Budget 2019 focuses on broader economic transformation and enhance the enterprise transformation that is underway by thrusting on three main themes: Building Deep Enterprise Capabilities, Building Deep Capabilities of Workers and Building Deep Global Partnerships.
Following is an overview of the key features of the Budget that impact the business community.
Building Deep Enterprise Capabilities
Scale-Up SG Programme
Startups and SMEs can now look forward to more customised help to scale up and grow, with the help of this new programme that will be launched by Enterprise Singapore in partnership with public and private sector entities. The programme will help aspiring high-growth firms to innovate and internationalise by offering customised business support, better financing options and supporting technology adoption.
Singapore has to up its ante and competitiveness by catalysing the growth of innovation driven enterprises. Amidst rapid technological transformation and disruptions, such schemes that acknowledge the disparate needs of enterprises at diverse growth stages is essential to foster an inclusive enterprise growth and innovation.
Innovation Agent Programme
It is a two-year pilot in which industry professionals with technology expertise and business experience will advise enterprises on innovation opportunities. The expert professionals, known as change agents will be identified by Enterprise Singapore based on their track record in innovation and growing businesses. The programme will tap into their ability to leverage their business network for the benefit of the enterprise seeking their mentorship. The Innovation Agents will be matched to enterprises by Enterprise Singapore.
While more information is awaited on the programmes from the lead agency, Enterprise Singapore, the startups and SMEs will be able to enhance their innovation quotient by such agile mentorship programmes. Besides being able to better their innovation edge, it is significant to secure right partnerships and optimal financing strategy to ensure transformative growth.
SME Co-Investment Fund (CIF) III
The CIF is part of Co-Investment Programme (CIP) that also includes SME Catalyst Fund and Mezzanine Growth Fund. Launched by the government in 2010, the CIP aimed to catalyse the growth of patient capital available for Singapore-based companies through co-investment from private sector. Along with the S$400 million set aside by the government since the inception of the programme, it has mobilised S$1.3 billion additional funding for SMEs thus far.
The government has now set aside S$100 million under the CIF III to continue to help qualifying SMEs to scale-up and internationalise. This fund injection is estimated to add another S$200 million additional fund from private investors and thus expand the available pool of patient capital for SMEs.
For innovations to progress from concept to prototype to actual solutions that are ready for deployment or commercialisation, SMEs need considerable time. Typically, private investors are unwilling to support enterprises through their long-gestation and prolonged roadmap of innovations. Expanding the patient capital pool will undoubtedly encourage SMEs to pursue innovations without investors’ pressure for returns.
Enterprise Financing Scheme (EFS)
The EFS streamlines the existing financing schemes to improve SMEs’ access to bank financing. With the streamlining, the Enterprise Singapore will discontinue eight financing schemes – SME Equipment Loan, SME Factory Loan, SME Working Capital Loan, SME Micro Loan, SME Micro Loan for Young Companies, SME Venture Loan, Internationalisation Finance Scheme, and Loan Insurance Scheme Plus.
Enterprise Singapore, through EFS, will now meet the financing needs of companies in six areas namely, working capital, trade financing, fixed assets, venture debt, mergers and acquisition, and project financing. Applications for financing can be made via participating financial institutions. The scheme will be launched in October 2019.
The scheme will provide stronger support for companies that have been incorporated for less than five years. The Government will take on up to 70% of the risk for bank loans to these young companies, compared to the current 50%. Notably, the enhanced support for young companies will be reviewed by 31 March 2021.
The simplified scheme is a welcome move and it will reduce the administrative costs of the SMEs and improve and quicken their access to funds. Startups will especially benefit from the enhanced support through easy access to funds during their early years- the most challenging for startups working on innovations with long gestation period.
SME Working Capital Loan
The scheme launched in 2016 offers enhanced support to the SMEs to access funds for their working capital needs. It is now being extended until 31 March 2021. The scheme, which was set to lapse on 31 May 2019, enables qualifying companies access up to S$300,000 in unsecured financing to meet their working capital and cash flow needs. This scheme will also be under the EFS.
It’s a welcome move and businesses will be able to enjoy short-term relief from the cost pressures for an extended period.
Expansion of SMEs Go Digital Programme
More sectors will get their own Industry Digital Plans (IDP), which will guide the SMEs in the sectors on relevant technologies and skills training programmes. The Accountancy, Sea Transport and Construction sectors will get their own IDPs. Earlier, the IDPs were available for Environmental Services, Retail, Food Services, Wholesale Trade, Logistics, Security and Media sectors.
Also, the number and range of pre-approved digital solutions will be expanded to drive digitalisation among SMEs. SMEs can access these pre-approved digital solutions on the whole-of-government (WOG) Business Grants Portal, and apply for the Productivity Solutions Grant (PSG) for up to 70% funding support for qualifying costs to adopt these solutions.
A marketplace powered by Artificial Intelligence, known as Business sans Borders, that matches buyers and vendors to help SMEs will be piloted by MAS and the Info-communications Media Development Authority (IMDA).
The pace of technological evolution and adoption is increasing rapidly. SMEs that do not adapt to the digitalised business landscape will soon lose out to their competition. The government’s push to digitalise is critical to boost economic growth and the expansion of the scheme to other sectors is a welcome move. The expansion of pre-approved solutions means SMEs can embrace more digital solutions cost-effectively. The cross-border digital platform will help SMEs to cost-efficiently expand their sources and markets beyond Singapore.
Digital Service Lab
The pilot programme to address digitalisation challenges in services sectors, through collaboration with industry and research partners was launched in November last year. The programme is intended to bring together industry and the research community to co-develop digital solutions capable of integrating technologies and re-engineering business process to cause sector-wide impact. The three-year pilot programme is aimed to bring together multiple stakeholders in service sectors such as Retail, Media and Logistics to cut-across the barriers in digitalisation. Companies participating as users and solution providers can apply for funding support of up to 70% of the qualifying costs.
This will catalyse digital transformation by defraying the early-stage costs and risks of solution development.
Automation Support Package (ASP)
The scheme was launched in 2016 to encourage companies to embark on large-scale automation projects to achieve significant productivity gains. The ASP, which was set to lapse on 31 March 2019, is now extended for another two years, up to 31 March 2021.
The package included – a grant of up to 50% of the qualifying costs for the roll-out or scaling up of automation projects, capped at S$1 million; a 100% investment allowance, in addition to the capital allowance for plant and machinery, on the amount of approved capital expenditure, capped at S$10 million per project; loan support through Local Enterprise Finance Scheme (LEFS) in the form of risk sharing (70% for SMEs and 50% for non-SMEs) for equipment financing through participating financial institutions. Notably, the LEFS will now be subsumed under Enterprise Financing Scheme from October 2019.
The extension of the ASP demonstrates Singapore’s commitment to aid industry transformation through digitalisation, automation and innovation. This will further entrench automation and digitalisation efforts among the SMEs in Singapore. However, building awareness among SMEs and helping them develop automation roadmaps will help build further synergies.
Building Deep Capabilities of Workers
New Professional Conversion Programmes (PCP)
New PCPs will be launched in new and high-growth sectors related to blockchain, embedded software, and prefabrication. PCPs are career conversion programmes to help mid-career PMETs to undergo training for skills conversion and move into new occupations or sectors that have good prospects and opportunities for progression. Under this programme the PMETs are either ‘placed and trained’ by participating employers or ‘attached and trained’ by participating employers in sectors with good growth prospects.
The PCP provides wage support to participating employers of up to 70% or 90% of the trainees’ monthly salary capped at S$4,000 or S$6,000, per trainee per month. Launched in 2007, the PCP is available for 30 sectors. This programme is aimed to re-skill and up-skill the local workforce to improve their employability and participation in the sectors that are growing and undergoing rapid technological transformation.
Amidst tight labour market, companies are keen on retaining staff, provided, they are able to reskill and retrain them. With rapid technological disruptions, retraining has become even more critical. With the help of partial defrayment of the training costs and the wage support, companies will find it easier to retrain workforce amidst economic headwinds and cost pressures.
Career Support Programme (CSP)
The CSP will be extended for another two years up to 31 March 2021 without any changes to the support parameters. The CSP is to help mature and retrenched or the long-term unemployed Singaporean PMETs to find suitable jobs. The participating employers receive up to 50% wage support, capped at S$42,000 for up to 18 months.
Industries are undergoing rapid technological transformations. To seize the next wave of economic growth, it is essential to empower the people to thrive amidst the technological disruption and remain relevant in the workforce. The extension of the CSP will bring more enterprise partners to participate and help reintegrate mature and unemployed workers back into the workforce with relevant skills.
Reduced Dependency Ratio Ceiling
While the duration of schemes intended to enhance the skills and employability of the local workforce are being extended, or its scope being widened, the government is also keen on maintaining the momentum of restructuring that is aimed at reducing the country’s dependence on foreign workers. Hence the Dependency Ratio Ceiling (DRC) has been reduced for the service sector. The DRCs for other sectors will remain unchanged though.
|To be reduced to 38% on 1 January 2020, and to 35% on 1 January 2021
|S Pass sub-DRC
|To be reduced to 13% on 1 January 2020, and to 10% on 1 January 2021
|All other sectors
Notably, the Foreign Workers Levy (FWL) for all sectors remain unchanged and any increase in the levy announced before the budget will not come into effect. The earlier- announced Foreign Worker Levy increases for the Marine Shipyard and Process sectors will be deferred for another year.
The announcement comes as no surprise as the government has strongly spelled out its commitment to restructure the economy and reduce the dependency on cheap foreign labour. The early notification is to help companies prepare themselves for the change by investing in automation and redesigning of works and processes and to reskill and upskill their workforce. Companies have to embrace a transformative mindset and pursue productivity measures to overcome any challenges posed by the change. Furthermore, the freezing of FWL and the help available under the Enterprise Development Grant and Productivity Solutions Grant should come as a welcome relief for companies that are affected by the change.
Enterprise Development Grant (EDG)
EDG is a holistic grant scheme providing up to 70% government funding to enterprises to undertake projects to strengthen their business capabilities, improve operational efficiencies and internationalise. The EDG is extended for three more years until 31 March 2023 and support levels will be reviewed after FY2022.
Under the EDG, SMEs can access up to 70% support while non-SMEs can access up to 50% support for qualifying expenses; but for hardware/software expenses, the support level differs – SMEs get up to 50% and non-SMEs get up to 30% (can get up to 50% if the project is large-scale and qualifies for Automation Support Package).
Productivity Solutions Grant (PSG)
The PSG offers support to enterprises to adopt pre-qualified, off-the-shelf productivity solutions and technologies. Depending on the sector which the PSG solution falls under, companies are given up to 70% support, however, this was set to drop to 50% after 31 March 2020.
To help firms transitioning to a lowered DRC, the PSG support level of up to 70% will be extended to 31 March 2023. Further, the scope of the PSG has been expanded to include expenses made towards productivity training. Accordingly, eligible enterprises will be able to receive a subsidy for up to 70% of their out-of-pocket training expenses (i.e. the remaining amount which is not already covered by other government training subsidies such as those under SkillsFuture), capped at $10,000 per enterprise. Support level will be reviewed closer to the end of FY2022.
The extension of both the scheme comes as a consolation for companies that have to combat the challenges of reduced DRC. Leveraging these two grants will not only help them through the transition but also help them gain long-term synergies through productivity gains.
Building Deep Global Partnership
Local Enterprise and Association Development Programme (LEAD)
The Programme run by Enterprise Singapore in partnership with the Singapore Tourism Board acknowledges the role of Trade Associations and Chambers (TAC) to build competitiveness of the local enterprises and enabling their access to international business networks. The LEAD programme provides up to 70% funding for qualifying expenses incurred to drive industry initiatives, focusing on areas like technology and infrastructure, business collaborations, as well as intelligence and research. Notably, high-impact multi TAC projects get up to 90% funding support.
It was announced that the Enterprise Singapore will develop a five-year roadmaps with TACs that have demonstrated strong leadership and shown ambition to do more for the business community. The aim is to make the TAC adopt a more strategic and longer-term approach in driving industry transformation by providing them access to funding and public sector secondees through LEAD.
TACs are a significant link in the internationalisation efforts of enterprises. Encouraging them to play a more strategic role through funding and secondment, will further enhance their role as enablers of industry development and enterprise expansion. This will help businesses forge alliances and gain synergies.
Framework for Secure Exchange of Electronic Trade Documents
The budget unveiled plans to work with partners to facilitate secure exchange of electronic trade documents to further ease international trade.
Last year, Networked Trading Platform was launched to streamline trade processes and provide a one-stop information management system for traders. If the secure exchange materialises, it will immensely benefit the trading enterprises whose costs in maintaining documents will be reduced significantly. More importantly, it will help Singapore extract further value from its international network of trade agreements and speed up cross-border movement of goods and services.
New Centres of Innovation (COI) in Aquaculture and Energy
The COIs support SMEs with technology innovation by providing assistance to enterprises in developing and testing technology products, through access to laboratory facilities, consultancy services and training courses. There are eight such COI currently. Two new COIs will be set up for aquaculture and energy in Temasek Polytechnic and Nanyang Technological University respectively. The former will support the growth and internationalisation of local enterprises in the aquaculture sector, and improve food resilience in Singapore, and the latter will drive industry-led innovation in energy efficiency, renewable energy and electric mobility. The COIs will work towards their objectives by pooling together resources, intellectual property, infrastructure and expertise.
Focused and integrated efforts are essential to translate research into commercial solutions and to commercialise. Enterprises in high-growth sectors and those probing opportunities in the sustainability spectrum require research assistance as well as incubation and commercialisation support. The two new COIs are to catalyse the industries with high growth prospects and the potential to underpin economic resilience if they are able to leverage pioneer advantage. The government is keen on hedging the future economic resilience and prosperity of the country.
Global Ready Talent Programme (GRTP)
To help Singapore firms in their overseas expansion, the GRTP aims to develop a pipeline of global-ready talent for enterprises through internships and Management Associate Programme. Under Internships, students, who are Singapore citizens and Singapore permanent residents, can take up local internships provided by local companies or overseas internships provided by local and foreign companies. Students will receive monthly internship stipends and overseas allowances. Participating companies can receive up to 70% funding support for the students’ monthly stipend.
The Management Associate Programme aims to enhance the international exposure and knowledge of international markets of young Singaporeans so that the internationalisation efforts of Singapore companies are powered by adequate local talent. The programme involves funding support for companies to defray the expenses incurred in sending young Singaporeans with up to three years of working experience on job postings in key overseas markets.
It is imperative for the Singapore companies to internationalise and also to foster talent with international exposure and expertise to remain competitive. In order to become a global node of technology, innovation and enterprise, we have to enhance the capabilities of our workforce. Hence, the scheme aimed at strengthening the local talent pool and improving capabilities through international exposure is a step in the right direction and companies will reap exponential benefits eventually.
Related links: Overview of Tax Changes for Business »
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