Chart of the Day: Construction sector is key focus in Singapore’s productivity boost

Policy measures will becomes less painful in the second half.

Five years into the process, productivity growth continues to languish.

Restructuring the economy and driving productivity growth will remain key thrusts for Singapore, and specific measures to help certain industries raise productivity may be on the cards.

For one, new initiatives to assist the construction sector may be announced, given that this sector has been a drag on overall productivity.

Incentives to encourage pooling of resources amongst construction companies may lead to greater efficiency and higher productivity.

According to analysts at DBS, more emphasis may be placed on helping companies enhance their top-line growth so as to bring about improvements on productivity.

That is, rather than taking the carrot-and-stick approach of starving companies of foreign workers and subsidising the costs of investment in technology, the focus going forward could be on helping local companies improve their revenues.

DBS expects more policy measures to facilitate internationalisation of local enterprises. Incentives to encourage joint ventures between GLCs, MNCs or foreign SMEs with local companies for regional expansion may also be introduced.

Beside the adjustments in restructuring approach, other measures affecting enterprises may include:

• Streamlining of the criteria for existing funding and productivity enhancement related schemes for start-up, SMEs and R&D activities so that more companies can benefit;
• One -off corporate income tax rebate and additional SME cash grant to help defray rising business costs;
• Generous tax incentives or subsidies for companies to defray costs of sending workers for training;
• Utilities rebates for companies and possibly even rental rebates for all commercial and industrial properties under JTC and HDB;
• Incentives tied to the incremental reduction in the number of foreign workers being employed as well as for hiring low-waged and aged resident workers (i.e., Special Employment Credit);
• Tax rebates to help some SMEs relocate some of their lower value-added operations overseas;
• Top-up to the Enterprise Development Fund and additional incentives to encourage companies to internationalise;
• More measures to facilitate foreign tax credit pooling and cross-border financing;
• Tax incentives to promote strategic business sector to diversify the structure of the economy and to promote growth in new growth sectors;
• Additional tax incentives and seed funding for startups to encourage entrepreneurship and social enterprises.