Tag: SMEs

Budget 2026

Budget Debate speech 2026
Gerald Giam (Aljunied GRC)
24 Feb 2026

Mr Speaker, the 2026 Budget Statement arrives at a moment of profound transformation. Globally, we are navigating tectonic shifts in security, trade and technology, while domestically, our workforce is feeling the weight of disruption alongside continuing cost-of-living pressures.

The Prime Minister describes our current fiscal position as “fortunate”, citing a revised FY2025 overall fiscal position that has resulted in a surplus of $15.1 billion. This is attributed largely to the front-loading of investments and a significant revenue surge.

Two-speed Economy

Yet, for many Singaporeans and local small businesses, this success feels distant. More than 2,400 retail food establishments closed last year; youths under 30 are experiencing unemployment rates almost double the national average. As the Association of Small and Medium Enterprises (ASME) highlighted, we are witnessing a “two-speed economy”. Despite positive aggregate macroeconomic data, local SMEs find themselves squeezed by a perfect storm of rising operating costs and weaker domestic demand.

ASME pointed to a productivity and contribution imbalance: Large enterprises contribute 74% of the nation’s nominal value-added, even though they employ just 30% of the national workforce. In contrast, micro and small enterprises contribute only 11% of the value-added, despite employing 45% of the national workforce.

This reveals a staggering labour productivity gap. Since wage growth is only sustainable when backed by productivity, when micro and small enterprises are stuck in a low-productivity “second speed”, it becomes supremely challenging for them to offer the competitive salaries needed to combat the rising cost of living.

Furthermore, as we look toward a future shaped by rapid AI integration and automation, we must confront the risk of structural “jobless growth”, where corporate profits and GDP continue to grow much faster than the labour market.

We must put our huge fiscal surpluses to use to support and empower the workers and sectors that find themselves stuck in the slow-growth track. It is only by doing so that we can secure the necessary social licence for continued high-growth strategies in elite sectors. When the average Singaporean sees tangible, structural benefits from these outsized gains rather than rising inequality, it fosters the public trust and political consensus required to maintain our open and competitive economic model.

Fiscal Projections and the GST Hike

The House should examine the government’s recurring pattern of overly conservative fiscal projections. The revised FY2025 surplus of $15.1 billion is more than double the original estimate of $6.81 billion. This $8.29 billion discrepancy is not an isolated incident; it is part of a trend where projected deficits regularly transform into healthy surpluses. While the government points to the volatility of tax revenue, this consistent under-estimation raises a fundamental question of whether the government is unnecessarily hoarding funds. We need more accurate forecasting that ensures our nation’s abundance benefits current generations as much as future ones.

This fiscal abundance also raises questions about the government’s tax strategy. With surpluses of well over a billion dollars in all but one of the last five years, totalling over $22 billion, we should re-evaluate the necessity of the GST hike.

The government said that the GST hike was meant to fund increased healthcare spending in an ageing society. But the Ministry of Health’s revised FY2025 operating expenditure was $305 million lower than estimated, mainly due to lower-than-projected funding needs for public healthcare institutions. Will the government be revising its projections for future increases in healthcare expenditure?

True prudence is not just about amassing vast fiscal buffers; it is about balancing future security with the current needs of our people. Unnecessary taxation drains liquidity from households up front, creating a dependency on government handouts rather than fostering genuine financial independence. Furthermore, it acts as a handbrake on economic growth by constraining household spending.

Reliance on High Vehicle and Licence Costs

In FY2025, Vehicle Quota Premium collections were 31% over estimates, reaching $8.66 billion. The COE was a primary driver of our massive surplus, and the government expects even more next year, projecting $9.42 billion in revenue. I am concerned that the government may be relying on high vehicle costs to anchor its fiscal position. This could create a perverse incentive to allow the COE to remain high, and result in inertia against necessary reforms to the COE system, which my Hon. Friend, Assoc Prof Jamus Lim, the MP for Sengkang, had called for in his adjournment motion last September.

There are other significant revenue spikes that I seek clarification from the Minister.

Revenue from Licences and Permits has surged by $2.08 billion—a 29% increase from the original estimate to the Revised FY2025 figure of $9.23 billion. According to the MOF’s Analysis of Revenue and Expenditure 2026, the transition to the new Singapore Public Sector Chart of Accounts (PS-COA) makes year-on-year comparisons for this item “not meaningful” due to changes in scope. However, this accounting reclassification alone does not explain why the government collected $2 billion more than it told this House it would just one year ago. Can the Minister clarify what specific licences or permits drove this increase, and whether this represents a permanent increase in the regulatory burden borne by our households and businesses?

While reclassification of FY2025 figures is promised for FY2027, was there some difficulty in providing it this year, so Parliament could properly track spending changes for this debate? Without a clear bridge between the old and new systems, there is a risk of losing oversight of expenditure growth.

Harnessing AI for the Frontline Workforce

Turning to technology, our AI roadmap must look beyond white-collar copilots. To ensure an inclusive social compact, we must deploy physical AI for blue-collar workers in manufacturing and logistics, for example. This could include tools like wearable haptic sensors that alert workers to ergonomic risks to prevent long-term injury, or collaborative robots to assist with heavy lifting on the factory floor. Furthermore, AI can be a powerful tool for blue-collar workers who may struggle with English language constraints. It can translate vernacular dictation into professional English documentation in real-time, allowing workers to focus on their technical expertise rather than linguistic hurdles. These tools enable productivity gains that lead to enhanced wages and reduced physical strain for those on the frontlines. AI should be an equaliser that elevates technical mastery, not a wedge that separates our workforce.

The government has also allowed 400% tax deductions on AI expenses. I propose that this should include corporate AI subscriptions, to give workers access to corporate AI tools to improve their daily productivity while keeping company data secure. Giving every worker a digital assistant should be a baseline goal for a nation that aspires to be an AI leader. This ensures that the benefits of the technology are shared by the employee and the employer alike.

Evolving Means-Testing Approach

Regarding our social safety net, a gap remains for the “sandwiched” generation which falls just outside existing means-testing thresholds. We need a more holistic means-testing model that looks at not just gross income alone, but disposable income after essential expenses are deducted. A household earning $9,000 with special needs children or elderly parents requiring chronic care may be functionally less wealthy than a household earning $3,000 with no such burdens.

Furthermore, I urge a shift toward individual-based assessments for our seniors to better protect their dignity. No senior should ever be forced to plead with an estranged adult child for financial support simply because that child’s income is bundled into the Per Capita Household Income (PCHI) calculation. When subsidies are tied to the disclosure of a child’s salary, we leave vulnerable seniors at the mercy of strained family dynamics. Our social safety net should be anchored more to a senior’s individual income instead of their children’s, to ensure they receive the care and support they need.

Rebalancing Spending

MTI’s development expenditure is estimated to double to $9.24 billion in FY2026, which is an increase of $4.32 billion in a single year. While the government says this increase is mainly due to initiatives to enhance Singapore’s economic competitiveness in an uncertain global environment, can the Minister shed more light on the specific milestones this money is expected to achieve? For comparison, the entire development budget for the Ministry of Social and Family Development is a mere fraction of this, at just $260 million.

There seems to be a disconnect between the government’s own risk assessment and its fiscal response. The Budget Statement identifies significant risks from an AI benefits reassessment and global trade tensions. Yet, the fiscal impulse of Budget 2026 is only 0.6% of GDP. This stance appears rather passive. If the risk of job displacement and investment decline is as real as the government acknowledges, our fiscal injection should be more robust and proactive, particularly when we are riding on a huge surplus from the previous year. We should be building more buffers for our workers now, rather than reacting after the displacement begins.

National Security

Finally, on the matter of security, the Prime Minister stated that defence spending will remain at 3% of GDP. Does this include the cybersecurity budgets across the government, including those under the Cyber Security Agency, for the protection of critical information infrastructure? With the rise in sophisticated cyber-attacks and hostile information campaigns, it is essential to know the true allocation of security resources.

A Budget of National Values

Mr Speaker, a budget is more than just a balance sheet; it is a statement of our national values and priorities. We cannot be a nation that celebrates multi-billion dollar surpluses while our middle-income families are squeezed, our seniors fear being a financial burden on their children, and our workers worry about a digital future that feels out of reach. Let us build a social compact that does not just manage growth, but shares it fairly and transparently.

We should measure our success not by the absolute size of our reserves, but by the security, dignity and peace of mind of every Singaporean.

Sir, I support the Budget.

What’s missing from Economic Strategies Committee report

These are just a few proposals that could help SMEs and entrepreneurs in Singapore. I believe that growing our local private enterprises holds the key to our next phase of economic growth, which unfortunately the ESC has overlooked.

I read through all 53 pages of the much-awaited Economic Strategies Committee’s (ESC’s) main report, which is supposed to “chart the course for Singapore’s economic development over the next decade”. The report proposed ways of increasing productivity and expanding our international economic footprint. It then shifted gear to talk about how to make Singapore a more attractive destination that rich and internationally-mobile “talents” would want to call home. The report’s areas of study are summarised in the diagram below.

ESC

While I appreciate the work that the committee members (or rather, their secretariats) have put in, I felt that the recommendations were too skewed towards boosting high-end growth of large corporations, with insufficient emphasis on growing the sector that is in the best position to generate broad-based growth for Singaporeans — small and medium-sized enterprises (SME).

To be fair, the ESC did present a few proposals for growing SMEs:

1. Develop stronger alliances between large and small players to promote technology transfer, test-bedding and commercialisation. Provide incentives for MNCs to co-develop innovative products and services with SMEs, helping Singapore-based companies build credible track records, enhance innovation and accumulate knowledge capital.

2. Catalyse the supply of growth capital for growth-oriented SMEs based in Singapore, through seeding public-private co-investment funds.

3. Enhance access to human capital for SMEs, which usually face more difficulties in attracting and retaining talent, through broadening the scope of internship programmes and facilitating a ready network of mentors to provide strategic and expert advice.

I think the ESC’s proposals for helping SMEs are too peripheral and are hardly enough to generate much growth in our domestic private sector. Without significant growth in our SMEs, we will continue to be at the absolute mercy of the winds of the global economy, as this last recession has demonstrated.

SMEs as a key engine of growth

Singapore cannot continue to depend so heavily on manufacturing exports and foreign MNCs to power our economy, when many MNCs are making plans to relocate to cheaper locations. We need to develop new engines of growth that are sustainable and benefit ordinary Singaporeans, not just foreigners and rich elites. The domestic private sector could form this new growth engine.

To achieve broad-based growth, it is critical that we help local enterprises prosper. This will not only benefit the national economy, but countless individual Singaporeans as well. SMEs make up 99 per cent of business establishments in Singapore and employ 56 per cent of all workers here. Many of those with lower paper qualifications are only able to find work in SMEs, as they do not possess the skills that many MNCs demand. SMEs tend to cater more to local consumers and businesses, and so are less likely to shut down and move to lower cost countries — taking all their jobs, intellectual property and technical know-how with them — when economic winds shift.

While SMEs employ 56 per cent of the workforce, they contribute only 42 per cent of Singapore’s GDP. Their comparatively lower output is due to many factors, including a lack of economies of scale, international connections to market their goods, access to financing and a shortage of talented workers willing to work for them instead of MNCs.

So far, the government’s efforts to specifically help SMEs have focused on training programmes for SME managers and the grooming of a few SMEs which are deemed to have the potential to become home-grown MNCs. The result is that a few enterprises receive a disproportionate amount of funding and assistance from the government, while those that really need the help get very little.

The government should dispense of its habit of “picking winners”. Instead, more effort should be put into attracting venture capital (VC) funds to our shores. These private sector investors can provide a greater amount of funding that start ups need to bring their ideas to market. VCs are more in touch with the market than civil servants are, so they are in a better position to assess the investment potential of start ups. Also, the risk of failure is spread out among many VC firms. So even if one VC makes a wrong investment, the fallout will be more limited than if a government agency makes a huge bet on an industry which ends up in utter failure.

Developing an entrepreneurial culture

Entrepreneurship is the bedrock of SMEs. Without entrepreneurs starting small businesses, there would be no SMEs to speak of. Thus, increasing the number of entrepreneurs and their success rate will directly contribute to the growth of SMEs.

The government has a few training programmes to support entrepreneurs. However training alone will not help Singapore reach the tipping point of entrepreneurship. For this to happen, a culture of entrepreneurship needs to be developed among not just working adults, but has to start from young with students and their parents.

The entrepreneurial culture in Singapore is weak, especially when compared to other developed economies like Taiwan, Korea and the US. The recent Global University Entrepreneurial Spirit Students survey (GUESS) of 2,300 students from local tertiary institutions found that only 18 per cent of them intended to start their own businesses after graduating. In contrast, a whopping 69 per cent planned to take up salaried jobs.

We need a mindset shift in our society regarding what constitutes career success. Our current education system is too geared towards preparing students to be good employees, not entrepreneurs. Most local students strive to ace their exams so they can get into good universities and land a stable, well-paying job working for some large firm or the government.

Entrepreneurs require a very different skill set from salaried workers. A business owner needs to do a lot of selling and marketing of one’s goods or services. This takes a lot of innovation, confidence and humility — all skills which our schools have not adequately prepared our young for.

The stigma of failure in our culture needs to be changed. There needs to be a greater tolerance for those who stumble while trying. A lot of the “afraid to fail” mindset originates from our education system, where examination results define a student’s success or failure.

Schools should see it as their mission to nurture future business owners, not just salaried workers. They should start teaching the basics of running a business, like managing cash flow and selling, early in secondary school. Our young should be brought up with the mindset that the brightest and most capable students start their own company after graduating (or more likely the other way around), rather than win government scholarships or work in MNCs.

Parents often frown on their children taking the entrepreneurial path, as it is seen as more risky and less likely to guarantee financial success. To counter this, schools could consider tying up with business associations to conduct seminars for the parents, to explain the motivations behind what their children are learning, so that parents too can catch the vision about entrepreneurship and encourage their children to pursue that as a career.

Conclusion

These are just a few proposals that could help SMEs and entrepreneurs in Singapore. I believe that growing our local private enterprises holds the key to our next phase of economic growth, which unfortunately I feel the ESC has overlooked.