Budget 2023: Funding boosts for enterprises will help Singapore develop globally competitive firms

• S$150 million set aside for SME Co-Investment Fund, S$1 billion boost to Singapore Global Enterprises initiative 
• Job-Skills Integrators to be appointed in certain sectors to optimise training and job placement 

TOP-UPS to the SME (small and medium-sized enterprise) Co-Investment Fund and the Singapore Global Enterprises initiative will increase the availability of capital to firms, and help Singapore develop a pipeline of globally competitive businesses, said industry observers.

In his Budget 2023 speech on Tuesday (Feb 14), Finance Minister Lawrence Wong announced that an additional S$150 million would be set aside for the SME Co-Investment Fund, while S$1 billion would be added to Singapore Global Enterprises initiative.

The extra S$150 million under the SME Co-Investment Fund will be used to invest in promising SMEs, after the government reaped “positive outcomes” from its previous funding rounds, added Wong. The government also aims to catalyse an additional S$300 million of private investments to support enterprises.

First announced in last year’s Budget, the Singapore Global Enterprises initiative provides large local enterprises with customised assistance in areas such as innovation, internationalisation and the fostering of partnerships with other companies.

Chai Wai Fook, tax services partner at Ernst & Young Solutions, noted that businesses face two key challenges in expanding overseas: a lack of internal capabilities, such as talent and leadership, and accessing “sustainable sources of funds at a lower cost”.

“As we know, businesses need cash or funds to invest and expand overseas,” he said. “Other than taking loans from financial institutions, investments through equity injections can serve as an alternative source of funding.”

He said that the SME Co-Investment Fund and the Singapore Global Enterprises initiative go hand-in-hand in helping more businesses go global.

Daniel Ho, mergers and acquisitions (M&A) tax leader at Deloitte Singapore, said that the additional funds are expected to fuel M&A activity in the region, and can help “transform home-grown companies into global enterprises that can compete better”.

According to Michael Tan, chief executive of the Singapore Productivity Centre, the Republic needed to do more to “build local champions as another engine of growth”, given current geopolitical uncertainties and macroeconomic challenges.

“These champions may one day be a crucial shock absorber for the Singapore economy as we face decelerating gross domestic product growth and fiscal surpluses.”

Despite both schemes being “very targeted”, Yuit Ang expressed the hope that the top-ups will ultimately benefit a wider spectrum of SMEs, rather than being limited to just “a handful” of bigger players. The Association of Small & Medium Enterprises vice-president noted that businesses which received funding from previous rounds under the SME Co-Investment Fund tended to be medium-sized.

“We hope that the fund can start looking at a broader range of SMEs, like the smaller boys or those at an earlier stage of development,” he said.

The government is also looking to develop labour-market intermediaries to plug skill gaps in Singapore’s workforce.

Dubbed Job-Skills Integrators, these intermediaries will work with industry, training and employment facilitation partners to optimise training and job placement for jobseekers. They will be piloted in the precision engineering, retail and wholesale trade sectors.

The appointed integrators would likely be experienced industry executives, who can help “smoothen” the talent acquisition and development process that employers face, said Goh Puay Guan, an associate professor at the National University of Singapore Business School.

“This initiative is good for not only skills upgrading and productivity, but also (for) allowing experienced industry executives to contribute in a mentorship or guiding capacity.” He added that this helps keep industry veterans “who want to continue to work gainfully occupied”.

Wong Wai Meng, chair of industry association SGTech, said that the introduction of these integrators was “a step in the right direction”, as it addresses the challenge of knowing “where the available resources are and how to utilise them”, with a view to bridging gaps in talents and skills.

However, the scheme’s success may depend on whether the job-skills ecosystem can be built in a way that incentivises outcomes that both workers and employers want, said Walter Theseira, associate professor at the Singapore University of Social Sciences.

He said that the training of workers has traditionally been on a basis of government reimbursement or co-funding. This means that training providers are motivated to get the “largest number of students through their doors”, rather than ensuring that the skills they teach have job-market applicability, or that their trainees achieve good job outcomes.

“Thus, some thought will have to be put to the problem of job-skill integration, and defining success in terms of outcomes that matter to workers and employers, such as higher wages, productivity and meeting the hiring needs for the employers,” he added.