The Future Of Singapore's Business Landscape

Addressing many of the key challenges facing SMEs, the 2015 Singapore Budget has offered a package of solutions to support business growth through innovation and internationalisation

Faced with rising business costs and manpower issues, the onus is on SMEs to drive change in their companies. That was the message delivered in this year’s Budget.

Commenting on the current business environment, Mr Thomas Chua, President, Singapore Chinese Chamber of Commerce and Industry (SCCCI), said the only way to solve the challenge facing business completely is to “press to upgrade”.

“Singapore is no longer a location of choice for conducting business because our economy has grown and we have become an advanced country. In order to compete effectively with our neighbours, we have to create value and produce quality products and services,” Mr Chua said. 

At a time where interest is growing in a unified ASEASN Economic Community, businesses need to adapt and transform to compete more efficiently at home and overseas. With the support of SPRING Singapore, they are well placed to do that.

As the Deputy Prime Minister and Minister for Finance, Mr Tharman Shanmugaratnam, said in his Budget address on 23 February, SMEs need to review their operations if they want to expand.

“Every sector can achieve a lift in productivity, but it is especially important for our domestic sectors,” he said. “Yet it will only happen as firms rethink business strategies, seek to break the mould by finding new ways of growing their revenues, and take full advantage of government incentives for upgrading. Our tight labour market will itself motivate businesses to do so.”

Building Muscle For The Future

The 2015 Budget outlined the way ahead for the nation, with a strong focus on innovation and internationalisation. The message to SMEs is that in a challenging environment, businesses need to embrace innovation.

Accelerating Business Growth Through Innovation And Automation: Local SME Foodedge Gourmet embraces innovation as part of its response to a challenging market.

Video provided courtesy of SPRING Singapore, from the SPRINGnews Apr 2015 Issue.

“We recognise that bringing about innovation involves a range of activities, from technology research to product development, process improvements, or creation of new brands and marketing efforts,” Mr Shanmugaratnam said.

“For most SMEs, innovation will often not come in the form of major technological breakthroughs, but in other forms of innovations that are nonetheless significant.”

The Budget saw a series of new initiatives or enhancements to SPRING programmes introduced to help enterprises expand their offering to new markets.

These include a simplified application process for the Capability Development Grant (CDG) for projects below $30,000 that will help SMEs get the assistance they need to grow their business. The CDG’s enhanced funding support, of up to 70% of qualifying costs, will also be extended for three more years to 31 March 2018.

Related: 3 Ways The Capability And Development Grant Can Benefit SMEs

Mr Chua said measures such as the CDG are there to help SMEs with their business costs, but it is equally important that they address their ‘mindset’. 

“Many SMEs are still going through the restructuring process and adjusting to the tight manpower situation,” Mr Chua said. “It is important for SMEs to have the right mindset during the period of business transformation, to help them adjust.

“The Budget measures can only do so much. SMEs must build their own muscle and they must find a new business model to bring them to the next level to sustain themselves and continue to grow.”

Her Velvet Vase is an online shop established in 2007, specialising in edgy and modern clothes for women. Co-founder Clare Chan says tapping the CDG opened up many possibilities for her company. Through CDG, it was connected with various vendors and industry experts who helped it by providing valuable business advice and insights.

“The enhancements to the CDG will make it more accessible for companies to tap on bite-sized vouchers and simplified applications for smaller projects,” Ms Chan said. Moving forward, Her Velvet Vase hopes to tap the CDG in the areas of Business Strategy Innovation and Service Excellence.

The Budget also revealed several enhancements to SPRING schemes that SMEs can tap into as they build up capacity. One example is the promotion of industry collaboration. This propels SMEs and opens doors for them in the industry supply chain.

SPRING will increase its Collaborative Industry Projects (CIPs) – which aim to incentivise industry players and partners to develop productive and innovative solutions – from five to 15 projects a year and will cover all industry sectors. It will also enhance the Partnerships for Capability Transformation (PACT) scheme to foster greater supply chain collaboration between large companies and SMEs.

Mastering Capabilities For The Future: Collaborating with the Precision Engineering Centre of Innovation (PE COI) enabled Proway to gain new expertise and capabilities

Video provided courtesy of SPRING Singapore, from the SPRINGnews Apr 2015 Issue.

While the Productivity and Innovation Credit (PIC) Bonus will be phased out at the end of this year, businesses will continue to benefit from the PIC scheme and PIC+ scheme which has been extended for another three years. With PIC, businesses can enjoy tax deductions or cash payouts for investments in innovation and productivity improvements.

Capital And Talent For Growth

Start-ups are not only an important contributor to jobs growth, they spur innovation and technology advancements. To cultivate a thriving start-up ecosystem in Singapore, SPRING will help promising start-ups access the capital they need to grow by increasing the co-investment cap for SPRING’s Start-up Enterprise Development Scheme (SEEDS) and Business Angel Scheme (BAS).

It will also top up the BAS to partner more investors who want to nurture innovative start-ups. SPRING will also pilot a venture debt risk-sharing programme with selected financial institutions for two years as an alternative to traditional bank loans. And the Angel Investors Tax Deduction Scheme will be extended to encourage angel investors to invest in start-up companies and help them to grow.

Also, approved venture capital funds under Section 13H of the Income Tax Act will be accorded a 5% concessionary tax rate. Companies can also claim Merger & Acquisition (M&A) benefits for acquisitions which result in at least 20% shareholding of the target company. Such claims include a 25% tax allowance of the value of acquisition, up from 5%,with a cap at $5 million per annum.

The Budget stressed the need for SMEs to build up their talent pool to overcome the labour crunch. Companies need to focus on building a strong talent pool, enabling all staff to excel and discover opportunities to fulfil their potential with training and career advancement opportunities and achieve skills mastery.

According to Mr Chua, SMEs should consider manpower issues earlier to avoid losing bright talent to other business sectors. Internships are one way of doing that, he said.

“Our SMEs should embrace internships wholeheartedly. In the past they have not paid as much attention to this, if they don’t get involved in the manpower resource process now it will become more challenging for the traditional sectors to get the right manpower in a tight labour market,” he said.

When it comes to talent and workforce development, SMEs can look forward to continued support through the SkillsFuture Earn and Learn Programme, which help brings new graduates into companies. Fresh polytechnic and ITE graduates can be matched with suitable employers and receive a salary while undergoing institution-based and structured on-the-job training.

From Q3 2015, SPRING will also start to roll out its SkillsFuture mentors programme. Under this initiative, industry partners including Trade Associations and Chambers (TACs) and Centres of Innovation (COIs) will be appointed to reach out to and recruit, manage and match mentors with interested SMEs.

In this way, a mentor pool of 200 will be built up over the next two years, serving SMEs in key sectors. The biomedical, healthcare, food services, retail, early childhood and social services sectors were among the first sectors to be identified. Retirees with deep skills and experience, and mid-career professionals and executives with experience and know-how in different fields will all be involved.

The programme will help SMEs implement measures to deepen the skills of their workforce. Mentors will also provide feedback to the employer and trainee in this learning process.

As key pillars of the Singapore economy, now is the time for SMEs to look at what adjustments they can make to improve productivity, upgrade their capabilities and internationalise. To help companies expand their business overseas, the support level for SMEs for all activities under IE Singapore’s grant schemes will be raised from 50% to 70% till 31 March 2018.

What’s more, some of these grant schemes will be simplified into two programmes – Market Readiness Assistance (MRA) and Global Company Partnerships (GCP). The MRA is designed to provide basic know-how for companies looking to expand overseas, and financial assistance for professional services related to market assessment, market entry and business restructuring. The GCP will help companies with established overseas operations achieve global competitiveness by upgrading their capabilities.

Related: Going Global With IE Singapore

The Double Tax Deduction for Internationalisation will be enhanced to cover manpower expenses incurred for Singaporeans posted overseas. A new tax incentive – the International Growth Scheme – will also be introduced to provide companies a 10% concessionary tax rate on their incremental income from qualifying internationalisation activities.

Many SMEs are still going through the restructuring process and adjusting to the tight manpower situation. It is important for SMEs to have the right mindset during the period of business transformation, to help them adjust.
— Mr Thomas Chua, President, Singapore Chinese Chamber of Commerce and Industry

According to Mr Chua, one thing SMEs need to refresh is their mindset. “If they can focus on their niche product and service, they can differentiate themselves,” he said.

With the support of SPRING, enterprises are in a good position to anticipate future challenges and continue to provide meaningful opportunities for our workforce.

Reproduced with permission from SPRINGnews Apr 2015 Issue. Published by SPRING Singapore.

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