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Singapore Budget 2016: What SMEs can expect from the Industry Transformation Programme
Analysts have welcomed the Industry Transformation Programme (ITP) announced in Singapore Budget 2016 as a potential boost for small businesses looking to transform, innovate and grow. Here's a breakdown of the programme, with more depth on some of the key measures.
Targeted support
The ITP aims to support Singapore's small- to medium-sized enterprises (SMEs) grow and compete internationally at a time when they face global economic headwinds and domestic constraints.
Finance minister Heng Swee Keat said the S$4.5 billion programme was designed to be targeted in order to better meet the needs of firms in each sector. It is in line with the government’s shift away from offering broad-based support.
Announcing the ITP in his maiden Budget speech on March 24, Heng pointed out that Singapore’s small businesses were operating in a global economy, which is growing increasingly interconnected, diverse and complex. "We must work together to muster our resources, to innovate, to scale up and internationalise," he said.
What exactly does the ITP entail?
The programme has three areas of focus for now: transforming enterprises, transforming industries and transformation through innovation. It aims to help businesses create new value and grow in four ways:
- Integrating different restructuring efforts.
- Providing more targeted and sector-focused support.
- Strengthening partnerships between government and industry players.
- Placing stronger emphasis on technology adoption and innovation.
Analysts have been generally positive about the ITP's potential to assist SMEs seeking to restructure, innovate and compete globally.
Chiu Wu Hong, head of enterprise at KPMG, said the measures addressed both the short- and long-term needs of small businesses. “SMEs need to transform themselves in the way they operate, automate and collaborate with an industry-centric approach,” he said. “It is heartening to see that the Budget adopts a more sector focused approach with calibrated measures.”
Chung-Sim Siew Moon, partner and head of tax at EY, said the ITP was designed to nurture an ecosystem where innovation could flourish. “If businesses seize the opportunities presented in these measures to restructure and grow, the SMEs of today could be the regional, or even global, players when 2065 arrives,” she concluded.
To see how you may be able to benefit from the ITP, here are some of the key measures in greater detail.
Achieving greater scale
First up, more funding is being made available to businesses seeking funding for growth projects.
Launched in the 2014 Budget, the SME Mezzanine Growth Fund is being expanded from S$100 million to up to S$150 million, with the government offering to match up to S$25 million of new private sector investment on a 1:1 basis. This will give SMEs who want to scale up and internationalise better access to capital.
The government has also raised the mergers and acquisitions (M&A) allowance cap from S$20 million to S$40 million and extended the tax break on company gains from disposing equity investments until 31 May 2022. Heng said the expanded financing and tax breaks aimed to help small businesses restructure and scale.
Driving innovation
To help businesses transform through innovation, the government is setting up an innovation district in Jurong, which will house learning, research, innovation and production activities. "Fifty years ago, we transformed Jurong from swampland into a thriving hub for the manufacturing industry that powered Singapore's economic growth,” said Heng. “Now we will make another leap to create the industrial park of the future."
Jurong Innovation District will also include a space for entrepreneurs, researchers and students to design and test innovations. Called Launchpad @ JID, the facility is already under construction and due to be completed in 2017.
EY’s Chung-Sim welcomed the new district, saying it “will be a boost to innovation”.
She also offered this insightful advice for entrepreneurs keen to leverage the ITP: “The key to seizing these opportunities is the spirit of partnership. It is no longer a debate of whether it should be a top-down or bottom-up, or public versus private sector approach. We need an all-inclusive commitment to work together.”
The launch of the ITP in the Singapore Budget 2016 was a promising sign for the local SME sector. As a business owner, your next step should be to consider how to leverage the support to take your business to the next level. Ask yourself:
- How you can utilise the mezzanine capital to scale.
- If you qualify for the M&A allowance and extended tax breaks.
- What kind of innovative solutions you could test-bed and develop in the upcoming Jurong Innovation District if you’re a technology owner.
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