Speech by Mr Tharman Shanmugaratnam, Minister for Finance, at the Singapore Business Awards 2009 on 24 March 2009, 8pm, Shangri-La Hotel24 Mar 2009
Dr Tony Tan,
Chairman, Singapore Press Holdings Ltd;
Mr Daniel McHugh,
CEO, Asia-Pacific, DHL Express;
Mr Alvin Tay,
Editor, Business Times;
Ladies and Gentlemen,
1. Good evening. It is a privilege for me to be here with you this evening at the preeminent Singapore event that honours outstanding performance in the business world. This is the 25th year, which means the first was in 1984, just before the recession. We are now in a recession, most likely the deepest recession in history. Times are more challenging and it calls for the same traits, same strengths that is shown by 24 years of illustrious business leaders. The things that made companies special, the things that allowed companies to have a footprint outside Singapore to impress upon the world, that Singapore means business. We are here to recognise the achievements of a few outstanding individuals and companies who have made significant contributions to Singapore business, and who in their different ways have made a difference for Singapore.
2. We are in the midst of a severe global economic storm, that shows no clear signs of receding. The just-announced US Treasury plan for dealing with bad assets in the US banking system has brought clarity, and the financial markets have reacted with relief. But the underlying economic problems remain, and only the most optimistic observers expect them to be solved within a year. US consumer spending, still the largest source of demand in the world economy, will be held back by excessive household debts for some time to come. The large US fiscal stimulus will provide some support, but is on its own insufficient to bring the US economy back to health. Outside the US, governments in the other leading economies, China apart, are not providing much of a boost by way of additional discretionary spending. Almost everywhere too, credit continues to tighten, and is acting as a drag on growth.
3. Singapore as a global city has taken a sharp hit to its growth. On current indications we expect to see a bottom in the economy within the next two quarters. But growth thereafter is likely to remain weak till at least the end of the year, and possibly 2010 as well if there are no clear signs of recovery in the global economy.
4. Singapore will however weather this storm, even if it lasts for some time. We have the will, the schemes, the resources and the ability to work out solutions together - the government, businesses, our unions and our people - and to build up new strengths. We will emerge from this crisis fitter and stronger, as we have done before.
5. Our moves and responses to the crisis are catching attention. Global companies are looking to partner Singapore in their next phase of growth. We are already beginning to see a flight to quality. As with every major crisis, there will be a rearranging of corporate footprints around the world. It will play to Singapore's advantage.
6. Immediately, the Government's schemes to help our companies and people through the crisis are being rolled out. Earlier this month, $560 million of additional GST Credits was given out to Singaporeans. About $300m in Workfare Income Supplements (WIS) was also paid out (to about 291,000 employees). On top of this amount, Singaporean employees also received an additional $50 million in cash as the first of three WIS Special Payments.
7. The first of four tranches of Jobs Credits, amounting to $900 million, will go out next week to about 100,000 employers, benefiting some 1.3 million jobs for locals. We are also seeing an encouraging take-up rate for the training initiatives, the SPUR (Skills Programme for Upgrading and Resilience) initiative as we call them. Within the first three months of implementation (1 Dec 08 to 28 Feb 09), more than 43,000 workers and 700 companies have already committed to SPUR.
8. Our initiatives to support bank credit to businesses are also seeing a higher take-up. Within the first 6 weeks of the enhanced Government measures to share risks with banks (from 1 Feb), loans worth over $620 million were booked under the various SME financing schemes. That's more than five times the value registered over a similar period a year ago.
9. We have reduced the tax burden. Besides immediate measures to support cash flow - such as the 40% property tax rebate; the enhanced loss-carry back scheme to help companies making losses; and the exemption of foreign-sourced income brought back to Singapore this year - we have also cut taxes to support growth. In other words, besides providing support to all companies to help in cash flow and to mitigate the loss of jobs, we are providing more for companies that are preparing for growth.
10. With the 1% reduction in corporate tax announced in this Budget and previous enhancements to the partial tax exemption scheme, companies within the 70th to 80th percentile of tax paying companies (chargeable income of around $300,000) will pay an effective tax rate of below 10%. Those who use the enhanced tax incentives for investments in innovation could pay close to zero tax, while R&D-intensive companies can obtain cash grants if they have yet to generate taxable income. Others can take advantage of the enhanced tax allowances for investments in machinery or to refit their business premises in preparation for growth. All these aims to reduce the tax burdens on companies.
11. In addition to all this, we are constantly finding new ways to make it easier for companies to do business in Singapore. I will say a little on this later in the speech.
Singapore's New Corporate Landscape
12. Over the past decade, Singapore's corporate landscape has evolved to become a diverse and vibrant eco-system of firms: the traditional players have expanded and evolved, while new ones have emerged to carve out niches for themselves.
13. The most striking feature of this has been the growth of our SME sector - local and foreign. We have also seen a greater rate of company formation: from about 13,500 new companies formed in 2004 to 24,000 in 2007 - or an average annual increase of about 19%. Entrepreneurship is alive and growing.
14. The SMEs have grown their share of value-added - accounting for about 48% of the economy by 2007 - and employment. Productivity amongst SMEs has also risen by over 3% on average over the period from 2004 - 2007, much faster than in the economy at large.
15. It's not just about the local SMEs. Foreign SMEs are expanding their presence in Singapore. By 2007, they accounted for about one fifth of value added in the economy, and employed approximately one tenth of our workforce. That's almost as many workers as the foreign MNCs.
16. More foreign SMEs are choosing to base themselves in Singapore. They want to be in Asia, and see good reasons to use Singapore as a springboard to expand globally.
17. Local or foreign, the SME sector is adding vibrancy to our economy. They may not make huge investments, but they expand the demand for financial services, IT and logistics - often demand provided by SMEs themselves. They also help us to spread our global networks, and respond quickly to new demands abroad.
18. So we will keep up our efforts to nurture home-grown SMEs and make more of them global, and keep Singapore attractive to foreign SMEs who want to take root here. Of course, the traditional players and MNCs continue to play a key role as drivers for the economy. We will work with all of them, develop our industry clusters, and prepare for growth.
The Government will continue to Help Businesses
19. The Government will not let up in our efforts to ensure that Singapore remains the be st place in the world to do business in. We will continue to help our businesses by reducing administrative speed-bumps, and removing regulatory roadblocks wherever possible.
Harmonised Regulatory Financial Reporting Initiative
20. I just want to make a point on financial reports being filed to various regulators. Currently, companies have to file their annual financial statements with several agencies or regulators, such as ACRA, IRAS and the Singapore Exchange. We can make things simpler, by going for standardised business reporting. We should aim ideally to allow companies to file a single financial report for all regulatory purposes. For a start, companies who file their full set of financial statements with ACRA in the eXtensible Business Reporting Language (or XBRL for short) will not need to file them again with IRAS. Going forward, we will also study the possibility of an integrated system of financial reporting including the SGX.
21. We are concurrently studying how to reduce the reporting requirements facing companies, especially the SMEs. Taken together, these measures will lighten the regulatory compliance burden of companies and help companies unlock more resources to focus on the business.
22. The Government is committed to facilitating business and commerce. We want to encourage a vibrant and effervescent mix of companies, big and small, local and foreign, to compete with and complement each other, to grow, thrive and spawn. The Government will do its part by simplifying regulations, keeping taxes low and providing strong incentives for businesses to innovate. Together with our businesses, we can lift our economy to a higher plane.
23. Tonight, we recognise leaders in business and enterprise: the Businessman of the Year, the Enterprise Award and the Outstanding Chief Executives. I would like to congratulate each of our winners this evening on your inspiring success stories.