Business Times: Wed, Feb 29
(SINGAPORE) Members of Parliament from the business community yesterday called for statutory board JTC Corporation to review its policy of divesting industrial space to real estate investment trusts (Reits) - a policy which small and medium enterprises (SMEs) have blamed for a spike in commercial and industrial rents.
This was one of a slew of suggestions MPs put forward to address higher business costs, set to rise further on the back of Budget 2012's additional curbs on foreign worker hiring. Most of the 25 MPs who rose to speak on Day One of the Budget debate at least acknowledged businesses' concerns over costs and manpower needs, with a handful raising more specific proposals. Another 35 MPs are slated to take the floor today and tomorrow.
Many lauded the Budget's distinct shift in social policy towards 'inclusive growth' with more help for the disabled, elderly and the poor. But like the vulnerable in society, SMEs hit by a 'double whammy of the rapid cost increases and a tight labour market due to the government's restructuring efforts' need help, said Inderjit Singh, MP for Ang Mo Kio group representation constituency (GRC) and CEO of Solstar International.
Highlighting a concern earlier flagged by the Singapore Business Federation-led SME Committee, Mr Singh and others noted that higher industrial rentals appear to be due to JTC's policy shift away from offering companies industrial land for designated uses at subsidised rates, to offering land to Reits and other private developers.
'These are now being redeveloped into strata-titled industrial units which are rented to non-industrial tenants for higher yields, including childcare centres and even religious organisations,' he said.
'This is clearly an industrial policy gone wrong,' Mr Singh added, raising the example of a 40 per cent hike in rents faced by SME tenants at a JTC development in Toa Payoh now run by a leading private property firm, when negotiating a lease renewal. A recent BT report on the matter also cited SME owners who saw rents jump as much as 56 per cent upon lease renewal, he added.
Workers' Party non-constituency MP and CEO of The Learning Grid, Yee Jenn Jong, also 'urged serious review of the effects of Reits on SMEs', noting that industrial rents rose 16 per cent last year - its sharpest increase in 14 years.
Chiming in on the issue was Liang Eng Hwa, Holland-Bukit Timah GRC MP and DBS managing director of treasury & markets, who thinks that if land costs continue to rise, Singapore's 'international competitiveness will be eroded, even without labour cost increases'.
Mr Singh proposed that JTC 'go back to being a direct industrial landlord'. Pegging industrial land to the market is not realistic since Singapore's market sits on the higher end of the curve due to a supply shortage, he said. JTC should thus 'offer land based on prices offered in equivalent competing economies' so that Singapore's companies can compete effectively.
Agreeing, Mr Liang said JTC has a role to play in providing the public good of no-frills industrial space that many small businesses count on - and not be too eager to 'mark to market' its industrial land bank.
Broader concerns over the pace of economic restructuring were also raised yesterday, especially as the foreign worker quota cuts will be rolled out sooner than productivity improvements materialise.
Moving from a foreign worker policy that was 'too liberal' in the past to 'the other extreme and completely turning off the tap' now will 'kill off the much needed labour supply for companies', Mr Singh warned. Apart from adding to manpower costs, local hiring 'may well be a zero- sum game' and lead to unhealthy 'staff poaching', Mr Liang said.
While dependency ratio ceilings need to fall to manage the foreign workforce, Aljunied GRC opposition MP Chen Show Mao suggested more differentiation among sectors than the 'blunt tool' of broad ratios for the manufacturing, services and construction sectors allows for.
He proposed more stringent foreign worker quotas for sectors with higher productivity and good jobs for locals, such as finance, aerospace, biomedical and professional services. But services that meet a social need - social services and public healthcare - may need less stringent foreign labour quotas to keep costs low for the end-consumer.
The government can work more with businesses on different targets and roadmaps to cut their dependency ratio ceilings as they adapt to the 'permanent, but different, realities of a tight labour market in their respective industries', Mr Chen said.
As for the enhancements to productivity incentives made in this Budget, implementation remains key. Part of the problem may be information overload, said East Coast GRC MP and Microsoft Singapore managing director Jessica Tan. For instance, the 66-page guide issued to SMEs hoping to use the Productivity and Innovation Credit (PIC) shows that the scheme can be further simplified, she said.
Singapore Management University (SMU) law professor Eugene Tan, one of the two new Nominated MPs who spoke yesterday, thinks business interests did not 'take a back seat' in this year's social budget. Rather, as a key stakeholder of the new social compact built with this Budget, businesses stand to gain from a cohesive society, which is not mutually exclusive from strong economic growth.Source: Business Times