SME Committee Budget 2017 Recommendations focus on new engine to boost economic growth and broad-based support to SMEs
- Multiple global factors stifling economic growth amid increasing pessimism clouding the sentiments of local SMEs
- Survival of local SMEs critical during period of protracted slow growth
4 January 2017 [Singapore] - The SBF-led SME Committee (SMEC) submitted its recommendations for Singapore Budget 2017 to the Government on 30 December 2016.
The following factors were taken into account when formulating the recommendations:
a) Uncertain Global Economic Outlook
Key risks that could stifle growth include rising private sector debt in large emerging markets, heightened policy and geopolitical uncertainties, sluggish global growth, nationalistic polices and anti-trade sentiments. As the world economy moves further away from the global financial crisis, factors affecting global economic performance are becoming increasingly complex. These reflect a combination of global forces such as demographic trends, disruptive technologies, persistent decline in productivity growth and adjustment to lower commodity prices.
b) Boosting Singapore’s Economic Growth with Globally Competitive Companies (GCCs)
Singapore is currently in a phase of economic restructuring and transformation amid tepid global growth. In the past five years, Singapore’s economic growth dropped from first to fifth amongst selected countries as competition with regional economies intensifies. To sustain our competitiveness and relevance in the new economy, which includes competitors from emerging and developing economies, Singapore needs to develop a new growth engine driven by technology, innovation and entrepreneurial talent.
c)Increasing Pessimism Clouds Local SMEs’ Forecast for 2017
The overall SBF-DP SME Index reading for 1Q17 to 2Q17 recorded its lowest reading of 49.8 in seven years, highlighting business uncertainty as SMEs’ topline performance weakens. Similarly, SBF’s National Business Survey (NBS) 2016/2017 indicated that only one in 10 businesses expected the economic climate to get better over the next 12 months, whilst almost 50% of those surveyed felt that it could get worse.
Budget 2017 Recommendations
SMEC’s recommendations for Budget 2017 considered how Singapore-owned world class companies would value-add to the local economy and the business ecosystem, as well as the increasingly significant role of SMEs in Singapore. In view of these, SMEC recommends (1) a third economic growth engine; and (2) providing broad-based support to SMEs during the current protracted period of low growth.
(1) Third Growth Engine: Globally Competitive Companies (GCCs)
Apart from growth led by MNCs and GLCs, Singapore should consider a congenial business environment to create new clusters of Globally Competitive Companies as additional growth engines for future economic success.
- Agencies-in-charge of their respective Industry Transformation Maps to be assigned targets on the number of GCCs to be developed
- Introduce incentive schemes to attract innovative companies to establish their regional base in Singapore, with the condition that they enter into a joint venture with local companies
- The government to commission a study to assess the feasibility of establishing a private bourse for innovative companies to raise capital
- The government to study the feasibility of a framework to enable entrepreneurs and investors, particularly those in high-technology industries, to protect important assets and investors’ interests so that distressed businesses can find viable solutions
- The government to review and refine the criteria for Employment Pass (EP) and Personalised Employment Pass (PEP) to take into account qualities which characterise entrepreneurial talents
- Review work pass requirements to allow entrepreneurs with innovative and/or disruptive technologies to be granted an Entrepass, on the condition they enter into a joint venture with qualified local enterprises
- Expand the Intellectual Property Financing Scheme (IPFS) to include Intellectual Property (IP) acquisition financing
- The government to co-share a higher risk quantum (currently at 50 percent) for loans under the IPFS
- The government to formulate and implement policies to better commercialise intellectual property developed by public sector research institutes and institutes of higher learning
(2) Providing broad-based support to SMEs
While the Singapore overall economy transforms, it is critical to ensure the survival of our local SMEs. SMEs should be accorded broad-based support to alleviate operating concerns, seize growth opportunities and navigate through the current economic slowdown.
- The government to hold back any planned increase in Foreign Worker Levy across all sectors for 36 months
- The government to study, review and streamline compliance, regulatory related costs, requirements and approving framework, starting with pilot sectors such as advanced manufacturing and food services
- Government landlords to provide rental rebates for all industrial, commercial and retail properties
- Government landlords to take the lead in adopting the Fair Tenancy Framework
- The government to commission a study on the implementation of a national Business-to-Business (B2B) platform
- Enhance the existing Working Capital Loan by raising the loan cap beyond $300,000 and increase the risk quantum co-shared (currently at 50 percent) by the government
- Formally recognise, via a Letter of Offer or equivalent, the contribution of partnering large enterprises, thereby allowing cost-recovery of resources attributed to the participation of such projects by these large enterprises
- Enhance the Headstart programme to grant SMEs the option to either acquire the foreground IP generated or directly extend the IP’s exclusivity to 36 months to facilitate successful commercialisation
- Allow economic agencies responsible for the awarding of Research and Development (R&D) incentives to independently assess the merits of SMEs’ R&D initiatives instead of adhering strictly to the tax definition of R&D
- Enhance the Global Company Partnership programme in the following ways:
- Do not subject Training Employment Passes (TEPs) to qualifying salary and Training Work Permits to foreign worker quota and levies
- Offer support on 100 percent of cost for staff on overseas deployment for the first year, and up to 70 percent in the subsequent two years for companies who have gone through the overseas market attachment programme
- The government to provide support through tax credits or special tax rebates to spur collaboration for large local enterprises to subcontract/partner SMEs for overseas projects
- Include SME leaders (including business owners and C-suite level) for funding support in leadership training schemes
- Enhance the Career Support Programme (CSP) to extend wage supplement support to 18 months from the current 12 months, with the option to include a training bond
Mr Ho Meng Kit, CEO of SBF, said “Singapore economy posted a stronger than expected growth in 2016. We hope that the growth momentum can be sustained. Our small businesses still have a pessimistic outlook for 2017. Immediate operational issues continue to challenge local SMEs’ operations. While Singapore’s economy will enter a phase of transformation under the directions set by the Committee of Future Economy, SBF will continue to bring up immediate business issues such as government compliance and regulatory costs, facing our SMEs.”
Mr Lawrence Leow, Chairman of SMEC, said "Singapore needs to create a new growth engine of globally competitive companies, driven by technology, innovation and entrepreneurial talent, to stay relevant to the global value chain and boost our economy. To achieve this, we have to transform into a creative and entrepreneurial nation that can attract foreign entrepreneurial talents and high technology enterprises to settle here, form joint ventures with local enterprises and create new businesses that will help propel our economy."
Budget 2017 Recommendations - Summary Report
Opening Address by Mr Lawrence Leow, Chairman of SMEC