RISING business costs and reducing reliance on foreign labour: These were two topics that dominated the Budget debate yesterday.

While Members of Parliament (MPs) applauded the Budget for addressing the needs of lower-income groups, many expressed disappointment that the Budget did not address many business concerns.

Mr Inderjit Singh (Ang Mo Kio GRC) and Nominated MP Teo Siong Seng pointed out that small and medium-sized enterprises (SMEs) currently face a "double whammy" of escalating costs and a labour shortage.

They cited how rentals, which account for a large part of SMEs' business costs, are spiralling upwards, and that labour costs could be driven up as the Government's move to tighten the supply of foreign labour is expected to cause competition for a limited pool of Singaporean manual labourers.

Such "unsustainable" business costs can hurt Singapore's economy in the long term, warned MPs like Mr Liang Eng Hwa (Holland-Bukit Timah GRC).

Said Mr Singh: "My fear is that, once again, the Government may be inducing a significant squeeze on SMEs, which are the biggest employers in Singapore."

He said that, if multinational corporations were to move out in large numbers one day, "we will see a vacuum and a hollowing of our economy without a strong base of home-grown companies".

While there was consensus that Singapore needs to wean itself off foreign workers, some, like NMP Teo, pointed out that not all jobs could be taken up by Singaporean workers.

Mr Chen Show Mao (Aljunied GRC) of the Workers' Party said "a multi-year plan is needed to manage effectively our foreign-worker dependency and allow our businesses time to adjust".

He proposed that clusters with high productivity that can generate good jobs for Singaporeans should have a lower quota for hiring foreigners.

Clusters that contribute to meeting Singapore's social needs could employ more foreigners to keep costs down.

Mr Singh, Mr Teo and Non-Constituency MP Yee Jenn Jong expressed concern that skyrocketing industrial rental rates are the result of changes to JTC Corporation's industrial-land policy in 2008.

Mr Yee said: "Industrial rent increased at more than three times the inflation rate at 16 per cent last year. This increase is the highest level in the past 14 years."

JTC's flatted factories were originally built to serve the needs of SMEs at subsidised rates, but it later divested its industrial land to real-estate investment trusts and private developers.

Said Mr Singh: "JTC should review this policy. Pegging industrial land to the market is not realistic in Singapore, where the market for land is on the higher end of the curve due to shortage of supply."

Agreeing, Mr Liang said that if labour costs have to increase, "we just have to hold all other costs down; at least for now".

"One of the most important costs we need to restrain is the cost of land."

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