SINGAPORE: Businesses are set to receive an array of targeted support from the Government to help them tide through immediate cyclical weaknesses in the economy.
According to Finance Minister Heng Swee Keat on Monday (Feb 20), there is a need for Budget 2017 to move beyond general stimulus and target industry-specific issues, given the uneven performance across different sectors.
Over the course of 2016, Singapore’s manufacturing sector saw a year-end pick-up on the back of strong growth in the electronics and biomedical manufacturing clusters, which propelled the economy to a faster-than-expected growth pace of 2 per cent for the year. However, not all manufacturers are seeing a recovery and the services sector, which accounts for two-thirds of the economy, remains lacklustre.
As such, Mr Heng noted that for firms and sectors that are holding up, the focus will be on the longer term and how to build on the momentum to seize new opportunities. But for sectors facing continued cyclical weaknesses, such as construction, as well as the marine and process sectors, there will be specific support measures.
These targeted measures include a further delay of the earlier announced foreign worker levy increases in the marine and process sectors by another year.
For the construction sector, the Government will bring forward S$700 million worth of public sector infrastructure projects to start in FY2017 and FY2018. Construction firms will be able to bid for and participate in these projects, which include the upgrading of community clubs and sports facilities, said Mr Heng in Parliament.
However, to sustain the momentum of productivity improvements, the Government will proceed with the foreign worker levy increases for this sector announced in 2015.
HELPING FIRMS MANAGE TRANSITION
Meanwhile, to help firms manage cost or cash flow as the economy restructures and positions itself for the future, the corporate income tax (CIT) rebate will be enhanced with a rise in the cap from S$20,000 to S$25,000 for Year of Assessment (YA) 2017. The rebate remains at 50 per cent of tax payable, after being raised from 30 per cent in last year’s Budget.
The CIT rebate will also be extended for another year to YA2018 at a reduced rate of 20 per cent of tax payable, capped at S$10,000. The enhancement and extension will cost an additional S$310 million over YA2017 and YA2018.
In line with the rise in re-employment age from 65 to 67 years old that is set to take effect on July 1, 2017, the Government will also provide more support for firms hiring older workers.
For instance, the Additional Special Employment Credit will be extended until the end of 2019. Under this scheme, employers will receive wage offsets of up to 3 per cent for workers who earn under S$4,000 per month and are not covered by the new re-employment age of 67 years old.
This extension is set to benefit about 120,000 workers and 55,000 employers, and will cost about S$160 million.
Taken together with the Special Employment Credit (SEC), which was modified and extended to end-2019 in last year’s Budget, employers will receive support of up to 11 per cent for the wages of their eligible older workers.
Firms can also look to schemes that were previously announced for continued support.
The Finance Minister said that the Government expects to pay out over S$600 million to businesses this March under the Wage Credit Scheme – a scheme aimed at helping firms cope with rising wages. Small and medium-sized enterprises (SMEs) are set to account for 70 per cent of this amount.
Under the SEC, over S$300 million will be paid out in FY2017 and 370,000 workers are set to benefit from that.
Lastly, the SME Working Capital Loan, which was announced last year to help businesses address near-term concerns while encouraging business growth and restructuring activities, will continue to be available for the next two years. Mr Heng noted that there has been “good take-up” for the scheme and more than S$700 million of loans has been catalysed since the launch last June.
Altogether, these additional near-term measures will give businesses support of more than S$1.4 billion over the next year.
SUPPORTING WORKERS AMID STRUCTURAL ECONOMIC SHIFTS
Budget 2017 also contains measures to help workers adapt to the structural shifts in the economy, especially those who seek to move to a different sector or industry.
Firstly, the “Adapt and Grow” initiative will be strengthened this year, through an increase of wage and training support provided under the Career Support Programme, the Professional Conversion Programme and the Work Trial Programme. Rolled out last year by the Ministry of Manpower (MOM), the “Adapt and Grow” initiative is aimed at helping Singaporeans adapt to changing job demands and grow their skills.
An “Attach and Train” initiative will also be introduced for sectors that have good growth prospects, but are not ready to hire yet. Instead, industry partners can send participants for training and work attachments, which will help increase the employment prospects of these workers.
To support these initiatives, an additional sum of up to S$26 million a year will be committed from the Lifelong Learning Endowment Fund and the Skills Development Fund, Mr Heng said.
