The Singapore government has been called on to provide funding support so large enterprises can continue with their digital transformation programs and smaller businesses can begin their sustainability journeys.
These measures are necessary to safeguard the country’s prosperity amid an increasingly uncertain global climate, according to a report released by KPMG in Singapore (KPMG) and the Singapore Business Federation (SBF).
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The document outlines recommendations on what the government should include in its upcoming budget to maintain Singapore’s appeal as a destination for foreign direct investment in light of growing competition from other financial hubs.
Deputy Prime Minister and Minister for Finance Lawrence Wong is scheduled to deliver the nation’s fiscal 2024 budget plan on February 16.
The report suggests that advocating innovation, digitalization, and ESG (environmental, social, and corporate governance) will place Singapore in a good position to attract global capital and talent. Organizations can also boost their competitiveness if they are given support to digitalize, decarbonize, and globalize.
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These measures will be integral to helping enterprises, particularly small businesses, deal with rising costs and a challenging business environment in a softening global economy.
Research suggests just 25% of companies in Singapore are confident the economy will improve during the next 12 months, compared to 41% the year before, according to SBF’s latest national business survey.
Some 58% of companies cite increased business costs as the top challenge, with 75% pointing to manpower costs as the key contributor. The survey respondents would like more support from the government for their ESG initiatives, as well as adoption of AI tools and global expansion.
The SBF survey, which polled 1,056 companies, also anticipates 2024 being a more challenging year for local businesses that will face headwinds in domestic and international markets.
“We recommend the government takes the lead to streamline procurement practices with smaller enterprises that may rely heavily on government projects,” KPMG and SBF said in a joint statement.
“To tackle manpower constraints, Singapore must maintain its openness to overseas talent and strengthen policies that promote the development of local talent. A public-private review of business competitiveness is needed to identify opportunities for cost mitigation even as we press ahead with industry transformation.”
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The report authors call for a tiered support model to facilitate companies in their digitalization roadmaps, spanning from a lower-tier grant support covering 20% of backoffice and operational digitalization initiatives, to a top-tier grant of 60% in funding support for the adoption of artificial intelligence (AI) and digital ledger technologies.
The report also suggests the government should reassess existing grants and subsidies, such as the Enterprise Innovation Scheme or Productivity Solutions Grant, and allow smaller companies to pay only the net cost of digital solutions to help them with their cash flow. Services providers can then claim the rest of the subsidies directly from the government.
Grant programs, the report suggests, should be expanded to include digital projects where development work is led out of Singapore, but involve resources from the region. The Enterprise Development Grant, for example, currently stipulates that such development work must be fulfilled locally. This restriction could stifle progress as businesses might not be able to access resources and skillsets to drive the work in a timely manner.
In addition, a universal grant program that covers the cost of AI and machine learning adoption and employee upskilling will be helpful for businesses looking to build training datasets and carry out data analysis and testing.
Smaller companies will also appreciate support in upskilling and retraining employees in emerging technologies, including AI, to acquire the necessary capabilities to handle new cyber threats.
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Organizations would further benefit from reskilling that can support their ESG development journey, which the government can provide through enhanced tax deductions for accredited training programs and tax subsidies.
The Singapore government can collaborate with sectoral agencies and trade associations to establish decarbonization industry roadmaps, with the aim of facilitating organizations’ transition to a greener ecosystem.
For instance, the report recommends that the Enterprise Financing Scheme – Green initiative is expanded to boost lending by eligible financial institutions and help smaller companies begin their sustainability journeys.
The report also calls for the establishment of data-sharing platforms to facilitate the exchange of ESG data, such as greenhouse gas emissions associated with certain activities. This process will enable businesses to carry out checks on internal data or make estimates when information is not available.
Furthermore, Singapore could look to calibrate its property tax policies to offer lower rates for green commercial and industrial buildings, which would motivate building owners to meet greener building requirements.
