However, is this enough for Singapore?
Image Credit: Mac Qin on Flickr
The global economic slowdown has hit our sunny shores hard. Despite our GDP’s last-minute hurrah at the end of 2016, businesses from across the spectrum – be it hospitality or maritime – have reported lacklustre growth for the past couple of quarters. To help cope with the economic shift, the government announced a bevy of new measures to help stem the tide for the near future, adding up to an impressive S$1.4b.
This focused approach by the government is meant to mainly help the ‘older’ part of the economy, who have been left behind by the world’s rapid globalization. This view was mirrored by Finance Minister Heng Swee Keat during his speech, when he said to “try new methods, continue with them when they work well, cut losses when they do not, and draw on feedback and experience to adjust and refine our plans. That is the Singapore way.”
Where The S$1.4b Will Be Going
Public Sector Infrastructure Projects
To prop up the construction industry, the Government will be bringing forward $700 million in public sector infrastructure projects. Within the next two years, construction companies will be allowed to bid for and to work on these projects, ranging from the construction of new public facilities to the upgrading of older ones.
However, despite the positive news for construction firms, the previously announced foreign levy increases are still moving forward, with the rate for basic tier R2 workers being raised from $650 to $700. This news comes as a double-edged sword to some firms, who were expecting levy increases to be delayed – as they were for the battered marine and processing industries – to help cope with the economic situation.
Corporate Income Tax (CIT)
Focusing on the bigger picture, the Government also rolled out some initiatives that will help companies regardless of their industry. As the economy evolves and adapts itself for the future, the Government is enhancing the Corporate Income Tax (CIT) – raising the cap from S$20,000 to S$25,000 – to help ease cash flow issues and management costs in the short-run. Additionally, the rebate will also be extended to 2018, but with a reduced cap of S$10,000. The combined enhancement and extension of the CIT is expected to cost over S$300 million over the course of the program’s life.
Additional Special Employment Credit
Plans are also underway to extend the Additional Special Employment Credit as well, till 2019. The scheme, which provides employers with 3% wage offsets for employees who earn less than S$4,000 and fall outside the new re-employment age of 67, is expected to cost another S$160 million. This scheme is expected to work hand-in-hand with the Special Employment Credit, which will help employers get up to 11% of wage offsets for hiring older workers.
Schemes for SMEs
And lastly, SMEs will be getting the bulk of the funds, under two previously announced schemes that will continue for the near future. Over S$600 million will be paid out to businesses under the Wage Credit Scheme, in which 70% of the funds are expected to go to SMEs to aid with the country’s rising wages. Furthermore, the SME Working Capital Loan scheme – which started rolling out last year – will continue to be available for at least the next two years.
All in all, these enhanced short-term aid schemes are expected to give firms and companies more than S$1.4 billion worth of support to stem the tide of a shifting economic structure.
Is It Enough?
The business community has been quick to react to the news, and some have expressed disappointment with the current and announced measures. Business leaders applauded the Government’s move towards more help in the short time, but have been critical with the amount, with the Singapore Business Federation calling the measures “inadequate.”
Businesses are also worried that the schemes to help businesses will be negatively impacted by the announced 30% increase in water prices. The President of the Singapore Chinese Chamber of Commerce & Industry (SCCCI), Mr. Thomas Chua, felt that the Budget did not include nearly enough measures to help SMEs. He added on by saying, “businesses are concerned with the impact on their business costs, especially with the immediate increase of diesel tax, and soon water price.”
It can be said that the Government is moving in the right to address the problems businesses have been facing as of late. However, whether or not the schemes will be enough for companies, both large and small, to hold their ground against the economy’s downturn is yet to be seen.
