Building Resilient Businesses

Budget 2014 lays the groundwork for SMEs to restructure for long-term success.

While Budget 2014 may include plans to continue many of the polices introduced in previous Budgets, it also features a distinct focus on the future - a future of quality growth, improving living standards, and changing social norms.

Quality growth remains one of the core themes of Singapore's economic evolution, and one that this year's Budget clearly supports. With its foundations in innovation, productivity and strengthened capabilities, quality growth aims to provide good jobs and rising incomes for Singaporeans. Given that SMEs are a key contributor to the economy, and one of tits largest employment sectors, their continued success is of key importance.

We are grateful for the extended time frame that allows companies to continue utilising PIC for three more years. Plus, the enhanced ICV is a boon to those looking to implement solutions to improve operational efficiency and productivity.
— Mr. Edwin Ng: Director, MUNCH Saladsmith

In line with this, many of Budget 2014’s key announcements were focused on supporting SMEs in their efforts to transform and grow their businesses. In doing so, the aim is clear: to ensure a thriving SME sector for years to come. Five core policy thrusts in the Budget exemplify the changes that will secure Singapore’s future.

Related: SMEs Rise Up To The Challenge To Restructure For Growth


New Ideas, New Skills

Budget 2014 extends and deepens support for businesses to invest in productivity, innovation and skills upgrading to step up their restructuring efforts. Key policies include an extension of the Productivity & Innovation Credit (PIC) scheme for a further three years and its enhancement through the PIC+ scheme, which raises the expenditure cap for each qualifying productivity or innovation-enhancing activity from $400,000 to $600,000.

Another important announcement was a top-up of $500 million to the Lifelong Learning Endowment Fund, to $4.6 billion. This funding will help to ensure that Singaporeans have the opportunity to continually upgrade their skills through continuing education and training. In doing so, their skills and knowledge will keep pace with the rapidly changing business environment, and help the companies become more competitive and achieve growth.

Raising Productivity With Infocomm Technology

The increased adoption of infocomm technology (ICT) is another key thrust of this year’s Budget. The three-year ICT for Productivity and Growth Programme (IPG) was introduced to spearhead the adoption of ICT, particularly amongst SMEs. The IPG aims to see some 10,000 SMEs adopt ICT in their operations to increase their productivity and position them for stronger growth.

The IPG will support 80% of qualifying costs for SMEs to adopt ICT, capped at $1 million per participating firm. The IPG also aims to increase high-speed connectivity amongst SMEs by subsidising fibre broadband subscriptions and the costs of new in-building network infrastructure, as well as supporting the implementation of Wireless@SG services.

Aiming For Growth

As part of the drive to restructure Singapore’s economy, the Budget also places particular focus on catalysing growth of promising enterprises. However, these young and innovative SMEs require access to financing to achieve their full potential. In Budget 2014, it was announced that the government will raise its risk-share in the Micro Loan Programme (MLP) to make it more accessible to young companies of less than three years old.

Government support alone is not sufficient, and also not the optimal way to fund growth enterprises. Hence, measures have been put in place to encourage increased early-stage investment from the private sector. To this end, the Co-Investment Programme (CIP) has catalysed over $500 million of investments from private sector players. Budget 2014 allocated an additional $150 million to the CIP to continue facilitating the flow of growth capital to promising enterprises.

Looking Abroad

A critical part of supporting growth in Singapore companies is helping them to expand their markets - and with the limited market size in Singapore, this inevitably means expanding overseas. To assist SMEs in their efforts to internationalise, Budget 2014 saw a doubling of the maximum loan quantum to $30 million per firm under the Internationalisation Finance Scheme. This will boost financing for companies to make asset investments abroad by providing working capital for overseas projects.

Another key programme to support overseas expansion is the Global Company Partnership (GCP) Programme, which was also enhanced as part of Budget 2014. The programme, which helps companies access and exploit overseas opportunities, will see its support level for pilot and test- bedding projects increase from 50% to 70%. This will allow companies to build up their track record in new markets and prototype new products to break into international markets.

Related Article: Going Global With IE Singapore

A New Way To Build

The construction industry received specific attention in Budget 2014 because of its strategic importance and large size. Several measures were announced to bring about broad and fundamental changes in the way the industry operates. These include efforts to increase productivity by mandating the use of productive technologies such as prefabricated components as part of government land sales. Incentives will be rolled out to further encourage the adoption of such technologies. Government agencies such as Land Transport Authority, Jurong Town Corporation and Housing Development Board will lead by example and continue to adopt advanced technologies to set precedents and catalyse mass demand.

In line with an increase in productivity, the measures aim to further reduce construction companies’ reliance on foreign workers. The measures also encourage companies to employ more skilled foreign construction workers, so that they can contribute to higher productivity in the industry.

Restructuring For The Future

Taken together, the five thrusts mentioned focus on one key concept - the need to restructure, upgrade and transform Singapore companies to compete more efficiently and effectively in Singapore, in the region, and around the world.

We are delighted that DPM Tharman acknowledged the feedback provided by the SBF-led SME Committee in his Budget Statement. SMEs seeking growth would benefit from the greater support in areas of innovation, financing and internationalisation. In a recently concluded post-budget survey by SBF, there was overwhelming appreciation to the extension of PIC till YA 2018, enhancement of PIC to PIC+ specially catered to SMEs, and the wide ranging support for ICT adoption.
— Mr. Lawrence Leow: Chairman, SME Committee, Singapore Business Federation

Five Key Thrusts To Provide More Incentives For Upgrading

Thrust One: Invest In Innovation And Skills

  • Extension of Productivity and Innovation Credit (PIC) Scheme is until YA 2018. 
  • Tax deduction on qualifying R&D expenditure is extended until YA 2025.
  • Further tax deduction on Singapore Economic Development Board-approved R&D projects - until 31 March 2020.
  • Extension of writing-down allowance for the acquisition of IPR is until YA 2020.
  • Acquisition of Intellectual Property Rights - writing down allowance until 2020.
  • Land Intensification Allowance (LIA) - until 30 June 2020, and extended to logistics and transport sectors.
  • Lifelong Learning Endowment Fund (LLEF) - top-up of S$500M in line with Government’s commitment to Continuing Education and Training.
  • PIC+ to help SMEs make more substantial investments, to transform their businesses. Expenditure cap for each of the six qualifying activites raised from S$400,000 to S$600,000 per YA, from 2015 to YA 2018.
  • New industrial spaces to cluster companies in the same industry.
  • Additional S$10M to fund the Enhanced Innovation Enhanced & Capability Voucher. This will help SMEs implement solutions beyond consultancy services to the following categories:
    • Equipment & Hardware.
    • Technical Solutions.
    • Professional Services.
    • Design & Renovation.

Thrust Two: Push For Adoption Of ICT Solutions

Over S$500M will be allotted to SMEs in the next 3 years to accelerate adoption of ICT solutions and to boost their productivity and growth.

The ICT for Productivity and Growth Programme (IPG) comprises 3 key initiatives:

  1. Scaling up proven ICT solutions
    • Targeted Reach: From 500 SMEs to another 10,000 SMEs over the next 3 years.
    • Up to 70% of the costs of ICT products and services will be subsidised; SMEs pay remaining 30%.
  2. Piloting of emerging solutions
    • 80% of the qualifying pilot project costs will be subsidised, up to S$1 million per SME; SME pay the remaining 20%.
    • Tech solutions include sensors, data analytics and robotics.
  3. Enabling high-speed connectivity for businesses
    • Government will subsidise SMEs’ fibre broadband subscription plans of at least 100 Mbps and provide support to implement Wireless@SG services at their premises.

    • Up to 80% of new in-building infrastructure will be subsidised, capped at S$200,000 per building.

Thrust Three: Catalyse Investment In Growth Enterprises

  • Phase 2 of the Co-Investment Programme (CIP)
    • Additional S$150M for Phase 2 of the Co-Investment Programme (CIP) to match private sector investments. Funds to be managed by Heliconia Capital Management.

  • SMEs in growth and expansion stage
    • SME Co-Investment Fund II will enable direct equity investments into companies.

    • SME Mezzanine Growth Fund will help meet demand for mezzanine financing.

  • Young enterprises
    • To help enterprises of less than three years old, the Government will increase risk-share in the Micro Loan Programme (MLP) to 70%.

    • Crowdfunding for start-ups will be studied by SPRING Singapore and the Monetary Authority of Singapore (MAS). 

Thrust Four: Seize Opportunities To Internationalise

  • Maximum loan quantum under the Internationalisation Finance Scheme (IFS) raised from S$15M to S$30M per firm.

  • Support level for pilot and test-bedding projects
    under the Global Company Partnership (GCP) raised from 50% to 70%.

Thrust Five: More Intensive Efforts For Construction Productivity

  • Productive technologies will be required in the tender conditions for selected Government Land Sales (GLS) sites (e.g. Prefab Prefinished Volumetric Construction and Prefab Bathroom units).

  • More incentives will be given to developers of Non-GLS sites.

  • Buildability and constructability scores for private projects on non-GLS sites will be raised.

  • Increase in foreign worker levies for basic skilled construction workers (R2), from S$600 to S$700.

  • Extend maximum Period of Employment from 18 to 22 years for higher-skilled workers.

  • Government will introduce a Market-based Skills Recognition Framework to retain workers with better skills.

Reproduced with permission from SPRINGnews April 2014 Issue. Published by SPRING Singapore.

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