Budget 2021: Emerging stronger

Photo by Sam Lion

As Singapore re-opened her economy, government measures have shifted from containment to restructuring, while continuing support for Singaporeans, workers, and businesses. Broad-based support has transitioned into more targeted efforts for firms, especially those in the hardest-hit sectors. At the same time, measures were introduced to preserve core capabilities.

Beyond preservation and adaptation which will safeguard lives, jobs, supply chains, and core economic capabilities, DPM Heng announced that from 2021, our focus will be on Emerging Stronger, Together.

This means turning attention to accelerating the structural adaptations which will help Singapore navigate the global shifts in the economic, social and political fronts that have set off new domains for competition and cooperation as well as accelerated technological advances.

An allocation of $24 billion over the next three years to enable Singapore’s firms and workers to emerge stronger, building on the momentum of the transformation push started five years ago, when the Industry Transformation Maps were launched. Three enablers were identified: a vibrant business community, with a strong spirit of innovation and enterprise, deeply connected with Asia and the world; the ability to catalyse a wide range of capital to enable businesses to transform and scale; and opportunity creation and redisnged jobs for our people to develop their skills, creativity, and talents.

Ultimately, the purpose, the raison d’être of this economic transformation is to grow opportunities for our people to realise their full potential and aspirations.

Vibrant Business Sector and Ecosystem for Innovation

DPM Heng stated that to emerge stronger, Singapore must deepen her position as a Global-Asia node. This involves positioning the aviation sector for recovery, as well as creating the platforms for nurturing creative ideas.

“To remain competitive, businesses will need to innovate and collaborate on a global scale,” he said. Support for businesses towards this include:

Corporate Venture Launchpad

This platform, piloted this year, will provide co-funding for corporates to build new ventures through pre-qualified venture studios. This is especially useful for larger businesses which want to rekindle a startup mindset within their organisations.

Open Innovation Platform (OIP)

This will facilitate the matching of problems faced by companies and public agencies, with solution providers, and co-fund prototyping and deployment.

For example, through the platform, the Building and Construction Authority, was matched with three solution providers, TraceSafe, TagBox and Nervotec, to develop solutions for safe re-opening of worksites. The firms developed real-time systems that helped construction site owners conduct contact tracing and health monitoring of their workers.

The OIP will be enhanced with new features such as a cloud-based Digital Bench for accelerated virtual prototyping and testing.

Global Innovation Alliance (GIA)

The GIA serves to catalyse cross-border collaboration between Singapore and major innovation hubs globally. Since its inception in 2017, over 650 students and about 780 Singapore businesses have taken part in innovation launchpads overseas. 40% of these were in Southeast Asia. Last year, despite the pandemic, there were over 100 potential business matches between Indonesian and Singapore-based companies.

The GIA network currently has 15 city links, including four Southeast Asian cities – Bangkok, Ho Chi Minh City, Jakarta, and Manila. It will be expanded to more than 25 cities around the globe over the next five years.

The GIA will also be enhanced through the inclusion of the Co-Innovation Programme. The Programme will support up to 70% of qualifying costs for cross-border innovation and partnership projects.

As businesses innovate, they will create intellectual property and intangible assets, or IP and IA. They will need to identify and protect, value and manage, and commercialise these. To support businesses in commercialising the fruits of their innovation, the Singapore Intellectual Property Strategy 2030 is being developed.

This will include equipping businesses with tools to value their IP and IA, and training skilled professionals in these fields.

Suite of Capital Tools to Co-Fund Transformation

Another enabler is to catalyse a wide range of capital to co-fund and enable businesses, from startups to small, medium, and large enterprises, to innovate, transform, and scale.

Businesses have had to preserve cash flows during these uncertain times. Yet, it is precisely now that those that are ready to seize new opportunities will emerge stronger.

To catalyse the flow of capital and bridge market gaps, the Government will step up risk-sharing arrangements with providers of capital, and provide grants, to support businesses at various stages of growth.

Jeff Lee, Co-Owner & Managing Director, HKBN JOS Singapore, says that “With these schemes, organisations will have the necessary support on the talent front, on a technical level and better prepare for the adoption of tomorrow’s emerging technologies. These are key areas for businesses especially with regards to their ability to adapt to today’s unpredictable business environment and begin working towards greater success.”

Venture Debt for High-Growth Enterprises

High-growth enterprises, including startups, will see the Venture Debt programme, in which the Government shares up to 70% of the risk on eligible loans with Participating Financial Institutions, continued. The cap on loan quantum supported will increase from $5 million to $8 million and $45 million of venture debt is expected to be catalysed over the next year.

Jeffrey Liu, co-founder of Jenfi, a Singapore-based fintech that provides revenue-based financing to business in Asia, says that this move will benefit the “significant number of companies are underbanked and do not have access to credit.

“Prior to the pandemic, accessing funding from banks and traditional lenders are known to be difficult. Traditional bank financing methods are unfavourable to SMEs and digitised business. Their method of underwriting means that businesses may not qualify for credit even though they may be well-founded.”

The introduction of the Venture Debt Programme, says Liu, means that “This form of financing is now available to high-growth startups that do not have significant assets to be used as collateral under traditional bank lending.

“Although the Emerging Technology Programme and Digital Leader Programmes are long-tail initiatives that may take a few quarters to a few years to materialise, it helps to eradicate barriers to financing innovation and digital transformation. 

Co-Funding Transformation of Mature Enterprises

More mature enterprises, from micro and small, to medium and large enterprises, should also invest in new and emerging technologies to sharpen their competitiveness. To encourage them to do so, the Government will co-fund their adoption of digital solutions and new technologies.

A new Emerging Technology Programme will co-fund the costs of trials and adoption of frontier technologies like 5G, artificial intelligence and trust technologies. This will support commercialisation of innovations and diffusion of technology downstream.

Welcoming the move, Liu explains that “Traditional financial institutions will not provide capital to these types of opportunities as there’s no cash flow to underwrite and no hard assets. It is unlikely that they will be able to rely on venture capital as venture capital firms will need to see revenue generation to back high growth multiples.

“Hence, the Emerging Technology Programme is critical support in R&D so that innovative companies are given the boost necessary to give Singapore an edge in frontier technologies.” 

To help firms to identify and adopt digital solutions, the Chief Technology Officer, or CTO-as-a-Service initiative will provide access to professional IT consultancies.

Lee says that this initative will be critical in helping organisations drive greater outcomes as they accelerate the transformation to capture growth in the coming years. “Businesses will need to tap into industry experts who are able take a macro and objective view on key areas that require transformation to meet the dynamic demands of Singapore’s digital-first consumers,” he explains.

A new Digital Leaders Programme will also support promising firms in hiring a core digital team and in developing and implementing digital transformation roadmaps.

According to Liu, the Digital Leaders Programme is also a medium-term investment horizon as it takes time for a company to evolve to a digital leader.

“Most lenders will not give any credit to these initiatives until there are tangible results such as a new revenue stream. Investors will not necessarily back a pre-existing company that’s going through a digital transformation if they can back a startup that’s already purpose-built for digital opportunities.”

“In essence, it is potentially harder for a traditional business to pivot to digital than to start a new business. Hence, this government programme helps to bridge this gap so that Singapore companies are able to embark on a digital transformation road map.”

Beyond these new initiatives, the enhanced support levels of up to 80% for existing enterprise schemes such as the Scale-up SG programme, Productivity Solutions Grant, Market Readiness Assistance Grant, and Enterprise Development Grant, will be extended to end-March 2022. These schemes and enhances have $1 billion set aside.

Equity investments in large local enterprises

To support the growth of local companies, the Government has partnered equity firms to provide growth capital for companies to transform and scale. Thus far, the focus has been on SMEs, with annual revenues of up to $100 million. Companies of this scale traditionally lack attention from private equity players, while larger enterprises tend to have the means to raise capital.

However, changes in the global economic landscape and financial markets have made it harder for our large local enterprises, or LLEs to attract private equity. This may mean missed opportunities for companies with strong fundamentals to plug into new areas, as supply chains are reconfigured. DPM Heng announced enhancements to existing grants and loans, and support them through equity investments, tapping on market players to ensure commercial discipline.

“To secure our future, we must build new capabilities in our people and businesses, and find new ways to work together effectively within and across industries, and beyond our shores,” states DPM Heng.

“In the face of major changes, we must move from just counter-cyclical fiscal and monetary stabilisation policies, to structural economic policies to equip our businesses and workers with deep and future-ready capabilities.”