subpage banner

Media Articles

Enterprising and Innovative Budget 2016

29 Mar 2016

The Budget is not only pro-business but also pro-active in priming firms for the long haul

By Wilson Chew and Lim Hwee Seng

THIS year's Budget is one that is both prudent and targeted at helping businesses that are enterprising and innovative. The outcomes of innovative discovery will drive new products and services, which will in turn help fast-growing medium enterprises (FGMEs) develop new business models and markets. In the long term, these Singapore blockbuster companies will inevitably emerge and thrive, given the right environment and resources.

Clearly, the journey to being a blockbuster company is not an easy one. Even FGMEs are experiencing slower growth in light of the current sluggish global demand caused by the restructuring of major economies and the fall in oil prices.

In addition, technological disruptions to global supply chains are causing major shifts in how industries operate. Hence, it would be folly for companies to assume that it will be business as usual even in the short term, let alone, the medium to long term.

But positive business leaders, who truly believe that they can build a successful company given the present circumstances, can take heart in Budget 2016.

Finance Minister Heng Swee Keat makes it clear that companies which are willing but not necessarily able to embark on building a globally competitive company can now progressively do so given the enhanced facilities within the Budget extended to FGMEs. But the will to succeed remains with the company.

Indeed, Budget 2016 addresses what we really want to see our local enterprises become over the longer term. However, for our companies to be global blockbusters, innovation, investments and internationalisation are critical ingredients.


To enable firms to deepen capabilities, enhance human competencies, generate greater revenue and globalise, a key Transforming Enterprises thrust under the newly introduced Industry Transformation Programme is being proposed to achieve this.

In a swift response to the business community's call for a concerted effort towards helping local enterprises, a one-stop Business Grants Portal will be introduced to improve access and to simplify application.

But a portal which consolidates various grants should also have a built-in processing system which allows companies to determine eligibility, navigate quickly to the appropriate grants, submit their applications, monitor approval process and administer reimbursements.

On the point of reimbursements, the government should consider multi-part payments on the back of project milestone completions given that cash flow management is critical in this downturn.

Speaking of cash flow, Budget 2016 offers two additional measures which will ease up cash flows:

Automation Support Package: Aimed at supporting automation adoption. This is a grant that funds automation projects and an investment allowance for automation equipment for an initial period of three years. With the government increasing its risk-share with banks from 50 per cent to 70 per cent, it is hoped that banks would be more willing to extend loans.
The SME Working Capital Loan scheme: For loans of up to S$300,000 per SME. The government will co-share 50 per cent of the default risk of these loans with participating financial institutions. The use of funds would be for daily operations or for automation and upgrading of factory and equipment.
Budget 2016 goes beyond automation to robotics. FGMEs in the construction, manufacturing and logistics space can take heart that the government will make available over S$450 million to support robotics projects over the next three years.

For FGMEs which are ready for larger research projects, the Research, Innovation and Enterprise (RIE) 2020 Plan contains a S$4 billion war chest which stands ready to help industry-research collaboration.

Investment & internationalisation

The current economic downturn may also present expansionary opportunities. Assets may be on the cheaper end of the investment spectrum. In this regard, FGMEs may need more money to acquire synergistic companies in various markets to strengthen their competitive advantage. On this front, the government has made a strong effort by providing more capital to support such scale-up and internationalisation plans by expanding the SME Mezzanine Growth Fund from S$100 million to S$150 million.

To hasten the expansion process even further, mergers and acquisitions (M&A) deals have been sweetened. Budget 2016 proposes that M&A tax allowance of 25 per cent will be granted for up to S$40 million in consideration of the qualifying deals for each year, instead of the current threshold of S$20 million.

FGMEs are generally more eager to seek new overseas markets. With more firms embarking on internationalisation initiatives, the Double Tax Deduction for Internationalisation scheme is extended till March 31, 2020. Qualifying expenses incurred for activities such as participation in overseas business development and investment study trips are included in this scheme.

Clearly, Budget 2016 lends substantial support to FGMEs in an endeavour to produce Singapore's next blockbuster companies over the longer term.

Dr Wilson Chew is Entrepreneurial & Private Clients Strategy Partner and Lim Hwee Seng, Entrepreneurial & Private Clients Tax Partner. Both are from PwC Singapore

Source: The Business Times © Singapore Press Holdings Limited. Permission required for reproduction.