After Budget, some businesses worry about costs

A day after new Budget measures were announced, some sectors are bracing themselves for a tougher time ahead.

In the short term, the Budget contained measures expected to push up operating costs for some firms, while other steps could help them in the longer run.

The semiconductor industry, for instance, is likely to take a big hit from higher water prices, which will go up by 30 per cent in two phases, starting from July 1.

Ms Christine Li, director and head of research at Cushman & Wakefield Singapore, said these facilities typically require up to 21.8 million litres of water per day for the production process and use large amounts of electricity, which make up as much as 30 per cent of operating costs.

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But Mr Lee Kok Choy, Micron Semiconductor Asia's managing director and Singapore country manager, said: "It is up to us to make a viable business with the cost of water we have." Other heavy users of water include the petrochemical industry and data centres.

The Budget also introduced a duty of 10 cents per litre on several diesel products to curb usage.

Transport companies such as private bus operators say they will have to absorb the diesel duty which took effect on Monday because contracts with customers were negotiated earlier.

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Taxi drivers have to pay 10 cents more per litre for their diesel, but much of this is being cushioned by cab operators.

The Budget could offer a lift to the property market, however, with a move to enhance housing grants for resale flats. Some market watchers expect transaction volumes to go up.

Mr Thomas Chua, president of the Singapore Chinese Chamber of Commerce and Industry, acknowledged that the Budget has initiatives in innovation and internationalisation to help firms stay relevant in the long term.

But he said: "Businesses are concerned with the impact on their business costs, especially with the immediate increase of diesel tax, and soon the water price."

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This article was first published on Feb 22, 2017.
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