FOCUS

BUDGET 2018

SUPPORTING ENTERPRISES, CAPTURING NEW OPPORTUNITIES

LOKE HOE YEONG AND VERNICE NEO

BUDGET 2018 AND REACTIONS FROM BUSINESSES

 

Against the backdrop of Singapore’s GDP growth of 3.6% for 2017, which exceeded even the government’s forecast, Minister for Finance Heng Swee Keat delivered the Singapore Budget on February 19. The thrust of Budget 2018 was based on the three major shifts that will affect the Singapore economy over the coming decade. These were identified by Mr Heng as the shift in global economic weight towards Asia, the emergence of new technologies, and the issue of ageing. While the expected increase in the Goods and Services Tax (GST) loomed large for most observers, the government framed this and other measures in Budget 2018 as part of its “strategic and integrated plan” to position Singapore for the future.

 

This vision was shared by key representatives from trade associations and chambers (TACs) and business leaders, who gathered for a post-Budget focus group discussion organised by ISCA on February 21. They found Budget 2018 to be prudent and future-oriented, while noting that the successful implementation of the Budget measures would lie in its details.

SUPPORTING ENTERPRISES, IMPROVING GRANT APPLICATION PROCESSES

 

To help Singapore businesses capture future opportunities in response to the two global shifts identified in Budget 2018 – the shifting of economic weight to Asia and the emergence of new technologies – the government is offering more targeted support to foster pervasive innovation throughout the Singapore economy, help build deep capabilities in businesses and people, and forge strong partnerships both locally and abroad.

 

Specifically, to help businesses build digital and enterprise capabilities, there will be a consolidation of such initiatives, which the government has made in response to feedback from the business community that the multiplicity of grants for businesses is appreciated but confusing. The Productivity Solutions Grant (PSG), announced this year, will streamline existing grants that support the adoption of off-the-shelf technologies into a single scheme. Additionally, International Enterprise (IE) Singapore’s Global Company Partnership grant will be combined with SPRING Singapore’s Capability Development Grant, to form an integrated Enterprise Development Grant (EDG).

 

How have businesses reacted to these measures? They believe the government is generally on the right track, but the technicalities of the grant application processes could be further improved. They feel that there should ideally be a one-stop shop for all grant applications as far as possible, rather than multiple agencies and even multiple portals within them. In this vein, the merger of SPRING Singapore and IE Singapore, effective this April, was lauded as the right move for consolidating grants relating to internationalisation. On a related point, there should not be a portal such as for the Innovation & Capability Voucher (ICV) that is separate from other grant schemes that are currently offered by SPRING Singapore.

 

Another feedback is that businesses often require the specialised services of consultants to assist them in completing voluminous grant application forms. This is a drain on valuable time and resources for them, and is not economically efficient. Businesses noted that the quality of an applicant’s business plan is captured in only about 30% of a typical grant application form, while 70% of it comprises basic information of the applicant – even though such basic information does not add value to the evaluation process. Furthermore, the basic compliance information usually refers to information on the company itself, which can be pre-filled through data that the Accounting and Corporate Regulatory Authority (ACRA), Inland Revenue Authority of Singapore (IRAS) and the CPF Board already hold. It was suggested that the government re-designs its grant forms such that the applicant’s compliance-related information are automatically collated and extracted from its various agencies. This will simplify the grant application process by reducing the time and effort spent by businesses in filling the forms.

 

INFRASTRUCTURE OFFICE AND INTERNATIONALISATION

 

Budget 2018 announced the setting up of an Infrastructure Office, amid the buzz surrounding programmes such as China’s Belt and Road Initiative, among others. It is envisaged that this office will bring together local and international firms from across the value chain to develop, finance and execute infrastructure projects. It will also enable infrastructure players to better tap on opportunities in the region, while supporting Asia’s infrastructure development and economic growth.

 

Our focus group participants regarded the proposed Infrastructure Office as possibly the best catalyst for Singapore companies to form consortia to internationalise by “hunting in packs” – a phenomenon which has not caught on in Singapore, unlike in Japan or South Korea. They hope that the office can help incentivise larger Singapore companies to form consortia with capable and qualified SMEs, for the purpose of better positioning Singapore businesses for projects in overseas markets. Measures such as the enhanced Double Tax Deduction for Internationalisation (DTDi) in this year’s Budget was deemed helpful. However, businesses would also like for the proposed Infrastructure Office to “take the driver’s seat” and actively push for projects to be undertaken by Singapore enterprises in overseas markets. This move is seen as the next step in helping Singapore businesses internationalise further.

BUILDING DEEP CAPABILITIES: TECHNOLOGY AND INNOVATION

 

The Budget rightly emphasised that digital capabilities are key to transforming the Singapore economy. Mr Heng stated that more than 650 SMEs have benefitted since the SMEs Go Digital Programme was started last year to support companies in digitalising. To improve labour productivity, Mr Heng announced that the government would expand the National Robotics Programme (NRP) to encourage wider use of robotics in the built-environment sector, especially in construction.

 

Not all businesses, however, see robotics and automation as the silver bullet to solve their productivity or other challenges. In a sector like construction, for instance, robotics is still regarded as being “far-fetched” because the value chain is yet to be set up for them to harness this aspect of productivity. For a start, workers in the sector would have to be retrained, for which time and additional investments are needed. Taken together, currently, there are few push factors for firms to make these additional investments in robotics. Market forces may prove to be a more powerful agent of change, but they may be too late if firms are pushed out of the game by more advanced foreign competitors in future. Such competition from these large foreign players may come very fast as they have the resources to adopt the latest technologies quickly. Smaller local players will find themselves with insufficient time to respond.

 

In research & development (R&D), the government is seeking to take advantage of Singapore’s research capabilities to enhance economic competitiveness. The National Research Foundation (NRF)-Temasek IP Commercialisation Vehicle, designed to translate public sector research efforts into commercially-viable applications, will be launched later this year. Businesses welcome this initiative, but express the hope that innovation efforts would not be hindered by form-filling exercises. Some participants have given feedback that field studies or pre-project groundwork is necessary before business ideas can be developed. In the interest of fostering pervasive innovation, there should be a balanced struck between having businesses fill up onerous pre-claim approval/evaluation forms in order to claim for groundwork that is integral to a project; they should be allowed to claim for the pre-project groundwork costs even after the field studies pre-project groundwork has commenced or has been completed. This is also because it may not be possible for them to present a full and feasible business plan at the pre-claim approval stage.

 

SKILLS, TALENTS AND THE POPULATION QUESTION

 

To plug the skills gaps quickly in a fast-changing economy, the government announced the Capability Transfer Programme to support the transfer of skills from foreign specialists to Singaporean trainers and trainees. However, one focus group participant felt that Singapore should not distinguish where talent comes from, that is, whether they are from foreign or domestic sources, as the government’s goal, after all, is to anchor Singapore as a Global-Asia node of technology, innovation and enterprise.

 

For the marine shipyard and process sectors, which continue to face cyclical weakness, the government will defer the increases in foreign worker levy rates for another year. Unfortunately, employers in sectors such as construction and marine are forced to scout for talent from overseas, given that students tend to gravitate towards professions like law, medicine and accountancy. However, such employers are then restricted by foreign manpower quotas. The consensus was that the government should be more flexible with regard to the recruitment of foreign talent in sectors that Singaporeans shun.

 

CONCLUSION: THE ROLE OF THE TACS

 

Our focus group participants supported the government’s emphasis on the important leadership role that TACs play in forging partnerships and driving industry-level advancements. It was highlighted though, that as business chambers cater to a very wide spectrum of members, they may have a more limited role than trade associations in promoting and pushing for the Industry Transformation Maps (ITMs) – the government’s S$4.5-billion programme of roadmaps for 23 industries – given the vast diversity of their members’ sizes and industries. It is difficult for chambers to work out what an ITM means for each of its members in a targeted way. Equipped with the specific industry knowledge, trade associations are better positioned to jointly implement the ITMs together with the government agencies.

 

Nevertheless, the government now looks to TACs, to be supported by the existing Local Enterprise and Association Development (LEAD) programme, to play a key role in implementing the measures in Budget 2018.

 

Read about the tax measures of Budget 2018 in “Tax Measures in Budget 2018”, the second part of this cover story.

 


 

Loke Hoe Yeong is Manager, and Vernice Neo is Executive, Insights & Intelligence, ISCA.