BUDGET 2016 - Shaping our future together/Transforming the economy

$4.5 billion helping hand for industry

Singapore companies, especially SMEs, will be given a $4.5 billion boost to automate, scale up and go overseas to emerge stronger after the current slowdown.
Singapore companies, especially SMEs, will be given a $4.5 billion boost to automate, scale up and go overseas to emerge stronger after the current slowdown.PHOTO: ST FILE

Companies, especially SMEs, will get more help to automate, scale up and go overseas

Singapore companies, especially small and medium-sized enterprises (SMEs), will be given a $4.5 billion boost to automate, scale up and go overseas to emerge stronger after the current slowdown.

The helping hand comes via a new Industry Transformation Programme and is on top of existing amounts allocated for research and development as well as the National Productivity Fund.

The programme aims to help firms create new value and lift growth by pulling together the various efforts to raise productivity, develop the workforce and drive innovation.

The Government will also take a more targeted approach in rolling out help schemes, and place stronger emphasis on technology adoption and innovation.

Partnerships between the Government and the industry - and among industry players - will be deepened.

Finance Minister Heng Swee Keat announced several new measures aimed at helping companies transform successfully.

  • $400 million

    Grants to support automation projects

ENTERPRISE-CENTRIC BUSINESS GRANTS PORTAL

A business grants portal will be launched in the fourth quarter of the year to house all the help schemes within one platform.

With this, "firms will not need to go from agency to agency to find out what schemes apply to them", said Mr Heng.

  • Cash rebates to be cut for Productivity and Innovation Credit Scheme

  • Cash rebates under the popular Productivity and Innovation Credit (PIC) Scheme will be decreased this year, as the Government seeks to replace broad-based measures with more targeted support for firms.

    The PIC scheme encourages small and medium-sized enterprises (SMEs) to invest in increasing productivity by offering them cash and tax deductions for costs like worker training, automation and research.

    Currently, SMEs enjoy a cash payout rate of 60 per cent on up to $100,000 of qualifying expenses across six activities. The payout rate will be cut to 40 per cent of expenses incurred on or after Aug 1 this year.

    The scheme also allows SMEs to claim 400 per cent tax deductions on their upgrading activities, with an expenditure cap of $400,000 per activity. That rate remains unchanged.

    DBS economist Irvin Seah said: "It's good that they've pared down the cash. This stems from the fact that the scheme is known to be badly abused."

    Fraudsters have been known to file fake claims under the scheme.

    Making it attractive for SMEs to file for tax rebates instead of cash rebates will also encourage applicants to stay profitable in order to reap the benefit, so less funds will be spent on zombie companies, Mr Seah said.

    The PIC scheme will expire in Year of Assessment 2018, as scheduled.

    Marissa Lee

For a start, the portal will include grants from trade agency IE Singapore, enterprise agency Spring, Singapore Tourism Board and Design Singapore.

They will be organised along the core business needs of capability building, training and international expansion.

However, Mr Simon Tay, director of bun and pastry maker BHF, felt the new portal would not be too useful to very small companies.

"It will be more helpful if the staff from the SME centres can proactively approach the SMEs to understand their needs and guide them through the application," he said. "It will be 50 per cent faster."

AUTOMATION SUPPORT PACKAGE

A new $400 million Automation Support Package will be introduced for an initial period of three years to help companies start or scale up their automation projects.

The Government will provide grants of up to half of the project costs, capped at $1 million per project. There will be a new 100 per cent investment allowance for automation equipment, in addition to the existing capital allowance.

SMEs will also find it easier to borrow money to upgrade and buy new equipment. The Government will raise its risk-share with banks from 50 per cent to 70 per cent.

The founder of food and pharmaceutical ingredient firm Natural Colloids Industries, Mr Lim Chai, noted that the grant quantum for automation is much larger compared to other grants previously rolled out.

"A good project or system that can help cut manpower and increase capacity substantially will naturally cost a lot more money," he said. "This (new grant) will help spur SMEs to be more daring, to think big and think long term when they consider buying new machines."

INCENTIVES TO SUPPORT SCALE-UPS

SME Mezzanine Growth Fund will be expanded from its current $100 million to $150 million. This will allow more capital to help SMEs scale up and internationalise.

To encourage firms to expand through mergers and acquisitions, the M&A allowance will be granted on up to $40 million of the consideration paid for qualifying M&A deals, up from $20 million now.

Together with the enhancement of the M&A scheme last year, to raise the tax allowance to 25 per cent of the value of a deal, companies will be able to enjoy up to $10 million of M&A tax allowances each year.

Mr Heng also extended a scheme granting non-taxation of companies' gains on disposal of their equity investments to May 31, 2022.

This will provide companies upfront certainty for their corporate restructuring efforts.

SUPPORT TO GO OVERSEAS

Mr Heng noted that Singapore firms, especially SMEs, are eager to seek new markets and grow overseas.

Last year, IE Singapore supported 34,000 companies in going overseas, a 21 per cent increase from 2014. This year, the agency expects to help around 35,000 to 40,000 companies of all sizes to internationalise.

The Double Tax Deduction for Internationalisation scheme - which covers expenses for activities such as overseas business development and investment study trips -will be extended to March 31, 2020.


Correction notes: An earlier version of the article stated that the PIC scheme will expire in 2018. It should be Year of Assessment 2018. We are sorry for the error.

The information on the M&A allowance has been edited for clarity.

A version of this article appeared in the print edition of The Straits Times on March 25, 2016, with the headline '$4.5 billion helping hand for industry'. Print Edition | Subscribe