Source: Singapore Budget website. View of Singapore.

Singapore’s Budget 2017 aimed to prepare the nation for the future amidst significant global economic shifts, presenting both obstacles and prospects. Finance Minister Heng Swee Keat stressed the need for companies and workers to develop robust adaptability to navigate these changing economic structures and technologies. He highlighted that digitalization, innovation, and a highly skilled workforce are key for cities and regions to thrive while maintaining global openness and connectivity.

Heng emphasized the importance of strong domestic partnerships, stating that the government’s responsibility is not to micromanage, but to build a shared awareness of the changes and cultivate collaborations. He called for partnerships between businesses, unions, firms, and workers, with each entity playing a crucial role in pooling resources, brainstorming, and collectively addressing challenges. These trust-based networks, he noted, would enable Singapore to capitalize on opportunities and manage unforeseen difficulties.

The retail sector, recognized as facing major structural changes, was encouraged to utilize technology for business model transformation. Heng recommended that retailers harness digital tools to tap into new markets via online marketing and e-commerce platforms.

Budget 2017 offers both short-term assistance, tailored to specific sector needs, and addresses the Committee on the Future Economy’s seven interconnected strategies for the medium to long term. These measures encompass bolstering corporate capabilities, particularly in digitalization through the new SMEs Go Digital Programme, and strengthening data and cybersecurity proficiencies.

Further measures aim to foster innovation and global expansion. This includes enhancing intellectual property (IP) access, introducing a new Tech Access Initiative, establishing a new International Partnership Fund, and offering financial backing to local companies engaged in overseas infrastructure ventures.

For Employees

The budget seeks to empower Singaporean workers by cultivating a skilled and versatile workforce. The goal is to equip them for successful overseas operations while simultaneously strengthening existing skills for sustained productivity in their roles. A Third Enabling Masterplan will be implemented to better integrate persons with disabilities into the workforce and provide caregiver support.

Heng announced increased wage and training support in 2017 under the Career Support Programme, the Professional Conversion Programme, and the Work Trial Programme. He introduced an Attach and Train initiative designed for high-growth sectors where companies might not be ready to hire immediately. This initiative allows industry partners to sponsor training and work attachments, increasing participants’ chances of securing employment within the sector later.

Employer Support

To assist employers, Singapore’s Wage Credit Scheme will continue to help companies manage rising salaries. Heng indicated an expected payout exceeding S$600 million to businesses in March, with approximately 70% directed towards SMEs.

The Special Employment Credit will remain in effect until 2019, providing employers with wage support for older workers. In FY2017, over S$300 million will be disbursed, benefiting 370,000 workers.

The SME Working Capital Loan will also be accessible for the next two years. Through this program, the government shares 50% of the default risk for loans of up to S$300,000 per SME. Heng highlighted the positive response to the scheme, which has facilitated over S$700 million in loans since its June 2016 launch.

Two new measures were introduced to further support businesses. The Corporate Income Tax (CIT) Rebate was enhanced. Previously increased from 30% to 50% of tax payable, capped at S$20,000 annually for the year of assessment (YA) 2016 and YA2017, the cap is raised to S$25,000 for YA2017. The CIT rebate will extend for another year, to YA2018, at a reduced rate of 20% of tax payable, capped at S$10,000.

Increased support for businesses hiring older workers will also be provided. Effective July 1, 2017, the Ministry of Manpower will raise the re-employment age from 65 to 67 years. This change applies to workers younger than 65 on that date.

The Additional Special Employment Credit is extended until the end of 2019, projected to benefit approximately 120,000 workers and 55,000 employers. This scheme grants employers wage offsets of up to 3% for employees earning below S$4,000 per month who are not covered by the new re-employment age of 67. Combined with the Special Employment Credit, employers will receive up to 11% support for the salaries of eligible older workers.

Heng then addressed the Committee for the Future Economy’s suggestions. Recognizing technology’s global impact on businesses, jobs, and lifestyles, he emphasized the need to capitalize on opportunities presented by the digital economy and leverage Singapore’s strengths as an agile, educated, and technologically adept society.

He stressed the importance of competing on the quality and originality of ideas and value creation as the economy matures. Building a robust innovation and enterprise engine to complement existing strengths in efficiency and speed was deemed crucial.

Expanding on the technology approach, Heng identified digital technology, innovation, and scaling up as key themes for the year. He introduced new initiatives aimed at helping enterprises develop capabilities for international expansion, digital adoption, and innovation. He highlighted the transformative potential of digital technology for businesses of all sizes, particularly SMEs, and stressed the importance of supporting their adoption of digital solutions.

More Digital Help for SMEs

A new SMEs Go Digital Programme, spearheaded by the Info-communications Media Development Authority (IMDA) in partnership with SPRING and other sector-leading agencies, will help SMEs develop digital capabilities. Heng outlined the program’s three key components:

• Step-by-step guidance on technology adoption: Sectoral Industry Digital Plans will provide SMEs with tailored advice on appropriate technologies at each stage of growth. The initial focus will be on sectors where digital technology can significantly enhance productivity, including retail, food services, wholesale trade, logistics, cleaning, and security.
• Personalized assistance: SME Centres and a new IMDA-established SME Technology Hub will offer in-person support. SMEs can seek guidance on pre-approved, off-the-shelf technology solutions eligible for funding support or connect with info-communications and technology (ICT) vendors and consultants. More digitally advanced firms can access specialist advice through the SME Technology Hub.
• Guidance and financial support for emerging ICT solutions: Support will be available for SMEs prepared to pilot emerging ICT solutions. Consortiums of large and small firms will work collaboratively to facilitate the adoption of impactful, interoperable ICT solutions for sector-wide advancement.

Data and Security

Singapore plans to enhance its data and cybersecurity capabilities. With increased digitalization, data will become a crucial asset for businesses, necessitating robust cybersecurity for smooth network operation. The Cyber Security Agency (CSA) of Singapore, in collaboration with professional organizations, will train cybersecurity professionals.

Driving Innovation

The Singaporean government is simplifying access to expertise at established research institutions. A*STAR, already engaged in assisting firms in leveraging technology for innovation and competitiveness, will expand its efforts to support 400 companies over the next four years.

Additionally, Intellectual Property Intermediary, a SPRING affiliate, will connect businesses with suitable IP. This will involve collaborating with the Intellectual Property Office of Singapore (IPOS) to analyze and bundle complementary IP from Singapore and international sources.

A*STAR’s Headstart Programme, enabling SMEs co-developing IP with A*STAR to enjoy royalty-free and exclusive licenses for the first 18 months, is extended to 36 months.

Support for businesses utilizing advanced machine tools for prototyping and testing, which often involve expensive specialized equipment, will be provided. A*STAR’s new Tech Access Initiative will offer access to such equipment, user training, and guidance.

Expanding Internationally

A new S$600 million International Partnership Fund will support businesses’ international growth. The fund will co-invest with Singapore-based companies to facilitate their expansion and globalization.

IE Singapore’s Internationalisation Finance Scheme will be enhanced. The government will promote private cross-border project financing for smaller Singaporean infrastructure developers through co-sharing the default risk of lower-quantum, non-recourse loans. Financing for projects by larger firms in higher-risk developing markets will be facilitated by sharing the required sovereign risk insurance coverage. These enhancements aim to empower more companies to undertake more overseas ventures.

Ecosystem for Global Innovation

The Global Innovation Alliance, designed to provide Singaporeans with overseas experience, networking opportunities, and collaboration with counterparts in other innovative cities, aligns with the goals of innovation and international expansion. It comprises three programs:

• Innovators Academy: This academy builds upon the NUS Overseas College program, expanding opportunities for tertiary students to network and develop capabilities overseas by connecting them with international startups. The Innovators Academy aims to increase annual student intake from 300 to 500 over the next five years.
• Innovation Launchpads: These launchpads, situated in select overseas markets, will connect entrepreneurs and business owners with mentors, investors, and service providers.
• Welcome Centres: These inbound centers will connect foreign companies with Singaporean partners for co-innovation, new product testing in Singapore, and regional expansion.

The Global Innovation Alliance represents a unique collaboration among educational institutions, economic agencies, and businesses. Initially, it will launch in Beijing, San Francisco, and various ASEAN cities.

Building Leaders for Internationalization

To ensure that companies expanding globally have access to skilled Singaporean leaders with international expertise, the SkillsFuture Leadership Development Initiative will broaden leadership programs. Promising individuals will participate in specialized training and overseas postings, with a target of developing 800 potential leaders in the next three years.

Local educational institutions will offer short, modular courses and expand e-learning options to further develop skills. Funding support for Singaporeans enrolled in approved courses will continue through the SkillsFuture initiative.

Heng highlighted the collaborative effort required from employers, trade associations and chambers (TACs), unions, and the government to apply these newly acquired skills. He emphasized the importance of effective job matching, connecting skilled individuals with suitable roles. The National Jobs Bank will be enhanced to better serve both job seekers and employers, and collaborations with private placement agencies will aim to improve job matching services for professionals.

Employers, TACs, and unions were urged to actively provide structured training for workers, with funding support available from SkillsFuture Singapore for developing industry-relevant programs.

Industry Transformation Maps (ITMs)

Introduced last year, ITMs unite stakeholders – TACs, unions, and the government – to synchronize efforts toward sector transformation. Six ITMs, covering 23 sectors, have been launched, with the remaining 17 expected to debut in FY2017.

Heng described ITMs as adaptable, living plans, open to modification based on emerging opportunities. Maximizing synergy between related ITMs, such as those in the food services and hotel industries, is also crucial.

Singtel was cited as a prime example of effective skills development, both internally and for the broader industry. The company not only facilitates the transition of its IT services employees into cybersecurity roles but also partners with CSA and IMDA on the Cyber Security Associates and Technologists program to cultivate mid-career talent for the cybersecurity sector. Singtel’s Cyber Security Institute provides training for technical professionals, management, and boards to improve cyber breach handling. Additionally, internship programs engage students within the field.

Regulations Aligned with Digital Change

Heng highlighted the government’s parallel transformation alongside industries. The Monetary Authority of Singapore (MAS) introduced a streamlined regulatory framework tailored to venture capital firms, offering greater flexibility and fostering a more favorable environment for venture capital investment, thereby increasing funding opportunities for startups.

Regulatory sandboxing was presented as a means to create more space for innovation. This concept involves establishing boundaries within which regulations are temporarily suspended to enable greater experimentation. The Land Transport Authority (LTA) has implemented this approach with self-driving vehicles, designating specific zones for road testing. Similarly, MAS has established a regulatory sandbox for fintech.

Regulatory agencies will continue to explore methods for facilitating innovation, including expediting risk assessments for new products and services. A notable example is the Health Sciences Authority (HSA), which will establish a priority review system to evaluate new and inventive medical devices, accelerating commercialization and positioning Singapore as a prime location for launching such devices.

To further support innovation efforts, the government will allocate an additional S$500 million to the National Research Fund. The National Productivity Fund will receive a further S$1 billion to bolster industry transformation. In total, S$2.4 billion will be dedicated over the next four years to implement CFE strategies, supplementing the S$4.5 billion earmarked last year for the Industry Transformation Programme.

Reactions to the budget were varied. The Singapore Business Federation (SBF) deemed the short-term measures “underwhelming” while welcoming the longer-term initiatives. Although the business community has consistently voiced concerns about rising operating costs, the SBF felt there was insufficient short-term support to mitigate these concerns.

However, the association welcomed the medium to long-term measures focusing on internationalization, innovation, and digital capability development, paving the way for the future economy.

Lawrence Leow, Chairman of the SBF-led SME Committee, acknowledged the budget’s focus on preparing SMEs for the future economy while acknowledging the ongoing challenges faced by businesses. He emphasized the need for immediate stimulus and anticipated further details during the Committee of Supply debate. Leow reaffirmed the SME Committee’s commitment to providing a platform for government and businesses to collaborate on industry transformation.

SS Teo, Chairman of SBF, echoed the sentiment that the budget fell short in terms of short-term measures to support businesses. However, he expressed confidence in the government’s close monitoring of the situation and responsiveness to emerging needs. Teo conveyed SBF and the TACs’ eagerness to work alongside the government in implementing the remaining 17 ITMs.

Tom Beach, Country Managing Director of Telstra Singapore, found it encouraging that the budget and CFE report aimed to address challenges that Telstra had also identified in recent research. The research highlighted Singapore’s leading position in Asia regarding digital infrastructure quality, but also revealed gaps in digital skills and partnerships.

Beach underscored the significance of initiatives aimed at fostering digital literacy in the workplace and connecting individuals with jobs, such as the enhancements to the National Jobs Bank, given the growing importance of digital skills for business success and the global competition for talent. He emphasized that government programs should be supplemented by private sector efforts to train their staff effectively, maximizing the benefits of utilizing cutting-edge technologies.

He highlighted the role of government- and corporate-driven innovation hubs in talent development and creating avenues for new businesses. To foster the growth of the country’s digital economy, Beach expressed hope that Singapore would maintain policies that attract high-growth startups to establish their operations within the country and export their innovative solutions globally.

Beach shared Telstra’s belief in the emergence of “co-corporation,” where digital partnerships accelerate expansion into new markets and customer segments, facilitate the development of new products and services, and strengthen existing capabilities. The newly launched Global Innovation Alliance, through its Innovators Academy, Innovation Launchpads, and Welcome Centres, will provide Singaporeans with structured opportunities to gain valuable overseas experience, cultivate networks, and collaborate with counterparts in other forward-thinking cities.

Interested?

More detailed information on the new and enhanced initiatives will be shared by the relevant ministries during the Committee of Supply debates, typically held shortly after the budget announcement.

The full Budget 2017 speech is available for reading, and the budget delivery video (over 1.5 hours) can be viewed online.

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