Lack of green perks disappoints industry players in Singapore

Budget surplus gives scope for perks such as tax credits, say industry players
Jessica Cheam, Straits Times 23 Feb 08;

IT HAD been widely anticipated, but in the end, the 'green Budget' that many people had been waiting for did not materialise.

The lack of incentives such as tax credits to encourage environmentally sustainable business practices has left industry players across various business sectors feeling disappointed.

They say the bumper $6.4 billion Budget surplus offered plenty of scope for such measures.

Post-Budget discussions in both the public and private sector have questioned the 'noticeable absence' of such policies.

Some MPs have said they will be raising questions of their own at the upcoming Budget debate, which begins on Monday.

Singapore Environment Council executive director Howard Shaw said, given that awareness of climate change has grown in the Republic in the last year, the lack of pro-green fiscal policies has been very surprising.

'I thought this year would be the green year. But perhaps, we'll see some provisions for this in the upcoming debate,' he said.

Dr Teo Ho Pin, the MP for Bukit Panjang, also said he had expected a 'green element' in the Budget, delivered on Feb 15. 'In emission standards, we are a long way off. Perhaps we should provide for all our public transport going diesel too,' he said.

Only one announcement - to cut costs for private diesel cars - seemed related. Under newer standards, such cars release less carbon dioxide than petrol cars.

However, Mr Charles Chong, who heads the Government Parliamentary Committee on National Development and Environment, felt the Government should move towards encouraging compressed natural gas (CNG) vehicles, which are greener than diesel and petrol cars.

Mr Chong, an MP for Pasir Ris-Punggol GRC, said he will also be asking questions related to green incentives in the debate.

'The private sector is more bottom-line driven and less altruistic in the short term. The Government has to take a longer-term view and put in the green infrastructure and policies. And what better time to do it than in a Budget surplus year?'

Although widely-expected direct measures such as tax credits for energy-efficient equipment for businesses did not turn up, the Budget did include indirect measures such as tax allowances for local research and development (R&D) - which could boost the environment solutions sector.

Also, in the past year, the Government has announced a slew of initiatives to improve environment sustainability such as the Clean Energy Programme Office.

Funds have been set aside to build test-bedding sites and for manpower training.

These efforts, although not part of the Budget, also helped to drive the local green movement.

Nominated MP Edwin Khew, also chief executive of local waste recycling firm IUT Global, said the R&D incentives will help the clean energy sector as its development is tied closely to breakthroughs in R&D.

Mr Khew said he will ask about incentives for the clean technology sector on Monday.

Recently, PricewaterhouseCoopers Singapore tax partner David Sandison said Singapore might have missed an opportunity in the wake of the Bali climate change conference to take a lead in the green movement.

Mr Shaw, however, recognised that an economy with green policies does not happen overnight. He added: 'Making the right decisions is necessary and this will take time.'

Singapore cost spiral: Rising prices, bigger handouts

Rising costs for individuals and businesses, a growing 'gimme' mentality and the dangers of the 'green-eyed' syndrome in society were among the concerns raised at a Straits Times roundtable, chaired by deputy editor Warren Fernandez, ahead of next week's debate on this year's Budget

Lydia Lim & Bryan Lee, Straits Times 23 Feb 08;

THEIR big looming worry is how fast costs for both individuals and businesses will keep rising, and for how long.

Their reading: No reprieve any time soon, even if economic growth were to moderate this year due to a global slowdown, as the momentum of economic activity will mean that competition for land, labour and other resources will remain red hot.

The six panellists fired off tough questions for the Government on why it pushed ahead with last July's hike in the goods and services tax (GST) from 5 to 7 per cent, and the increase in Electronic Road Pricing (ERP) tariffs from April this year, at a time when the inflation rate is high and rising.

Citigroup economist Kit Wei Zheng said: 'I think the real danger here is that this could risk entrenching inflation expectations - therefore making the inflation problem even more persistent than it otherwise would be.'

OCBC economist Selena Ling agreed. She observed that inflation has both external and domestic sources and said government fee hikes can have a significant impact on costs over the medium term.

But panel members were divided on how best to tackle the issue of rising costs for businesses.

At one end were Mr Kit and MP Inderjit Singh. They argued that this year's Budget should have done more to help businesses tackle rising costs, with some short-term reliefs.

Mr Singh, who chairs the Government Parliamentary Committee (GPC) for Finance and Trade and Industry, said cost increases for materials, rentals and manpower have been 'too steep and too fast', catching many businesses off-guard.

'So businesses will struggle for a while. And I thought that this was the best time, with the kind of surplus that we have, to also address this short-term problem,' he said.

The Government logged a whopping $6.45 billion Budget surplus last year, due to record levels of stamp duties from a red-hot property market and higher- than-expected income tax receipts.

Its 2008 Budget measures for businesses, however, focused on developing local enterprises over the longer term, through new tax deductions and incentives to spur research and development.

But Mr Singh said what businesses urgently need are measures such as rental and corporate tax rebates, to provide immediate relief from cost pressures.

Mr Kit questioned if the Government should go ahead with this year's planned ERP hikes, which will further raise business costs.

Businessman Zulkifli Baharudin and MP Sin Boon Ann took a different view.

They argued that Singapore's open economy limits what the Government can do to buffer businesses and individuals against high costs. They believe the focus should be on channelling resources to raise productivity.

Mr Zulkifli, managing director of logistics company Global Business Integrators, said: 'If you want to be a London or New York, then it's going to be very costly. But there's the other side of the argument, which is productivity. If your productivity is high, you can mitigate against high costs.'

High costs have hit individuals too.

Taxi driver Raymond Lo, 68, a regular contributor to the Forum pages of this newspaper, said the public feels 'Singapore is a very expensive city to live in'.

He related a recent incident which brought home to him how prices are shooting up.

He stopped at a petrol station to pick up his favourite lotus paste bun, only to find that the price had gone up from 60 cents to 80 cents.

'I got a shock. That is a 33.5 per cent jump,' he said.

Mr Lo welcomed the Budget measures to help the lower-income cope with rising costs but says more needs to be done to combat profiteering. Amid a buoyant economy, businesses believe they can get away with raising costs by more than the rise in GST.

Others round the table, however, noted that costs have risen in part because of global factors beyond anyone's control, such as oil prices hitting US$100 a barrel, and skyrocketing food prices worldwide.

Mr Singh pointed to how wages had been rising significantly, with some bankers, for instance, drawing $8,000 starting salaries. Such rises feed into higher prices for rentals and housing, adding to inflationary pressures.

Last week, Finance Minister Tharman Shanmugaratnam announced a $1.8 billion surplus-sharing package that included personal income tax rebates, cash grants in the form of Growth Dividends and top-ups to Medisave.

Those on lower incomes and the elderly received more Growth Dividends and larger top-ups.

Mr Tharman also gave the assurance that the Government has in place strategies to ensure Singapore continues to have lower inflation than the rest of the world, over the medium term.

In assessing how the Government is helping Singaporeans cope with inflation, the six cited two main concerns. The first is Singaporeans may develop a 'subsidy mentality' and expect handouts in every Budget.

The second is the social tension arising from a growing income gap.

Mr Singh noted that the Government has felt compelled to dish out goodies three Budgets in a row: this year because of the 'unbelievable' surplus and rising costs, last year to offset the GST hike, and the year before because 'it was a good time to do it for the Government'.

Singapore went to the polls in 2006.

OCBC economist Selena Ling said the Government could better manage expectations of handouts if it could find a more accurate way of estimating its tax receipts.

She suggested a mid-year review of its budgetary position.

' That's something they really need to look into because it's all about managing expectations, at the end of the day. If you project a small deficit and in the end, you get a huge surplus, the political pressure will be there,' she said.

Mr Sin, who chairs the GPC for Community Development, Youth and Sports, was concerned that people's expectations will always outstrip the Government's ability to help them cope with rising costs.

The challenge, he said, is to manage expectations in the midst of a rich-poor divide that cuts across local-foreigner lines.

The double blow of rising costs and a widening income gap on low-income Singaporeans is causing Mr Singh to wonder about the Government's strategy of making a dash for growth in good years.

This approach had given rise to the present situation in which the economy is racing ahead, but running into major constraints in terms of labour shortages, a housing crunch, and crowded public transport.

He plans to make that a focus of his speech during next week's Budget debate.

'A couple of years ago, the PM - when he was the Finance Minister - said that his model is going to be grow as fast as you can in good years to make up for the bad times, and so therefore, we created an overheated situation,' he says.

Others, like Mr Kit, pointed to how attempting to ease the shortage of workers could give rise to more pressures on housing and places in schools.

While no one was wishing for slower growth - which might come this year anyway - panellists believed that more could be done to help businesses and individuals cope with the downside of a boom economy.