Singapore's Deputy Prime Minister and Finance Minister Heng Swee Keat has finished giving his annual budget speech to parliament and in his speech, he spoke on the challenges facing the country and how the Government was introducing two special packages worth a total of $5.6 billion to help support businesses and households amid an economic slowdown caused by trade uncertainties and the COVID-19 novel coronavirus.
$4 billion of the package will be used to help local workers stay employed and to support enterprises. The remaining $1.6 billion will go to a Care and Support Package to help households, with the less well-off getting more help.
1) KEEPING SINGAPOREANS EMPLOYED
Singapore's Finance Minister Heng said that the country's Government would continue to ensure that there were jobs for all Singaporeans.
Businesses, especially SMBs, will be receiving significant support in terms of staff retention and liquidity options to keep their businesses going
The Jobs Support Scheme (JSS) will help enterprises retain their local employees during this period of uncertainty.
A temporary scheme for 2020, employers will receive an 8 per cent cash grant on the gross monthly wages of each local employee (applicable to Singapore Citizens and Permanent Residents only) on their Central Provident Fund (CPF) payroll for Oct 2019 to Dec 2019, subject to a monthly wage cap of $3,600 per employee.
The existing Wage Credit Scheme (WCS) that was due to expire will be extended and enhanced. The enhancement will raise the gross monthly wage ceiling from $4,000 to $5,000 for qualifying wage increases given in 2019 and 2020. It will also raise government co-funding levels for 2019 and 2020 by 5 per cent, to 20 per cent and 15 per cent respectively.
To help companies with cash flow, a Corporate Income Tax (CIT) Rebate of 25 per cent of tax payable, capped at $15,000, will be granted for Year of Assessment (YA) 2020.
Finally, there are enhancements to the SME Working Capital Loan programme that was introduced in 2016 to help small and medium enterprises (SMEs) access financing for their working capital needs.
The Government will raise the maximum loan quantum from $300,000 to $600,000 and enhance the Government's risk-share to up to 80 per cent (from the current 50 per cent to 70 per cent) for SMEs borrowing from Participating Financial Institutions under the scheme.
Oo Gin Lee, MD of Gloo PR, said that while he never expected any handouts from the Government.
As a small business, he has been extremely grateful for all the subsidies over the years, "These government subsidies to help SMEs tide through the expected rough times ahead is appreciated. When I started this business five years ago, I didn't even know there were things like corporate tax rebates and WCS."
He added that while the subsidies for SMEs might at first appear to a small incremental improvement over last year, it is actually a significant move because those subsidies like the Work Credit Scheme were supposed to decrease this year.
2) INVESTING IN TECHNOLOGY
The Singapore government will set aside an additional $300 million under the Startup SG Equity co-investment scheme, to provide equity investments to tech startups with strong intellectual property and global market potential, Deputy Prime Minister and Finance Minister Heng said in his Budget speech.
As these startups need larger investments and longer gestation periods and face higher risks, investors are less prepared to invest in them, so Startup SG Equity helps startups get their ideas off the ground by providing support such as co-investments, mentorship and physical space.
This year, the government will increase support for deep-tech startups - those in emerging technology areas such as pharmbio and medtech, advanced manufacturing, and agri-food tech.
But more may be needed for startups to succeed.
"While an additional $300 million has been set aside for investing in Deep Tech startups (including MedTech) with requirements for larger investments and longer gestational periods, success will also require not only committed investment but also an integrated ecosystem that allows startups to navigate in a timely and efficient manner," said Dr Zubin Daruwalla, MBBCh (Hons), BAO, MRCSI, MCh (Orth), MMed (Orth), Health Industries Leader at PwC Singapore.
3) PUSHING THE SME FORWARD
First announced in Budget 2017, SMEs Go Digital aims to help SMEs build digital capabilities. This year it will be further expanded to drive greater adoption of digital technology.
Chia Seng Chye, Partner, Tax Services at Ernst & Young Solutions LLP said, "The expansion of the SME Go Digital scheme reaffirms that investments in technology and enhancement of digital connectivity is the way forward for Singapore.
Further, the measures to support deep-tech startups is a welcomed move to create a 'hubbing' effect and platform whereby startups can thrive from funding support, industry network and expertise."
Part of this will be Grow Digital, a new initiative as part of the SMEs Go Digital programme, where the IMDA and Enterprise Singapore will help SMEs access global markets via B2B and B2C digital channels.
ADDRESSING BUSINESS CONCERNS
Ong Pang Thye, Managing Partner at KPMG in Singapore said, "Minister Heng Swee Keat has delivered a Budget which is strategic, calibrated and confident. There's clearly a focus on helping companies to grow, with supportive measures on digital transformation, capability building and internationalisation.
The incentives offered will certainly promote the right activity. What may be even more desirable is if there are follow-through incentives to reward positive outcomes. For example, the introduction of the broad-based R&D incentive scheme will encourage certain desired activities by firms.
What will make it even more potent is if there is an additional incentive which kicks in when these activities lead to the desired revenue outcomes. In other words, an incentive to encourage action, and an incentive to recognise the success of the action."
While encouraging in the scope of support, it is still too early to say if the budget goes far enough to address business and individual concerns around economic and global uncertainty.
With the presidential election in the United States set to take place at the end of the year, waiting for the COVID-19 virus to subside, the full effect of Brexit to hit, and the conclusion to the trade war between China and the United States, the continuing investment by the Singapore Government into businesses and workers is encouraging and should alleviate some concern.
At least until the next crisis.
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This article was first published in Hardware Zone.