21 February 2017

Singapore's 2017 Budget is all about managing uncertainty

Source: Singapore Budget website. View of Singapore.
Source: Singapore Budget website. View of Singapore.
The Singapore Budget 2017 was a call to reposition the country to the future at a time of deep shifts in the global economy, leading to both challenges and opportunities for Singapore. Singapore Minister for Finance Heng Swee Keat said Singapore should develop strong capabilities in both firms and workers so they can adapt to the changes in economic structures and technology.

"Digitalisation, innovation and highly skilled workers will enable cities and regions to prosper while staying open and connected to the world," he said.

Heng also called for deep partnerships domestically. "The government’s role is not to plan every move, but to forge a common understanding of the changes, and foster partnerships with businesses, unions, firms and workers, with each playing a key role. We need to pool our resources and ideas, and solve problems together. Such networks of trust will allow us to seize opportunities and respond to unexpected challenges," he noted.

Retail was singled out among the sectors that are facing structural shifts, and advised to embrace technology to help transform business models. Heng suggested retailers leverage digital capabilities to access new markets through online marketing, and e-commerce platforms.

Budget 2017
provides both near term support measures, with a targeted approach to address sector-specific needs, and also addresses the Committee on the Future Economy’s seven mutually reinforcing strategies for the medium to longer term. It includes measures to strengthen corporate capabilities, particularly in promoting digitalisation, with a new SMEs Go Digital Programme, and strengthened capabilities in data and cybersecurity.

There are also measures to promote innovation and scaling up globally, including improving access to intellectual property (IP), a new Tech Access Initiative, a new International Partnership Fund, and financing support for local companies with overseas infrastructure projects.

For employees

The Budget seeks to deepen Singaporean’s capabilities by developing a skilled and adaptable workforce, with workers that hold their own when operating overseas while also deepening existing skillsets to remain in productive jobs. A Third Enabling Masterplan will be introduced to better integrate persons with disabilities into the workforce and to give support for caregivers.

Heng said that 2017 would see increased wage and training support provided under the Career Support Programme, the Professional Conversion Programme, and the Work Trial Programme. "We will introduce an Attach and Train initiative for sectors that have good growth prospects, but where companies may not be ready to hire yet. Instead, industry partners can send participants for training and work attachments. This will increase the chances of these workers to find a job in the sector later," he added.

Employer support

For employers, Singapore's Wage Credit Scheme is to continue to help firms cope with rising wages. "We expect to pay over S$600 million to businesses this March. Roughly 70% of this amount will be to SMEs," Heng shared.

The Special Employment Credit will continue to provide employers with support for the wages of older workers till 2019. Over S$300 million, which will benefit 370,000 workers, will be paid out in FY2017.

The SME Working Capital Loan will also be available for the next two years. Under this initiative the government co-shares 50% of the default risk for loans of up to S$300,000 per SME. "There has been good take-up for this scheme. Since its launch in June 2016, the scheme has catalysed more than S$700 million of loans," Heng commented.

Two more measures have been introduced to support firms. The Corporate Income Tax (CIT) Rebate has been enhanced further. It was enhanced from 30% to 50% of tax payable, capped at S$20,000 each year for year of assessment (YA) 2016 and YA2017, and that cap is now raised to S$25,000 for YA2017. The CIT rebate is further available for another year, to YA2018, at a reduced rate of 20% of tax payable, capped at S$10,000.

The government will also provide more support for firms hiring older workers. The Ministry of Manpower will raise the re-employment age from 65 to 67 years, with effect from 1 July 2017. This will apply to workers younger than 65 on that day.

The Additional Special Employment Credit has been extended till end-2019 and is expected to benefit about 120,000 workers and 55,000 employers. Under this scheme, employers will receive wage offsets of up to 3% for workers who earn under S$4,000 per month, and who are not covered by the new re-employment age of 67 years old. When combined with the Special Employment Credit, employers will receive support of up to 11% for the wages of eligible older workers.

Heng focused next on the recommendations of the Committee for the Future Economy. "Technology is reshaping businesses, jobs and lifestyles across the world. We must spot the opportunities in the digital economy, and make the most of our strengths as a nimble, well-educated, tech-savvy society," he said.

"As we mature as an economy, we must compete on the quality and novelty of our ideas, and our ability to create value. We need to build a strong innovation and enterprise engine, to complement our traditional strengths in efficiency and speed."

Elaborating further on the technology strategy, Heng said that digital technology, embraceing innovation, and scaling up should be the hallmarks for the year, and introduced new initiatives to help enterprises "build capabilities to go international, go digital, and to innovate".  "Digital technology has unique potential to transform businesses, large and small, across the economy. The first way to strengthen our enterprises, especially small and medium sized enterprises (SMEs), is to help them adopt digital solutions," Heng said. 

More digital help for SMEs

A new SMEs Go Digital Programme has been created to help SMEs build digital capabilities, to be helmed by the Info-communications Media Development Authority (IMDA) in collaboration with SPRING and other sector lead agencies. The SMEs Go Digital Programme will have three components, Heng said:

+Step-by-step advice on the technologies to use at each stage of their growth through sectoral Industry Digital Plans. "We will start with sectors where digital technology can significantly improve productivity. These include retail, food services, wholesale trade, logistics, cleaning and security," Heng said.

+In-person help at SME Centres and at a new SME Technology Hub to be set up by IMDA. SMEs will be able to ask about off-the-shelf technology solutions that are pre-approved for funding support, or connect to info-communications and technology (ICT) vendors and consultants. "The more digitally advanced firms can get specialist advice from the SME Technology Hub," Heng added.

+Advice and funding support for SMEs that are ready to pilot emerging ICT solutions. "We will work with consortiums of large and small firms to help them adopt impactful, interoperable ICT solutions, to level up whole sectors," Heng promised.

Data and security

Singapore also plans to level up on capabilities in data and cybersecurity. "With increased digitalisation, data will become an important asset for firms, and strong cybersecurity is needed for our networks to function smoothly. The Cyber Security Agency (CSA) of Singapore will work with professional bodies to train cybersecurity professionals," Heng said. 

Driving innovation

The Singapore government is also making it easier to tap into expertise at existing research institutes. Heng noted that A*STAR, which already works with firms to identify how technology can help them innovate and compete, will expand its efforts to support 400 companies over the next four years.

Additionally, Intellectual Property Intermediary, a SPRING affiliate, will be working with companies to match them with suitable IP.  "It will work with the Intellectual Property Office of Singapore (IPOS) to analyse and bundle complementary IP from Singapore and overseas," Heng said. 

A*STAR's Headstart Programme, which allows SMEs that co-develop IP with A*STAR to enjoy royalty-free and exclusive licences for the first 18 months, has been extended to the first 36 months.

"We will also support companies in the use of advanced machine tools for prototyping and testing, which may require costly specialised equipment. A*STAR will provide access to such equipment, user training and advice under a new Tech Access Initiative," Heng said. 

Expanding internationally

A new S$600 million International Partnership Fund has been set up to help companies grow overseas. The fund will co-invest with Singapore-based firms to help them scale up and internationalise.

IE Singapore’s Internationalisation Finance Scheme will be enhanced. The government will catalyse private cross-border project financing to smaller Singapore-based infrastructure developers by co-sharing the default risk of lower quantum, non-recourse loans. "We will also catalyse financing for projects undertaken by larger firms in higher-risk developing markets, by providing a share of the needed sovereign risk insurance coverage. Overall, these enhancements will enable more companies to take on more overseas projects," Heng said. 

Ecosystem for global innovation

Innovation and growing internationally were also the seeds for the Global Innovation Alliance, which is designed to help Singaporeans gain overseas experience, build networks, and collaborate with their counterparts in other innovative cities. The Global Innovation Alliance will have three programmes:

+The Innovators Academy will enable tertiary students to build connections and capabilities overseas. The academy builds on the NUS Overseas College programme, which connects students to startups overseas. The Innovators Academy will go further by making these opportunities available to students from other Singapore universities. "We aim to grow the annual intake of students from 300 to 500 over the next five years," Heng said.

+Innovation Launchpads will be set up in selected overseas markets, enabling entrepreneurs and business owners to connect with mentors, investors and service providers.

+Welcome Centres are inbound, allowing foreign companies to link up with Singapore partners to co-innovate, test new products in Singapore, and expand in the region.

"The Global Innovation Alliance is a novel collaboration among our educational institutions, economic agencies and businesses. In the initial phase, we will launch the Alliance in Beijing, San Francisco and various ASEAN cities," Heng said.

Building the leaders for internationalisation

To ensure that companies expanding overseas have capable Singaporean leaders with overseas experience, the SkillsFuture Leadership Development Initiative will expand on leadership development programmes. Promising individuals will be sent on specialised courses and overseas postings, beginning with a target to develop 800 potential leaders over the next three years.

For building skills in general, local educational institutions will be offering short, modular courses, and expanding the use of e-learning. Funding support for Singaporeans to take approved courses will continue to be available through the SkillsFuture initiative. 

When it comes to applying those new skills, Heng said employers, trade associations and chambers (TACs), unions and the government will work together. "First, we must make sure that skilled workers are matched to where they can best use their skills. We will make the National Jobs Bank more useful for jobseekers and employers, and work with private placement firms to deliver better job matching services for professionals," he said. 

Heng also called for employers, TACs, and unions to actively offer structuring training for workers "Employers and TACs who develop training programmes for their workers and the industry can receive funding support from SkillsFuture Singapore," he said.
Industry Transformation Maps (ITMs)

ITMs, announced last year, bring together various stakeholders – TACs, unions, and the government – to align efforts around sector trasnformation. Six of the projected ITMs for 23 sectors have already been launched. The remaining 17 are expected to debut in FY2017.

Heng emphasised that the ITMs are living plans that can be changed. "Where we spot opportunities, including ones that do not fit any existing industry, we will adapt our ITMs to seize them. We must also maximise synergies between related ITMs, such as between the food services and hotel industries," he said.

Heng mentioned Singtel as a shining example of what can be done for skills development both internally and for the industry as a whole. "Singtel not only trains its IT services employees to transition into cyber security roles, it also works with CSA and the IMDA on the Cyber Security Associates and Technologists programme to develop mid-career talent for the broader cyber security industry. Singtel has also launched its Cyber Security Institute to train technical professionals, management and boards to better handle cyber breaches. It also engages students through internship programmes," he said.
Regulations to keep pace with digital change

Heng noted that the government is transforming in tandem with industry. The Monetary Authority of Singapore (MAS) has announced a simplified regulatory framework tailored to the needs of venture capital firms, he said. "This will give them greater flexibility, making Singapore more conducive to venture capital investment, thereby enhancing the supply of financing for startups," he explained.

Heng also said more space for innovation is facilitated through a concept called regulatory sandboxing. "This involves setting boundaries within which some rules can be suspended, to allow greater experimentation," he said. "The Land Transport Authority (LTA) has done this with self-driving vehicles, setting out specific zones where they can be tested on roads. Likewise, MAS has set up a regulatory sandbox for fintech."

"Regulatory agencies will further explore how we can facilitate innovation. For instance, our regulators can make their risk assessments for new products and services more swift and effective. A good example is the Health Sciences Authority (HSA), which will be setting up a priority review scheme to evaluate new and innovative medical devices. This will accelerate the commercialisation process and make Singapore a preferred location to launch these devices," he said.
The government will also top up the National Research Fund by S$500 million, to support innovation efforts, and the National Productivity Fund by another S$1 billion, to support industry transformation. "All in, we are putting aside S$2.4 billion over the next four years to implement the CFE strategies. This will be over and above the S$4.5 billion set aside last year for the Industry Transformation Programme," Heng said. 

Reactions were mixed. The Singapore Business Federation (SBF) said the Budget announcements this year were 'underwhelming' in terms of short-term measures, but welcomed the longer-term initiatives. The SBF said there is inadequate short-term support to lower business and compliance costs, although the business community has been communicating concerns on rising business costs for some time.

The association welcomed the medium to long-term measures in the areas of internationalisation, innovation and development of digital capabilities, which continue to pave the way for the future economy, however.

“While it is comforting to know that this year’s Budget has a strong focus of preparing our SMEs for the future economy, the current business outlook remains challenging. The business community requires immediate stimulus. We hope to see more details shared at the Committee of Supply debate. The SME Committee will continue to provide the platform for government and businesses to work together to transform our industries,” said Lawrence Leow, Chairman of the SBF-led SME Committee.

“This year’s Budget on the short-term measures to help businesses fall short of our expectations. However, we are confident that the government is monitoring the situation very closely and will respond accordingly when the need arises. Also, SBF and the TACs look forward to working closely with the government on the implementation of the remaining 17 ITMs,” added SS Teo, Chairman, SBF.

Tom Beach, Country MD, Singapore, Telstra, commented that it is encouraging that the Budget announcement and CFE report seek to tackle the challenges which Telstra has also identified in recent research. Telstra's research showed that Singapore is a leader in Asia when it comes to the quality of its digital infrastructure, but also gaps in digital skills and digital partnerships.

"Reflecting the fact that digital skills are becoming central to business success and there is global competition for talent, initiatives to cultivate digital literacy in the workplace and link people with jobs, like the enhancements to the National Jobs Bank, are important. To be truly successful, Government programmes need to be complemented by the private sector continuing to actively train their staff to maximise the benefits from using the latest technologies," he said.

"In addition to training, government- and corporate-driven innovation hubs can also play a role in developing talent and opening up pathways for new businesses to emerge. To grow the country’s digital economy, we trust that Singapore will continue to pursue policies that make it easier for high-growth startups to base their operations here and export their innovative solutions globally."

Beach shared that Telstra believes an era of “co-corporation” is emerging. "Digital partnerships accelerate expansion into new markets and customer segments, facilitate the development of new products and services, and augment existing capabilities. With the newly announced Global Innovation Alliance, Singaporeans – through the Innovators Academy, Innovation Launchpads and Welcome Centres – can now formally gain overseas experience, build networks and collaborate with counterparts in other innovative cities," he said.


More details of the new or enhanced initiatives will be shared by the various ministries in charge at the Commitee of Supply debates, which are typically held soon after the Budget announcement.

Read the full Budget 2017 speech or watch the Budget 2017 delivery video (over 1.5 hours)

Hashtag: #SGBudget2017