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  • SBF SME Committee’s Budget Recommendations for 2020 focuses on strengthening companies’ resilience amidst a soft global economic forecast

SBF SME Committee’s Budget Recommendations for 2020 focuses on strengthening companies’ resilience amidst a soft global economic forecast

  • Mix of near- and long-term measures for business sustainability as well as growth opportunities
  • Adequate liquidity, talent retention, and removal of barriers to the adoption of innovation and digital solutions are key priorities for businesses
Singapore, Tuesday, 21 January 2020  The Singapore Business Federation (SBF) SME Committee (SMEC) submitted its recommendations for the Singapore Budget 2020 to our Government on 28 December 2019.

Singapore’s growth for 2019 came in at 0.7 per cent and the Ministry of Trade and Industry (MTI) forecasted Singapore’s growth in 2020 to be at 0.5 to 2.5 per cent1. MTI expects growth in the Singapore economy to pick up modestly in 2020 as compared to 2019. However, based on the SBF National Business Survey (NBS) 2019/20202, which was released last week, business sentiments remain weak as almost 50 per cent of businesses surveyed expect the Singapore economy to worsen in 2020.

Moreover, manpower costs and the need for new or better ways to generate revenue have become the top challenges for businesses. While they recognise the importance of transformation to mitigate these issues, the cost of technology adoption is the biggest roadblock. And with a credit crunch experienced by one-third of the businesses, solving near-term issues like financing has emerged as a priority.

Budget 2020 Recommendations

For the 2020 Budget, the SBF SMEC is proposing seven key recommendations that will provide our SMEs with increased liquidity through new schemes and initiatives, greater access to digital solutions, more financial and R&D support, as well as incentives to hire mature workers. These measures will also better position our companies for the next upswing in the global economy.


1. One-Stop Digital Trade Platform to Enable Trade amongst Organisations

As growing revenue has remained the top priority for our SMEs, our Government can help B2B companies grow their businesses more by enabling and optimising trade through a one-stop digital trade platform. With greater sales opportunities, companies are also more likely to adopt digital solutions such as e-invoicing.

The SBF SMEC recommends:
Our Government to develop a one-stop digital trade platform or encourage the usage of available procurement platforms by leveraging GeBiz and government spending on local SMEs products and services, to enable buying and selling activities amongst companies online.

2. Increase Support to SME Financing

The 2018 SBF ‘Singapore’s SME Debt Financing Landscape’ study identified a 15 per cent (or $19 billion) credit demand gap of the total approved loan facilities extended to SMEs, mainly attributed to the lack of collateral and their risky borrower profile. The Loan Insurance Scheme (LIS) supports short-term financing lines such as invoice financing. Enhancement of the LIS can provide greater financing support and also encourage SMEs’ shift to e-invoicing.

The SBF SMEC recommends:
Our Government to increase the sharing of the cost of insurance from 50% to 70%, for the LIS.

3. Government to Support and Adopt a Payment Code of Conduct

The SBF NBS 2019/2020 found that almost 50 per cent of the late payments experienced by companies were above 30 days past due, on top of the two months credit term offered. This caused seven in 10 businesses to face moderate to severe cash flow issues. Larger companies are encouraged to follow the Government’s practice of paying SMEs quickly and on time. Taking reference from Australia’s Supplier Payment Code, more than two-thirds of the Survey respondents felt that a similar code would help reduce late payments in Singapore.

The SBF SMEC recommends:
Our Government to support SBF in the development of a Payment Code of Conduct for Singapore. Government Procurement Entities should endorse and adopt this code. Our Government should also use this development to proliferate the adoption of e-invoicing by paying its suppliers that e-invoice even faster and introduce incentive schemes for larger enterprises to onboard their SME suppliers onto e-invoicing platforms.

4. Promote Collaboration Between A*STAR and Local Enterprises to Conduct More Research and Development Activities and Channel More Research Funds Directly to Private Enterprises

More collaboration between Research Institutions (RIs) like A*STAR and our SMEs will ensure that our SMEs, which are often constrained by a lack of resources, are able to develop new capabilities through R&D. It is also critical for local enterprises to develop intellectual property and intangible assets so as to move up the value chain. Public sector R&D should focus more on supporting SMEs. More can be done to expand the allocation of funds to private enterprises directly.

The SBF SMEC recommends:
  1. There should be more funding help for companies in the areas of creation, regulation and the administration of their intellectual property filing in global markets.
  2. To place greater focus and channel more resources towards collaborative R&D between RIs/Institutes of Higher Learning (IHLs) and our local SMEs. Taking reference from ESG’s Enterprise Development Grant and Productivity Solutions Grant, to offer support of up to 70% of eligible R&D costs directly to private enterprises to conduct applied R&D to develop industry-relevant technologies and innovation, in close partnership with our RIs and IHLs. The RIs and IHLs can also help to identify common challenges faced by similar companies and aggregate the demand for R&D for the same outcome.
5. Financial Incentives for Productivity-driven Innovation

An option for a cash or cash-back system for companies that are not paying tax can be introduced to drive R&D activities amongst SMEs which are not yet profitable. This is currently practised by the Australian government, where companies with a turnover of less than A$20 million receive a refundable tax offset for eligible R&D expenditure, which can be a cash refund if they are in a tax loss position. All other eligible companies receive a non-refundable tax offset to reduce the tax they pay.

The SBF SMEC recommends:
To introduce a research expenditure rebate for R&D activities for local SMEs that are in the non-taxable group, similar to that provided by the Australian government, to supplement the current R&D tax benefits.

6. Greater Assistance for Adoption of Cybersecurity Solutions

Apart from the cost of technology adoption, the prevalence of cybersecurity risks was also listed as one of the top three barriers to adopting technologies in the SBF NBS 2019/2020. The cybersecurity needs of SMEs are increasingly complex as enterprise IT systems sit across in-house and outsourced systems, on both desktop and mobile platforms, while catering to the varied needs of customers, suppliers and employees. While there are government assistance schemes available, SMEs will require expert advisory to diagnose and identify vulnerabilities and develop cybersecurity solutions.

The SBF SMEC recommends:
Our Government to introduce an Enterprise Cybersecurity Advisors programme where selected advisors are deployed to SMEs to facilitate the adoption of comprehensive cybersecurity solutions and customised training for the needs of individual SMEs.

7. Increase Support for Companies to Employ Older Workers

As the retirement and re-employment age and CPF contribution rates for older workers will be increased progressively over 10 years, the SBF SMEC recognises the importance of the Special Employment Credit (SEC) and the Temporary Employment Credit (TEC) in supporting companies in the face of an aging population. The SEC provides subsidies of up to 11% of older employees' monthly wages, while the TEC, introduced by our Government back in 2015, helped to cushion employers’ cost for increased CPF contributions.

The SBF SMEC also noted that the Portable Medical Benefits Scheme (PMBS) has not been fully leveraged, as only 5 per cent of companies offer it currently. This Scheme helps to defray employers’ high costs of medical benefits, especially for older workers. The SBF SMEC will work with other TACs and the Singapore National Employers Federation to increase awareness among companies on the PMBS.

The SBF SMEC recommends:
  1. Our Government to extend the SEC beyond December 2020 in tandem with the plans to progressively increase the retirement and re-employment age by 2030.
  2. Our Government to reintroduce the TEC at every occasion when the CPF contribution rates for older workers are increased over the next decade.
Mr Ho Meng Kit, CEO of SBF, said, “Our businesses are increasingly aware of the importance of innovation and transformation, as reflected in the latest SBF National Business Survey. We hope the government can build on that momentum with robust measures that encourage, support and strengthen the digitalisation and R&D efforts of our companies. This will position them well for the future economy.

“At the same time, we should not ignore bread and butter issues like facilitating adequate cash flow for our SMEs, especially during this prolonged period of economic uncertainty. The SBF SMEC will prioritise our engagement with the Government and business community to ensure our companies stay resilient and prepared to capture future opportunities.”

Mr Kurt Wee, Chairman of the SBF SMEC, said, “The global slowdown in growth is likely to persist for the foreseeable future. Companies should seize this window of opportunity to upgrade their human capital, strengthen their digital capabilities and expand overseas for diversification of markets. Whilst more tangible support for SMEs is necessary this year, we would also like to encourage SMEs themselves to be more proactive in seeking out and leveraging available resources, be it provided by the Government, SBF or other TACs.”

For the full report of the SBF SMEC Budget 2020 Recommendations, please click here.
For the summary report of the SBF SMEC Budget 2020 Recommendations, please click here.

1 https://www.mti.gov.sg/-/media/MTI/Resources/Economic-Survey-of-Singapore/2019/Economic-Survey-of-Singapore-Third-Quarter-2019/PR_3Q19.pdf
2 The summary of the findings can be referred to at https://www.sbf.org.sg/images/2020/01-Jan/NBS_2019-2020_Infographics_For_Web.pdf

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