Budget 2018 balances between short-term relief and support for longer term efforts to go digital and go regional.
Author: Joyce Tee, Managing Director and Group Head, DBS SME Banking
Two weeks after Finance Minister Heng Swee Keat delivered his Budget, we’ve had some time to analyse how the measures announced this year impact the local business community. This included polling some 240 of our SME customers to get their feedback on the challenges they face and how they thought the Budget might help them.
We had expected Budget 2018 to continue the medium to longer-term measures put in place by the Government in the last few years. This turned out to be largely the case, as the Government continued on its mission to transform the economy to meet new challenges.
Of the support measures announced, I believe the Productivity Solutions Grant (PSG) is timely as it will help SMEs adopt the digitalisation and productivity tools they need to promote innovation and enhance their digital capabilities. Such capabilities are critical for companies seeking to thrive in an environment marked by technological disruption.
Meanwhile, the announcement of the ASEAN Innovation Network and the setting up of the Infrastructure Office is consistent with our belief that Singapore can benefit from Southeast Asia’s growth by participating actively in the economic development of the region. Taken together, these measures are aligned with our mission to support our SME customers’ efforts to Go Digital and Go Regional to fuel growth.
The commitment to innovate and increase productivity through digital means must come from both the SME owner and their employees. Both parties need to be convinced that being more innovative and productive will give them a competitive edge in the global market.
Reaping the benefits of digital transformation isn’t as tough as it sounds. Our customers tell us that digitalisation is a way to simplify day-to-day operations so that they can spend more time on growing their business, rather than on operational issues.
Many local SMEs have already taken steps to digitalise their operations. Encouragingly, over 63% of SMEs that we polled expressed their interest in Enterprise Development Grant (EDG) that were unveiled in the Budget. The EDG combines existing grants to fund up to 70% of costs for projects that help companies develop capabilities and internationalise.
While such assistance is most welcome, it requires the company to pay for the costs of implementation first, before being reimbursed by the Government. Which is why DBS offers a loan of up to S$300,000 at a low interest rate of 0.88% p.a for the first 12 months to help SMEs implement digital solutions quicker, as it gives business owners access to cash flow for rapid technology implementation while awaiting Government grant reimbursements.
Companies looking for more customised solutions can also apply to the DBS TechMatch scheme that matches SMEs with tech solution providers. Meanwhile, our industry focused Disrupt @ the Bay events have helped over 500 SMEs learn about the range of technology solutions available for their industry to enhance productivity and efficiency. They also have a chance at these events to meet businesses that are disrupting their industry with innovative ideas and business models.
Providing help for businesses to internationalise was another key theme for SMEs in Budget 2018. Such assistance is timely as 32% of SMEs polled said that expanding regionally was their top strategy for growth. However, some 35% of respondents shared that a lack of funds was the key reason for not venturing abroad.
As such, the enhancement of DTDi (Double Tax Deduction for Internationalisation) in the Budget was welcomed by SMEs. Over 62% of respondents said the measure would be an important consideration for their plans to regionalise.
Under the DTDi, however, companies will only realise tax savings in the next FY after the qualifying expenses are incurred. For more immediate financial assistance, SMEs can tap on IE Singapore’s Market Readiness Assistance Grant, which funds up to 70% of the costs to cover activities such as overseas market set-up, identification of business partners, and overseas market promotion. They can further apply for DBS’s range of working capital loans to ease their cash flow when they regionalise.
Once the decision has been made to enter a new market, the DBS Internationalisation Finance Scheme offers companies up to SGD 30 million to support their overseas expansion.
Beyond access to funding, some 30% of polled SMEs were reluctant to go abroad due to a lack of familiarity with the competitive dynamics in international markets. To help them address this problem, our DBS BusinessClass platform offers SMEs access to market insights and trends through content, events and workshops. Our contact with SMEs through BusinessClass has helped us to understand first-hand what keeps business owners up at night and what we can do to provide more effective support.
Overall, Budget 2018 struck the right balance between short-term relief for businesses and support for their longer term efforts to go digital and go regional. As DBS banks more than 60% of all SMEs in Singapore, we stand ready to supplement these measures to help our SMEs digitalise at each stage of growth and have the necessary financial solutions to help them spread their wings regionally.
Published Date: 15 Mar 2018