Singapore Budget 2020: What Can the SMEs Expect?

Singapore Budget 2020: What Can the SMEs Expect?

957 393 Purnima Madaan

Mr. Heng Swee Keat, the Finance Minister, presented the budget for the year 2020 on February 18. The effect of coronavirus on the budget was as evident as that on the current economic condition of the country. While the minister announced a hefty relief package for helping the businesses of all sizes amid viral flu outbreak, the focus was primarily on the revival of the SME sector that has been facing a slowdown since late December 2019.

Source: CNA

The Singaporean economy grew by 0.7% in 2019, which was the slowest since the financial crisis of 2008. However, this is in resonance with the economic slowdown around the world. The effect of weakening growth on Singapore was felt in a more pronounced way due to the limitation of the size of the land. To help the business grow, the Government announced that the GST rate would remain unchanged for the oncoming year, forcing the Government to absorb a budget deficit of S$10.9 billion.

Stabilization and Support Package

A relief package of S$4 billion will aid the Singaporean SMEs in ensuring regular cashflow and retaining their workers. The package will get distributed among various schemes that will help the SMEs cater to different needs. For example, the package contains Jobs Support Scheme and Wage Credit Scheme, which gets aimed at assisting the enterprises in retaining their employees and increasing their wages in 2020. For every local worker, 8% of the total wages (up to S$3,600 per month for three months) will cover under this program.

Working Capital Loan will be enhanced for more efficient use by the businesses. The companies will be able to access up to S$600,000 (double as compared to current value) under this scheme. The package also includes a Corporate Income Tax Rebate for the assessment 2020, to increase the capacity of the SMEs. The rebate proposed at 25% of the total taxable income, and not more than S$15,000 per company. Other tax treatments will also be enhanced for the coming year. For instance, faster write down on the investment made on plant and machinery and renovation and refurbishment will be facilitated. However, this rebate will cost around S$400 million to the Government, further increasing the deficit.

Aid for Sectors Hit by Coronavirus

The Government has recognized five sectors, namely, tourism, aviation, retail, food and beverage, and point to point transportation service that will receive additional support of S$8.3 billion. The aid will be delivered through an Adapt and Grow Initiative. The program will help these sectors by extending the re-skilling funding period from 3 to 6 months. The Government to deploy a Temporary Bridging Loan Program with interest rate capped at a low 5%, including 80% of the loan risk covered by the Government, rental rebates at the Changi Airport, and 15% tax rebate on Property for Changi Airport, and other qualifying commercial properties.

The establishments in the F&B sector will receive a rebate in the form of a rental waiver to stallholders in NEA-managed centers and markets. HDB will also waive off half a month of rental of its commercial tenants. The complete relief package will spread over three years and focus on three things: enabling stronger partnerships, expanding enterprise competences, and developing skills.

Support for Training

The Government, in the budget, recognized the need to move to newer technology and the need of the current employees to get trained in the latest technology to stay employable. To meet this need, the Government has planned to extend and enhance the SkillsFuture program by creating new SkillsFuture Enterprise Credit, which promises to benefit the organizations that promote learning in their workforce. The Government hopes to help 35,000 enterprises, with prime focus on SME.

Foreign Worker Quota

The Government will be cutting down allocation for skilled FW in the construction, marine shipyard, and process sectors over the next three years. It is to encourage firms to hire more native skilled workers.
The Dependency Ratio Ceiling (DRC) of S-Pass holders will be reduced from 20% to 18% by January 1, 2021, and to 15% on January 1, 2023, for these three industries.
However, the overall DRC (irrespective of the pass), remains identical at 87.5% for the construction and process sectors, and 77.8% for the marine shipyard sector.

Go Digitization Initiatives

The Government wants the SMEs in Singapore to go global and emerge as the opportunity generators for the world. The honorable PM announced the expansion of the Market Readiness Assistance grant to enable the SMEs to venture out of the country. The Government has expanded its international network recently, and SMEs can use this network along with the MRA to explore and establish themselves overseas.

The Government is also setting up a brand-new online platform called GoBusiness, which will enable businesses to interact with the right people. This Initiative will streamline the flow and make it easy for firms to find the correct information. This platform will also be used to centralize many government functions, like licensing and applications for grants.

SMEs Go Digital is another digitization program that has proven to be a success in 2019. 2020 will see the expansion of SMEs Go Digital program to benefit a total of 10 out of 23 industrial niches from next year.

Other decisions announced by the Government include:

  • S$300 million set aside for Startup SG Equity to help the startups in adopting deep-tech.
  • Executive in Residence program enables the SME sector to hire experienced executives.
  • Plan to help 3000 projects in FY 2020 to develop leadership skills.

Is This a Good Sign for SMEs?

Singapore has been known for its startup-friendly policies and grants to SMEs. The current budget is the extension of the ideology that makes Singapore what it is – supportive and hopeful. The Government has realized the need to address economic slowdown and the loss of business due to Covid-19 outbreak. The relief packages have been planned very efficiently, and cover all major expenses of an SME. The packages also take care of the cash flow for the SME sector, which is currently facing challenges due to the viral infection.

Also, the Government is expanding its online presence, making it easier for business owners to connect with the right authorities and communicate effectively. All these efforts should make the SME sector in Singapore a little less worried. Of course, the impact of Covid-19 on the world economy will take time to negate. Still, unless that happens, the Singaporean SMEs need to trust the authorities and stay whatever possible to remain practical.

Purnima Madaan

Purnima is a digital entrepreneur and likes to share her thoughts on business development and marketing. She likes to watch documentaries, read about customer psychology and review financial products. When she is not busy finding opportunities for her clients, she loves to indulge in fashion magazines and watch movies.

All stories by:Purnima Madaan
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Purnima Madaan

Purnima is a digital entrepreneur and likes to share her thoughts on business development and marketing. She likes to watch documentaries, read about customer psychology and review financial products. When she is not busy finding opportunities for her clients, she loves to indulge in fashion magazines and watch movies.

All stories by:Purnima Madaan

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