Businesses feel the heat of restructuring; Most businesses in Singapore are finding it hard to keep up with the pace of economic restructuring, citing rising costs, a tight labour market and raising productivity as their main concerns

Businesses feel the heat of restructuring

SINGAPORE — Most businesses in Singapore are finding it hard to keep up with the pace of economic restructuring, citing rising costs, a tight labour market and raising productivity as their main concerns, according to a survey by professional services firm KPMG in the run-up to Budget 2014.

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SINGAPORE — Most businesses in Singapore are finding it hard to keep up with the pace of economic restructuring, citing rising costs, a tight labour market and raising productivity as their main concerns, according to a survey by professional services firm KPMG in the run-up to Budget 2014.The survey, supported by the Singapore International Chamber of Commerce, found that 66 per cent of the 159 respondents felt economic restructuring was happening too fast. Some businesses were unsure how to restructure, with 21 per cent calling for more help from the Government.

Half of the respondents also indicated that existing measures did not have the desired impact on their innovation-related activities.

In 2010, the Economic Strategies Committee pushed for an economy driven by skills, productivity and innovation. Aimed at reducing reliance on labour, it targeted 2 to 3 per cent annual productivity growth with a 30 per cent rise in wages over 10 years.

The Government launched several initiatives at the time, including the Productivity and Innovation Credit (PIC) scheme, which provides tax deductions or cash payouts to businesses that improve operations by investing in productivity and innovation.

Mr Tay Hong Beng, Head of Tax at KPMG Singapore, said: “Businesses have come to accept the need for Singapore to push productivity growth. With the PIC due to expire by 2015, it is no surprise many are calling for an extension. This is because the productivity journey is a long and continuous one. Some companies are also just starting out and need more help.”

Almost all the survey respondents — 97 per cent — want the PIC scheme to be extended beyond next year.

While the chase for productivity has caught on, innovation appears to have taken a back seat, especially among small and medium-sized enterprises.

“The uncertainty around businesses’ R&D (research and development) incentive claims is putting a dampener on Singapore’s innovative efforts,” said Mr Tay. “The experience overseas suggests that countries which are more receptive to commercially-driven R&D … can be more effective in encouraging innovative activities than those with the largest incentives.”