Singapore Minister for Finance Lawrence Wong has delivered a Budget for 2022 that will include the strengthening of digital capabilities and pervasive innovation to stay globally competitive.
Digital infrastructure
"Today, we are one of the most connected cities in the world, and among the first to roll-out a 5G standalone network. In parallel, we have built digital utilities, like SingPass, Myinfo and PayNow, that allow our people and businesses to access digital services and transact seamlessly and safely," he said. "We will invest further to meet our future needs."
Specifically, the broadband infrastructure will be upgraded to increase broadband access speeds by around 10 times over the next few years, Wong said. Singapore will also invest in future technologies like 6G.
"The use cases for such high speeds are still nascent, but there are many new possibilities for augmented and virtual reality tools, limited only by our imagination," Wong noted. He also shared that S$200 million has been earmarked to enhance schemes that build digital capabilities in local businesses and workers over the next few years.
Pervasive innovation
An innovation mindset will be another focus. "Innovation is built on strong R&D foundations. That is why, over the years, we have steadily increased the government’s investment in R&D, maintaining it at about 1% of GDP, comparable to other small advanced economies. I will continue to sustain our investments in R&D, with S$25 billion set aside under the Research, Innovation and Enterprise, or RIE2025 strategy," Wong said.
"Public investments in R&D also serve as a catalyst for similar investments in the private sector."
Wong said that Singapore's total business expenditure on R&D lags that of other economies, however, with most of the R&D driven by multinational corporations (MNCs). "Local enterprises, which comprise about 80% of all firms, account for only about a quarter of total business R&D expenditure in Singapore," he said.
To boost innovation at the local level, Wong announced changes to an existing network of more than 80 centres across academic institutions like polytechnics and ITE which collaborate with SMEs in technology, innovation, and enterprise activities. Specifically, the capacity of the centres will be expanded so that they can provide research and innovation support to more SMEs.
"Over the next five years, these centres will be able to undertake close to 2,000 innovation projects across five pilot sectors: agri-tech, construction, food manufacturing, precision engineering and retail," Wong said.
"This amounts to an eight-fold increase in the number of innovation projects undertaken in these sectors. We look forward to many more success stories in the coming years."
"The Minister’s announced plans to further strengthen Singapore’s digital capabilities focuses on both infrastructure development and continued upskilling of our workforce. Whilst Singapore is already at the leading edge globally when it comes to the quality, speed and effectiveness of its broadband network, the intention to further invest in future broadband infrastructure signals an eye on the future and the potential that 6G networks may hold. The commitment towards further investment in digital upskilling will also enable a human-led, technology-enabled future as industries transform for the future," said Greg Unsworth, Risk Assurance Leader, PwC Singapore.
"The pandemic has accelerated digital transformation by several years, especially in Singapore where the digital economy continues to flourish. With the shift towards digital transformation at 20 to 25 times faster than expected, it is critical for businesses to review the effectiveness of the digital projects implemented in the past 24 months so that they can retain their digital competitiveness – both regionally and globally," observed Lionel Legros, VP & GM, APAC, OVHcloud.
"In the rush for digital transformation, many businesses often realised too late how deep they have sunk in terms of cloud cost and its unpredictability, which inevitably affect their market competitiveness. Businesses need to review and manage the true cost of their digital services, and opt for full transparency and price predictability of the cloud infrastructure they deploy while recentring their business objectives on long-term growth."
Legros noted that this can be further achieved through greater support from the government in the form of subsidy grants "to enable local businesses to readjust and accelerate their digital transformation at the same time, which will drive better resiliency and agility as they continue to scale for success in the digital future."
David Ng, Country Manager, Singapore, Trend Micro, noted that Singapore is making a proactive effort to bolster its position as Asia’s digital hub, called it "an exciting time for businesses across various industries".
"For instance, investments into cutting-edge technologies such as 6G will bring a highly interconnected and digital economy. 5G alone is already bringing immense benefits to enterprises through its scalability, speed, and connectivity – and the outlook of 6G will only propel innovation.
"This is no different for the cybersecurity space. The features of 6G – including nearly limitless bandwidth, delay-free feedback loops, and so on – might actually amplify the damage caused by threats if they do infiltrate systems. This may seem daunting, but it also means greater innovation to provide end-to-end security for 6G service platforms," he said.
"As the nation looks to invest in digital capabilities and infrastructure, efforts must be complemented by investments into cybersecurity. Today’s landscape is very risky, and it will only get riskier with further investments into cutting-edge technologies. Businesses cannot afford to overlook security. With great power, comes great risk - and hence, greater responsibility."
Business productivity
Another priority will be to raise business productivity, Wong said. S$600 million has been budgeted to expand the range of available solutions under the Productivity Solutions Grant to implement digital and automation solutions in a push for greater takeup of productivity solutions by SMEs.
"We estimate that this will support more than 100,000 productivity projects over the next four years. This is more than double the number of projects supported since the scheme began," Wong said.
Larger local enterprises, on the other hand, will be receiving some help to globalise in the form of a new initiative, Singapore Global Enterprises. "Under this initiative, we will provide bespoke assistance tailored to the needs of promising local enterprises, in areas like innovation, internationalisation and fostering of partnerships with other firms," Wong said.
A new Singapore Global Executive Programme will further help larger enterprises attract and nurture a new generation of leaders through industry and overseas attachments, mentorships, and peer support networks.
"Leading enterprises through transformation in times of disruption like what we are experiencing today, requires new and different leadership skills. Leaders will need to navigate through complexities and ambiguity, without necessarily having all the answers. The announcement of a new Singapore Global Executive Programme is a fantastic opportunity to help next generation leaders develop these skills," commented Martijn Schouten, People and Organisation Leader, PwC South East Asia Consulting.
Continual learning
Singapore's institutes of higher learning, or IHLs will now be reframed as institutes for continual learning. "We will review the programming in our IHLs, and enhance their provision of quality continuing education and training," said Wong.
Employers are also asked to help. "Employers are well placed to identify skills that are in demand and provide industry-relevant training," Wong added, announcing a waiver of the Skills Development Levy requirement which covers a qualifying period of 1 January 2021 to 31 December 2021.
According to Wong, the SkillsFuture Enterprise Credit is typically claimed by employers that have had at least three local employees, and contributed at least S$750 of Skills Development Levy over the qualifying period. The waiver is expected to better support smaller and micro enterprises, he said. The deadline to claim the credit will also be extended by a year, to 30 June 2024.
Climate change
Two years ago, Singapore committed to peaking emissions around 2030, and to halve emissions from the peak by 2050. In line with this, the current carbon tax of S$5 per tonne will be raised to S$25 per tonne in 2024 and 2025, and S$45 per tonne in 2026 and 2027, with a view to reaching S$50 to S$80 per tonne by 2030.
"With the challenges of climate change now at our doorstep, it is no longer an option to ignore sustainable efforts and ‘greenwash’ for reputation’s sake," Legros commented.
"Singapore plans to lift a current two-year moratorium on the development of new data centres and be more selective in anchoring resource-efficient data centres, making it one of the first countries with such moratoriums to tackle the topic of sustainability in the cloud computing industry. Accounting for 7% of total electricity consumption in Singapore in 2020, sustainability efforts in the industry need to be at scale, not just at a proof-of-concept stage," he said.
"Businesses must also continue to manage their environmental impact with full accountability; be equipped with technologies to track and manage their operational efficiency and carbon footprint; and pivot towards a growth model with sustainability as a core pillar. Government support with clear policies and frameworks will be crucial in helping businesses ensure they meet the necessary industry standards and capitalise on technologies to realise a sustainable future."
Struggling sectors of the economy will receive a S$500 million Jobs and Business Support Package that includes a Small Business Recovery Grant for small and medium sized enterprises (SMEs) in the F&B, retail, tourism and hospitality sectors among others. SMEs in the eligible sectors will receive a payout of S$1,000 per local employee, up to a cap of S$10,000 per firm. In addition, workers who continue to face income loss due to COVID-19 can apply for the COVID-19 Recovery Grant, which has been extended to the end of 2022.
Wong further disclosed that the Jobs Growth Incentive will be extended by six months to September this year, "with stepped-down support rates reflecting the improved labour market conditions". "This extension will cover those who face greater difficulty finding jobs, like mature workers who have not been employed for six months or more, persons with disabilities, and ex-offenders," he said.
Additional financial help is on hand through the expansion of an existing M&A loan programme to include domestic M&A activities from 1 April 2022 to 31 March 2026. "This will support companies to grow and expand through mergers and acquisitions (M&A)," Wong explained.
In addition to extending the enhanced Trade Loan till September 2022, the enhanced 70% risk-share will be maintained under the Trade Loan for enterprises venturing into emerging markets, Wong said.
Lennon Lee, Partner, Tax, PwC Singapore, thinks that SMEs will need more help. "Given that eligible SMEs are already struggling with lower business income and increased operating costs, the extension of the Temporary Bridging Loan Programme and enhanced Trade Loan Scheme will be welcomed but the benefit is likely shortlived given that these programmes and schemes are extended for only six months when the effects of the pandemic are unlikely to be gone in six months," he explained.
"Faced with significant increase in operating costs, the extension of the Jobs Growth Incentive and the S$1,000 payout per local employee, in my view, would not be sufficient to help a struggling SME with increased employment costs to retain its local worker population."
Goods and services tax hike
Singapore's GST will be going up from 1 January 2023, from 7% to 8%, and then again on 1 January 2024, from 8% to 9%.
"Introducing (a) GST rate hike in 2-steps and at a later date will help manage concerns over the rising costs of living especially when there is significant uncertainty surrounding the outlook of inflation. At the same time, businesses will need to plan ahead to address two rounds of costs and efforts to implement the GST rate hike," noted Kor Bing Keong, GST Leader, PwC Singapore.
"More than 80% of businesses in Singapore are not GST registered. The costs of these businesses will increase with the GST rate hike. These businesses should re-evaluate the costs and benefits of a voluntary GST registration when the GST rate increases on 1 January 2023 and 1 January 2024."
Kor further warned that there is not much time to prepare for the new round of GST hikes. "1 January 2023 will arrive faster than you think. Businesses need to start reviewing their systems, processes and pricing strategy to prepare for the GST rate hike. Understanding how the transitional GST time of supply rule is also key to avoid costly mistakes," he said.
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