Mr Speaker,

Earlier this year, Parliament formally recognised chess as a sport in Singapore. Chess rewards foresight and discipline. It punishes hesitation.

Budget 2026 reflects that mindset. It is not a defensive budget. It is a positioning budget.

Let us first acknowledge the board we are playing on. 

Singapore’s total fertility rate remains around 0.97. Our median age exceeds 42. Labour force growth will slow structurally over the coming decade. At the same time, remuneration per worker rose by about 3.4%, with wage growth outpacing productivity in several labour-intensive domestic sectors. 

Budget 2026 recognises this shift. The business community welcome the measures to mitigate rising business costs — including the 40% Corporate Income Tax rebate, expanded internationalisation support, enhanced enterprise financing and the expansion of the Productivity Solutions Grant to cover a wider range of digital and AI-enabled solutions  

The direction is correct. But execution at scale is what will determine whether this repositioning succeeds.

Take productivity. 

Budget 2026 elevates AI as a national priority to boost productivity. The Prime Minister will chair a new National AI Council to drive the agenda, and specific sectors — advanced manufacturing, connectivity, finance and healthcare — have been identified for coordinated AI transformation. This sectoral focus is appropriate. Early concentration builds credibility and scale. But enabling transformation for SMEs will be the real test.  Most SMEs do not lack awareness. They lack integration capacity.

AI implementation is expensive — not just software, but data restructuring, cybersecurity, workflow redesign, up-skilling costs of workers and managerial capability. 

Big firms have both the talent and financial muscle to spread this fixed cost. SMEs often cannot - if transformation succeeds, gains are gradual; if it fails, losses are immediate.  

Through the Champions of AI programme, expanded EIS for AI expenditure, and broader PSG support, Budget 2026 seeks to change the risk equation. That is welcome.

But execution hinges on clarity. The definition of “qualifying AI expenditure” must be unambiguous. If not, SMEs will misjudge eligibility, misallocate resources, and struggle to justify bundled AI costs embedded in broader systems.

Without precision, we risk entrenching a two-speed economy — where large firms execute full transformation while SMEs are left with isolated tools and superficial adoption.

In sectors such as logistics, F&B, facilities management and manufacturing, robotics may deliver more immediate productivity gains than abstract AI tools. The rapid deployment of advanced robotics and humanoid systems in China is already reshaping production economics.

However, the cost equation is misaligned. Robotics requires high upfront capital and long payback periods, while labour remains the cheaper short-term substitute. As long as that remains true, firms will default to hiring rather than automating.

If we want AI and robotics to meaningfully raise productivity and preserve competitiveness, the investment signal must decisively shift behaviour at scale. 

That suggests a different incentive logic — one that first reduces risk at the point of adoption, and then rewards firms that deliver measurable productivity gains.

In practical terms, this could include accelerated capital allowances for robotics to improve early-stage cashflow, green-linked automation incentives where AI deployment also reduces energy intensity, and co-investment platforms or shared automation hubs to lower entry barriers for SMEs.

Can the Government therefore consider layering outcome-linked incentives on top of entry support? Where firms demonstrate sustained productivity improvements — whether through higher output per worker, value-add per employee, or reduced energy intensity — enhanced rebates or credits, potentially up to 90% of qualifying outlay, could reinforce genuine transformation.

But technology is only half the equation. Management capability is the multiplier. Without structured managerial uplift, AI support will concentrate in already capable firms and widen the competitive gap. 

Can the government consider working with SBF, SNEF and other trade associations to strengthen sector-specific management upgrading programmes tied directly to AI integration, job redesign and workforce planning? If we professionalise transformation management, adoption will become more even and less risky.

I now turn to manpower and labour.

Recent increases in qualifying salary thresholds and adjustments to LQS reflect a legitimate objective: strengthening the Singaporean core and reinforcing the social compact. Businesses understand and support that principle. However, in SBF’s latest National Business Survey, 63% of firms continue to cite manpower costs as a top challenge.

On the Employment Pass front, higher thresholds raise the cost of specialised expertise — particularly for multinational firms considering Singapore as a regional HQ or Centre of Excellence. 

Combined with elevated rental and operating costs, this can influence marginal location decisions. We have already seen instances of HQ relocations with downstream job losses, and these signals warrant close attention.

On the S Pass front, domestic sectors such as F&B and retail operate on thin margins and face immediate pressure. Qualifying salaries are intended to nudge productivity upgrading, but many firms in these sectors have already digitalised and streamlined operations.

In sectors where productivity headroom is structurally limited, further cost escalation leaves little room to adjust. Firms are effectively left with two options: raise prices — affecting consumers and cost of living — or compress operations, reducing service levels and employment scale. That is the economic reality we must acknowledge.

At the same time, there are narratives suggesting future excess manpower in some service sectors. Yet on the ground, many businesses remain acutely short of workers for operational and frontline roles. Backend productivity gains do not eliminate the need for human service at the frontend. As such, where productivity headroom is limited and local supply gaps persist, would the Government consider a more granular, sector-calibrated approach — whether through further refinement of the Non-Traditional Source Occupation List or conditional flexibility mechanisms tied to demonstrated upgrading efforts?

Mr Speaker, when margin compression becomes structural, firms cannot absorb it indefinitely. If adjustment is delayed until distress becomes acute, closures are sharper and workers more exposed.

Sector-level mapping can identify fragmented industries where consolidation strengthens resilience. Structured advisory support for mergers and joint ventures — as proposed in SBF’s Budget recommendations — can help SMEs scale non-organically before financial stress escalates. Strategic consolidation can be treated as repositioning, not failure.

At the same time, worker transitions must remain swift and credible. As structural cost pressures and technological change increase the frequency of adjustment, we should approach procedural changes carefully.

Retrenchment incidence remains below the long-term average, and re-entry rates remain relatively strong. Most employers comply with the existing five-day notification requirement.

In that context, before introducing additional procedural rigidity — such as mandatory advance retrenchment notification — we should ask whether shorter timelines would materially improve worker outcomes, or whether they may instead constrain firms during critical restructuring periods.

Entrepreneurs do not take retrenchment decisions lightly. Most exhaust every option to stabilise operations before acting. The more constructive question is how to enable earlier and more orderly adjustment.

Confidential early engagement channels could allow firms to signal emerging restructuring risks while recovery efforts are still ongoing, enabling agencies to prepare redeployment support without compromising commercial sensitivity.

The objective should be responsible restructuring — preserving business viability while safeguarding workers through timely and effective support.

Mr Speaker, if labour supply is structurally tight, senior employment must be treated as a core component of our labour strategy.

The extension of the Senior Employment Credit is welcome. However, wage offsets alone do not address the operational realities employers face.

Older workers often require role redesign, modular reskilling and workplace adjustments to remain productive over a longer career horizon. SMEs, in particular, face volatility in medical and insurance costs as their workforce ages. If unmanaged, these uncertainties can become deterrents to hiring and retention.

If we want businesses to employ seniors with confidence, can the government examine whether pooled insurance mechanisms, calibrated risk-sharing arrangements, and structured workplace redesign support can reduce that uncertainty?

I have previously suggested that senior and special needs employment be more directly linked to dependency ratio ceiling adjustments. It may also be timely to revisit whether such alignment can better incentivise inclusive workforce participation while maintaining overall labour discipline.

Now let me turn to innovation.

If Singapore is to move ahead of structural tightening, we cannot rely solely on cost efficiency alone. We must strengthen value creation. 

That requires accelerating commercialisation of intellectual property, particularly among SMEs.

Large firms often have internal R&D pipelines. SMEs do not.

We should therefore consider enhancing schemes that embed scientists and research talent directly within SMEs — not only as affordable project-based consultants, but through structured industry attachments that can shorten the path from lab to market.

At the same time, IP financing remains underdeveloped. Many SMEs hold valuable IP but lack access to financing instruments that recognise intangible asset value. 

There may be merit in strengthening state-backed risk-sharing measures to catalyse IP-backed financing — reducing collateral constraints and encouraging financial institutions to participate more actively in this space.

And finally, internationalisation.

If Budget 2026 is a positioning budget, then internationalisation is one of its most important instruments.

The Government has taken important steps. Enhanced MRA support of up to 70% for SMEs, the raised DTDi cap to $400,000, and expanded Enterprise Financing Scheme limits materially reduce the financial burden of overseas expansion. These measures signal clearly that scaling beyond Singapore is part of our competitiveness strategy.

For companies prepared to reposition and compete regionally or globally, these measures are helpful. 

Emerging markets across Southeast Asia, the Middle East, Africa and Latin America offer growth, but they also carry higher political, regulatory and receivable risk. While existing financing schemes provide access to capital, the binding constraint for many SMEs is working capital resilience in higher-risk markets.

Would the Government consider calibrating risk-sharing mechanisms more explicitly by market risk — for example, enhanced trade credit coverage or working capital guarantees in markets where the opportunity is real, but the uncertainty deters participation?

Scale is the second constraint.

Many overseas projects are too large or complex for individual SMEs. Procurement frameworks favour size, track record and integrated capability. If we want our firms to compete meaningfully, we must move beyond supporting individual expansion towards structured collaboration.

Schemes such as MRA and EFS could be adapted to provide explicit incentives for consortium-led bids — enabling firms to “hunt as a pack” and pool complementary strengths to pursue opportunities that no single company could realistically secure alone.

And as firms from Northeast Asia and Europe increasingly view Singapore as a gateway into Southeast Asia, we must ask whether our ecosystem has sufficient regional fluency — multilingual advisory capability, regulatory expertise, deep local partnerships — to anchor these flows here. If we want to capture these investment and trade flows, we must strengthen not just financing, but market intelligence and in-market advisory platforms, working closely with Trade Associations and Chambers. 

Mr Speaker, Garry Kasparov, one of the world’s greatest Grandmaster of Chess, once said, “The point of modern chess is not to wait for mistakes. It is to force them.”

Budget 2026 recognises that Singapore cannot afford to wait, especially in an increasingly uncertain and volatile world. 

It gives us the tools and sets the direction.

But forcing the move forward cannot be done by Government alone.

Businesses must invest — not delay.

Management must redesign — not defend the past.

Workers must upskill — not stand still.

In a structurally tighter Singapore, hesitation is not caution. It is decline.

If we take the offensive with discipline and conviction, we will not merely respond to structural change.

We will shape it. For these reasons, I support the motion.