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Survive or thrive with the unprecedented Resilience Budget
AT the end of the current economic storm, two types of companies will emerge - those that survive but remain status quo, and those that thrive. The difference: the latter took the downtime to transform.
The Covid-19 outbreak is unprecedented on many fronts, notably the scale and impact on lifestyle, business and the economy. The speed of response and support from the Singapore government to protect its people and the economy is no less unprecedented. In just five weeks after the initial S$6.4 billion support packages were unveiled by Deputy Prime Minister and Finance Minister Heng Swee Keat at the Singapore Budget 2020, the announcement of the S$48.4 billion Resilience Budget is truly extraordinary - in its size and comprehensive coverage.
The combined S$55 billion package amounts to some 11 per cent of Singapore's gross domestic product. Under this mammoth package is a suite of programmes to enable businesses to stay afloat, with focus on cashflow, cost and credit. These include the automatic three-month deferment of the corporate income tax payments for companies and the self-employed.
Recognising that rental is a major part of the running cost for businesses, qualifying commercial properties such as hotels and restaurants will receive a 100 per cent property tax rebate, while other non-residential properties such as offices and industrial properties will get a 30 per cent property tax rebate. For properties that are eligible for 100 per cent rebate, this works out to slightly more than one month's rental. The government has urged landlords to fully pass on the rebate to their tenants and engage in open discussions to work out a win-win arrangement for all.
At the same time, the government is increasing its wage co-funding under the job support scheme, from the initial 8 per cent announced in Budget 2020, to 25 per cent for all local workers, with the wage cap lifted from S$3,500 to S$4,600, and severely impacted sectors receiving more support. The period of co-funding is also extended from the original three months to nine months.
The objective is clear: to help companies remain in business, so jobs are saved, and livelihoods of the people protected.
Not time to break away from transformation
Over the next few months, businesses and people will receive various aid and support - some even in cash.
Yet, this is no time for organisations to take a breather and step back from the restructuring and transformation journey that the government has pushed forth previously.
Rather, they should take the brief respite during this low period to look inward to reshape their business, redesign jobs and reskill the workforce, so they can be more competitive and effective for the long term. Companies can tap the enhancement of support, from the current 70 per cent to 80 per cent, for the Enterprise Development Grant (EDG) and Productivity Solutions Grant, to continue to spur innovation and enhance productivity and core capabilities, particularly in areas that relate to securing growth opportunities in the digital economy. Enterprises that are most severely impacted by the Covid-19 situation may see the maximum support level for EDG further raised to 90 per cent on a case-by-case basis.
Additionally, the SG Together Enhancing Enterprise Resilience (STEER) Programme will support funds set up by trade associations and chambers or industry groupings to help businesses tide over the immediate cost challenges and to push on with transformation efforts in preparation for the economic recovery. Under the programme, Enterprise Singapore matches S$1 for every S$4 raised by such industry-led funds. As part of the enhancement, the government will increase the matching ratio to S$1 for every S$2 raised, up to S$1 million per fund. Businesses can tap these STEER-supported funds for sustenance, growth, and capability upgrading.
The Resilience Budget continues to build on the lifelong learning culture that has been put forth through initiatives by SkillsFuture Singapore and Workforce Singapore. But beyond lifting the abilities of individuals in the workforce, reskilling and upskilling talent will go a long way to help companies too.
Historically, when the economy recovers, there begins a battle for talent. For companies that have used the downtime to embark on digital transformation, retrain and reskill workers, and keep them culturally connected to the organisation's values, they will find themselves in a good place to retain their talent.
Importantly, individuals, particularly the self-employed, gig workers, freelancers, are encouraged to take learning into their own hands. In addition to the SkillsFuture Credit enhancements announced in Budget 2020, higher training allowances is announced in the Resilience Budget, increased from S$7.50 to S$10 per hour. This helps to continually nurture a talent pool with improved employability, which companies can tap when the situation stabilises.
With the Covid-19 pandemic expected to continue for months to come, this may be the time for businesses and individuals to advance their capabilities, so they can be ready to seize opportunities and thrive when recovery hits.
It's not over until it's over
As Covid-19 hits the world amid the perfect storm of geopolitical and economic uncertainties and trade challenges, it would seem that a deep adverse impact on Singapore's economy is inevitable. But with the Resilience Budget, where the stops are pulled to help businesses and people address their immediate concerns while steering them to continue onwards along the longer-term transformation journey, we may well hear a different, and perhaps unprecedented, upbeat tune.
- Tan Ching Khee is Partner, Tax Services at Ernst & Young Solutions LLP, and Samir Bedi, EY Asean Workforce Advisory Leader. The views are the writers' and do not necessarily reflect the views of the global EY organisation or its member firms.