Budget 2020 presented in the backdrop of COVID-19 outbreak is cognizant of the immediate challenges as well the need to bolster the economy to tackle the challenges emerging from the long-term structural changes happening around the world. Coming at the back of the weakest-ever GDP growth registered since the global economic crisis and amid looming uncertainties, the priority is undoubtedly on recouping the resilience. Budget 2020, dubbed as unity budget, aims at advancing as one nation to seize future opportunities by growing and transforming the economy and enterprises, but most importantly, by addressing the immediate imperatives of enterprises and workers by stabilising and supporting them.
Following is an overview of the key features of the budget that impact the business community.
The S$4 billion Stabilisation and Support package aims to empower businesses and workers in overcoming the uncertainties hovering over the economy following the COVID-19 breakout. Budget 2020 has set aside S$8.3 billion towards growing and transforming the economy and reinforces its focus on the three thrust areas underscored in the previous budget: Deepening Enterprise Capabilities, Developing Worker Capabilities and Enabling Stronger Partnerships.
Stabilization And Support Package
Targeted assistance is rolled out to the five sectors namely, hotels, tourism, aviation, retail and food services that are adversely affected by COVID-19 breakout. The support provided under Adapt and Grow initiative has been enhanced from three months to six months for the Place and Train (PnT) programmes in retail and hotel industry to help workers to be re-skilled and up-skilled. Additionally, workforce Singapore WSG will provide new PnT programmes and Professional Conversion Programme (PMP) for targeted sectors.
Eligible enterprises in the tourism sector can borrow up to $1 million, with the interest rate capped at 5% p.a., from Participating Financial Institutions under the new Temporary Bridging Loan Programme (TBLP). The TBLP will be available until March 2021, and the government will provide 80% risk-share on these loans.
In the aviation sector the airlines that had operated scheduled passenger flights between mainland China and Singapore before the COVID-19 outbreak will be given landing credits and those airlines that continue to operate scheduled flight along the route will be given 100% rebate on the landing charges. Furthermore, to help airlines and cargo agents defray their operating costs, rebates on parking and landing charges as well as regulatory fees charged on airworthiness certificate along with a six-month waiver of the planned annual increase of landing, parking and aerobridge (LPA) charges have been announced. The retailers, F&B operators and other stakeholders operating at the Changi airport will benefit from assistance such as rental rebates.
Cruise ships and regional ferries with a port stay of not more than five days, and passenger-carrying harbour craft will benefit from the 50% port dues concession provided by the Maritime and Ports Authority of Singapore (MPA).
Hawkers and Commercial Tenants
National Environment Agency (NEA) will provide a one-month rental waiver, a minimum of S$200 to stallholders in NEA hawker centres and markets. Likewise, eligible commercial tenants/lessees in government facilities will be given half a month’s worth of rental waiver.
Property Tax Rebate
Accommodation and function room components of hotel buildings, serviced apartment buildings; Meetings, Incentive, Conferences and Events (“MICE”) venues, and other qualifying commercial properties will receive a 30% rebate on property tax payable. Qualifying commercial properties such as premises of an international airport, international cruise or regional ferry terminal, shops within hotel buildings, serviced apartment buildings, and the prescribed MICE venues will be given a 15% rebate on property tax payable. The two integrated resorts will receive a 10% property tax rebate.
Measures focusing on Jobs and wages
Under the Jobs Support Scheme (JSS), as a temporary measure employers will receive an 8% cash grant on the gross monthly wages of each local employee (applicable to Singapore Citizens and Permanent Residents only) for October 2019 to December 2019, subject to a monthly wage cap of $3,600 per employee. The grant will be awarded automatically by the Inland Revenue Authority of Singapore (IRAS) to employers based on the CPF data.
The level of co-funding by the government under the Wage Credit Scheme (WCS) has been increased to 20% and 15% (from existing 15% and 10%) for the years 2019 and 2020, respectively. The gross monthly wage ceiling is also increased from S$4,000 to S$5,000.
Measures to Improve Cash Flow
A 25% rebate on corporate income tax payable, capped at S$15,000 will be given for the Year of Assessment (YA) 2020.
An additional two months of interest-free instalments for payment of corporate income tax will be given to companies that file their Estimated Chargeable Income (ECI) within three months from the companies’ financial year-end (FYE).
Capital allowances against capital expenditure incurred for acquisition of Plant and Machinery (P&M) will be allowed to be claimed over an accelerated period of two years instead of the present claimable period of three years or the working life of the P&M. Likewise, expenses incurred on renovation and refurbishments (R&R) during the FY2020, can now be deducted in one YA instead of the current provision of deduction over three consecutive YAs following the basis period.
Instead of one year that is presently allowed under the carry-back relief scheme, the unabsorbed capital allowance and trade losses for YA2020 will be allowed to be carried back up to three immediate preceding YAs.
The maximum loan quantum available under Enterprise Financing Scheme – SME Working Capital Loan (EFS-WCL) will be increased from $300,000 to $600,000, the Government’s risk-share under the scheme will be increased to 80% (from the current 50% to 70%). The scheme will be available from March 2020 to March 2021.
The package is a sliver of hope amidst the gloomy outlook and comes as a handy and timely help to companies in the sectors that are directly impacted by the COVID-19 outbreak. It gives more reasons for employers to reskill and upskill their employees, and wise employers will leverage the downtime caused by the economic downturn to prepare themselves for the opportunities that would arise with an upturn. By investing in people as well as in P&M and facelifts for their facilities, they could enjoy tax benefits in the near-term and productivity enhancement in the medium-term. The wage offsets under JSS and WCS will help retain jobs and uphold wage increases during the difficult time. Notwithstanding all these rebates, offsets and benefits, we sincerely hope that the impact of the outbreak remains muted on the economy that is already teetering on the verge of recession and does not turn out like the proverbial last straw to break the camel’s back.
Growing and Transforming Enterprise
Deepening Enterprise Capabilities
Enhancements to Startup SG Equity
Recognising the long gestation period and huge investments needed for deep-tech startups and the dearth of patient capital, S$300 million has been committed to promoting private investments into deep-tech startups in critical sectors such as pharmbio and medtech, advanced manufacturing, and agri-food tech. The Government may partner with qualified third-party investors to make direct co-investments into eligible startups, or invest in funds through a fund-of-funds approach.
Our Comments on Deepening Enterprise Capabilities
Government’s active participation in promoting the deep-tech startups will draw more private investors into the ecosystem and more importantly help startups leverage the funds to easily access technical expertise and network that will enhance their innovation coefficient.
Enterprise Grow Package
Launch of GoBusiness and e-Adviser
The GoBusiness platform is a central platform that streamlines and digitalises transactions between the government and businesses. Following a pilot programme in October 2019 for food services sector licensing, the portal is now being made permanent and will be expanded to cover more sectors and government agencies. Access to government assistance programmes will be streamlined, and e-Adviser will recommend the ideal assistance based on the individual needs of the businesses.
Expansion of SMEs Go Digital Programme
The Go Digital Programme launched in 2017 to help SMEs embrace digital technology and transform their business process will be expanded. More sectors will get their own Industry Digital Plans (IDP), which will guide the SMEs in the sectors on relevant technologies and skills training programmes. Collectively, these will cover the different needs of 23 sectors, up from the current ten sectors. Some of the new sectors that will benefit are Healthcare, Food Manufacturing, Adult and Early Childhood Education. IDPs are currently available for sectors such as Environmental Services, Retail, Food Services, Wholesale Trade, Logistics, Security and Media sectors. Also, the number and range of pre-approved digital solutions, which the government co-funds up to 70%, will be expanded to drive digitalisation among SMEs.
A new initiative to enable SMEs to gain access to global markets via B2B and B2C digital channels, known as Grow Digital, has been rolled out. The IMDA and Enterprise Singapore will support SMEs to participate in e-commerce platforms. Eligible SMEs will be co-funded at 70% for Multichannel E-commerce Platform solution packages.
Enhancement to Market Readiness Access (MRA)
A broad-based enterprise grant scheme, MRA provides support to companies to take their first step in expanding overseas. To accelerate the internationalisation efforts of SMEs, MRA will be enhanced to:
- Expand the scope of supportable activities to include: (a) Free Trade Agreement (FTA) consultancy services to support companies in better leveraging FTAs; and (b) in-market business development;
- Increase the grant cap from $20,000 per year to $100,000 per new market per company over the enhancement period of FY20-22; and
- Extend 70% support level for another three years, until 31 March 2023.
Other Growth Programmes
Set up to assist Singapore enterprises looking to internationalise for the first-time, GlobalConnect@ Singapore Business Federation(SBF), will have a team of market advisors to assist SMEs through face-to-face market advisory services. Also, SMEs will benefit from networking opportunities, business matching services, referrals to in-market consultants, partners and government contacts, FTA education and advisory, Market insights, and Belt and Road Initiative business matching.
There are currently 11 SME centres attached to Trade Associations and Chambers (TAC) offering general business diagnosis and advisory services, capability workshops and group-based upgrading projects. The SME centres over the next two years will identify enterprises demonstrating growth ambition, having a good track record of growth or having a scalable or unique business model. Qualifying enterprises, thus identified will receive enhanced support in the form of one-on-one in-depth business diagnosis, business plan development for digital transformation talent development and internationalisation, business coaching and help in the implementation of growth roadmaps.
The Productivity Solution Grant (PSG), which provides funding support for the adoption of IT solutions and equipment that are pre-identified by the government, will be enhanced to offer a more comprehensive suite of pre-approved solutions. PSG’s support will be expanded to include consultancy services, starting with job redesign. The number of sector-specific solutions on the PSG will also be increased.
Our Comments on Enterprise Grow Package
The GoBusiness and e-Adviser initiatives are welcome moves as small businesses have been demanding such single-interphase interactive platforms to conduct their transactions and access government schemes. They have limited resources to plough through the dispersed and disintegrated contents and government services. The single platform will empower them with easy access as well as transact more efficiently with the government agencies. It is a welcome and empowering resource that will aid the growth of small businesses. Given the rising cost of doing business in the region, the increase in grant cap under the MRA programme is well-founded. FTA is one area where even large companies fumble, helpful to SMEs that are keen on expanding into Singapore FTA partner countries. The expansion of pre-approved solutions under the GoDigital programme would enable SMEs to embrace more digital solutions cost-effectively. The Grow Digital is a laudable initiative as SMEs will be able to diversify their markets and supply sources and fortify their competitiveness and profitability.
Enterprise Transform Package
Enterprise Leadership for Transformation (ELT)
The three-year pilot is mostly a training programme for business leaders that is delivered in partnership with Institutes of Higher Learning (IHLs), banks, and experienced industry experts. It aims to help business leaders of promising SMEs in achieving the next bound of growth. It is achieved through programmes such as structured modular training to improve capabilities in solving business problems, coaching by advisors and industry practitioners to develop business growth plan, alumni engagement and networking, to enable peer learning and collaboration as well as support for implementing business growth plans.
Expansion of Enterprise Transformation Support
Under this scheme Enterprise Singapore will scale up its support for enterprise transformation by supporting up to 3,000 enterprises in FY20 in their transformation journey through the Enterprise Development Grant (EDG) and by facilitating close to 100 companies identify their intangible assets and develop strategies to harness them.
Open Innovation Platform Sector-Wide Challenges
The Open Innovation Platform (OIP) is a virtual crowd-sourcing platform which bridges business needs with digital solutions. Enterprises place their business challenges on the platform and are matched to tech firms to develop solutions. IMDA will provide 70% co-funding of prize monies for solutions that bring sector-wide benefits. IMDA will also lower the entry barriers for innovation by supporting prototype development whereby 30% of the prize monies will be paid in the first tranche during the development phase to the shortlisted companies and 70% after prototype delivery.
Our Comments on Enterprise Transform Package
The ELT drives home the point that strengthening the competency of leaders is critical to transforming businesses. The grooming of leaders to empower them with capabilities will help them build futuristic visions for their businesses and implement transformation roadmaps assertively. Removing barriers for innovation and inculcating an innovation mindset is critical for driving companies along the transformation route. The enterprise transformation support and OIP will undoubtedly lay the groundwork in this direction and prepare companies for challenges thrown by Industry 4.0.
Enabling Stronger Partnerships
Executive-in-Residence Programme (EIR)
The two-year pilot programme is to help TACs and enterprises engage the services of experienced professionals with relevant expertise as EIRs, to drive industry and enterprise transformation efforts. Enterprise Singapore will support TACs in identifying, engaging and matching these professionals with interested enterprises besides defraying up to 70% of the costs of engaging EIRs.
Heartland Enterprise Upgrading Programme (HEUP)
Jointly administered by Enterprise Singapore and the Housing and Development Board, with support from Heartland Enterprise Centre Singapore the HEUP aims to create more vibrant commercial precincts in the headland by rejuvenating and transforming the enterprises there. The enterprises will also receive further assistance to improve productivity through business advisory, digitalisation road-mapping, and brand transformation This will be implemented through Merchants’ Associations (MAs), with support from Town Councils, Citizens’ Consultative Committees, grassroots organisations and relevant government agencies.
Enhancing Digital Connectivity
This scheme is to provide businesses and traders with more efficient trade processes and expanded market access by digitalising trade process and improving connectivity with overseas traders. The projects under the scheme are:
- Nationwide E-invoicing Network that allows suppliers to send e-invoices via this network to the Government;
- Networked Trade Platform (NTP) that supports international trade data exchange to facilitate trade, risk assessment and enhance supply chain security for which collaborations are ongoing with China, Indonesia and the Netherlands to allow the international exchange of customs declaration data;
- Digital Economy Agreements (DEAs) provide a government-to-government (G2G) framework to facilitate seamless end-to-end digital trade, digital flows and foster greater international cooperation on emerging digital issues such as Artificial Intelligence.
Our Comments on Enabling Stronger Partnerships
The EIR will enable SMEs to access high-quality expertise and will create a level playing field among SMEs that are deprived of resources to chalk out a transformation plan and lack knowledge of and access to various government schemes. The partnerships will build inherent synergies among co-opting entities. The deep local partnerships built by the HEUP will ensure that no business is left out of the transformation plans. While there are targeted programmes for SMEs, very often small business owners lack the motivation or sometimes the resources to transform their businesses to remain competitive. The HEUP will specifically be able to target such businesses, and true to the theme of the budget, will be able to drive the economic transformation as one nation. While NTP is well-intended and will automate and speedup international trading information exchange, bringing businesses on board such massive networks spanning across countries with only tacit benefits will remain a challenge.
Building Deep Capabilities of Workers
Skillsfuture Credit (SFC)
Introduced in 2015 to promote lifelong learning among Singaporeans to equip themselves with skills that are relevant for the evolving workplace requirements, the SFC has received a further impetus to drive the transformation of Singapore’s workforce.
SkillsFuture Credit (SFC)
Singaporeans aged 25 years and above (as of 31 December 2020) will receive a one-off top-up of S$500. Eligible individuals can start using the additional $500 SFC from 1 October 2020. While the opening credit of S$500 will continue to have no expiry, unused top-up credit will lapse after 31 December 2025.
SkillsFuture Enterprise Credit (SFEC)
The scheme spurs employers to undertake enterprise and workforce transformation initiatives in tandem. Eligible employers will receive a one-off $10,000 credit to cover up to 90% of out-of-pocket expenses incurred towards enterprise capability development and workforce transformation programmes. However, no more than S$7,000 of the credit can be used on enterprise capability development, but the entire amount can be used for workforce transformation programmes. A list of supportable programmes that are reviewed from time to time is available at Enterprise Singapore website.
SkillsFuture Mid-Career Support Package
This is to facilitate the career transition of Singaporean workers in their 40s to 50s, improve their access to good jobs while making them employable through reskilling. It aims to increase the annual placements to 5,500. On the demand side, it targets employers by encouraging more employers to step up efforts to recruit, re-train, and retain mature workers through Hiring Incentives. Under the Hiring Incentives, employers are given 20% salary support for six months, capped at $6,000 in total when they hire new local workers aged 40 and above through select reskilling programmes such as Professional Conversion Programmes (PCPs), Place-and-Train (PnT) programmes, and career transition programmes by Continuing Education and Training (CET) centres. On the supply side, through the SkillsFuture Credit top-up for the 40s and 50s scheme, individuals who are Singapore Citizens aged 40 to 60 (as at 31 December 2020), are given a one-off top-up of $500. This top-up is in addition to the one-off top-up given those aged 25 year and above. Any unused credit will lapse after 31 December 2025.
Our Comments on Building Deep Capabilities of Workers
Stamping an expiry date on the top-ups is a welcome move, and it will nudge the workers out of their complacency and tendency to postpone learning new skills. The credit given to enterprises will spur the employers to think on the lines of reskilling their workforce and redesigning their work processes during potential downtime caused by the economic slowdown. It mitigates the increased risk of employers laying-off workers who have become redundant. Thus, the changes to the SFC will not only improve the employability and reduce the skills gap among the Singaporean workforce, but it will also ensure job security.
Reduction in S Pass sub-Dependency Ratio Ceiling (DRC)
While the duration of schemes intended to enhance the skills and employability of the local workforce are being extended, or its scope being widened, the government is also keen to increase the job opportunities for the skilled Singaporean workforce developed through the targeted skills development programmes. The restructuring is also aimed at reducing the country’s dependence on foreign workers. As announced in Budget 2019, the Dependency Ratio Ceiling (DRC) is reduced for the service sector. Also, the S Pass sub-DRC will be reduced for the Construction, Marine Shipyard and Process sectors. The changes will take effect from 1 January 2021. Notably, when the change is implemented, firms will not be able to renew work passes of foreign workers that have exceeded the revised DRC or sub-DRC can retain them until their work passes expire to avoid disrupting existing operations.
DRC and Sub-DRC changes
|Services||40%||To be reduced to 35% on 1 January 2021|
|Marine Shipyard||77.8%||No change|
S Pass sub-DRC
|Services||15%||To be reduced to 10% on 1 January 2021|
|Manufacturing||20%||To be considered for reduction in future|
|Construction||20%||To be reduced to 18% on 1 January 2021, and to 15% on 1 January 2023|
Foreign Worker Levy (FWL) rates
Notably, the Foreign Workers Levy (FWL) for all sectors remains unchanged. The earlier- announced Foreign Worker Levy increases for the Marine Shipyard and Process sectors will be deferred for another year.
Though the plans to phased reduction was announced well ahead in the previous budget, it will still cause some unease among the employers in the services sector as they find that certain tasks are difficult to automate and the local workforce still shuns some roles. However, the government has emphatically spelt out its commitment to restructure the economy and reduce the dependency on cheap foreign labour even in the face of volatile economic conditions. The early notification of the changes in the S Pass Sub-DRC is to help companies prepare themselves for the change and companies should take advantage of the reskilling and upskilling support provided under the SFC Enterprise Credit and also invest in automation. The freezing of FWL and the help available under the Enterprise Development Grant and Productivity Solutions Grant should come as a welcome relief for companies that are affected by the change.
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