Singapore: Singapore Budget 2019 – Sustained support for firm level restructuring

The upcoming budget due on 18 February will stay the course on restructuring.
Irvin Seah29 Jan 2019
  • The budget help companies regionalise given emerging opportunities from the trade war
  • There is also a need to sharpen policy effectiveness, and support the trade associations (TACs)
  • Smaller companies should be given fair access to the existing slew of policy assistance schemes
  • This is the second of a three-part series on Budget 2019
Photo credit: AFP Photo

While 2018 has been a roller coaster ride, 2019 will not be any less daunting. However, despite a slightly more downbeat economic outlook, the government will likely continue to stay its course on longer term issues, focusing on restructuring of the economy, rather than using fiscal stimulus as a counter-cyclical policy tool.

Focus on ASEAN

Amidst the ongoing trade disputes between the US and China, one of the likely outcomes is a rebalancing of global trade and investment dynamics. Trade and investment flows will increasingly be diverted away from North-east Asia, and very likely towards Southeast Asia / ASEAN in the coming years. Singapore will be in a unique position given its regional hub status, a comprehensive FTA network and higher level of business sophistication. Singapore companies must re-orientate their business strategies in order to capitalise on the opportunities arising from an emerging ASEAN.

There are evidences to suggest that Singapore companies are increasingly more encouraged to regionalise. Policy measures by the government to provide greater support for companies in the development of their capabilities and in their internationalisation efforts would likely yield positive outcomes in the mid to longer-term. Indeed, we expect the government to “double-down” on the efforts in this regard in the upcoming budget.

Enhancing policy effectiveness

Besides enhancing the level of support for some of the existing schemes, the focus could shift towards execution and streamlining of existing schemes to enhance policy effectiveness.

For example, a fast track scheme for grant approval could be implemented for selected high growth industries to spur intensification of investment into those clusters. This will help to expedite the development of the cluster and further broaden the scope of the entire industry structure.

To enhance the effectiveness of our internationalisation effort, trade associations (TACs) should also be given more support to enable them to set up more overseas offices to better facilitate the local companies that are venturing abroad. With a better understanding of the various types of businesses and markets, the TACs would be able to leverage on their local contacts and resources to help their members explore overseas markets.

Focus on SMEs

Smaller companies typically require more help. And in the current age of technological advancement, innovation matters more than just sheer size of the organisation. SMEs below a certain level of sales turnovers should be given added attention in their grant applications. This can be achieved by simplifying the documentation requirements in the grant application process.

However, some policy measures continue to be skewed in favour of bigger companies. Despite some risk coverage by the government, the outcome is that smaller companies who need more financing help may not get the necessary support regardless of their product innovation or business ideas. Henceforth, the government could consider taking a bigger share of the risk for smaller companies that apply for financial support. This would enhance the accessibility of these schemes for smaller companies.

Staying the course

While economic cycle is certainly drifting southward, recession risk is still remote in 2019. We reckon that the government would prefer to keep its powder dry and continue to stay focused on longer term structural issues, specifically on preparing the economy for the future.

Helping companies venture abroad, particularly to ASEAN, could receive added impetus. Tweaking the policy approach to target the smaller companies could be another focus. Beyond that, encouraging automation, helping companies leverage on digital technologies, supporting R&D and entrenching local value creations, as well as internationalisation, will continue to be the key features of Singapore’s restructuring efforts in this upcoming budget.

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Irvin Seah

Executive Director

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