SME Committee Budget 2018 Recommendations focus on strategies to help companies ride on the momentum of growth and industry transformation
- Enabling the private sector to be co-drivers of growth
- Embracing technology and innovation to drive profitability and future success of businesses
- Support to address on-going business challenges
17 January 2018 [Singapore] - The SBF-led SME Committee (SMEC) submitted its recommendations for Singapore Budget 2018 to the government on 28 December 2017.
The global economy is projected to continue its forward momentum in 2018. The International Monetary Fund’s forecast is 3.7%, while Singapore’s economic growth is expected to remain firm this year. The SBF National Business Survey 2017/2018 (NBS), released last week, also flagged the business community’s increased optimism for this year. Singapore’s mature and experienced companies are capable and ready to provide support to catalyse the emergence of innovative companies to help build new core-competencies within the local workforce and drive the growth of the local economy.
Notwithstanding increased positive vibes, many local companies are still facing on-going business challenges related to the cost of doing business, as well as an increasingly competitive business environment. An increasing number of companies are already becoming progressive and transformational in line with the introduction of Industry Transformation Maps. Timely and measured support to address broad-based challenges could help local businesses accelerate growth.
Budget 2018 Recommendations
For the 2018 Budget, SMEC is proposing 18 key recommendations across 3 pillars of support:
Pillar 1: A Growth Strategy to help companies grow their business both locally and internationally.
Pillar 2: A Reiteration of previous Recommendations yet to be adopted but still relevant in the current economic context.
Pillar 3: Possible Broad-based Support Measures that will give a tail wind to SMEs’ industry transformation efforts.
Pillar 1: Growth Strategy – Harvesting Transformation Efforts
The five key components to this Growth Strategy are:
- Private Sector as Co-driver of Globally Competitive Companies / Development of Unicorns in Singapore
This growth strategy is premised on positioning the private sector as a powerful resource, an important stakeholder in the business community and an agent of change to spur the development of globally competitive companies in Singapore. This can be achieved given a conducive business environment, with financial and non-financial support to innovative young companies that have the potential to eventually become unicorns.
SMEC recommends to position Singapore as an attractive hub for unicorns and investors:
- Design incentives to attract start-ups with the potential to be unicorns to set up base or relocate to Singapore.
- Incentivise private companies to invest or co-invest in potential unicorns through grants and tax incentives, and providing tax deductions and rebates for private companies with failed investments.
- To benefit Singapore companies and Singapore residents, the schemes should incorporate criteria such as:
- A minimum Singaporean equity stake in the potential unicorn company of say, 30 percent.
- Requiring the unicorn company to house its headquarters, research and development, Intellectual Property (IP) holding and other key functions in Singapore.
- Creation of jobs good for the Singapore economy and Singaporeans.
- Promote Partnerships between Large Companies and SMEs
This second growth strategy follows up on Minister for Finance, Mr Heng Swee Keat’s statement at SBF’s recent “Future Economy Conference & Exhibition”, held on 1 & 2 November 2017, on the importance of collaboration at the industry and national levels to ensure economic success in the future. SMEC has further deliberated on this concept, and recommends the following to encourage more collaboration between large companies and SMEs:
- Provide tax or other incentives specifically for projects with substantial SME involvement to induce and promote partnerships and collaborations between large companies and SMEs on overseas ventures.
- Instate a Presidential Award to recognise companies that have made significant contributions towards the partnership efforts of large companies and SMEs, especially in the area of internationalisation.
- Leveraging on Industry Transformation Maps (ITMs) to Internationalise
The ITMs are important in enabling our SMEs to strive for the next level of growth. To augment the value and attractiveness of our ITMs, the SMEC recommends that the government include as a component of the ITMs, useful market intelligence and information to help SMEs grow their revenue and explore new markets.
- Boost Innovation: More Research and Development and Technology Commercialisation Support in Identified Growth Industries and ITMs
The fourth component of this Growth Strategy pertains to a key thrust of the ITMs which is to leverage on R&D to develop new products and services through a systematic and coordinated industry-centric strategy. The SMEC recommends:
- Public Research Institutes (PRIs) and ITM agencies to forge deeper partnerships to provide technological support and advice to SMEs.
- More R&D funding support to local businesses in identified growth sectors through the ITMs.
- Enhanced accessibility and expansion of services provided by Centres of Innovation (COIs) to help SMEs with technology application.
- Trade Associations and Chambers (TACs) As Intellectual Property (IP) Aggregator for Member Companies
The fifth and final component of the Growth Strategy recognizes that industry vertical TACs such as the Textile and Fashion Federation Singapore (TaFF), Singapore Precision Engineering and Technology Association (SPETA), and Singapore Food Manufacturers’ Association (SFMA) which are keenly aware of their own industry trends and issues, are best placed to play the role of an IP aggregator or IP Bank to serve their member companies’ needs. SMEC thus recommends that the government conduct a feasibility study and initiate a pilot scheme for industry vertical TACs to function as IP aggregators.
Pillar 2: Relevant Past SMEC Recommendations
In reviewing its past recommendations to government, SMEC identified several that were not taken on board and strongly feel that they are still relevant in the current economic context, and could possibly help spur the growth of our companies.
- Government to study the feasibility of implementing 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 solutions to alleviate their situation.
- Expand the Intellectual Property Financing Scheme (IPFS) to include IP acquisition financing for IP assets and the acquisition of IP-owning companies.
- Provide financial support to TACs to connect and formalise their working relationship with selected overseas-based Singapore business groups and equip TACs with the necessary resources to establish a network that provides assistance to businesses that are venturing into or operating in the overseas markets.
- Government to consider expanding the type of common costs to support companies’ participation in overseas missions and trade shows.
For IE Singapore's Global Company Partnership (GCP) programme:
- Increase the maximum sales turnover criteria from $100,000 to $300,000 in the definition of new markets.
- Increase the support quantum from $100,000 a year to $300,000 over two years.
- Government to consider reviewing the source countries for work permit holders in certain sectors and industries, which will still require physical manpower and are of less appeal to the Singapore workforce.
Pillar 3: Broad-Based Support
The third pillar of SMEC’s 2018 Budget Recommendations contains broad-based support that will give a tailwind to SMEs’ transformation efforts. There are 12 broad-based support recommendations:
- Easier access to Government schemes
- Enhance the Business Grant Portal (BGP) and SME Portal with new features to help SMEs better understand the grant application process and requirements.
- Call on Government to adopt a “multiple pathways to success” approach that considers different aspects of an SME’s strengths beyond the current measurement metrics such as years in operation and revenue in the grant eligibility criteria.
- Government to consider introducing a “Credits-based Scheme” similar to how the Productivity and Innovation Credit (PIC) supports SMEs in productivity and innovation, which focuses on helping companies adopt relevant technology to support their business and train their staff to upskill them to be future economy-ready, with additional criteria to prevent abuse of the scheme.
- Funding support to SMEs in patent drafting and commercialisation-related expenses.
- More flexible renewal criteria for determining fixed asset investment to take into account the progressive investments and investments in intangible assets that have been made over the existing period of lease.
- Build awareness of Government Procurement
- Call on Government to raise SMEs’ awareness and understanding of government procurement by:
- Establishing stronger communication channels and outreach efforts to businesses, particularly the registered GeBIZ Trading Partners.
- Partnering TACs for outreach activities on government procurement.
- Government Procurement Entities (GPEs) can introduce more outcome-based procurement practices that allow for alternative solutions to be adopted for government tenders.
- Call on Government to raise SMEs’ awareness and understanding of government procurement by:
- Study the feasibility of introducing a government procurement scorecard to be sent to all bidders containing relevant and useful information.
- Consortium bidding for Government Procurement:
- Introduce clear guidelines to inform SMEs of the regulations of consortium bidding.
- Create awareness and promote the benefits of consortium bidding.
- Call on Government to recognise the joint track records of firms that participate in projects as a consortium.
- Call on Government to support the establishment of a voluntary Supplier Payment Code in Singapore and adopt the Code for its payment to its suppliers.
Mr Lawrence Leow, Chairman of SMEC, said "The evolving business landscape has spawned the emergence of potential unicorns with disruptive and transformative capabilities across several industries globally. For Budget 2018, SMEC calls on Government to consider tapping on the resources and business expertise of the private sector through grants and tax incentives for private companies to invest in unicorns that could potentially bring greater benefits to our economy. This would enable the private sector to play a more active role in becoming co-drivers for the growth and development of the economy."
Mr Kurt Wee, Chairman, SMEC Cost of Doing Business Sub-committee said “SMEs are here to stay and they contribute to half of our nation’s value-add. This year we dug deep, re-looked into what matters most for businesses and re-surfaced those recommendations, while introducing some new ones, which could provide a tailwind to businesses’ transformational efforts.”
Ms Audrey Yap, Chairman, SMEC Innovation Sub-committee, said that “Technology and innovation as business differentiators will play increasingly more important roles in determining the future success and profitability of businesses. I am pleased that for this year, the SMEC has put forth 4 key recommendations to promote and drive the innovation thrust in Singapore.”
Mr Ho Meng Kit, CEO of SBF, said “The Singapore economy posted stronger than expected growth in 2017 and we hope that this growth momentum carries us well into 2018. Whilst SMEs are heeding the government’s call to transform, they are also challenged by immediate operational issues which the SMEC outlined in several of this year’s Budget Recommendations. One of these challenges is low profitability and tight cash flow experienced by many small businesses. We call on our government to support the establishment of a voluntary Supplier Payment Code to enable SMEs suppliers to benefit from prompt payments which will enable better cash flow management. Another challenge is to get more SMEs to engage and be successful in tendering for Government Procurement projects to provide a much needed track record and tailwind for SMEs to grow.
Annex: List of 18 key recommendations