Companies are grappling with the slowing economy and mounting cost pressures, but there is only so much the Government can and should do to help, Finance Minister Heng Swee Keat said yesterday.
While the Budget contains some measures to help viable companies tide over the rough patch, Mr Heng said businesses must be able to compete by relying on productivity and innovation in the long run, instead of depending on low costs.
Over three days of debate, MPs had called for more help for small and medium-sized enterprises hit by the economic slowdown.
The minister acknowledged their concerns, noting that it is vital to ensure viable companies survive the current period of cyclical weakness. However, the Government “cannot permanently subsidise costs”.
Resources such as space and labour will remain costly here as they are scarce, which means firms cannot treat the Republic as a low-cost location. “Enterprising firms understand this, and build their business models with these hard constraints in mind,” Mr Heng added.
The Government’s role is to shape macroeconomic conditions to support growth – and companies themselves have to take the initiative to restructure and become more productive to thrive, he said.
He noted that some MPs had warned against government support becoming a crutch for companies. Citing a metaphor used by business leader Stephen Koh, Mr Heng said: “Government support is like push-starting a car that has gotten stuck in a difficult patch.
“It can get the car going again, but the Government cannot be pushing the car for miles and miles… once the car is moving, it has to rely on its own engine to go for the long haul.”
In successful economies that have produced many world-leading firms, governments have played “an enabling role” in helping enterprising individuals and businesses go further than they could have on their own, he noted.
Mr Heng quoted Ms Lee Bee Wah (Nee Soon GRC), who had said that in the short term, firms expect some fish from the Government to keep workers fed, but “ultimately, the country will run out of fish if they don’t develop eager, smarter and faster ships to get fish from international waters”.
He added: “The Government can help businesses to develop bigger, smarter and faster ships, but ultimately, the captains of industry must navigate the ships and help our firms go the distance.”
chiaym@sph.com.sg
This article was first published on April 7, 2016.
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