The 2015 Budget of Singapore provides support for businesses

Source: Ministry of Finance, Singapore. Infrastructure investments were also announced as part of Budget 2015.

Singapore’s Budget 2015, presented by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam, included several business initiatives. These encompassed increased training assistance, a gradual reduction in business restructuring aid, a freeze on foreign worker levies (excluding manufacturing and construction), and measures to encourage innovation and expansion.

Training and development

Shanmugaratnam emphasized the government’s commitment to continuous investment in Singaporeans’ skills development. Through SkillsFuture, the government aims to support lifelong learning and the development of expertise in all fields. The SkillsFuture program includes these business-specific components:

  • SkillsFuture Earn and Learn Programme: This program will provide recent polytechnic and ITE graduates with paid employment while they participate in structured, institution-based, and on-the-job training that results in an industry-recognized certification. Both participants and their employers will receive significant government assistance.

  • Targeted Support for Career Advancement: Shanmugaratnam stated that this initiative would assist those seeking to specialize in areas related to future growth sectors. According to him, this could include professions like software developers, satellite engineers, or expert artisans. Those who already possess specialized skills and want to enhance their business acumen or cross-cultural understanding could also benefit from these awards.

    Singapore’s focus, according to the Minister, will be on the following growth areas:

    • Advanced manufacturing, encompassing advanced robotics and 3D printing
    • Applied health sciences, such as creating novel medical devices and improved nutrition, as well as revolutionizing healthcare delivery
    • Smart, eco-friendly urban solutions, ranging from water and waste management to transportation and urban design
    • Logistics and aerospace, leveraging existing air and seaport infrastructure and investing in cutting-edge technology platforms
    • Asian and international financial services.

    Beginning this year, SkillsFuture Study Awards will be given out gradually, eventually reaching an annual total of about 2,000 recipients. To help Singaporeans become masters in their fields, SkillsFuture Fellowships will be awarded beginning in 2016. Every year, about 100 fellowships will be given out.

  • SkillsFuture Leadership Development Initiative: This initiative will involve increased collaboration with key companies to create a pipeline of Singaporeans prepared to assume leadership positions and responsibilities within businesses.

  • Industry Collaboration: In order to raise the bar for all businesses and support the career advancement of Singaporeans, the government will collaborate with employers, unions, educational institutions, and training providers to create and implement Sectoral Manpower Plans (SMPs) across all major industries by 2020.

    The government will collaborate with business partners to establish a shared pool of SkillsFuture Mentors with specialized, industry-relevant skills that SMEs can use to address their unique capability and capacity development challenges.

    These initiatives’ specifics will be made public later.

Restructuring support

Shanmugaratnam highlighted Singapore’s productivity increase of 13% since the national restructuring initiative began in 2010. This represents a 2.5% average annual growth rate. The entire gain was realized in 2010 (11.6%) and 2011 (2.3%) as the nation recovered from the economic downturn; in the three years that followed, there has been little growth.

He added that greater productivity gains are attainable, especially when contrasting companies with global operations to those that primarily serve the local market. There is a noticeable productivity difference between industries where our businesses compete internationally and those where they primarily compete domestically, such as construction, retail, and food and beverage.

“Our outward-oriented sectors have seen average productivity growth of over 5% annually over the past five years, compared to less than 1% for our domestic-oriented sectors. Additionally, the domestic-oriented sectors have experienced the majority of employment growth. This is essentially why our overall productivity growth has been sluggish, " he stated.

“Every industry can experience an increase in productivity, but it is especially important for our domestic industries. Only if businesses are willing to reconsider their business models, look for new revenue streams, and fully utilize government incentives for modernization will this be possible. Businesses will be encouraged to do so by our constrained labor market. We are aware that this significant upgrade is feasible in our domestic sectors, where productivity has lagged, because international leaders have already accomplished it.”

The Transition Support Package will be extended for an additional two years with reduced support levels because businesses may need more time to adapt to rising costs during restructuring.

  • Wage Credit Scheme: To give employers more time to adjust to the tight labor market, the Wage Credit Scheme will be extended until 2017. Gross monthly wage increases of at least S$50 in the qualifying year (2016 to 2017), up to a gross monthly wage level of $4,000, will be eligible for 20% co-funding.

    Additionally, gross monthly salary increases of at least S$50 granted in 2015 and maintained in 2016/2017, as well as wage increases granted in 2016 and maintained in 2017, will continue to receive 20% co-funding.

  • Corporate Income Tax (CIT) Rebate: The 30% Corporate Income Tax (CIT) Rebate will be extended for Years of Assessment (YA) 2016 and YA2017, with a lower cap of S$20,000 per company per YA. This reduction will ensure that more assistance is directed toward small and medium-sized businesses (SMEs).

  • Productivity and Innovation Credit (PIC) Bonus: The Productivity and Innovation Credit (PIC) Bonus will be phased out after YA2015 because it was designed to be a temporary measure and has been effective in fostering a productivity-focused culture among SMEs. Businesses will continue to gain from the PIC program, which has been extended until YA2018, as well as the PIC+ program, which was introduced in Budget 2014.

Foreign worker levies

Given the significant slowdown in the net inflow of foreign workers (excluding those in the construction industry), the Government will postpone the planned levy increases for S Pass and Work Permit Holders this year, with the exception of Work Permit Holder levies in the Manufacturing and Construction industries.

Shanmugaratnam emphasized that the government is not shifting its position on relying on foreign talent. “Let me state unequivocally that, despite the fact that we are modifying the rate of our foreign worker measures, we are not altering our course to avoid any misunderstanding. Restructuring our economy to lessen our reliance on labor, particularly low-skilled foreign labor, continues to be essential for Singapore, he said.

“Our fundamental strategy is still the same. We must maintain our course toward reducing our reliance on labor, particularly low-skilled foreign labor. However, we will keep adjusting our foreign worker policies in light of data on the rate of inflows, the caliber of workers being hired, and the development of productivity increases in each industry.”

Strengthening support for innovation

Since 2011, Singapore’s public investments have generated S$8.6 billion in industrial R&D, according to Shanmugaratnam. He praised Dou Yee International, a local electronics manufacturer, as a prime example of innovation success. “From its humble beginnings as a trading company, Dou Yee International has grown into a major player in the electrostatic materials sector with an annual revenue of S$300 million. This was accomplished by R&D and a long-standing collaboration with A*STAR. In its most recent project, Dou Yee collaborated with A*STAR to create intelligent plastic packaging that increases the shelf life and freshness of food, " he stated.

“In our upcoming five-year Research, Innovation, and Enterprise plan, we will intensify our efforts to support businesses in developing, testing, and commercializing novel goods and services. Later this year, more information will be released.

  • Capability Development Grant (CDG): To encourage SME innovation, the Capability Development Grant (CDG) application process will be streamlined for projects under S$30,000 to make it easier for businesses to apply. The CDG’s enhanced funding support level of up to 70% of qualifying costs will also be extended for an additional three years, until March 31, 2018.
  • SPRING’s Collaborative Industry Projects & Partnerships for Capability Transformation (PACT): To foster industry collaborations, SPRING’s Collaborative Industry Projects will be expanded to include all industry sectors in order to develop effective and inventive solutions. The Partnerships for Capability Transformation (PACT) initiative will also be expanded to encourage collaboration between major corporations and SMEs in their supply chains.
  • National Research Fund: This year, the National Research Fund will receive a S$1 billion boost, with a focus on assisting businesses in developing and marketing brand-new products.
  • Business Angel Scheme (BAS), Startup Enterprise Development Scheme (SEEDS), and Venture Debt Risk-Sharing Programme: To ensure that promising businesses have access to the funding they require for expansion, the government will take the following actions:
    • Add S$75 million to the Business Angel Scheme (BAS) and raise the co-investment cap to S$2 million per company for BAS and SPRING’s Startup Enterprise Development Scheme (SEEDS) to close early-stage funding gaps for startups.
    • For a two-year trial period, implement a venture debt risk-sharing program to give qualified financial institutions a 50% risk-sharing option for such loans. The objective is to encourage roughly 100 venture debt loans totaling about S$500 million.

Expanding overseas

The government will implement the following to support internationalization:

  • For three years, until March 31, 2018, increase the support level for SMEs participating in IE Singapore’s grant programs from 50% to 70%*.
  • Expand the Double Tax Deduction for Internationalisation program to include eligible manpower costs incurred for Singaporeans assigned to new overseas offices.
  • Establish a new International Growth Scheme to offer eligible businesses a 10% concessionary tax rate on their incremental revenue from authorized internationalization activities. On March 31, 2020, the program will come to a close.

Encouraging mergers & acquisitions

To assist businesses in achieving scale through mergers and acquisitions (M&A), the government will:

  • Raise the tax deduction for acquisition costs from 5% to 25% of the acquisition value while maintaining the allowance cap at S$5 million per YA. Additionally, businesses will be able to claim M&A benefits for acquisitions that result in at least a 20% ownership stake in the target company, down from the existing 50% requirement. The M&A tax allowance program will also be extended until March 31, 2020.
  • Expand IE Singapore’s Internationalisation Finance Scheme to include funding for international M&A.

At the Committee of Supply of the Ministry of Trade and Industry, more information will be released.

You can read more about Budget 2015 here.

*These programs include the Global Company Partnership (GCP) and the Market Readiness Assistance (MRA) grants. From April 1, 2012, to March 31, 2015, the current level of support for both of these programs is up to 50%, with the exception of four activities: design, branding, intellectual property, and M&A, which receive 70% support.

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