Respite for firms as business costs fall

Respite for firms as business costs fall

Business costs, especially utilities and rentals, have declined in the past year or so, likely providing some respite for companies.

Minister for Trade and Industry (Industry) S. Iswaran told Parliament yesterday that the cost of utilities is expected to remain subdued given sustained low oil prices.

He said regulated tariffs paid by households fell by 24 per cent from the beginning of last year to the second quarter of this year - a trend also observed in the corporate sector.

"There were similar trends for those in the industry, especially because they have greater flexibility in negotiating contracts."

He was responding to a question from Ms Lee Bee Wah (Nee Soon GRC) on whether the ministry has looked into how local price rises from labour, materials, transport and a stronger Singdollar affect overall business cost.

In his reply, Mr Iswaran said rents are down across various segments.

The industrial rental index was down by 6.8 per cent over the past five quarters, while office rents in the central region fell by 12.2 per cent, and central region retail rents slid 9.3 per cent in the same period.

"The strong pipeline supply of industrial and commercial space coming on-stream in 2016 should continue to ease rental cost pressures."

Labour costs, however, varied. The unit labour cost in the manufacturing sector fell by 0.7 per cent year on year in the second quarter due to productivity improvements but the unit labour cost in the service sector rose by 4.5 per cent.

Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) wanted to know how the Government is addressing the sharp fall in private investments and its impact on job creation.

The Economic Development Board (EDB) saw fixed asset investments dipping from $12.1 billion in 2013 to $11.5 billion last year.

Mr Iswaran said the decline in investment is due partly to uncertain global economic conditions.

It also reflects Singapore's targeted approach to attracting projects "consistent with our stage of economic development, manpower policies and international commitments on carbon emissions".

The Republic, he said, remains attractive to investors, citing chipmaker Micron and drug-maker AbbVie as companies that made investments here recently.

Mr Iswaran said wooing investments remains a key part of the Government's strategy to grow the economy, which will generate good job opportunities for Singaporeans.

The EDB expects investment commitments to create 20,000 to 22,000 jobs this year - up from 16,800 in 2015 and 18,600 in 2014.

Responding to a question from Mr Liang Eng Hwa (Holland-Bukit Timah GRC) on the number of failed companies, Mr Iswaran said more enterprises were formed than shut in the first two quarters of the year. Figures from the Accounting and Corporate Regulatory Authority showed that more than 33,600 were formed, compared with some 21,800 shut in the first half of this year.

Mr Iswaran said the Government seeks to help companies manage immediate challenges, but they must stay competitive in the mid- to long term by embracing new technologies and business models. "Successful economic transformation will require the collective effort of workers, unions, companies, industry associations and the Government."


This article was first published on Oct 11, 2016.
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