Minister for Finance Mr Lawrence Wong delivered the FY2022 Budget Statement on 18 February. Recognising the unpredictability of the virus, he called on Singaporeans to adjust to the new normal. “We cannot let it change our hopes, our aspirations, our values,” he said.
On a positive note, he explained that our economy has “rebounded strongly from our worst recession since independence”, which he attributed to “the close tripartite partnership between the unions, employers and the Government [which enabled] decisive and timely actions to preserve jobs and create new ones even through this crisis”.
This has reduced unemployment, and he forecasted steady recovery in the year ahead, while cautioning that the global economy still presents pandemic, geopolitical and security risks, as well as supply-chain disruptions and slowdowns in external demand.
Small Business Recovery Grant
As part of the government’s target help for workers and businesses in struggling sectors, a $500 million Jobs and Business Support Package was announced. This includes a Small Business Recovery Grant for SMEs that have been most affected by COVID-19 restrictions over the past year, such as those in the F&B, Retail, Tourism and Hospitality sectors.
SMEs in the eligible sectors will receive a payout of $1,000 per local employee, up to a cap of $10,000 per firm. Local sole proprietors and partnerships in eligible sectors, as well as SFA licensed hawkers, market and coffeeshop stallholders, who do not hire local employees, will also receive a $1,000 payout.
Additional support to face higher prices
Minister Wong also acknowledged the risk of rising inflation and cost of living that have been driven by the recovery in global demand amidst continuing supply chain dislocations, and the rise in energy prices.
While MAS is taking pre-emptive steps to damped inflationary pressures, Minister Wong announced support within the budget to help businesses and households tide over the current period of higher prices.
To support companies with their cashflow needs, the Temporary Bridging Loan Programme and the enhanced Trade Loan Scheme, with revised parameters, will be extended for another six months, from 1 April to 30 September this year.
Access to Project Loans for the domestic construction sector will also be extended for another year, from 1 April this year to 31 March next year. This is on top of the Foreign Worker Levy rebates that construction firms are receiving currently.
Looking towards the digital future
Looking towards the future, Minister Wong noted that Singapore is recognised globally as a trusted and reliable node, keeping air and sea ports open, ensuring an uninterrupted flow of critical supplies, and maintained appropriate responses to the pandemic.
However, the future also holds a greater era of contestation for influence between countries and blocs, while turbocharging the move into a digital future. “Such new digital technologies will disrupt and reshape businesses, and impact a wide range of jobs across all sectors of the economy,” he says.
Speaking about the benefits this will bring, he notes that “Our local businesses, especially those that are digitally savvy, will be able to take advantage of the rich opportunities on offer, and transcend our geographical limitations.
“But this cuts both ways, as it will also be possible for MNCs to “reshore” more functions to their home countries, as they seek to simplify and localise their supply chains.
“In short, we are entering a future where conditions are more volatile, the global environment more unpredictable, and change more fast-paced than ever. We can and must adjust, and still excel in this new environment. “
As part of their support for businesses during this transition, the Minister promised significant investment in infrastructure, as well as aside an additional $200 million over the next few years to enhance schemes that build digital capabilities in our businesses and workers.
Equinx, a data centre and colocation infrastructure provider, welcomed he move, stating that “Digital infrastructure, coupled with a robust network infrastructure, is the backbone of the digital economy. Trading stocks, paying bills, hosting video calls, and remote working or studying – all of these are made possible by a maze of technologies running on a digital infrastructure.
“Without it, a digital economy – and even a smart city – would be just a dream.”
At the same time, more support will be provide for local firms to undertake R&D activities that will support “pervasive innovation”. This includes developing the network of centres located among Polytechnics and ITE that engage in technology, innovation and enterprise activities. These centres work closely with SMEs to undertake industry projects, many of which have led to new innovations.
“Such collaborations are a win-win,” he says. “SMEs get to tap on the R&D capabilities in our polytechnics and ITE, while students can contribute meaningfully to these projects and gain valuable hands-on industry experience.”
To further support such collaborations, the government will increase the capacity of the centres so that they can provide research and innovation support to more SMEs.
Over the next five years, these centres are projected to undertake close to 2,000 innovation projects across five pilot sectors: Agri-Tech, Construction, Food Manufacturing, Precision Engineering and Retail.
This amounts to an eight-fold increase in the number of innovation projects undertaken in these sectors.
Strengthening Local Enterprises
Another move to prepare for the future is to strengthen Singapore’s local enterprise system.
For the broad base of SMEs, the priority will be to raise their productivity. SMEs can make use of the Productivity Solutions Grant, or PSG, to implement digital and automation solutions.
$600 million will be set aside to expand the range of available solutions under the PSG and push for greater take up of productivity solutions by SMEs. The government estimate that this will support more than 100,000 productivity projects over the next four years. This is more than double the number of projects supported since the scheme began.
According to Joseph Lyons, Managing Director, Australia and Asia, Xero, “The extension of schemes like the COVID-19 Recovery Grant and the launch of new initiatives including the Jobs and Business Support Package will continue to provide immediate support to small businesses who need it most.
“In tandem, the $600m earmarked this year for boosting small business productivity gives SMEs the resources to digitalise and automate their business processes.
“Enhancements of grants like the Productivity Solutions Grant will not only encourage new SMEs to tap into support, but foster greater business innovation by making even more digital solutions accessible to the community.
“These new government initiatives will be essential in allowing SMEs to build on the digital foundations they laid last year for a successful future.”
Besides grants and bespoke assistance, some companies also need help with their financing needs. This will be provided through the Enterprise Financing Scheme. The government will enhance two components of the Scheme. Meanwhile, larger local enterprises will receive more customised assistance to scale up and invest in overseas markets, as well as support in talent development.
In addition, the M&A loan programme will be expanded to include domestic M&A activities from 1 April this year to 31 March 2026. This will support companies to grow and expand through mergers and acquisitions.
The extension of the enhanced Trade Loan till September this year had been announced earlier. Beyond this six-month extension, the government will maintain the enhanced 70% risk-share under the Trade Loan for enterprises venturing into more nascent markets like Bangladesh or Brazil. The government hopes this will encourage our enterprises to seek untapped opportunities in these markets.
Mr Kurt Wee, Chairman, SBF SME Committee said, “We have seen Singapore businesses consolidate amid an uncertain operating environment in the past two years. For those who have adapted well, they have also emerged stronger and more resilient. Nevertheless, for companies that are still struggling to get on the path of recovery, the SBF SME Committee is glad that schemes such as Temporary Bridging Loan and Jobs Growth Incentive have been extended to allow these companies more time to adapt and manage their manpower and business costs.”
Investing in the workforce
Besides support for companies, Minister Wong also reiterated the government’s continuing investment in education, and the provision of continual learning.
In this, the enterprises also play a critical role, he said. “Employers are well placed to identify skills that are in demand and provide industry-relevant training.”
To increase their support, the government will make adjustments to the SkillsFuture Enterprise Credit.” Today, only employers that have had at least three local employees, and contributed at least $750 of Skills Development Levy over a qualifying period, are eligible for this Credit – and these have tended to be larger enterprises,” said Minister Wong.
“To better support our smaller and micro enterprises, I will grant a waiver of the Skills Development Levy requirement for the qualifying period of 1 January 2021 to 31 December 2021. This is estimated to double the number of eligible employers, from 40,000 today to 80,000.
“The deadline to claim the credit will also be extended by a year, to 30 June 2024, to give employers more time to use the credit.”
Beyond training individuals, new approaches include the Company Training Committee model which brings together the unions and employers to develop concrete firm-level transformation plans that can then be implemented with the support of relevant Government agencies.
The government will set aside $100 million to support NTUC in its efforts to scale up the CTCs, and extend their outreach to smaller companies through other platforms.
Minister Wong reiterated the government’s Net Zero Ambition to achieve net zero emissions as soon as viable in the second half of the century. Part of these include raising the carbon tax on companies, while putting in place a transition framework to manage the near-term impact on company’s competitiveness, and supporting SMEs to invest in energy-efficient equipment and decarbonisation solutions.
All in all, the various support measures are expected to draw $42.9 billion from Past Reserves, down from $52 billion in FY2020.
Commenting on the Budget, Mr Lam Yi Young, SBF CEO said, “Budget 2022 is well-balanced, with a strong focus on growth and the future, while also taking care of immediate needs of SMEs still affected by COVID-19. The broad range of measures will support businesses in digitalisation, innovation and transformation to help them stay competitive and position themselves to seize growth opportunities. With the green economy as a future growth engine, there are also good opportunities for our SMEs to leverage sustainability for growth. As businesses move from survival to recovery and growth, Budget 2022’s strong signal of optimism and growth is welcomed by businesses.”