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SMEs feel the blues of a tighter foreign labour supply

Wei Chan, owner of a mom and pop bakery in Ang Mo Kio spoke at two of events. From what I understand from Gilbert, Wei Chan wanted to convince the audience that we need more cheap foreign workers in order for SMEs to survive. However, not only did he fail to get his message across, he soon became the target for the rest of the guys in the room. The conversation soon steered from a forum for minimum wage to one about migrant worker issues. At the heart of it was a very deep-seated problem faced by most SMEs in Singapore – businesses here are struggling to survive.


Vincent Wijeysingha, Kumaran Pillai, Leong Sze Hian, Jolovan Wham and Wei Chan.

Wei Chan obviously was in the wrong neck of the woods. He soon realized that enough is enough and went back to where he hailed from and we didn’t see him around Gilbert’s forum anymore. I later found out that he sought company with ASME where his misery found other doting companions.

Like the story of Wei Chan, SMEs, who contribute to 50% of our national income, feel that they are left in the cold and with the government restricting the flow of foreigners in Singapore; these little businesses will have to either shape up or ship out (or close shop).

From the conversations that I have had with him and from what he has shared at the forum; behind his veneer of success is a struggling businessman. He depends on it to feed himself and his family. His workers depend on it and he is driven to succeed not because of greed but because of an ambition to do better than his predecessors, or plainly put because of the need to survive. For success would mean breakout from the economic trap(s) that hold us down.

Now, his hopes of building a better tomorrow, after investing thousands of dollars are dashed – the government plans to tighten the supply of foreign labour which he depends on to expand his business. He says the locals do not want to do it at the wage levels that he is offering. He can’t offer more because he will not be able to sustain his business at higher costs.

So, what can the likes of Wei Chan do?

If you’re an owner of an SME and have been adversely affected by the change in government’s foreign manpower policy, do not fret because there are ways to overcome this labour shortage by adopting strategies to overcome our over-reliance on cheap foreign labour.

But seriously, how much more can we innovate? If you have already invested in nice IT systems – point of sales, accounting, inventory management and automated your sales process or bought expensive machinery to cut down manual work, what else can you do?

Take a look at the two video below and you’ll be amazed but what our counterparts are doing:

Lay’s Vending Machine in Argentina

Automated cake baking machine in Japan

Now, why didn’t Wei Chan think of that? Or might it be that the cakes baked by an untrained foreign baker would be any better? I do not know.

But, what I know is that the noisiest fellas in our business community come from small businesses that are either too small to automate and not large enough to innovate (pun intended); and they often indulge in wallowing and attention seeking (just read the statements that come out from ASME).

Looking on the bright side, our G has decided to throw some good $$$ at this problem. However, throwing money at a problem is not a solution. What we need to do is to throw money where it matters most. There are few programmes, administered by A*Star and Spring Singapore that comes to my mind:

1. Technology Adoption Programme: A*STAR will help to link companies’ technology needs to solution providers to help companies across sectors increase productivity through adopting technology innovations and solutions. From July 2013, this programme will be piloted in six sectors – Construction, Food Manufacturing, Precision Engineering, Marine, Aerospace as well as Retail.

2. Capability Development Grant (CDG): supports up to 70% of the cost of productivity improvements and capability development that will result in greater enterprise competitiveness and business growth.

3. Collaborative Industry Projects: The Government will work with industry players and partners like Trade Associations and Chambers (TACs) to address sector-specific productivity challenges. Consortia with at least 3 SMEs, comprising solution providers and users, will be formed to develop and propose bottom-up deployable and scalable productivity solutions. SPRING will be looking at the Collaborative Industry Projects (CIP) in six priority sectors: Food Manufacturing, Food Services, Furniture, Printing & Packaging, Retail and Textile & Fashion…   for more information

There is also another programme that caught my eye – SME Talent Programme – where SMEs can attract local talent from ITEs and Polytechnics over the next three years. This is really commendable; something that they should have done years ago. Now, Wei Chan cannot say that he can’t find talent locally!

If you do need assistance or advise, please drop me an email or leave a message below.

Kumaran Pillai is a member of Action Community for Entrepreneurship (ACE). He also blogs actively, comments periodically, runs a business incubator daily and stages protests at Hong Lim Green when he feels the blues. 


Is PAP becoming more welfare oriented?

I predicted not too long ago that the government would become more welfare oriented at a forum organized by Gilbert Goh in 2011. My predictions were not based because PAP would have a change in mindset, but because of necessity and with a huge fiscal reserve, the government can afford to have a more balanced budget in the future. In fact, going forward and if everything else remains constant we’d see more balanced budgets in the years to come.

govt here to help

Photo: Internet

My assumptions are based purely on econometric projections, if the government has a huge reserve and since we are investing our monies in economies which are growing at a rate which is faster than ours; the external wing of our economy is self-sustaining. So there is little incentive to grow the external wing by extracting rent from the locals.

Besides, what our economy requires is a shot in the arm and it is also politically prudent to do so. Our local industries, particularly the SMEs need to be revitalized. The government has probably come to the realization that growing the GLCs at the expense of SMEs is hurting the people. And if you’ve been paying close attention to Hsien Loong and team, they will probably push our GLCs to focus in the regional economies so that SMEs can grow domestically.

But growth in the domestic sector will be sluggish in the next couple of years. With rising cost of living (and it seems like they will be able to tame this beast for the moment) and because of cutting down on the intake of foreign labour, our SMEs will take time to adapt to the new cost structures.

Putting the moral issues of whether the workfare subsidies reach employees and about the profligate use of tax-payers’ monies, any injection into the circular flow of income will boost GDP by a factor of 1.8- 2 times of $3.6B. Hence, the revision of our GDP projections from 1% -3% to 3% – 4% in the next three years. Good GDP growth and a more social focus seems like a good recipe to win over those sitting on the political fence.

According to some analysts, the COE prices are also likely to decline in the next few months/years. And Khaw is likely to keep a lid on HDB prices and even bring it down to tolerable levels. It is also quite unlikely that Khaw would adopt the suggestions put up by SDP, as it Pareto inefficient i.e. as some home owners may be adversely affected by this policy*. (I mean no disrespect to the ex Chief Economist of GIC who endorsed it. To be fair, he said that it is worth looking at)

It seems like the arguments for minimum wage is based on grounds of morality rather than good economics or politics. A minimum wage of S$1200 would more likely to benefit our foreign workers and foreign domestic workers. While we speak of greed and all that (and enough of that rubbish), the real test is whether we are willing to pay S$1200 for our maids (Foreign Domestic Workers) at home. It just seems to me that this policy would be hugely unpopular as it would affect about 600,000 people in Singapore. Unless the minimum wage policy is aimed purely at locals, in which case, the policy makers would be criticized of being home biased or exploitative of foreign workers,  cos their (FW) wages may be lower than the minimum wage floor.

Increasing our population to 7M maybe arguably good economics (still I’m not totally convinced by this) but it is definitely poor politics. It seems like the government wants to grow our population in order to drive domestic consumption and growth. There are some benefits from this exercise, but the key concern is that some Singaporean workers may be displaced (and the PAP knows this). On the flip side, there are more opportunities for locals to set up businesses as the consumption base would be bigger.

There are more reasons now than ever to implement social programmes to keep the electorate happy. And speaking of PAP trying to keep us happy, we may even get free bus rides during off-peak hours. How about throwing in a free lunch at Jack’s Place and free Dim Sums for tea? For some, that would be enough to win their “trust.”

*I do confess that I have not read the whole population paper by SDP in its entirety and if there are any differences of opinion, I’d be happy to publish their response on my blog. 

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