity. [1]

For example, Sin Boon Ann, an MP for Tampines GRC, said that the cost of labour and factors of production would necessarily go up when businesses attempt to follow the government’s lead in raising productivity.

He pointed out that this occurred in 1980s when the the unit cost of labour increased as a by-product of the government pushing through measures to increase productivity through automation.

Similar concerns about potential problems faced by SMEs were previously raised by the NSP in its response to Budget 2010 published on its website a day after the Finance Minister gave the budget speech in Parliament.

The NSP explained that most SMEs do not have the financial means to embark on sizeable investments in human resource and technology to improve their productivity, rendering tax breaks for such investments useless for them.

The NSP felt that special emphasis should be given to local SMEs to help upgrade themselves from mere contract manufacturers and spare parts suppliers to that of MNCs, and from Original Equipment Manufacturers (OEMs) to that of Original Design Manufacturers (ODM), Private Label Manufacturers (PLM), or Main Brands Owners (MBO).

Countries such as Taiwan and Korea, for instance, were successful in grooming their own local SMEs to become higher value-added industrial players, eventually overtaking their Singapore counterparts in the 1990s.

In my opinion, the best way to help SMEs is to drastically reduce the suffocating entrenchment of GLCs in our economy.

GLCs account for 60% of our economy. They are inefficient and uncompetitive because they are run by bureaucrats from the establishment circle rather than by seasoned business leaders.

They promote poor allocation of resources and are not flexible and responsive to changes in the global marketplace.

They stifle innovation and creativity by crowding out smaller players and cornering the domestic market.

They lead to a hollowing out of the domestic entrepreneurial base by forcing promising young business talents to relocate elsewhere in search of greener pastures and a fairer and more level playing field.

PAP MPs should heed the NSP’s critique of Budget 2010 and give the NSP due recognition when they raise similar ideas in Parliament.

Unfortunately there seems little political will within the ranks of the ruling party to address the fundamental issues, especially the entrenchment of GLCS and micromanagement of the economy by the government which hurts our SMEs unfairly.

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References:

[1] Channel News Asia, “MPs concerned low-wage workers could be left behind in productivity drive“, 02 March 2010.


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